Texas Mineral Resources Corp

BALANCE SHEETS

(Unaudited)

TEXAS MINERAL RESOURCES CORP.

CONSOLIDATED STATEMENTS OF CASHFLOWS

For the Six Months Ended February 28, 2022 and February 28, 2021

(Unaudited)

Texas Mineral Resources Corp.

Notes to Interim Consolidated Financial Statements

November 30, 2017February 28, 2022 

(Unaudited)

NOTE 1 – BASIS OF PRESENTATIONGENERAL

Basis of Presentation

The accompanying unaudited interim consolidated financial statements of Texas Mineral Resources Corp. (“we”, “us”, “our”, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in our annual report on Form 10-K, for the year ended August 31, 2017,2021, dated December 14, 2017November 29, 2021 as filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year ended August 31, 20172021 as reported in our annual report on Form 10-K, have been omitted.

Principles of Consolidation

The consolidated financial statements include the accounts of Texas Mineral Resources Corp. and its proportionate interest in the assets, liabilities, and operations of Round Top Mountain Development Company, LLC (“RTMD”). All significant intercompany balances and transactions have been preparedeliminated.

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share (“EPS”) calculation in certain areas. This ASU is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. Management does not expect the adoption of this standard to have a significant impact on the Company’s financial position, results of operations or cash flows.

NOTE 3 – JOINT VENTURE ARRANGEMENTS

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 going concern basis70% interest in the Company’s Round Top Project (“Project” or “Round Top” or “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 RTMD, a wholly-owned subsidiary of the Company, in exchange for their ownership interests in RTMD, of which assumesthe 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 not be ableserve as one of the three members of the management committee.

In connection with USARE meeting its obligations to realize its assets and discharge its liabilitiesacquire a 70% interest in the normal courseRound Top Project and exercising its right to an additional 10% interest, the Company received total consideration of businessapproximately $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 was recognized during the quarter ended May 31, 2021.

Texas Mineral Resources Corp. 

Notes to Interim Consolidated Financial Statements 

February 28, 2022 

(Unaudited)

NOTE 3 – JOINT VENTURE ARRANGEMENTS (CONTINUED)

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:

and USARE assigned the foreseeable future. following assets to RTMD (or the Company, as applicable) for its 80% membership interest in RTMD:

The Company has incurred losses since inception resultingaccounts for its interest in RTMD using the proportionate consolidation method, which is an accumulated deficit of approximately $34,748,000 as of November 30, 2017 and further losses are anticipatedexception available to entities in the developmentextractive industries, thereby recognizing its pro-rata share of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitableassets, liabilities, and operations of RTMD in the future and/or to obtainappropriate classifications in the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and or private placement of common stock.

On March 14, 2016, the Company filed a Certificate of Amendment with the Secretary of State of the State of Delaware to amend its Certificate of Incorporation to change the name of the Company from “Texas Rare Earth Resources Corp” to “Texas Mineral Resources Corp”. The amendment was effective at 9:00 am EST on March 21, 2016. The Certificate of Amendment did not make any other amendments to the Company’s Certificate of Incorporation.

Reclassification of prior year balances

Our financial statements during the period ended November 30, 2017 contain amounts that have been reclassified for presentation and comparability purposes. The amounts and content of these related account balances were not altered during the reclassification.statements.

NOTE 24 –MINERAL PROPERTIES

September 2011As set forth in Note 3- Joint Venture Arrangements, the ownership of and obligations associated with the leases and options maintained with the Texas Land Office and other third parties were transferred to RTMD in May 2021. 

August 2010 Lease

On September 2, 2011, we entered intoAugust 17, 2010, the Company executed a new mining lease with the Texas General Land Office covering Sections 7 and 18 of Township 7, Block 71 and Section 12 of Block 72, covering approximately 860 acres at Round Top Mountain in Hudspeth County, Texas. The mining lease issued by the Texas General Land Office gives usthe Company the right to explore, produce, develop, mine, extract, mill, remove, and market beryllium, uranium, rare earth elements, all other base and precious metals, industrial minerals and construction materials and all other minerals excluding oil, gas, coal, lignite, sulfur, salt, and potash. The term of the lease is nineteen years so long as minerals are produced in paying quantities.

