NOTE 7 – SUBSEQUENT EVENTS

As a part of our obligation for our 20% ownership in the joint venture as disclosed in Note 3, on December 2, 2021 we contributed approximately $305,000 to the joint venture in accordance with the Contribution Agreement between the Company and 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, 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.

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:

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.

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:

and USARE assigned the following assets to RTMD (or the Company, as applicable) for its 80% membership interest in 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”Fe"). Under the option 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, if any, 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 contemplated terms of the proposed 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 expected to be negotiated between the Company and Santa Fe.Fe in the future.

Under the terms of the option 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”"project area" and commence detailed exploration work. The property covered in the option 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"area of interest.”" The option agreement also provides the Company with the optionright to include in the “project area”designate any properties within the “area"area of interest”.interest" as "project area" properties. 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’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”("Greentech"). Under the financing 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.

There can be no assurance any joint venture agreement or financing agreement will be consummated or that this project will materialize. 

Liquidity and Capital Resources

As of November 30, 2021,May 31, 2022, our accumulated deficit was approximately $37,187,000$38,932,000 and our cash position was approximately $4,863,000.$3,542,000. We had a working capital surplus of approximately $4,812,000.$3,313,000. 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 nine months ended May 31, 2022, we funded approximately $900,000 of the RTMD expenditures during such period in accordance with our obligation as a 20% RTMD member. The balance was funded by existing cash of RTMD as well as by USARE. We have budgeted approximately $800,000 to fund our portion of RTMD expenditures during the balance of our current fiscal year ending August 31, 2022, of which approximately $500,000 has been spent since May 31, 2022. RTMD is expected to fund the expenditure of approximately $20 millioncontinues to optimize the leaching and developing ofdevelop 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

Depending upon the amount 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 currentthe next fiscal year. Thereafter,year, we willmay 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 equatescorrelating to our membership interest in RTMD)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 Stockcommon stock will result in dilution of equity ownership to existing stockholders. This means that if we sell shares of Common Stock,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 Stockcommon stock may be issued. Exercise of such warrants or options will result in dilution of equity ownership to our existing stockholders.

Results of Operations

ThreeNine months ended November 30,May 31, 2022 and May 31, 2021

General and November 30, 2020Revenue

We had no operating revenues during the nine months ended May 31, 2022 and May 31, 2021. We are not currently profitable. As a result of ongoing operating losses, we had an accumulated deficit of approximately $38.93 million as of May 31, 2022.

Grant IncomeOperating expenses, other income (expenses) and resulting losses from Operations.

We incurred exploration costs for the nine months ended May 31, 2022, and May 31, 2021, in the amount of approximately $1,102,000 and $160,000, respectively. The increase in expenditures for the nine months ended May 31, 2022, versus the nine months ended May 31, 2021 were primarily the result of mining and transporting approximately 30,000 metric tonnes of rhyolite from the deposit site to the planned demonstration plant site. There was also considerable earth work done at the site of the production plant to divert storm runoff water. In addition, we began contracting various consulting groups to commence the designing of the mine, heap leaching plant and processing plant. During the nine months ended May 31, 2022, exploration expenditures for mining activities were funded by RTMD. We account for our interest in RTMD under the proportional consolidation method. Under the proportional consolidation method, we record our share of expenses of RTMD within the income statement in the same line items that we would if we were to consolidate our financial statements with RTMD. Additionally during the nine months ended May 31, 2022, we spent approximately $325,500 on a survey and other project related costs for the Santa Fe Project that commenced during the current fiscal year.

Our general and administrative expenses for the nine months ended May 31, 2022 and May 31, 2021, were approximately $987,000 and $1,080,000, respectively. For the nine months ended May 31, 2022 and 2021, this amount included approximately $404,000 and $606,000, respectively, in stock-based compensation to directors and common stock and stock options to 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.

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 threenine months ended November 30,May 31, 2022 and 2021, the Company recognized $561,950 and 2020, we recognized approximately $374,600 and $50,000,$150,000, respectively, of grant income which is presented in other income, net of grant related expenses totaling approximately $304,000$561,857 and $0,$138,921, respectively.

For the nine months ended May 31, 2022 and May 31, 2021, we earned approximately $4,600 and $4,000 in interest income from depository accounts.

In May 2021, USARE met its obligations under the Option Agreement and acquired a 70% interest in Round Top. In addition, USARE exercised its option to acquire an additional 10% interest in Round Top for $3 million. In connection with this transaction, the Company received total consideration of approximately $3,728,000, consisting of the $3 million upon exercise of the option and an assumption of approximately $728,000 in advances from related parties, 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 $3,327,000 is included as its own line item in other income (expense).

