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 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;
? risks associated with increased costs affecting our financial condition;
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? 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
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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
In connection with USARE meeting its obligations to acquire a 70% interest in
the
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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
On
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, on
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
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
As of
During the nine months ended
Depending upon the amount of our portion of the RTMD budget during the next fiscal year, we may 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, correlating to our membership interest), the failure of which could cause us to reduce our ownership interest in RTMD or 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
Nine months ended
General and Revenue
We had no operating revenues during the nine months ended
Operating expenses, other income (expenses) and resulting losses from Operations.
We incurred exploration costs for the nine months ended
Our general and administrative expenses for the nine months ended
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 nine months ended
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For the nine months ended
In
We had losses from operations for the nine months ended
We had a net loss for the nine months ended
Three months ended
General and Revenue
We had no operating revenues during the three months ended
Operating expenses, other income (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
For the three months ended
In
We had losses from operations for the three months ended
We had a net loss for the three months ended
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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 August 31, 2021 and
May 31, 2022 , 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.
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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