10-Q: T-REX Acquisition Corp. Faces Foreclosure, Deepening Losses

T-REX Acquisition Corp. reported a significant net loss of $654,214 for Q3 2025, a substantial working capital deficit, and a foreclosure notice on its Orofino data center, raising substantial doubt about its ability to continue as a going concern.

Summary

• Net loss for the three months ended September 30, 2025, was $654,214, significantly higher than the $311,815 loss for the same period in 2024.
• Revenue for the quarter was $9,258, primarily from mining, compared to $0 in the prior year, but hosting revenue was $0 for the quarter.
• The company has a working capital deficit of $1,513,335 and an accumulated deficit of $10,213,563 as of September 30, 2025.
• Cash and cash equivalents decreased from $49,733 to $384 during the quarter.
• A Notice of Default was filed on September 24, 2025, on the Orofino, Idaho data center, with a foreclosure sale scheduled for February 10, 2026, due to nonpayment of a $267,555 secured promissory note.
• Operations at the Orofino data center were disrupted on July 23, 2025, due to contractor disputes, equipment removal, and damage, leading to temporary interruption and software impairment. Full operations resumed November 17, 2025.
• Management concluded that disclosure controls and procedures were not effective due to deficiencies in segregation of duties and limited qualified accounting personnel.
• The company issued 2,475 shares of newly designated Series A Preferred Stock, with 10% cumulative dividends and 500 votes per share, primarily for the cancellation of related-party notes and accrued interest totaling $433,225.

Sentiment

Score: 1

Explanation: The company is in a precarious financial position, marked by substantial losses, minimal cash, a significant working capital deficit, and a foreclosure notice on its key asset. Operational disruptions and ineffective internal controls further compound the negative outlook, raising serious doubts about its ability to continue as a going concern.

Positives

• Revenue increased to $9,258 for the quarter ended September 30, 2025, from $0 in the prior year, primarily due to the resumption of mining operations at the Orofino facility.
• Net cash used in operating activities decreased to $136,387 for the three months ended September 30, 2025, from $201,556 in the same period of 2024.
• The company received a $63,434 insurance settlement on October 30, 2025, related to the Orofino facility disruption.
• Full operations at the Orofino facility resumed on November 17, 2025, following the disruption.

Negatives

• Net loss significantly widened to $654,214 for the quarter ended September 30, 2025, from $311,815 in the prior year.
• Cash and cash equivalents plummeted to $384 as of September 30, 2025, from $49,733 at June 30, 2025.
• Working capital deficit increased to $1,513,335 as of September 30, 2025.
• Accumulated deficit grew to $10,213,563.
• The Orofino data center is facing foreclosure, with a sale scheduled for February 10, 2026, due to default on a $267,555 secured promissory note.
• The company's software assets, acquired for $210,000, were impaired to $0.
• Disclosure controls and procedures were deemed ineffective due to deficiencies in segregation of duties and limited qualified accounting personnel.
• Hosting revenue was $0 for the quarter ended September 30, 2025, indicating a halt in third-party hosting services.
• The derivative liability increased significantly to $105,710 from $34,597, indicating increased risk associated with convertible notes.

Risks

• Substantial doubt about the company's ability to continue as a going concern due to significant operating losses, accumulated deficit, and working capital deficit.
• Risk of losing the Orofino data center through foreclosure if the $325,000 outstanding balance (including interest and penalties) on the secured promissory note is not cured by February 10, 2026.
• Operational disruptions, such as the July 23, 2025, incident at Orofino, can lead to temporary cessation of mining and co-location operations, equipment damage, and financial losses.
• Ineffective disclosure controls and procedures, including deficiencies in segregation of duties and limited qualified accounting personnel, pose a risk of material misstatements in financial reporting.
• Reliance on external financing (public or private offerings) to fund operations and expansion, with no assurances of successful fundraising.
• The rapid technological obsolescence and fluctuating market conditions in the cryptocurrency mining industry pose risks to the useful life and profitability of mining equipment.
• The Bitcoin halving event (April 19, 2024) reduces mining rewards, impacting revenue generation.
• The company has not filed tax returns since 2016, which could lead to future IRS examinations and penalties.

