Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
PART
I
Corporate
Organization and History
We
were incorporated in the State of Nevada in 1970 as Standard Silver Corporation. In July 2004, our Articles of Incorporation were
amended and restated to increase the number of shares of common stock to 25,000,000, and in March 2007, we affected a 1 for 2
reverse stock split. In September 2008, we amended and restated our Articles of Incorporation to: (i) increase of the number of
shares of common stock from 25,000,000 to 100,000,000; and to (ii) authorize an additional 10,000,000 shares of preferred stock,
to be issued at management’s discretion. In September 2010, we amended our Amended and Restated Articles of Incorporation
to change our name from Standard Silver Corporation to Texas Rare Earth Resources Corp.
On
August 24, 2012, we changed our state of incorporation from the State of Nevada to the State of Delaware (the “Reincorporation”)
pursuant to a plan of conversion dated August 24, 2012. The Reincorporation was previously submitted to a vote of, and approved
by, our stockholders at a special meeting of the stockholders held on April 25, 2012.
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 became effective on March 21, 2016. The Certificate of Amendment did not make any
other amendments to the Company’s Certificate of Incorporation.
Our
common stock is traded on the OTCQX U.S. operated by OTC Markets Group Inc. under the symbol “TMRC.” The market for
our common stock on the OTCQX U.S. is extremely limited, sporadic and highly volatile.
Our
fiscal year-end is August 31.
Narrative
Description of Business
We
are a mining company engaged in the business of the acquisition, exploration and development of mineral properties. We currently
hold two nineteen year leases, executed in September 2011 and November 2011 respectively, to explore and develop a 950 acre rare
earths project located in Hudspeth County, Texas known as the Round Top Project. We also have prospecting permits covering 9,345
acres adjacent to the Round Top Project. Our principal focus is on developing a metallurgical process to concentrate or otherwise
extract the metals from the Round Top Project’s rhyolite, although we will continue to examine other opportunities in the
region as they develop. We currently have limited operations and have not established that any of our projects or properties contain
any Proven or Probable Reserves under SEC Industry Guide 7 (“Guide 7”).
On
November 8, 2011, we announced that our supplementary operating plan to expand exploration activities at our Round Top Project
had been approved by the Texas General Land Office (GLO); the expanded development and exploration drill plan called for an additional
40 drill holes and 4 diamond core holes for an estimated planned drilled footage of 20,000 feet. The program included 4,000 feet
of Core drilling to establish a high level of confidence in the mineralization, provide physical engineering data and additional
metallurgical sample. During 2011-2012 the permits were amended and there were 41,765 feet of reverse circulation drilling and
1,294.5 feet of core drilling done on Round Top.
On
March 20, 2012, we submitted for approval an updated plan of operations. The updated plan of operations consisted of the reclassification
of the drilling program through to a feasibility study into three phases. Phase 1 consists of 25 drill locations, phase 2 consists
of 41 drill locations and phase 3 consists of 27 drill locations all located on the Round Top Project. The plan of operations
also included two locations for 100 ton bulk sample collection for additional metallurgical tests. We have suspended this phase
of physical exploration and development at the Round Top Project pending development of a metallurgical process to extract the
potentially marketable metals.
On
June 22, 2012, we published our Preliminary Economic Assessment for our Round Top Project, entitled “NI 43-101 Preliminary
Economic Assessment Round Top Project, Sierra Blanca, Texas,” dated June 22, 2012, effective as of May 15, 2012 (the “PEA”).
On
October 3, 2012, our management released updated economic projections related to various revisions to the proposed mine plan presented
in the PEA.
On
March 6, 2013, we purchased the surface lease at the Round Top Project, known as the West Lease, from the Southwest Wildlife and
Range Foundation (the “Foundation”) for $500,000 cash and 1,063,830 shares of our common stock. We also agreed to
support the Foundation through an annual payment of $45,000 for ten years to support conservation efforts within the Rio Grande
Basin and in particular engaging in stewardship of Lake Amistad, a large and well-known fishing lake near Del Rio, Texas. The
West Lease comprises approximately 54,990 acres. Most importantly, purchase of the surface lease gave us unrestricted surface access for the potential development and mining of our
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.
On
May 8, 2013, we released testing results by an independent laboratory of the leaching characteristic of the rhyolite at our Round
Top Project, which demonstrates characteristics that may be favorable to heap leach mining at the Round Top Project. These leaching
characteristics are described in greater detail below under the section heading “Item 2. Properties – Round Top Project
– Metallurgy”.
