TRXA Trex Acquisition Corporation (PK)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

TREX Acquisition Corp. (The “Company”) was formed on January 16, 2008 in the state of Nevada under the name Plethora Resources, Inc. as a development stage enterprise. The Company was originally organized to engage in the business of consulting to oil and gas exploration companies interested in obtaining exploration and production licenses at auction for oil and gas properties in Russia. The Company later changed its name to Sync2 Networks Corp when the Company began to engage in software-related services. On March 20, 2014 to TREX Acquisition Corp. after the Company business operations had ceased.

As of September 30, 2021, the Company consists of itself, its 100% owned subsidiary Sync2 Networks International Ltd, a Nevada corporation (“Sync2 Subsidiary”), its 100% owned subsidiary TRXA Merger Sub, Inc., a Delaware corporation (“TRXA Subsidiary”), and its 100% owned subsidiary, Raptor Mining LLC, a Florida limited liability company (“Raptor Mining Subsidiary”).

These unaudited interim consolidated financial statements should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s fiscal year end June 30, 2021 report. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the three months ended September 30, 2021, are not necessarily indicative of results for the entire year ending June 30, 2022.

On April 7, 2014, our Board of Directors deemed it in the best interests of the Company and its shareholders to domesticate our subsidiary, Sync2 International Ltd., as a corporation formed under the laws of Malta to a corporation formed under the laws of the State of Nevada (the “Domestication”), which under Nevada statutory law involves the transfer of an existing corporation from one jurisdiction to another whereby Sync2 Networks International Ltd. shall cease all operations in Malta. On May 1, 2014, we filed Articles of Domestication with the Nevada Secretary of State effecting the domestication of Sync2 International Ltd. as a corporate entity formed under the laws of the State of Nevada, which domestication provides that Sync2 Subsidiary as domesticated in the State of Nevada shall be the same entity as Sync2 International Ltd. organized under the laws of Malta. Sync2 Subsidiary does not and has not had any operations since 2015/

On March 13, 2020, the Company incorporated the TRXA Subsidiary in order to facilitate the acquisition of a pre-revenue Software-as-a-Service internet platform business. The Company’s sole Officer and Director currently serves as the sole officer and director of the TRXA Subsidiary. As of the date of this filing, neither the Company nor the Merger Sub have entered into a definitive agreement or non-binding letter of intent to acquire a company. The Company’s acquisition consultants continue to provide vetted candidates for merger with the Company.

Raptor Mining LLC

On July 9, 2021, the Company formed Raptor Mining Subsidiary in order to investigate a business model pivot towards operating a cryptocurrency mining facility. As of the date of this filing, Raptor Mining Subsidiary has only engaged in the due diligence process regarding the risks and opportunities attendant to cryptocurrency mining, but the Company hopes to begin testing and implementation by November 30, 2021.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.

Determination of Bad Debts

The Company’s policy is to analyze the collectability of Accounts and Notes Receivable on a monthly basis to determine whether any allowance for doubtful accounts is necessary. Once the allowance has been determined the offset is booked to bad debt expense and subsequently if the account is deemed to be a bad debt, it is written off the allowance for doubtful accounts.

Principles of Consolidation

The accounts include those of the Company and its 100% owned subsidiaries All intercompany transactions have been eliminated. At this time, Sync2 Subsidiary has no operations, assets or liabilities.

Concerning the TRXA Subsidiary, the Company’s sole Officer and Director currently serves as the sole officer and director of the TRXA Subsidiary. As of the date of this filing, neither the Company nor the TRXA Subsidiary have entered into a definitive agreement or non-binding letter of intent to acquire a company. The Company’s acquisition consultants continue to provide vetted candidates for merger with the Company.

Concerning the Raptor Mining Subsidiary, the Company serves as the sole member and managing member. The Company is assessing potential personnel and consultants needed to implement the cryptocurrency mining operations.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the estimated useful lives of property and equipment. Actual results could differ from those estimates.

Cash equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Fair value of financial instruments

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S.) GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

The carrying amount of the Company’s financial assets and liabilities, such as cash, and accrued expenses approximate their fair value because of the short maturity of those instruments. The Company’s notes payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at September 30, 2021.

The assets and liabilities recorded on the balance sheet approximate their fair value.

Equipment

Equipment is recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful life of three (3) or seven (7) years. Upon sale or retirement of equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations.

Stock based compensation

The Company accounts for stock-based compensation in accordance with ASC Section 718 Compensation – Stock Compensation. Under the fair value recognition provisions of ASC 718 stock based compensation is measured at the grant date based on the fair value of the award and is recognized as expensed ratably over the requisite service period/vesting period.

The company accounts for its non-employee stock-based compensation in accordance with Update 2018-07—Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.