Under the terms of the lease, wethe Company will pay the State of Texas a total lease bonus of $142,518; $44,718 of which was$142,518. The Company paid $44,718 upon the execution of the lease, and $97,800 which will be due when we submitpay the remaining $97,800 upon submission of a supplemental plan of operations to conduct mining. Upon the sale of any minerals removed from Round Top, wethe Company will pay the State of Texas a $500,000$500,000 minimum advance royalty.

Thereafter, weif paying quantities of minerals are obtained, the Company will pay the State of Texas a production royalty equal to eight percent (8%(8%) of the market value of uranium and other fissionable materials removed and sold from Round Top and six and one quarter percent (61/4%(6 1/4%) of the market value of all other minerals removed and sold from Round Top.

Assuming production ofsold. If paying quantities hashave not been obtained, wethe Company may pay additional delay rental fees to extend the term of the lease for successive one (1)(1) year periods pursuant to the following schedule:

Texas Mineral Resources Corp. 

Notes to Interim Consolidated Financial Statements 

February 28, 2022 

(Unaudited)

NOTE 24 – MINERAL PROPERTIES (Continued)(CONTINUED)

Schedule of August 2010 Lease

In August 2017, we2021, our joint venture partner paid the State of Texas a delay rental to extend the Stateterm of Texasthe lease in an amount equal to $134,155 and as of the amountdate of $67,077.this filing, RTMD is current in its lease obligations.

November 2011 Lease

On November 1, 2011, we entered intothe Company executed a mining lease with the State of Texas covering approximately 90 acres more or less, of land that we purchased in September 2011 near our Round Top site. The deed was recorded with Hudspeth County on September 16, 2011.is adjacent to the August 2010 Lease. Under the lease, wethe Company paid the State of Texas a lease bonus of $20,700 which was paid$20,700 upon the execution of the lease. Upon the sale of minerals removed from Round Top, wethe Company will pay the State of Texas a $50,000$50,000 minimum advance royalty.

Thereafter, weif paying quantities of minerals are obtained, the Company will pay the State of Texas a production royalty equal to eight percent (8%(8%) of the market value of uranium and other fissionable materials removed and sold from Round Top and six and one quarter percent (6(6 1/4%4%) of the market value of all other minerals sold from Round Top.

Assuming production ofminerals. If paying quantities hashave not been obtained, wethe Company may pay additional delay rental fees to extend the term of the lease for successive one (1)(1) year periods pursuant to the following schedule:

Schedule of November 2011 Lease

In October 2017, weAugust 2021, our joint venture partner paid the State of Texas a delay rental to extend the Stateterm of Texasthe lease in an amount equal to $13,500 and as of $6,750.the date of this filing, RTMD is current in its lease obligations.

March 2013 Lease

On March 6, 2013, wethe Company purchased the surface lease at the Round Top Project, known as the West Lease, from the Southwest Wildlife and Range Foundation (the “Foundation”)(since renamed the Rio Grande Foundation) for $500,000$500,000 cash and 1,063,830 shares of our common stock. Westock valued at $500,000. The Company also agreed to support the Foundation through an annual payment of $45,000$45,000 for ten years to support conservation efforts within the Rio Grande Basin, and in particular engaging in stewardship ofparticularly Lake Amistad, a large and well-known fishing lake near Del Rio, Texas. The West Lease comprises approximately 54,990 acres. Most importantly, the purchase of the surface lease gave usprovides the Company unrestricted surface access for the potential development and mining of ourthe Round Top Project. As of the date of this filing the $45,000 payments due in June 2016 and 2017 have not been paid; consequently, we have expensed the value of the West Lease during fiscal 2017. We fully intend to continue with the evaluation of the mineral potential of the property, to ultimately mine the property, and to bring the lease current when funds are available. Expensing the value of the West Lease does not restrict our access to the mineral leases.

October 2014 Surface Option and Water Lease

InOn October 29, 2014, we executed an agreementthe Company announced the execution of agreements with the Texas General Land Office securing the option to purchase the surface rights covering the potential Round Top projectProject mine and plant areas and, separately, a lease to develop the water necessary for the potential Round Top projectProject mine operations.