On
September 30, 2013 we released the results on column leach testing by an independent laboratory and announced our intention to
issue a revised PEA based on a heap leach operation designed to produce approximately 2,500 tons per year of heavy rare earth
elements plus yttrium. The column leach testing results are described in greater detail below under the section heading “Item
2. Properties – Round Top Project – Metallurgy”.
On
December 23, 2013, we published a revised version of the June 2012 Preliminary Economic Assessment (the “Revised PEA”)
based on a 20,000 tonne per day heap leach operation using a conventional element separation plant. The mineralized material estimate
was recalculated to include uranium, niobium, tantalum and tin. The Revised PEA assesses the potential economic viability of the
simplified and “scaled down” operation which we believe is a much better fit with the present rare earth market.
On
September 8, 2014, we announced that we had completed 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 products 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.
On
October 29, 2014, we announced that we had executed agreements with the Texas General Land Office securing the option to purchase
the surface rights covering the potential Round Top project mine and plant areas and, separately, a lease to develop the water
necessary for the potential Round Top project 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. We may exercise the option for all or part of the option acreage at any time during the
sixteen year primary term of the mineral lease. The option can be kept current by an annual payment of $10,000. The annual payment
for the fiscal year ending August 31, 2017 has not been made as of the date of this filing. The purchase price will be the appraised
value of the surface at the time of exercising the option.
The
ground water lease secures our right to develop the ground water within a 13,120 acre lease area located approximately 4 miles
from the Round Top deposit. The lease area contains five existing water wells. It is anticipated that all potential water needs
for the Round Top project mine operations would be satisfied by the existing wells covered by this water lease. This lease has
an annual minimum production payment of $5,000 prior to production of water for the operation. The minimum production payment
for the fiscal year ending August 31, 2017 has not been made as of the date of this filing. After initiation of production we
will pay $0.95 per thousand gallons or $20,000 annually, whichever is greater. This lease remains effective as long as the mineral
lease is in effect.
On
February 24, 2015, we signed a letter of intent to form a joint venture with K-Technologies, Inc. (K-Tech), a chemical process
development and applications company serving the minerals and chemicals industries to develop, refine and market K-Tech’s
Continuous Ion Exchange (CIX) and Continuous Ion Chromatography (CIC) technology as it applies primarily to the extraction of
rare earth elements (REE) from native ores. The joint venture will license the technology to us, as well as other rare earth production
companies. Subject to agreement by TMRC, the joint venture may also elect to build and operate processing facilities to separate
and purify mixed rare earth concentrates into individual purified rare earth oxides for other rare earth production companies
in addition to TMRC.
In
early March 2015, we conducted a trial mining test during which we mined 500 tonnes of rhyolite, transported and crushed the ore
to 80% passing a 1 ј inch screen. This rock is now stockpiled and will be used in the Stage 2 pilot plant development, as
described in greater detail below under the section heading “Item 2. Properties – Round Top Project – Metallurgy”.
On
May 26, 2015, we announced that K-tech had successfully produced a low cerium concentrate solution employing their CIX/CIC process.
This concentrate solution was separated from crushed Round Top rhyolite leached in 8 inch by 8 foot columns. If precipitated,
dried and calcined, this concentrate would be salable in the present rare earth market. Neither uranium nor thorium was detected
in the rare earth concentrate. Further test work has shown that it is possible to remove both uranium and thorium from the spent
solution from the REE extraction plant. Production of the low cerium concentrate essentially completed Phase 2 of Stage 1 of our
development process, with the production of final purified elemental oxides being the only step remaining to complete Phase 2
of Stage 1.
On
April 6, 2015, we announced the execution of a uranium offtake agreement with UG USA, a subsidiary of Areva. According to the
agreement, TMRC will supply up to 300,000 pounds of natural uranium concentrates (U308) per year based upon a pricing formula
indexed to U308 spot prices at the times of delivery. The Agreement is for a term of five years commencing in 2018 or as soon
thereafter, contingent upon development and production at its Round Top project. Other terms and conditions of the Agreement reflect
industry standards. According to Ux Consulting, a leading uranium industry data provider, the closing spot price of U308 on March
30, 2015 was $39.50 per pound.
On
July 15, 2015, we entered into an operating agreement (“Operating Agreement”) with K-Tech, to formalize our joint
venture company, Reetech, LLC, a Delaware limited liability company (the “Reetech”), for the purposes of developing,
refining and marketing K-Tech’s CIX/CIC process pursuant to the February 24, 2015 letter of intent with K-Tech. On October
18, 2015, we entered into an amendment agreement to the Operating Agreement, expanding the way in which we can earn percentage
membership interests in Reetech in exchange for granting K-Tech changes in the management of Reetech and TMRC’s license
from Reetech to use K-Tech’s CIX/CIC process for its properties.