Commitments and contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. Since September 30, 2021 and through the date of filing, there have been no intervening lawsuits, claims or judgments filed.

Revenue recognition

The Company recognizes revenue under ASU No. 2014-09, ”Revenue from Contracts with Customers (Topic 606),” (“ASC 606”). The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods and services transferred to the customer. The following five steps are applied to achieve that core principle:

Income taxes

Federal Income taxes are not currently due since we have had losses since inception.

Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25 Income Taxes – Recognition. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard required by ASC 740-10-25-5.

Deferred income tax amounts reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes.

As of September 30, 2021, we had a net operating loss carry-forward of approximately $(2,866,559) and a deferred tax asset of $601,977 using the statutory rate of 11%. The deferred tax asset may be recognized in future periods, not to exceed 20 years. However, due to the uncertainty of future events we have booked valuation allowance of $(601,977). FASB ASC 740 prescribes recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At September 30, 2021, the Company had not taken any tax positions that would require disclosure under FASB ASC 740.

Due to the changes the Tax Reform Act of 1986 and the Tax Cut and Jobs Act of 2017, net operating loss carryforwards for Federal Income tax reporting purposes are subject to additional limitations. Should certain changes in ownership occur, our net operating loss carryforwards may be limited to use in future years. In addition, tax rates on corporations were reduced and certain other deductions limited. These changes may affect the income tax benefit calculation and related allowance during subsequent fiscal years

Net income (loss) per common share

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding and potentially outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented.

There were outstanding warrants that could convert into 187,500 shares of common stock as of September 30, 2021. At the end of both periods the potentially dilutive shares were excluded because the effect would have been anti-dilutive.

Cash flows reporting

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.

Advertising Costs

The Company expenses the cost of advertising and promotional materials when incurred. Total Advertising costs were zero for all periods.

Subsequent events

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer, considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

NOTE 3 – GOING CONCERN

As reflected in the accompanying financial statements, the Company had an accumulated deficit of $2,939,616 and a working capital deficit of $74,181 as of September 30, 2021.

While the Company is attempting to commence operations and generate revenues, the Company’s cash position may not be significant enough to support the Company’s daily operations. 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. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate revenues.

The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 4 – RELATED PARTY TRANSACTIONS

On June 24, 2014 the company entered into an unsecured promissory note with Lazarus Asset Management, LLC. in the amount of $34,550 with an interest rate of 5% per annum and a due date of June 24, 2015. This note was  in default until September 30, 2021, when all outstanding principal and interest balances were converted into common stock. Therefore the balance on this note at September 30, 2021 was $0.

On June 24, 2014, the company entered into an unsecured promissory note with Squadron Marketing, Inc. in the amount of $19,350 with an interest rate of 5% per annum and a due date of June 24, 2015. This note was in default until September 30, 2021, when all outstanding principal and interest balance were converted into common stock. Therefore, the balance on this note at September 30, 2021 was $0.

On July 1, 2014, the Company entered into management agreements with Squadron Marketing, Inc. and Lazarus Asset Management, LLC for $30,000 each annually to assist the Company in obtaining potential merger candidates, negotiating the merger agreements, drafting, along with the Company’s attorney, offering documents, and assisting with closing the transactions. The agreements resulted in Management Fee expense of $15,000 for the three months ended September 30, 2021 and September 30, 2020. As of September 30, 2021, all but $15,000 had been converted into common stock.

On January 1, 2015, the company entered into a management agreement with Frank Horkey for a period of 5 years and will issue 350,000 shares of its common stock as consideration and was accounted for on the balance sheet as shares to be issued and was expensed over the life of the contract (5 years), which resulted in a prepaid consulting expense of $210,000. They were valued on the date of the agreement and the stock price at that time was $.60. As of September 30, 2021, all the shares have been issued and the cost has been fully amortized. For the three months ended September 30, 2021 and 2020 the company amortized and expensed $0 and $0 respectively.

Free office space

The Company has been provided office space by its Chief Executive Officer at no cost. The management determined that such cost is nominal and did not recognize the rent expense in its financial statements.

Due to Related Parties

During the three months ended September 30, 2021, the Company incurred management fees to related parties of $15,000 and advanced $29,334 for operational expenses by related parties. As of September 30, 2021 the outstanding balance due was $44,344.

During the year ended June 30, 2021 the company converted $598,662 in related party debt, including amounts due for advances and accrued management fees, into 11,380,198 shares of common stock.

On August 6, 2021 the company issued 1,500,000 for the conversion of $45,000 in related party payables.

