TEXAS MINERAL RESOURCES CORP. In this Quarterly Report on Form 10-Q, unless the context requires otherwise,
references to "
Forward-Looking Statements
This Quarterly Report on Form 10-Q and the exhibits attached hereto contain "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, "forward-looking statements"). Such forward-looking statements concern our anticipated results and developments in our operations in future periods, planned exploration and development of our properties, plans related to our business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects" or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "estimates" or "intends", or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q, include, but are not limited to:
? the progress, potential and uncertainties of the rare-earth exploration
plans at our Round Top project in Hudspeth County, Texas (the "Round Top
Project " or "Round Top");
? timing for a completed feasibility study for the Round Top Project ;
? the success of getting the necessary permits for future Round Top drill
programs and project development;
? success of RTMD (as defined below) in developing the Round Top Project ,
including without limitation raising sufficient capital;
? expectations regarding our ability to raise capital and to continue our
exploration plans on our properties (either to fund our proportionate
expenditures in the Round Top Project as a member of RTMD or otherwise);
? plans regarding anticipated expenditures at the Round Top Project ; and
? plans to enter into a joint venture agreement with Santa Fe and our
ability to fund such potential exploration and development project.
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation:
? risks associated with our ability to continue as a going concern in future
periods;
? risks associated with our history of losses and need for additional
financing;
? risks associated with our operating history;
? risks associated with owning a 20% interest in Round Top ;
? risks associated with our properties;
? risks associated with the lack of history in producing metals from the
Round Top Project ;
? risks associated with our need for additional financing to maintain our
ownership interest in, as well as the requirement in general for
additional capital to further develop, the Round Top Project ;
? risks associated with exploration activities not being commercially
successful;
? risks associated with ownership of surface rights and other title issues
with respect to the Round Top Project ;
? risks associated with increased costs affecting our financial condition;
? risks associated with a shortage of equipment and supplies adversely
affecting the ability to operate properties;
? risks associated with mining and mineral exploration being inherently
dangerous;
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? risks associated with mineralization estimates;
? risks associated with changes in mineralization estimates affecting the
economic viability of the properties;
? risks associated with uninsured risks;
? risks associated with mineral operations being subject to market forces
beyond our control;
? risks associated with fluctuations in commodity prices;
? risks associated with permitting, licenses and approval processes;
? risks associated with the governmental and environmental regulations;
? risks associated with future legislation regarding the mining industry and
climate change;
? risks associated with potential environmental lawsuits;
? risks associated with land reclamation requirements;
? risks associated with rare earth and mining in general presenting
potential health risks;
? risks related to competition in the mining and rare earth elements
industries;
? risks related to economic conditions;
? risks related to our ability to manage growth;
? risks related to the potential difficulty of attracting and retaining
qualified personnel;
? risks related to our dependence on key personnel;
? risks related to our United States Securities and Exchange Commission (the
"SEC") filing history; and
? risks related to our securities.
This list is not exhaustive of the factors that may affect the Company's forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the section headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Except as required by law, the Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. We qualify all the forward-looking statements contained in this Quarterly Report by the foregoing cautionary statements.
In light of these risks and uncertainties, many of which are described in greater detail elsewhere in this Quarterly Report, there can be no assurance that the events predicted in forward-looking statements contained in the Quarterly Report will in fact transpire.
An investment in our Common Stock involves significant risks, including the risk of a loss of your entire investment. You should carefully consider the risks and uncertainties described herein before purchasing our Common Stock. The risks set forth herein are not the only ones facing our Company. Additional risks and uncertainties may exist and others could arise that could also adversely affect our business, financial condition, operations and prospects. If any of the risks set forth herein actually materialize, our business, financial condition, prospects and operations would suffer. In such event, the value of our Common Stock would decline, and you could lose all or a substantial portion of your investment.