The
operating agreement between TMRC and K-Tech is still in effect, but due to the inactivity of our Round Top project, there has
been no ongoing advancement under the operating agreement as of August 31, 2017.
See
“Item 2. Properties – Metal Recovery Methods” for a more detailed description of the Reetech joint venture.
On
September 25, 2015, we announced that Reetech was awarded a Broad Agency Announcement (BAA) research contract by the United States
Defense Logistics Agency (DLA) Strategic Materials Division. The Defense Logistics Agency is the Department of Defense’s
largest logistics combat support agency, providing worldwide logistics support in both peacetime and wartime to the military services
as well as several civilian agencies and foreign countries. The DLA Strategic Materials Division is charged with maintaining cognizance
of worldwide strategic and critical material’s supply chain from the source to final assembly, evaluating the capability
of these supply chains to support national defense and essential civilian industries, and developing mitigation solutions when
access to materials are insufficient to provide support for national defense and emergency response.
Reetech
will conduct research to demonstrate, at the bench scale level, the ability to separate and refine yttrium (Y) oxide to a minimum
of 99.999% purity, ytterbium (Yb) oxide to a minimum of 99.99% purity and a third rare earth oxide, which is not being publicly
disclosed, to a minimum 99.999% purity level, using continuous ion exchange (CIX) and continuous ion chromatography (CIC).
Cautionary
Note to Investors:
The PEA and Revised PEA have been prepared in accordance with Canadian National Instrument 43-101 —
Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum
(the “CIM”) —
CIM Definition Standards on Mineral Resources and Mineral Reserves
, adopted by the CIM
Council, as amended.
The Company has voluntarily had the PEA and Revised PEA prepared in accordance with NI 43-101 but the
Company is not subject to regulation by Canadian regulatory authorities and no Canadian regulatory authority has reviewed the
PEA or Revised PEA or passed upon its accuracy or compliance with NI 43-101.
The terms “mineral reserve”, “proven
mineral reserve” and “probable mineral reserve” are Canadian mining terms as defined in accordance with NI 43-101.
These definitions differ from the definitions in SEC Industry Guide 7 under the United States Securities Act of 1933, as amended
(the “Securities Act”). Under SEC Industry Guide 7 standards, a “final” or “bankable” feasibility
study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to
designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority.
In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource”
and “inferred mineral resource” are defined in NI 43-101; however, these terms are not defined terms under SEC Industry
Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned
not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves. “Inferred
mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic
and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher
category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility
studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists
or is economically or legally mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under
Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves”
by SEC Industry Guide 7 standards as in place tonnage and grade without reference to unit measures. Accordingly, information in
the PEA and Revised PEA contains descriptions of our mineral deposits that may not be comparable to similar information made public
by United States companies subject to the reporting and disclosure requirements under the United States federal securities laws
and the rules and regulations thereunder. Our project as described in the PEA and Revised PEA currently does not contain any known
proven or probable ore reserves under SEC Industry Guide 7 reporting standards. U.S. investors are urged to consider closely the
disclosure in the Registrant’s latest reports and registration statements filed with the SEC.
U.S. Investors are cautioned
not to assume that any defined resources in these categories will ever be converted into SEC Guide 7 compliant reserves.
Current
and Planned Exploration Activities
Stage
1
Upon
receipt of adequate further financing, we plan to complete the development of the CIX/CIC processing of the Round Top primary
leach solution. The bench scale testing of this process, Stage 1, was divided into two phases. Phase 1, now completed, was to
purify the primary leach solution and produce a concentrated, low flow rate feedstock suitable for further processing by CIX/CIC.
Development has now progressed into Phase 2 which is to effect a separation of the rare earth elements into groups for final refinement.
In work completed to date, we have produced a concentrated solution from which we have removed the low value elements lanthanum
and cerium. The resulting solution containing the high value rare earth elements could be precipitated into a marketable concentrate
if so desired.
Work
now is in progress to make the final purified elemental oxides, thereby completing Stage 1 bench scale testing. This work is being
done in conjunction with the contract from the Defense Logistics Agency to produce the highly purified yttrium, ytterbium and
other element products.