We had losses from operations for the nine months ended May 31, 2022 and May 31, 2021 totaling approximately $2,088,000 and $1,240,000, respectively.

We had a net loss for the nine months ended May 31, 2022 totaling approximately $2,084,000 and net income for the nine months ended May 31, 2021 totaling approximately $2,102,000.

Three months ended May 31, 2022 and May 31, 2021

General and Revenue

We had no operating revenues during the three months ended November 30, 2021May 31, 2022 and November 30, 2020.May 31, 2021. We are not currently profitable. As a result of ongoing operating losses, we had an accumulated deficit of approximately $37.2$38.93 million as of November 30, 2021.May 31, 2022.

Operating expenses, other income (expenses) and resulting losses from Operations.

We incurred exploration costs for the three months ended November 30,May 31, 2022 and May 31, 2021, and November 30, 2020, in the amount of approximately $71,000$519,900 and $66,000,$63,400, respectively. Expenditures during the three months 2021 and 2020 were primarily for metallurgical testing and delay rentals. InDuring the three months ended November 30, 2020May 31, 2022, exploration expenditures for metallurgicalmining activities were funded by RTMD. We account for our joint venture partner, USARE.interest in RTMD under the proportional consolidation method. Under the proportional consolidation method, we record our share of expenses of RTMD within the income statement in the same line items that we would if we were to consolidate our financial statements with RTMD. Additionally during the quarter ended May 31, 2022, we spent approximately $247,000 on a survey and other project related costs for the Santa Fe Project that commenced during the current fiscal year.

Our general and administrative expenses for the three months ended November 30,May 31, 2022 and May 31, 2021, and November 30, 2020, respectively, were approximately $340,000$295,000 and $325,000.$345,000. For the three months ended November 30,May 31, 2022 and 2021, and 2020, this amount included approximately $171,000$112,000 and $190,000,$211,700, respectively, in stock-based compensation to directors and common stock and stock options to 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,May 31, 2022 and May 31, 2021, and November 30, 2020, we earned approximately $1,600$1,200 and $1,400,$700, respectively, in interest income from depository accounts.

In May 2021, USARE met its obligations under the Option Agreement and acquired a 70% interest in Round Top. In addition, USARE exercised its option to acquire an additional 10% interest in Round Top for $3 million. In connection with this transaction, the Company received total consideration of approximately $3,728,000, consisting of the $3 million upon exercise of the option and an assumption of approximately $728,000 in advances from related parties, 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 $3,327,000 is included as its own line item in other income (expense).

We had losses from operations for the three months ended November 30,May 31, 2022 and May 31, 2021 and November 30, 2020 totaling approximately $411,000$815,000 and $391,000,$409,000, respectively.

We had a net lossesloss for the three months ended November 30,May 31, 2022 in the amount of approximately $814,000 and net income for the three months ended May 31, 2021 and November 30, 2020 totaling approximately $339,000 and $340,000, respectively.$2,919,000.

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:

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.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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

At the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision of and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) under the Exchange Act). Based on that evaluation, and in light of the material weakness existing in our internal controls over financial reporting as of August 31, 2021 (as described in greater detail in our annual report on From 10-K for the year ended August 31, 2021), the CEO and CFO have concluded that as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were not effective in providing reasonable assurance that: (i) information required to be disclosed by us in our reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially effect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

The following updates our risk disclosures set forth in our Form 10-K for the year ended August 31, 2021 as filed with the SEC on November 29, 2021.

There is no assurance that we will be able to enter into a joint venture agreement with Santa Fe, or if we do, that such joint venture arrangement will result in any successful exploration or development prospects.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Except as set forth below, all unregistered sales of equity securities during the period covered by this Quarterly Report were previously disclosed in our current reports on Form 8-K or quarterly reports on Form 10-Q.

With respect to sales designated by “Sec. 4(a)(2),” these shares were issued pursuant to the exemption from registration contained in to Section 4(a)(2) of the Securities Act as privately negotiated, isolated, non-recurring transactions not involving any public offer or solicitation. Each purchaser represented that such purchaser’s intention to acquire the shares for investment only and not with a view toward distribution. None of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved.

We did not repurchase any of our securities during the quarter covered by this report.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Pursuant to Section 1503(a) of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (The “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the quarter ended November 30, 2021,February 28, 2022, our U.S. exploration properties were not subject to regulation by the Federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977.

Item 5. Other Information

None.