NOTE 5 – COMMON STOCK

On January 1, 2015, the Company entered into a management agreement for a period of 5 years and will issue 350,000 shares of its common stock as consideration and is accounted for on the balance sheet as shares to be issued and will be expensed over the life of the contract (5 years), which resulted in a prepaid consulting expense of $210,000. They were valued on the date of the agreement and the stock price at that time was $.60. For the three months ended September 30, 2021 and 2020 we expensed $0 and $0 respectively. These shares were issued as part of the January resolution referenced below.

On January 1, 2015, the Company entered into a management agreement for a period of 2 years and will issue 100,000 shares of its common stock as consideration and is accounted for on the balance sheet as shares to be issued and will be expensed over the life of the contract (2 years), which resulted in a prepaid consulting expense of $60,000. They were valued on the date of the agreement and the Company’s stock price at that time was $.60. For the three months ended September 30, 2021 and 2020 we expensed $0 and $0 respectively. These shares were issued as part of the January resolution referenced below.

On January 21, 2020, the Company formally resolved to issue (a) 1,835,835 shares of its common stock in connection with prior Boardwalk convertible debt conversions, (b) 450,000 shares of its common stock in connection with management compensation, (c) 250,000 shares of its common stock to unit subscribers in connection with the failed Kerr transaction, and (d) 350,000 shares of its common stock in connection with a 2018 private sale of 350,000 shares to a related party for $47,500. These shares were issued on September 9, 2020.

On March 12, 2020, the Company resolved to issue 300,000 shares of its common stock in connection to professional service providers. These shares were issued on September 9, 2020.

On June 24, 2020, the Company resolved to issue 8,900,000 shares of its common stock in connection with the conversion of $473,616 in debt owed to consultants pursuant to a July 1, 2014 consulting agreement, this includes all notes payable, accrued interest and other advances. These shares were issued on September 9, 2020.

On September 9, 2020, the Company issued 200,198 shares of its common stock in connection to expenses paid by related parties.

In accordance with the terms and provisions of that certain Settlement Agreement dated October 9, 2020 (the "Settlement Agreement"), on November 20, 2020 TREX Acquisition Corp. issued to Squadron Marketing LLC, 400,000 of the Company’s common stock and to Lazarus Asset Management LLC, 400,000 of its common stock and 500,000 shares of its common stock were issued to the estate of a former shareholders. These shares were issued on November 23, 2020.

On March 24, 2021 the company issued 980,000  shares of its common stock  for advances and payments made on behalf of the company and management services rendered by related parties.

On August 6, 2021 the company issued 1,500,000  shares of its common stock for the conversion of $45,000 in related party payables.

NOTE 6 – WARRANTS

On May 3, 2014, it was resolved that the Company shall offer 250,000 Units at a price of $.80 per unit.Each Unit shall consist of (a) one (1) share of common stock and (b) a combination of series A warrants (which may be exercised within three (3) years) and series B warrants exercised within five (5) years of the consummation of a merger.

On May 14, 2014, the company entered into a subscription agreement for 157,500 units at $.80 per share for a total of $125,000. Each unit consists of one (1) share of common stock and one (1) series A warrant to purchase one share of common stock at $1.25 per share. Each A warrant expires three years from the date of issuance.

On May 14, 2014, the company entered into a subscription agreement for 32,000 units at $.80 per share for a total of $25,000. Each unit consists of one (1) share of common stock and one (1) series A warrant to purchase one share of common stock at $1.25 per share. Each A warrant expires three years from the date of issuance.

On July 14, 2014, the company entered into a subscription agreement for 62,500 units at $.80 per share for a total of $50,000. Each unit consists of one (1) share of common stock, and two (2) Series A warrants to purchase one (1) share of common stock at $.65 per share and one (1) series B warrant to purchase one (1) share of common stock at $.80. Each series A warrant expires three years from the consummation of a merger and each series B warrant expires 5 years from the consummation a merger.

The Company may call the B Warrants at such point the quoted market closing price is at least $2.50 for 20 consecutive trading days. In the event the Company calls the Warrants, it shall immediately notify holders of the Warrants of the call. Warrants holders will be granted a period of 45 calendar days to redeem the Warrants by returning the Warrant to the Company accompanied by payment of $.80 per share. The warrants were valued using a Black Scholes calculation.

The inputs for series A used a price $.59, a strike price range of $.65 – $1.25, maturity 3 years, a risk-free interest rate of 3.9% and a beta of 50% estimated and were valued at $.202. The inputs for series B used a price $.59, a strike price of .80, maturity 5 years, a risk-free interest rate of 3.9% and a beta of 50% estimated and were valued at $.232.

As of the filing date of this quarterly report, 189,500 A warrants have expired leaving only 125,000 A Warrants and 62,500 B Warrants remaining effective since the Company has yet to consummate a merger.

The following is the outstanding warrant activity: