In this Quarterly Report on Form 10-Q, unless the context requires otherwise, references to "Texas Mineral Resources Corp," "the Company" "we," "our" or "us" refer to Texas Mineral Resources Corp. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this quarterly report. This Quarterly Report on Form 10-Q may also contain statistical data and estimates we obtained from industry publications and reports generated by third parties. Although we believe that the publications and reports are reliable, we have not independently verified their data.





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 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 history of losses and need for additional financing;




  ? risks associated with our limited operating history;




  ? risks associated with our properties all being in the exploration stage;




  ? risks associated with our lack of history in producing metals from our
    properties;




  ? risks associated with our inability to fund our proportionate expenditures in
    the Round Top Project as a member of RTMD which will result in dilution of our
    membership interest in RTMD;




  ? risks associated with our need for additional financing to develop a producing
    mine, if warranted;




  ? risks associated with the potential Santa Fe joint venture arrangement;




  ? risks associated with our exploration activities not being commercially
    successful;




                                       12





  ? risks associated with increased costs affecting our financial condition;




  ? risks associated with a shortage of equipment and supplies adversely affecting
    our ability to operate;




  ? risks associated with mining and mineral exploration being inherently
    dangerous;




  ? risks associated with mineralization estimates;




  ? risks associated with changes in mineralization estimates affecting the
    economic viability of our 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 our land reclamation requirements;




  ? risks associated with rare earth and beryllium mining presenting potential
    health risks;




  ? risks related to title in our properties;




  ? 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 SEC filing history; and




  ? risks related to our securities.



This list is not exhaustive of the factors that may affect our forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the section heading "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report and "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended August 31, 2021, filed with the SEC on November 29, 2021. Although we have 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. We caution 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, we disclaim any obligation to subsequently 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.





                                       13





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 Texas General Land Office to explore and develop a 950-acre rare earths project located in Hudspeth County, Texas, known as the Round Top Project. The leases, originally signed with primary terms of approximately 19 and 18 years, each currently have remaining terms of approximately eight years and provisions for automatic renewal if Round Top is in production. RTMD also holds prospecting permits covering 9,345 acres adjacent to the Round Top Project. The strategy of RTMD is to develop a metallurgical process to concentrate or otherwise extract the metals from the Round Top Project's rhyolite, conduct additional engineering, design, geotechnical work, and permitting necessary for a bankable feasibility study and then to extract mineral resources from the Round Top Project. The Round Top Project has not established as of the date hereof that any of the properties contain any probable mineral reserves or proven mineral reserves under Item 1300 of Regulation S-K.

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 China. Our ability to raise additional funds to continue to fund our participation interest in the Round Top Project may be impacted by future prices for REEs.

USA Rare Earth Agreement

In August 2018, the Company and Morzev Pty. Ltd. ("Morzev") entered into an agreement (the "2018 Option Agreement") whereby Morzev was granted the exclusive right to earn and acquire a 70% interest in the Company's Round Top Project by financing $10 million of expenditures in connection with the Project, increasable to an 80% interest for an additional $3 million payment to the Company. Morzev began operating as USA Rare Earth, LLC ("USARE") and in May 2019 notified the Company that it was nominating USARE as the optionee under the terms of the 2018 Option Agreement. In August 2019, the Company and USARE entered into an amended and restated option agreement as further amended on June 29, 2020 (the "2019 Option Agreement" and collectively with the 2018 Option Agreement, the "Option Agreement"), whereby the Company restated its agreement to grant USARE the exclusive right to earn and acquire a 70% interest, increasable to an 80% interest, in the Round Top Project. The 2019 Option Agreement has substantially similar terms to the 2018 Option Agreement:

On May 17, 2021, and in accordance with the terms of the Option Agreement, the Company and USARE entered into a contribution agreement ("Contribution Agreement") whereby the Company and USARE contributed assets to Round Top Mountain Development ("RTMD"), a wholly-owned subsidiary of the Company, in exchange for their ownership interests in RTMD, of which the Company now owns membership interests equating to 20% of RTMD and USARE owns membership interests equating to 80% of RTMD. Concurrently therewith, the Company and USARE as the two members entered into a limited liability company agreement ("Operating Agreement") governing the operations of RTMD which contains customary and industry standard terms as contemplated by the Option Agreement. USARE will serve as manager of RTMD and Mr. Gorski, on behalf of the Company, will serve as one of the three members of the management committee.





                                       14




In connection with USARE meeting its obligations to acquire a 70% interest in the Round Top Project and exercising its right to an additional 10% interest, the Company received total consideration of approximately $3,728,000, consisting of the $3 million upon exercise of the option and approximately $728,000 in previous advances to the Company by USARE, and derecognized 80% of the carrying amount of mineral properties, or approximately $402,000. The resulting gain on sale of interest in mineral properties in the amount of approximately $3,326,000 is included as its own line item in other income (expense) was recognized during the quarter ended May 31, 2021.

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. Subsequent to the sale of an undivided 80% interest in the Round Top Project, there was no significant activity in RTMD requiring recognition in the financial statements.

Santa Fe Project

On November 8, 2021, the Company entered into a mineral exploration and option agreement with Santa Fe Gold Corporation ("Santa Fe"). Under the agreement, the Company and Santa Fe plan to pursue, negotiate and subsequently enter into a joint venture agreement to jointly explore and develop a target silver property to be selected by the Company among patented and unpatented mining claims held by Santa Fe within the Black Hawk Mining District in Grant County, New Mexico. Completion of a joint venture agreement is subject to the successful outcome of a multi-phase exploration plan leading to a bankable feasibility study to be undertaken in the near future by the Company. Under the terms of the joint venture agreement, the Company would be project operator and initially own 50.5% of the joint venture while Santa Fe would initially own 49.5%. Additional terms of the joint venture are to be negotiated between the Company and Santa Fe.

Under terms of the agreement, the Company plans to conduct a district-wide evaluation among the patented and unpatented claims held by Santa Fe, consisting of geologic mapping, sampling, trenching, radiometric surveying, geophysics, drilling and/or other methods as warranted. Based on the district-wide evaluation, the Company will designate one 80-acre tract as the "project area" and commence detailed exploration work. The property covered in the agreement is approximately 1,300 acres and covers approximately 75% of the known mining district. The area to be studied also includes a two-mile radius "area of interest." The agreement also provides the Company with the option to include in the "project area" properties within the "area of interest". The term of the option is for so long as the Company continues to conduct exploration activities in the Project Area and can be exercised on 60 days' notice to Santa Fe.





                                       15




Additionally, on November 8, 2021, the Company entered into a financing and purchase option agreement with Greentech Minerals Holdings, Inc. ("Greentech"). Under the agreement, Greentech is responsible for funding initial exploration activities and the bankable feasibility study, estimated to cost approximately $6.5 million, for the Santa Fe project exploration. It is contemplated that the bankable feasibility study will be designed to proceed in five tranches, each based on the success of the previous. It is estimated that completion of all tranches, if successful, would take twelve to fifteen months, depending on variables such as data analysis, weather and permitting.

Upon successful completion of the study, Greentech will be entitled to received 20% of the Company's initial equity in the proposed joint venture with Santa Fe, equal to approximately 10.1% of the total equity of the joint venture. In addition, assuming Greentech exercises its option to participate in funding the Santa Fe project capital expenditures, currently anticipated to be approximately $15 million, it will be entitled to receive another 20% of the Company's initial equity in the future joint venture, equal to approximately an additional 10.1%. In total, Greentech, in exchange for its funding, has the ability to earn at least 20.2% membership interest in the potential joint venture with Santa Fe assuming successful completion of the overall first project.