Stage
2
Stage
2 will consist of the pilot plant scale testing of the process proven most effective by Stage 1, and will consist of the work
required to bring the processing plant into full feasibility with capital and operating costs estimated to an accuracy range of
10 -15%. Stage 2 will also develop the heap leach procedure to pre-feasibility level with capital and operating estimated to an
accuracy of 25 - 35%. Environmental base line studies and initial co-ordination with the Texas regulatory agencies will be included
in this stage.
Stage
3
Stage
3 will bring the Round Top Project to full feasibility level with all electrical power and water needs developed, final engineering
of heap leach systems, mine design and engineering, geotechnical drilling and construction planning, and permitting in place.
Additional drilling to bring all of the rock included in the 20 year pit to a measured or indicated resourced category.
Trends
– Rare-Earth Market
Rare
earth elements (or “REEs”) 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 important
in a wide range of technologies, products, and applications and are critical inputs in existing and emerging applications including:
computer hard drives, cell phones, clean energy technologies, such as hybrid and electric vehicles and wind power turbines; multiple
high-tech uses, including fiber optics, lasers and hard disk drives; numerous defense applications, such as guidance and control
systems and global positioning systems; and advanced water treatment technology for use in industrial, military and outdoor recreation
applications. As a result, 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 in order to
complete our plan of exploration and, if warranted, development at the Round Top Project may be impacted by future prices for
REEs.
Rare
earth prices are extremely depressed at this time. It is thought that the liquidation of excessive inventories in China is causing
these depressed prices. Chinese sources observe that most of the Chinese primary producers are not showing profit at this time.
However, demand for rare earth products continues to grow at a healthy rate. We believe that the present prices will likely prevail
for the next year at least until the surplus Chinese product is absorbed by the market.
Pricing
for REEs has experienced significant volatility over the past several years, but current prices for all REEs remain significantly
higher than pre-2010 levels, although they have fallen from the peak levels seen in 2011. According to www.metal-pages.com (“Metal-Pages”)
REE prices increased from mid-2010 to mid-2011 approximately 2,000 to 3,000 percent, depending on the element, and then REE prices
began decreasing through the end of 2011. REO prices of individual oxides increased considerably during the first two quarters
of 2011 but declined thereafter through to the end of the year. Beginning in the second quarter of 2012, REE prices have decreased
significantly for all REEs.
Pricing
is affected by a number of factors, including the general health of the global economy, efforts to institute greater environmental
reforms in China, industry consolidation, stockpile build-ups in China and by consumers and governments, lack of certainty regarding
future REE production, development and continued use of REE technologies, potential oversupply, potential substitution of other
metals, and potential for recycling REEs.
REE
supply markets continue to be dominated by China, which produced an estimated 86% of the global REE production in 2012. IMCOA
forecasts that global rare earth supply will increase to 180,000 mt in 2016, with China producing approximately 65% of that total.
In relation to global REE demand, based on the IMCOA Report, REE total demand is forecasted to increase from 115,000 tonnes in
2012 to 162,500 tonnes in 2016. It is forecasted that the demand for REE will increase at a rate of eight to 10 percent per year
for the next five to 10 years, but this is dependent on continued development and use of REEs in new technologies.
We
plan on focusing primarily on so-called “heavy” rare earth elements (HREE). The supply market for HREEs is dominated
by the Chinese who control approximately 99% of the market. In addition to the pricing influences mentioned above applicable to
all REEs, pricing of HREEs in the future is expected to be highly influenced by China policies of HREE supply and China stockpile
buildups.
Sources
and Availability of Raw Materials
We
are currently in the exploration stage and as such we do not require any significant raw materials in order to carry out our primary
operating activities. Our primary operating objective is to explore and develop the Round Top Project. For at least the next year,
we expect to continue to require the use of contract drilling services in order to obtain additional geological information. In
the past year we have been able to secure contract drilling services without excessive delay and costs. We expect the contract
drilling services will continue to be available over the next year.
The
raw materials that our current operations rely on are gasoline and diesel fuel for the exploration vehicles and for the heavy
equipment required to build roads and conduct drilling operations. Water is provided per service contract by Eagle Mountain Gang
which is used for the drilling operations.
Seasonality
Seasonality
in the State of Texas is not a material factor to our operations for our project.
Competition
The
mining industry is highly competitive. We compete with numerous companies, substantially all with greater financial resources
available to them. We therefore are operating at a significant disadvantage in the course of acquiring mining properties and obtaining
materials, supplies, labor, and equipment. Additionally, we are and will continue to be an insignificant participant in the business
of exploration and mineral property development. A large number of established and well-financed companies are active in the mining
industry and will have an advantage over us if they are competing for the same properties. Nearly all such entities have greater
financial resources, technical expertise and managerial capabilities than ourselves and, consequently, we will be at a competitive
disadvantage in identifying possible mining properties and procuring the same.