Going Concern
These financial statements have been prepared assuming that the Company will
continue as a going concern. The Company has an accumulated deficit from
inception through
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At
In accordance with our current projected budget, the Company does not have
sufficient capital to fund its total cash calls and expected general and
administrative expenses during the fiscal year ending
Overview
We are a mining company engaged in the business of the acquisition, exploration
and development of mineral properties. We currently own a 20% membership
interest in RTMD, which entity holds two mineral property leases with the
Rare earth elements ("REE") are a group of chemically similar elements that usually are found together in nature - they are referred to as the "lanthanide series." These individual elements have a variety of characteristics that are critical in a wide range of technologies, products, and applications and are critical inputs in existing and emerging applications. Without these elements, multiple high-tech technologies would not be possible. These technologies include:
? cell phones,
? computer and television screens,
? electric vehicles,
? clean energy technologies, such as hybrid and electric vehicles and wind
power turbines,
? fiber optics, lasers and hard disk drives,
? numerous defense applications, such as guidance and control systems and
global positioning systems,
? advanced water treatment technology for use in industrial, military and
? outdoor recreation applications
Because of these applications, global demand for REE is projected to steadily
increase due to continuing growth in existing applications and increased
innovation and development of new end uses. Interest in developing resources
domestically has become a strategic necessity as there is limited production of
these elements outside of
In
On
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In connection with USARE meeting its obligations to acquire a 70% interest in
the
Upon entry into the Contribution Agreement, the Company assigned the following
contracts and assets to RTMD in exchange for its 20% membership interest in
RTMD:
? the assignment and assumption agreement with respect to the mineral leases
from the Company to RTMD;
? the assignment and assumption agreement with respect to the surface lease
from the Company to RTMD;
? the assignment and assumption agreement with respect to the surface
purchase option from the Company to RTMD;
? the assignment and assumption agreement with respect to the water lease
from the Company to RTMD; and
? the bill of sale and assignment agreement of existing data with respect to
RTMD owned by the Company.
and USARE assigned the following assets to RTMD (or the Company, as applicable) for its 80% membership interest in RTMD:
? cash to RTMD to continue to fund Round Top Project operations in the
amount of approximately $3,761,750 comprising the balance of the $10
million required expenditure to earn a 70% interest in RTMD;
? cash in the amount of $3 million to the Company upon exercise of the USARE
option to acquire from the Company an additional 10% interest in RTMD,
resulting in the aggregate ownership interest of 80% in RTMD;
? bill of sale and assignment agreement of the Pilot Plant to RTMD;
? the assignment and assumption regarding relevant contracts and permits
with respect to RTMD; and
? bill of sale and assignment agreement of existing data and intellectual
property owned by USARE to RTMD.
The Company accounts for its interest in RTMD using the proportionate consolidation method, which is an exception available to entities in the extractive industries, thereby recognizing its pro-rate share of the assets, liabilities, and operations of RTMD in the appropriate classifications in the financial statements.
Santa Fe Project
In
Under the terms of the option agreement, the Company plans to conduct a
district-wide evaluation among the patented and unpatented claims held by
Additionally, in
There can be no assurance any joint venture agreement or financing agreement will be consummated or that this project will materialize.
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Liquidity and Capital Resources
At
During the fiscal year ending
During the current fiscal year,
We do not have sufficient cash on hand to fund our portion of the Round Top
Budget during our current fiscal year. Therefore, we will need to raise
additional funding to implement our business strategy and to continue to fund
our portion of the Round Top Budget, the failure of which would result in
dilution of our ownership interest in RTMD (which could be significant) and
could further cause us to curtail or cease our operations. The most likely
source of future financing presently available to us is through the sale of our
securities. Any sale of our shares of Common Stock will result in dilution of
equity ownership to existing stockholders. This means that if we sell shares of
Common Stock, more shares will be outstanding and each existing stockholder will
own a smaller percentage of the shares then outstanding. Alternatively, we may
rely on debt financing and assume debt obligations that require us to make
substantial interest and capital payments. Also, we may issue or grant warrants
or options in the future pursuant to which additional shares of Common Stock may
be issued. Exercise of such warrants or options will result in dilution of
equity ownership to our existing stockholders. We have no firm commitment with
respect to obtaining debt or equity financing and, accordingly, we will be
reliant upon a best efforts financing strategy. Accordingly, there is no
assurance that we will be able to raise necessary capital to fund our portion of
the Round Top Budget and our general administrative expenses during the fiscal
year ending
Results of Operations
Three months ended
Grant Income
Grants received from government and other agencies in advance of a specific
project's expenses are deferred and recognized as other income in the statements
of operations in the period they are earned and the related project costs are
incurred. For the three months ended
Revenue
We had no operating revenues during the three months ended
Operating expenses and resulting losses from Operations.