The option to purchase the surface rights covers approximately 5,670 acres over the mining lease and the additional acreage adequate to site all potential heap leaching and processing operations as currently anticipated by the Company. WeThe Company may exercise the option for all or part of the option acreage at any time during the sixteen yearsixteen-year primary term of the mineral lease. The option can be kept current by anmaintained through annual paymentpayments of $10,000, which has not been paid as of the date of this filing.$10,000. The purchase price will be the appraised value of the surface at the time of exercisingoption exercise. All annual payments have been made as of the option.date of this filing.

The ground water lease secures ourthe right to develop the ground water within a 13,120 acre-acre lease area located approximately 4 miles from the Round Top deposit. The lease area contains five5 existing water wells. It is anticipated that all potential water needs for the Round Top projectProject mine operations would be satisfied by the existing wells covered by this water lease. This lease hasterms include an annual minimum production payment of $5,000$5,000 prior to production of water for the operation, which has not been paid as of the date of this filing.operation. After initiation of production, wethe Company will pay $0.95$0.95 per thousand gallons or $20,000$20,000 annually, whichever is greater. This lease remains effective asin effect so long as the mineral lease is in effect.

The Pagnotti Enterprises Inc. Memorandum of Understanding

On June 28, 2016 TMRC executed a Memorandum of understanding with Pagnotti Enterprises Inc. (“PEI”) of Wilkes Barre, Pennsylvania, owners of the Jeddo Coal Co., whereby under specified terms TMRC could lease one or more of Jeddo’s deposits located in the anthracite region of northeast Pennsylvania. Research by the Department of Energy (DOE) has shown that these coal deposits and the sandstones and siltstones immediately associated with them contain anomalously high values of rare earth and on particular interest, Scandium. The DOE research to date has indicated that the rare earth can be efficiently extracted from pulverized rock using ammonium sulfate as the lixiviant. TMRC is in the process of preparing an applicationminimum production payment for a federal grant to design and construct a continuous ion exchange/continuous ion chromatography (CIX/CIC) pilot plant to be delivered to a designated project area in the Appalachian coal province. TMRC and its co-applicants, K-Tech, Inventure Renewables, of Tuscaloosa, Alabama and Penn State University are proposing to plan, develop, design and install the CIX/CIC pilot plant at one of the Jeddo Coal properties. The grant was awarded in March 2017 to the consortium consisting of Inventure Renewables, Penn State, K-Tech and TMRC with Inventure being the principal investigator in the consortium. Funding began in September 2017.

Under the terms of the Memorandum of Understanding (MOU) signed 28 June 2016, TMRC had a six-month term to perform the necessary due diligence and to technically and economically evaluate the properties. Upon execution of the MOU TMRC and PEI had six months to draft and execute a formal lease agreement containing all the standard terms of mining lease agreements. Upon execution of a lease, TMRC will be obligated to pay a $5,000 per month rental or a 12% royalty whichever is greater. As of the date of this filing, no lease hasfiscal years have been executed.

NOTE 3 – NOTES PAYABLE

As part of our surface lease with the Rio Grande Foundation (formerly referred to as the Southwest Wildlife Foundation), the Company recorded a note payable for an amount for the initial $45,000 due upon signing of lease and the nine (9) future payments due of $45,000 which has been recorded at its present value discounted with an imputed interest rate of 5% for a total note payable of $364,852. As of the date of this filing, we have not paid the June 2016 or 2017 installment of our surface lease, in the amount of $45,000 each, to the Southwest Wildlife Foundation. As a result, the full amount of the note payable has been classified as currently due. The note payable balance as of November 30, 2017 $260,000. The Company has also accrued interest expense as of November 30, 2017 of $37,500. This unpaid interest is included in accrued liabilities.

The Foundation has not given notice of default or made any demand for payment as of the date of this filing. However, based upon the Company being in default on the Note Payable there is no guarantee that the Foundation will allow the Company

Texas Mineral Resources Corp. 