China
accounts for the vast majority of rare earth element production. While rare earth element projects exist outside of China, very
few are in actual production. Further, given the timeline for current exploration projects to come into production, if at all,
it is likely that the Chinese will be able to dominate the market for rare earth elements into the future. This gives the Chinese
a competitive advantage in controlling the supply of rare earth elements and engaging in competitive price reductions to discourage
competition. Any increase in the amount of rare earth elements exported from other nations, and increased competition, may result
in price reductions, reduced margins and loss of potential market share, any of which could materially adversely affect our profitability.
As a result of these factors, we may not be able to compete effectively against current and future competitors.
Government
Approvals
The
exploration, drilling and mining industries operate in a legal environment that requires permits to conduct virtually all operations.
Thus permits are required by local, state and federal government agencies. Local authorities, usually counties, also have control
over mining activity. The various permits address such issues as prospecting, development, production, labor standards, taxes,
occupational health and safety, toxic substances, air quality, water use, water discharge, water quality, noise, dust, wildlife
impacts, as well as other environmental and socioeconomic issues.
Prior
to receiving the necessary permits to explore or mine, the operator must comply with all regulatory requirements imposed by all
governmental authorities having jurisdiction over the project area. Very often, in order to obtain the requisite permits, the
operator must have its land reclamation, restoration or replacement plans pre-approved. Specifically, the operator must present
its plan as to how it intends to restore or replace the affected area. Often all or any of these requirements can cause delays
or involve costly studies or alterations of the proposed activity or time frame of operations, in order to mitigate impacts. All
of these factors make it more difficult and costly to operate and have a negative and sometimes fatal impact on the viability
of the exploration or mining operation. Finally, it is possible that future changes in these laws or regulations could have a
significant impact on our business, causing those activities to be economically reevaluated at that time.
Effect
of Existing or Probable Government and Environmental Regulations
Mineral
exploration, including mining operations are subject to governmental regulation. Our operations may be affected in varying degrees
by government regulation such as restrictions on production, price controls, tax increases, expropriation of property, environmental
and pollution controls or changes in conditions under which minerals may be marketed. An excess supply of certain minerals may
exist from time to time due to lack of markets, restrictions on exports, and numerous factors beyond our control. These factors
include market fluctuations and government regulations relating to prices, taxes, royalties, allowable production and importing
and exporting minerals. The effect of these factors cannot be accurately determined, and we are not aware of any probable government
regulations that would impact the Company. This section is intended as a brief overview of the laws and regulations described
herein and is not intended to be a comprehensive treatment of the subject matter.
Overview.
Like all other mining companies doing business in the United States, we are subject to a variety of federal, state and local
statutes, rules and regulations designed to protect the quality of the air and water, and threatened or endangered species, in
the vicinity of its operations. These include “permitting” or pre-operating approval requirements designed to ensure
the environmental integrity of a proposed mining facility, operating requirements designed to mitigate the effects of discharges
into the environment during exploration, mining operations, and reclamation or post-operation requirements designed to remediate
the lands affected by a mining facility once commercial mining operations have ceased.
Federal
legislation in the United States and implementing regulations adopted and administered by the Environmental Protection Agency,
the Forest Service, the Bureau of Land Management, the Fish and Wildlife Service, the Army Corps of Engineers and other agencies—in
particular, legislation such as the federal Clean Water Act, the Clean Air Act, the National Environmental Policy Act, the Endangered
Species Act, the National Forest Management Act, the Wilderness Act, and the Comprehensive Environmental Response, Compensation
and Liability Act—have a direct bearing on domestic mining operations. These federal initiatives are often administered
and enforced through state agencies operating under parallel state statutes and regulations.
The
Clean Water Act.
The federal Clean Water Act is the principal federal environmental protection law regulating mining operations
in the United States as it pertains to water quality.
At
the state level, water quality is regulated by the Environment Department, Water and Waste Management Division under the Water
Quality Act (state). If our exploration or any future development activities might affect a ground water aquifer, it will have
to apply for a Ground Water Discharge Permit from the Ground Water Quality Bureau in compliance with the Groundwater Regulations.
If exploration affects surface water, then compliance with the Surface Water Regulations is required.
The
Clean Air Act
. The federal Clean Air Act establishes ambient air quality standards, limits the discharges of new sources and
hazardous air pollutants and establishes a federal air quality permitting program for such discharges. Hazardous materials are
defined in the federal Clean Air Act and enabling regulations adopted under the federal Clean Air Act to include various metals.