Future Outlook

The company plans to secure an additional 275 latest generation ASIC miners, with pricing directly related to Bitcoin's price (currently $5,200-$5,800 per miner). This purchase is contingent on the company's financial ability or obtaining equity financing. Management intends to raise additional funds through public or private offerings to support operations and expansion, acknowledging the substantial doubt about its ability to continue as a going concern.

Management Comments

• "Management intends to raise additional funds by way of a public or private offering."
• "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."
• "While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect and there is substantial doubt about the Company's ability to continue as a going concern."
• "Management intends to cure the outstanding balance [on the Orofino facility mortgage] and continues to operate the facility."
• "Our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective."

Industry Context

The company operates in the highly volatile cryptocurrency mining sector, which is subject to significant factors like Bitcoin's price fluctuations, network hash rate, and rapid technological advancements in mining hardware. The recent Bitcoin halving (April 2024) has reduced mining rewards, increasing pressure on miners to maintain profitability through efficiency and lower operating costs. The company's strategy of acquiring data centers for co-location hosting aims to diversify revenue streams within this industry.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• Notice of Default filed on September 24, 2025, by the holder of the first mortgage on the Orofino, Idaho property, initiating foreclosure proceedings due to default on a $267,555 secured promissory note. A Notice of Trustees Sale was received on October 6, 2025, scheduling a foreclosure sale for February 10, 2026.

Related Party Transactions

• Lease agreement with President Frank Horkey for office space at $250 per month, with $750 recorded as rent expense for the quarter.
• Management advisory fees of $15,000 incurred and $233,000 owed to Squadron Marketing (an advisor).
• Compensation expense of $151,751 incurred for key management personnel, including Frank Horkey (President/CFO), Lazarus Asset Management LLC (Operations Manager), and Antonio Oliveira (CTO).
• Board of director fees totaling $15,000 incurred, with $105,500 owed to board/advisory board members (including Frank Horkey and Michael Christiansen).
• Related party notes payable with a principal balance of $334,366 and accrued interest of $18,632, including notes to Frank Horkey and Lazarus Asset Management LLC.
• Advances from officers for operating expenses totaling $14,331, which are non-interest bearing, unsecured, and due on demand.
• Issuance of 1,368 shares of Series A Preferred Stock to Frank Horkey for cancellation of $239,571 of related-party notes and accrued interest.
• Issuance of 1,107 shares of Series A Preferred Stock to Timothy Ruggiero (or assigns) for cancellation of $193,654 of related-party notes and accrued interest.
• Issuance of 661,553 common shares to New Hudson Properties LLC (a related party) to settle a stock subscription liability for Lazarus Asset Management LLC.

Stakeholder Impact

• Shareholders face significant dilution risk due to ongoing issuance of shares for compensation, debt conversion, and future capital raises, with potential loss of investment if the company cannot resolve its going concern issues or foreclosure.
• Creditors face high risk of non-payment, as evidenced by the default and foreclosure proceedings on the Orofino facility. Related party creditors are converting debt to preferred stock, indicating a lack of cash for repayment.
• Employees and management face uncertainty regarding job security due to the company's financial distress and going concern doubt, with compensation frequently paid in shares, indicating cash flow constraints.
• Customers of hosting services face potential disruption if the Orofino facility is foreclosed upon or if operational issues persist.

Next Steps

• Cure the outstanding balance on the Orofino facility mortgage to prevent foreclosure by February 10, 2026.
• Raise additional funds through public or private offerings to support operations and expansion.
• Secure an additional 275 latest generation ASIC miners, contingent on financing.
• Address deficiencies in disclosure controls and procedures and staffing of the financial accounting department.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by a rapidly depleting cash balance, a substantial working capital deficit, and a widening net loss. The notice of default and impending foreclosure on its primary operating asset (Orofino data center) represents an existential threat. Furthermore, the admission of ineffective internal controls over financial reporting raises significant governance concerns and increases the risk of financial misstatements. While the company is attempting to raise capital, its current financial state and operational challenges make it a highly speculative and risky investment. The combination of these factors points to a high probability of further share price decline and potential insolvency.

Keywords

Cryptocurrency mining, Bitcoin, SEC filing, 10-Q, Financial results, Going concern, Foreclosure, Orofino data center, Mining operations, Co-location hosting, Digital assets, Blockchain, Working capital deficit, Net loss, Related party transactions, Internal controls, ASIC miners, Convertible notes, Preferred stock