Notes to bring the lease payments current without requiring the Company to provided additional consideration to the Foundation. Consequently, since the Company cannot be guaranteed the ability to utilize the lease due to its current default status, the Company has written off the value of this lease ($1,394,852) as of August 31, 2017. The Company intends to continue with the evaluation of the mineral potential of the property, to ultimately mine the property, and to bring this note payable and its accrued interest current when the funds are available.Interim Consolidated Financial Statements 

February 28, 2022 

Related Party Notes Payable and Advances(Unaudited)

On July 1, 2016 the Company received two loans for $2,500 each from two directors of the Company. The loans are non-interest accruing, unsecured and due upon demand. As additional consideration for the loans, we issued 5,000 common stock purchase warrants to each individual. The warrants have an exercise price of $0.10 and term of five years. The warrants had a fair value of $1,185 at the date of issuance determined using the Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 1.00% (ii) estimated volatility of 185% (iii) dividend yield of 0.00% and (iv) expected life of the warrants of five years. The notes payable balance as of August 31, 2017 and August 31, 2016 was a total of $5,000. The value of the warrants was expensed as interest expense at the time of issuance due to no stated term on the advances.NOTE 4 – MINERAL PROPERTIES (CONTINUED)

On September 1, 2016, the Company entered into five loans totaling $71,500 from five directors of the Company. The loans were due March 1, 2017, are non-interest bearing, and unsecured. As of this filing the loans are in default and due upon demand. As additional consideration for the loans, we issued in total 147,000 common stock purchase warrants. The warrants have an exercise price of $0.10 and term of five years. The loans have a relative fair value of $57,414 and the warrants have a relative fair value of $14,086 at the date of issuance determined using the Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 1.180% (ii) estimated volatility of 245% (iii) dividend yield of 0.00% and (iv) expected life of the warrants of five years. The notes payable balance as of August 31, 2017 and August 31, 2016 was $71,500. The value of the warrant was amortized to interest expense over the term of the note payable.Santa Fe Gold Corporation

On November 1, 2016 the Company entered into two loans for $4,000 and $1,000 from two directors of the Company. The loans are non-interest bearing, unsecured and due upon demand. As additional consideration for the loans, we issued 8,000 and 2,000 common stock purchase warrants to each individual. The warrants have an exercise price of $0.10 and term of five years. The warrants had a fair value of $1,057 at the date of issuance determined using the Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 1.30% (ii) estimated volatility of 181% (iii) dividend yield of 0.00% and (iv) expected life of the warrants of five years. The notes payable balance as of August 31, 2017 was $5,000. The value of the warrants was expensed as interest expense at the time of issuance due to no stated term on the advance.

On December 12, 2016,8, 2021, the Company entered into a loan for $15,000mineral 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 directorjoint 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 expected terms of the Company. The loan is due June 12, 2017, is non-interest accruing,joint venture agreement, the Company would be project operator and unsecured. As of this filing the loan is in default and due upon demand. As additional consideration for the loan, we issued 60,000 common stock purchase warrants to the individual. The warrants have an exercise price of $0.10 and term of five years. The loan has a relative fair value of $10,437 and the warrants have a relative fair value of $4,563 at the date of issuance determined using the Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 1.90% (ii) estimated volatility of 241% (iii) dividend yield of 0.00% and (iv) expected lifeinitially own 50.5% of the warrants of five years. The notes payable balance as of August 31, 2017 was $15,000. The valuejoint venture while Santa Fe would initially own 49.5%. Additional terms of the warrant was amortizedjoint venture are to interest expense overbe negotiated between the Company and Santa Fe. 

Under the 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 2-mile radius “area of interest.” The agreement provides the Company with the option to designate any properties within the “area of interest” as “project area” properties. The term of the note payable.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.

On January 12, 2017Additionally, on November 8, 2021, the Company entered into two loans totaling $20,000 from a directorfinancing and an officerpurchase 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 5 tranches, each based on the success of the Company. The loans are due July 12, 2017, are non-interest accruing,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 unsecured. As of this filing the loans are in default and due upon demand. As additional consideration for the loans, we issued 40,000 common stock purchase warrants to each individual. The warrants have an exercise price of $0.10 and term of five years. The loans have a relative fair value of $13,542 and the warrants have a relative fair value of $6,458 at the date of issuance determined using the Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 1.87% (ii) estimated volatility of 240% (iii) dividend yield of 0.00% and (iv) expected lifepermitting.

Upon successful completion of the warrants of five years. The notes payable balance as of August 31, 2017 was $20,000. The valuestudy, Greentech will be entitled to received 20% of the warrant was amortizedCompany’s initial equity in the proposed joint venture with Santa Fe, equal to interest expense over the termapproximately 10.1% of the note payable.