Liquidity and Capital Resources

As of November 30, 2021, our accumulated deficit was approximately $37,187,000 and our cash position was approximately $4,863,000. We had a working capital surplus of approximately $4,812,000. We have not commenced commercial production on any of our mineral properties. We have no revenues from operations and anticipate we will have no operating revenues until we place one or more of our properties into production. All properties are in the exploration stage.

In December 2021, the Company funded its December cash call in the amount of $305,000 into the Round Top Project.

During the current fiscal year, RTMD is expected to fund the expenditure of approximately $20 million to optimize the leaching and developing of the CIX/CIC processing of the Round Top Project. Initial process design work will be carried out at USARE's facility in Wheat Ridge, Colorado. Pending completion of the initial process development, this facility will either be relocated to or replicated at the Round Top Project where a pilot plant is expected to be established. This work will consist of mining and crushing approximately 40,000 tonnes of rhyolite and setting up and equipping a facility to conduct pilot plant scale heap leaching. It is estimated that the Round Top Project will require additional time and further expenditure to complete a bankable feasibility study. We plan to fund up to approximately $3.5 million of the expected expenditures by RTMD during our current fiscal year.

We have sufficient cash on hand to fund our portion of the RTMD budget during our current fiscal year. Thereafter, we will need to raise additional funding to implement our business strategy and to continue to fund our portion of the RTMD budget (20% is our obligation and this percentage equates to our membership interest in RTMD), the failure of which could 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.





Results of Operations



Three months ended November 30, 2021 and November 30, 2020





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 November 30, 2021 and 2020, we recognized approximately $374,600 and $50,000, respectively, of grant income which is presented in other income net of grant related expenses totaling approximately $304,000 and $0, respectively.





Revenue


We had no operating revenues during the three months ended November 30, 2021 and November 30, 2020. We are not currently profitable. As a result of ongoing operating losses, we had an accumulated deficit of approximately $37.2 million as of November 30, 2021.

Operating expenses and resulting losses from Operations.

We incurred exploration costs for the three months ended November 30, 2021 and November 30, 2020, in the amount of approximately $71,000 and $66,000, respectively. Expenditures during the three months 2021 and 2020 were primarily for metallurgical testing and delay rentals. In the three months ended November 30, 2020 expenditures for metallurgical activities were funded by our joint venture partner, USARE.





                                       16




Our general and administrative expenses for the three months ended November 30, 2021 and November 30, 2020, respectively, were approximately $340,000 and $325,000. For the three months ended November 30, 2021 and 2020, this amount included approximately $171,000 and $190,000, respectively, in stock-based compensation to directors and outside consultants. The remaining expenditures were primarily for payroll and related taxes and benefits, professional fees and other general and administrative expenses necessary for our operations.

For the three months ended November 30, 2021 and November 30, 2020, we earned approximately $1,600 and $1,400, respectively, in interest income from depository accounts.

We had losses from operations for the three months ended November 30, 2021 and November 30, 2020 totaling approximately $411,000 and $391,000, respectively.

We had net losses for the three months ended November 30, 2021 and November 30, 2020 totaling approximately $339,000 and $340,000, respectively.

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, 2021, have been booked at cost in accordance with
    GAAP. We have an accumulated deficit of approximately $37.2 million at August
    31, 2021 as a result of owning and developing the Round Top Project. Our Board
    of Directors has authorized and instructed us to (i) invest approximately $3.5
    million of our current cash during the current fiscal year to meet the RTMD
    budgeted cash calls pursuant to the initial budget adopted by the Company and
    USARE in the Operating Agreement, for the Round Top Project, as well as to
    (ii) fund future budgets to be adopted by the management committee of RTMD for
    the development of the Round Top Project to the extent of available working
    capital.




  ? 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.




                                       17




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

For the three months ended November 30, 2021 and 2020, we have off-balance sheet arrangements for annual payments in relation to the mineral leases as disclosed in Note 4 of the interim consolidated financial statements.





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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