The federal Clean Air Act also imposes limitations on the level of particulate matter generated from mining operations.
National
Environmental Policy Act (NEPA)
. NEPA requires all governmental agencies to consider the impact on the human environment of
major federal actions as therein defined.
Endangered
Species Act (ESA)
. The ESA requires federal agencies to ensure that any action authorized, funded or carried out by such agency
is not likely to jeopardize the continued existence of any endangered or threatened species or result in the destruction or adverse
modification of their critical habitat. In order to facilitate the conservation of imperiled species, the ESA establishes an interagency
consultation process. When a federal agency proposes an action that “may affect” a listed species, it must consult
with the USFWS and must prepare a “biological assessment” of the effects of a major construction activity if the USFWS
advises that a threatened species may be present in the area of the activity.
National
Forest Management Act
. The National Forest Management Act, as implemented through title 36 of the Code of Federal Regulations,
provides a planning framework for lands and resource management of the National Forests. The planning framework seeks to manage
the National Forest System resources in a combination that best serves the public interest without impairment of the productivity
of the land, consistent with the Multiple Use Sustained Yield Act of 1960.
Wilderness
Act
. The Wilderness Act of 1964 created a National Wilderness Preservation System composed of federally owned areas designated
by Congress as “wilderness areas” to be preserved for future use and enjoyment.
The
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)
. CERCLA imposes clean-up and reclamation responsibilities
with respect to discharges into the environment, and establishes significant criminal and civil penalties against those persons
who are primarily responsible for such discharges.
The
Resource Conservation and Recovery Act (RCRA)
. RCRA was designed and implemented to regulate the disposal of solid and hazardous
wastes. It restricts solid waste disposal practices and the management, reuse or recovery of solid wastes and imposes substantial
additional requirements on the subcategory of solid wastes that are determined to be hazardous. Like the Clean Water Act, RCRA
provides for citizens’ suits to enforce the provisions of the law.
National
Historic Preservation Act
. The National Historic Preservation Act was designed and implemented to protect historic and cultural
properties. Compliance with the Act is necessary where federal properties or federal actions are undertaken, such as mineral exploration
on federal land, which may impact historic or traditional cultural properties, including native or Indian cultural sites.
In
the fiscal year ended August 31, 2017, we incurred minimal costs in complying with environmental laws and regulations in relation
to our operating activities.
Employees
Including
our executive officers, we currently have three fulltime employees. Salaries for these three employees are in arrears and are
accrued monthly. We also utilize the services of qualified consultants with geological and mineralogical expertise as well as
individuals for accounting services.
Available
Information
We
make available, free of charge, on or through our Internet website, at www.TMRC.com our Annual Report on Form 10-K, our quarterly
reports on Form 10-Q and our current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act. Our Internet website and the information contained therein or connected thereto are not intended
to be, and are not incorporated into this Annual Report.
Our
filings can also be viewed at our corporate offices, located at 539 El Paso Street, Sierra Blanca, Texas 79851. Our reports, registration
statements and other information can be inspected on the SEC’s website at www.sec.gov and such information can also be inspected
and copies ordered at the public reference facilities maintained by the SEC at the following location: Judiciary Plaza, 100 F
Street NE, Washington, D.C. 20549.
Executive
Officers of the Company
The
following table sets forth certain information regarding our executive officers as of December 11, 2017:
Name
|
|
Age
|
|
Position
|
Daniel
E. Gorski
|
|
80
|
|
Chief
Executive Officer and Director
|
Wm Chris Mathers
|
|
58
|
|
Chief Financial
Officer
|
Daniel
E. Gorski –
Mr. Gorski has severed as a director of the Company since January 2006 and as the Company’s chief
operating officer since May 2011. Prior thereto, Mr. Gorski served as the Company’s president and chief executive officer
from January 2007 to May 2011. From July 2004 to January 2006, Mr. Gorski was the co-founder and vice president of operations
for High Plains Uranium Inc., a uranium exploration and development company that went public on the Toronto Stock Exchange in
December 2005. Between June 1996 to May 2004, Mr. Gorski served as an officer and director of Metalline Mining Co., a publicly
traded mining and development company with holdings in the Sierra Mojada Mining District, Coahuila, Mexico. From January 1992
to June 1996, Mr. Gorski was the exploration geologist under contract to USMX Inc. and worked exclusively in Latin America. Mr.
Gorski earned a BS in 1960 from Sul Ross State College, in Alpine, Texas and an MA in 1970 from the University of Texas in Austin,
Texas. Mr. Gorski has over forty-three years of experience in the mining industry.