During the three months ended May 31, 2017 the Company entered into eight loans totaling $47,500 from two directorstotal equity of the Company. The loans are non-interest accruing, unsecured and due upon demand. As additional consideration forjoint venture. In addition, assuming Greentech exercises its option to participate in funding the loans, we issued in total 190,000 common stock purchase warrants. The warrants have an exercise price of $0.17 - $0.21 and a term of five years. The warrants had a fair value of $39,557 at the date of issuance determined using the Black-Scholes option-pricing model. The assumptions usedSanta Fe project capital expenditures, currently anticipated to calculate the fair market value are as follows: (i) risk-free interest rate of 1.75% (ii) estimated volatility of 234% (iii) dividend yield of 0.00% and (iv) expected lifebe approximately $15 million, it will be entitled to receive another 20% of the warrants of five years. The notes payable balance as of August 31, 2017 was $47,500. The valueCompany’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 warrants was expensed as interest expense at the time of issuance due to no stated term on the advance.overall first project.

During the three months ended August 31, 2017 the Company entered into seven loans totaling $82,165 from two directors of the Company. The loans are non-interest accruing, unsecured and due upon demand. As additional consideration for the loans, we issued in total 328,660 common stock purchase warrants. The warrants have an exercise price of $0.20 - $0.23 and a term of five years. The warrants have a fair value of $65,137 at the date of issuance determined using the Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 1.75% (ii) estimated volatility of 169% (iii) dividend yield of 0.00% and (iv) expected life of the warrants of five years. The notes payable balance as of August 31, 2017 was $82,165. The value of the warrants was expensed as interest expense at the time of issuance due to no stated term on the advance.

During the three months ended November 30, 2017 the Company received two advances totaling $16,750 from a director and an officer of the Company. The loans are non-interest accruing, unsecured and due upon demand. As additional consideration for the loans, we issued a total of 67,000 common stock purchase warrants. The warrants have an exercise price of $0.21 - 0.22 and a term of five years. The warrants have a fair value of $12,518 at the date of issuance determined using the Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 2.88% (ii) estimated volatility of 122% (iii) dividend yield of 0.00% and (iv) expected life of the warrants of five years. The note payable balance as of November 30, 2017 was $16,750. The value of the warrants was expensed as interest expense at the time of issuance due to no stated term on the advance.

NOTE 45 – SHAREHOLDERS’ EQUITY

Capital Stock

OurThe Company’s authorized capital stock consists of 100,000,000 shares of common stock, with a par value of $0.01$0.01 per share, and 10,000,000 preferred shares with a par value of $0.001$0.001 per share.

All shares of common stock have equal voting rights and, when validly issued and outstanding, are entitled to one non-cumulative vote per share in all matters to be voted upon by shareholders. The sharesShares of common stock have no pre-emptive, subscription, conversion or redemption rights and may be issued only as fully paid and non-assessable shares. Holders of the common stock are entitled to equal ratable rights to dividends and distributions with respect to the common stock, as may be declared by ourthe Company’s Board of Directors (our(the “Board”) out of funds legally available. In the event of a liquidation, dissolution or winding up of the affairs of the Corporation,Company, the holders of common stock are entitled to share ratably in all assets remaining available for distribution to them after payment or provision for all liabilities and any preferential liquidation rights of any preferred stock then outstanding.

In October 2021, the Company issued 41,231 shares of common stock related to Director fees earned and expensed during the year ended August 31, 2021.

During the quarter ended November 30, 2021, the Company recognized stock compensation and a corresponding charge to additional paid-in capital in the amount of $41,502 for director’s fees earned during the quarter. The Company issued the related 31,218 shares of common stock in December 2021.

During the quarter ended November 30, 2021, the Company granted a total of 43,500 stock options with a fair value of $73,788 on the date of grant to a consultant. The fair value of the options was determined using the Black-Scholes option-pricing model. The weighted average assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 0.25% (ii) estimated volatility of 201.75% (iii) dividend yield of 0.00% and (iv) expected life of all options of 5 years. The Company recognized the full $73,788 as compensation expense during the three months ended November 30, 2017, we recognized $3,474 in stock compensation expense for 30,000 stock options issued2021.

Texas Mineral Resources Corp. 