We incurred exploration costs for the three months ended
Our general and administrative expenses for the three months ended
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For the three months ended
We had losses from operations for the three months ended
We had net losses for the three months ended
Investment Company Act Exclusion
Section 3(a)(9) of the Investment Company Act of 1940, as amended ("1940 Act"), provides that a company "substantially all of whose business consists of owning or holding oil, gas, or other mineral royalties or leases, or fractional interests therein, or certificates of interest or participation in or investment contracts relative to such royalties, leases, or fractional interests" is not an investment company within the meaning of the 1940 Act. The Company has determined that this exemption applies to it giving consideration to the following four factors:
? whether the exempted activity constitutes "substantially all" of our
business;
? The Company has owned mineral leases since 2010, all of our business to
date has been comprised of owning and developing the mineral leases
and, after the May 2021 "farm-down" of its 100% interest in the mineral
leases, all of our business continues to be comprised of owning and
holding a certificate of interest and a participation in the mineral
leases owned by RTMD. The Company's mineral assets historically, as
well as the value of the certificate of interest at November 30, 2022 ,
have been booked at cost in accordance with GAAP. We have an
accumulated deficit of approximately $40.4 million at November 30, 2022
as a result of owning and developing the Round Top Project .
? whether we own or trade in the mineral leases;
? The Company has owned the mineral leases, which are now owned by RTMD,
since 2010 and neither the Company nor RTMD is in the business of
dealing or trading in the mineral leases.
? what qualifies as an eligible asset for purposes of the exception; and
? The statute specifically references mineral leases and our mineral
leases were owned by the Company and are now owned by RTMD. In
accordance with Regulation S-K Item 1300 that governs disclosure by
registrants engaged in mining operations, the definition of mineral
resource is "a concentration or occurrence of material of economic
interest in or on the Earth's crust." Our rare earth elements and
minerals underlying the mineral leases meet that definition, as well as
does coal, silver, gold and other material mined for economic value by
registrants involved in mining operations. The SEC staff has recognized
that an excepted entity can also engage in related business activities
such as exploring, developing, and operating the eligible assets.
? what qualifies as a "certificate of interest or participation in" or an
"investment contract relative to" the eligible assets.
? The statute allows a Company to own a "certificate of interest" or
"participation in" the mineral leases. The SEC staff has advised that
limited partnership interests and/or similar securities issued by
entities that themselves own the leases constitute "certificate of
interest or participation in or investment contracts" related to such
leases. The Company's 20% membership interest in RTMD constitutes a
"certificate of interest" and a "participation in" the mineral leases
that are owned by RTMD.
The Company intends to continue to conduct its business operations in order to continue to be excluded from the definition of an "investment company" under the 1940 Act.
Off-Balance Sheet Arrangements
None.
Critical Accounting Estimates
Management's discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. Preparation of financial statements requires management to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and the related disclosures of contingencies. Management bases its estimates on various assumptions and historical experience, which are believed to be reasonable; however, due to the inherent nature of estimates, actual results may differ significantly due to changed conditions or assumptions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are fairly presented in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Management believes that the following critical accounting estimates and judgments have a significant impact on our financial statements; Valuation of options granted to directors, officers and consultants using the Black-Scholes model.
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