Wm
Chris Mathers
– Mr. Mathers was appointed as the Company’s Chief Financial Officer from 2010 through 2012 and
again from February 2016 through the present. Mr. Mathers is also involved in providing contract chief financial officer and consulting
services to a wide variety of privately and publicly held companies. From 1993 through 1999, Mr. Mathers served as CFO to InterSystems,
Inc. (AMEX:II). Mr. Mathers began his career in public accounting with the international accounting firm of PriceWaterhouse. Mr.
Mathers holds a BBA in accounting from Southwestern University located in Georgetown, Texas, and is also a Certified Public Accountant.
ITEM
1A. RISK FACTORS
The
following sets forth certain risks and uncertainties that could have a material adverse effect on our business, financial condition
and/or results of operations, and the trading price of our common stock which may decline and investors may lose all or part of
their investment. These risk factors should be considered along with the forward-looking statements contained in this Annual Report
on Form 10-K because these factors could cause our actual results or financial condition to differ materially from those projected
in forward-looking statements. Additional risks and uncertainties that we do not presently know or that we currently deem immaterial
also may impair our business operations. We cannot assure you that we will successfully address these risks or that other unknown
risks exist that may affect our business.
Risk
Related to Our Business
Our
ability to operate as a going concern is in doubt.
The
audit opinion and notes that accompany our financial statements for the year ended August 31, 2017, disclose a going concern qualification
to our ability to continue in business. The accompanying financial statements have been prepared under the assumption that we
will continue as a going concern. We are an exploration stage company and we have incurred losses since our inception. We do not
have any working capital to fund normal operations and meet debt obligations without deferring payment on certain current liabilities
and raising additional funds.
We
currently have no historical recurring source of revenue and our ability to continue as a going concern is dependent on our ability
to raise capital to fund our future exploration and working capital requirements or our ability to profitably execute our business
plan. Our plans for the long-term return to and continuation as a going concern include financing our future operations through
sales of our common stock and/or debt and the eventual profitable exploitation of our mining properties. Additionally, the current
capital markets and general economic conditions in the United States are significant obstacles to raising the required funds.
These factors raise substantial doubt about our ability to continue as a going concern.
The
financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going
concern. If the going concern basis were not appropriate for these financial statements, adjustments would be necessary in the
carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.
We
have a history of losses and will require additional financing to fund exploration and, if warranted, development and production
of our properties. Failure to obtain additional financing could have a material adverse effect on our financial condition and
results of operation and could cast uncertainty on our ability to continue as a going concern.
We had no revenues during the fiscal year ended August 31, 2017. For the fiscal year ended August 31, 2017, our net loss was approximately
$2,135,000 and our accumulated deficit at August 31, 2017 was approximately $34.6 million. At August 31, 2017, our cash position
was approximately $1,000 and our working capital deficit was approximately $1,502,000. 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 of our properties are in the exploration stage.
We
will need to raise additional funding to implement our business strategy. We currently do not have any working capital.
During
the current fiscal year ending August 31, 2018, we plan to complete the first part of Stage 2 of our metallurgical activities
as discussed in the section heading “ITEM 2. PROPERTIES” of this Annual Report. Our initial budget for Stage 1 of
activity was approximately $508,000. To date we have spent approximately $134,000 completing Stage 1. Stage 2 is subdivided into
two parts, the first, referred to as milestone 1, is the bench scale separation of selected high purity rare earth carbonate.
The second part, or milestone 2, is the construction and operation of a pilot plant. Milestone 1 of Stage 2 is in progress and
is expected to be completed by the end of calendar year 2015. TMRC has spent approximately $360,000 on this phase and this expense
is to be augmented by an additional $140,000 supplied by the Defense Logistics Agency of the Department of Defense. Projected
costs of the second part of Stage 2, milestone 2, is approximately $1,120,000. The final part of Stage 2, milestone 3, is the
preparation of a bankable feasibility study of the process and is expected to cost approximately $500,000. We anticipate that
our financing efforts will raise sufficient capital to finish Stage 2 but there is no guarantee that we will be able to raise
the working capital necessary to complete Stage 1 or begin Stage 2 activities. After completion of Stage 2, we will use any remaining
available capital to begin work on other phases of project feasibility work.