Notes to outside consultants for services and $12,518 in interest expense for warrants issued to a director and an officer for advances to us.Interim Consolidated Financial Statements 

February 28, 2022 

We had 44,941,533 shares of our common stock outstanding as of November 30, 2017.(Unaudited)

NOTE 5 – RELATED PARTY TRANSACTIONSSHAREHOLDERS EQUITY (CONTINUED)

In January 2020, the Company entered into three separate consulting agreements for total consideration of 699,999 shares of common stock (233,333 per agreement). The common stock underlying the agreements had a total value of $448,000, based on the $0.64 quoted market price of the common stock on the agreement date. The right to receive the common stock is subject to ratable vesting over a 24-month period and at February 28, 2022, 699,999 shares had vested and 87,501 had been issued. The Company has received advances from certain Directorsrecognized approximately $18,666 and Officers.$74,666 of compensation expense under these consulting agreements during the three and six months ended February 28, 2022, respectively, and $56,000 and $112,000 during the three and six months ended February 28, 2021, respectively, which is included in general and administrative expenses in the accompanying consolidated statements of operations. The advances totaled approximately $263,000consultants have requested that the Company hold the remaining shares issuable under the agreements in trust to allow the consultants to request their shares as they vest.

During the quarter ended February 28, 2022, the Company granted a total of November 30, 2017.

30,000 stock options with a fair value of $60,230 on the date of grant to a consultant. The fair value of the options was determined using the Black-Scholes option-pricing model. The weighted average assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 0.25% (ii) estimated volatility of 201.75% (iii) dividend yield of 0.00% and (iv) life of all options of 5 years. The Company rents office space onrecognized the full $60,230 as compensation expense during the three months ended February 28, 2022.

During the quarter ended February 28, 2022, the Company recognized stock compensation and a monthcorresponding charge to month basisadditional paid-in capital in the amount of $1,600 from a former director. This space is currently subleased$41,502 for director’s fees earned during the quarter. The related 25,938 shares of common stock were issued in March 2022.

During the quarter ended February 28, 2022, the Company issued 570,001 shares of common stock to a tenant.consultant from the exercise of common stock options. The total proceeds received by the Company as a result of the conversion of common stock options was $171,000.

NOTE 6 – GRANT INCOME

Grants received from government and other agencies in advance of a specific project 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 February 28, 2022 and 2021, the Company recognized $187,317 and $150,000, respectively, of grant income which is presented in other income, net of grant related expenses totaling $257,400 and $138,922, respectively.

NOTE 67 – SUBSEQUENT EVENTS

In December 2017 certain membersAs a part of our Board lentobligation for our 20% ownership in the company $14,000joint venture as disclosed in Note 3, on March 23, 2022 we contributed approximately $171,400 to the joint venture in accordance with no stated term on the advancesContribution Agreement between the Company and no interest. The Board members were also issued 56,000 warrants that will be valued during our second fiscal quarter ending February 28, 2018 using the Black-Scholes model.USARE.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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:

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:

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, 2017,2021, filed with the SEC on December 14, 2017.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 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.

Overview

We are a mining company engaged in the business of the acquisition, exploration and if warranted, development of mineral properties. We currently holdown a 20% membership interest in RTMD, which entity holds two nineteen yearmineral property leases executed in September 2011 and November 2011,with the Texas General Land Office to explore and develop a 950 acre950-acre rare earths project located in Hudspeth County, Texas, known as the Round Top ProjectProject. 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 an9,345 acres adjacent 9,345 acres. Our principal focus will be on developingto 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, although we will continueconduct additional engineering, design, geotechnical work, and permitting necessary for a bankable feasibility study and then to examine other opportunities inextract mineral resources from the region as they develop. We currently have limited operations and haveRound Top Project. The Round Top Project has not established as of the date hereof that any of our projects orthe properties contain any Provenprobable mineral reserves or Probable Reservesproven mineral reserves under SEC Industry Guide 7. Our operationsItem 1300 of Regulation S-K.

Rare earth elements (“REE”) are exploratorya group of chemically similar elements that usually are found together in nature.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:

We currently do not have any producing propertiesBecause of these applications, global demand for REE is projected to steadily increase due to continuing growth in existing applications and consequently, we have no current operating income or cash flowincreased innovation and have not generated any revenues. Further exploration will be required beforedevelopment of new end uses. Interest in developing resources domestically has become a final evaluationstrategic necessity as there is limited production of these elements outside of China. Our ability to the economic and practical feasibility of any ofraise additional funds to continue to fund our properties is determined.

On December 23, 2013, we published a revised version of the June 2012 Preliminary Economic Assessment (the “Revised PEA”) onparticipation interest in the Round Top Project based onmay 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 20,000 tonne per day heap leach operation using a conventional element separation plant. The mineralized material estimate70% 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 recalculated to include uranium, niobium, tantalum and tin. The revised PEA assessesnominating USARE as the potential economic viabilityoptionee under the terms of the simplified2018 Option Agreement. In August 2019, the Company and “scaled down” operation which we believe is a much better fitUSARE entered into an amended and restated option agreement as further amended on June 29, 2020 (the “2019 Option Agreement” and collectively with the present rare earth market.

On September 8, 2014, we announced that we had completed2018 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 internal analysis suggesting that there is a reasonable possibility to adapt a lower volume staged growth approach to development of our Round Top project. The analysis indicated that an operation designed to produce a selected group of separated REE products80% interest, in the range of 350-450 tonnes per year range, could potentially yield favorable mine economics. The goal of the proposed staged approach would be to increase mining rates if and when our products gained acceptability. The analysis suggested that capital needs in the Revised PEA could be proportionally reduced in relation to the lower volume initial stage. We are currently conducting a more detailed analysis of the relative capital expenses and operating expenses requirements of a scaled down processing plant with both solvent extraction and ion exchange processes under evaluation. We believe the lower capital requirements of a staged startup could offset any marginal increase in unit operating costs.

Our current management and Board are stockholder-centric, and receive either no cash compensation or compensation that has been accrued. We will require definitive scientific documentation, rigorous economic studies, consideration of a wide range of alternatives and meticulous oversight of any cash outlays of stockholder funds.

Current Plan of Operations

Continued Work Program on Round Top Project

See “Properties – Current and Planned Metallurgical Activities” for a description of our current work activities and budget for the Round Top Project. The 2019 Option Agreement has substantially similar terms to the 2018 Option Agreement:

Exploration PotentialOn 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.

In connection with USARE meeting its obligations to acquire a 70% interest in the Round Top Property

Although we have no plansProject 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 next 24 monthsamount of approximately $3,326,000 was recognized during the quarter ended May 31, 2021.

Upon entry into the Contribution Agreement, the Company assigned the following contracts and assets to conduct more physical exploration, we do believe, as statedRTMD in our 2010 presentations, that there are untested exploration targets present. They are:exchange for its 20% membership interest in RTMD:

and USARE assigned the following assets to RTMD (or the Company, as applicable) for its 80% membership interest in RTMD:

We believe thatThe Company accounts for its interest in RTMD using the existing data we can improve our understandingproportionate 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 November 8, 2021, the Company entered into a mineral exploration potentialand 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 without resorting to such expensive techniquesbe 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.

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 drilling.data analysis, weather and permitting.

Actively Seeking Project Partners

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 pursuingparticipate 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 February 28, 2022, our accumulated deficit was approximately $38,118,000 and our cash position was approximately $4,013,000. We had a working capital surplus of approximately $3,977,000. 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.

During the current fiscal year, RTMD is expected to fund the expenditure of our Round Top Project, we are actively seeking industry partnersapproximately $20 million to assistoptimize the Company in financingleaching and developing of the exploration and, if warranted, developmentCIX/CIC processing of the Round Top Project. While we do not currently have any agreements and do not anticipate any agreementsInitial process design work will be carried out at USARE’s facility in Wheat Ridge, Colorado. Pending completion of the near future, we are actively engaged in pursuing partners forinitial process development, this facility will either be relocated to or replicated at the Round Top Project forwhere a rangepilot plant is expected to be established. This work will consist of participation, including but not limitedmining and crushing approximately 40,000 tonnes of rhyolite and setting up and equipping a facility to joint-venture arrangements, project sale, significant investment in the Company, back-end processing and product sales arrangements and other financing arrangements to assist inconduct pilot plant scale heap leaching. It is estimated that the Round Top Project.