We
currently do not have any funds to complete exploration and development work on any of our properties, which means that we will
be required to raise additional capital, enter into joint venture relationships or find alternative means to finance placing one
or more of our properties into commercial production, if warranted. Failure to obtain sufficient financing may result in the delay
or indefinite postponement of exploration and development or production on one or more of our properties and any properties we
may acquire in the future or even a loss of property interests. This includes our leases over claims covering the principal deposits
on our properties, which may expire unless we expend minimum levels of expenditures over the terms of such leases. We cannot be
certain that additional capital or other types of financing will be available if needed or that, if available, the terms of such
financing will be favorable or acceptable to us. Our ability to arrange additional financing in the future will depend, in part,
on the prevailing capital market conditions as well as our business performance.
The
most likely source of future financing presently available to us is through the sale of our securities. Any sale of our shares
of common stock will result in dilution of equity ownership to existing stockholders. This means that if we sell shares of common
stock, more shares will be outstanding and each existing stockholder will own a smaller percentage of the shares then outstanding.
Alternatively, we may rely on debt financing and assume debt obligations that require us to make substantial interest and capital
payments. Also, we may issue or grant warrants or options in the future pursuant to which additional shares of common stock may
be issued. Exercise of such warrants or options will result in dilution of equity ownership to our existing stockholders.
We
have a limited operating history on which to base an evaluation of our business and properties.
Any
investment in the Company should be considered a high-risk investment because investors will be placing funds at risk in an early
stage business with unforeseen costs, expenses, competition, a history of operating losses and other problems to which start-up
ventures are often subject. Investors should not invest in the Company unless they can afford to lose their entire investment.
Your investment must be considered in light of the risks, expenses, and difficulties encountered in establishing a new business
in a highly competitive and mature industry. Our operating history has been restricted to the acquisition and sampling of our
Round Top Project and this does not provide a meaningful basis for an evaluation of our Round Top Project. Other than through
conventional and typical exploration methods and procedures, we have no additional way to evaluate the likelihood of whether our
Round Top Project or our other mineral properties contain commercial quantities of mineral reserves or, if they do, that they
will be operated successfully. We anticipate that we will continue to incur operating costs without realizing any revenues during
the period when we are exploring our properties.
All
of our properties are in the exploration stage. There is no assurance that we can establish the existence of any mineral reserve
on any of our properties in commercially exploitable quantities. Until we can do so, we cannot earn any revenues from these properties,
and our business could fail.
We
have not established that any of our properties contain any mineral reserve, nor can there be any assurance that we will be able
to do so. The probability of an individual prospect ever having a mineral reserve that meets the requirements of the SEC is extremely
remote. Even if we do eventually discover a mineral reserve on one or more of our properties, there can be no assurance that they
can be developed into producing mines and extract those minerals. Both mineral exploration and development involve a high degree
of risk and few properties, which are explored, are ultimately developed into producing mines.
The
commercial viability of an established mineral deposit will depend on a number of factors including, by way of example, the size,
grade and other attributes of the mineral deposit, the proximity of the deposit to infrastructure such as a smelter, roads and
a point for shipping, government regulation and market prices. Most of these factors will be beyond our control, and any of them
could increase costs and make extraction of any identified mineral deposit unprofitable.
Even
if commercial viability of a mineral deposit is established, it may take several years in the initial phases of drilling until
production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required
to establish proven and probable reserves through drilling and bulk sampling, to determine the optimal metallurgical process to
extract the metals from the ore and, in the case of new properties, to construct mining and processing facilities. Because of
these uncertainties, no assurance can be given that our exploration programs will result in the establishment or expansion of
a mineral deposit or reserves.
We
have no history of producing metals from our mineral properties.
We
have no history of producing metals from any of our properties. Our properties are all exploration stage properties in various
stages of exploration and evaluation. Our Round Top Project is an early exploration stage project. Advancing properties from exploration
into the development stage requires significant capital and time, and successful commercial production from a property, if any,
will be subject to completing feasibility studies, permitting and construction of the mine, processing plants, roads, and other
related works and infrastructure. As a result, we are subject to all of the risks associated with developing and establishing
new mining operations and business enterprises including:
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completion of feasibility
studies to verify reserves and commercial viability, including the ability to find sufficient REE or gold reserves to support
a commercial mining operation;
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the timing and cost,
which can be considerable, of further exploration, preparing feasibility studies, permitting and construction of infrastructure,
mining and processing facilities;
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the availability
and costs of drill equipment, exploration personnel, skilled labor and mining and processing equipment, if required;
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the availability
and cost of appropriate smelting and/or refining arrangements, if required, and securing a commercially viable sales outlet
for our products;
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compliance with
environmental and other governmental approval and permit requirements;
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the availability
of funds to finance exploration, development and construction activities, as warranted;
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potential opposition
from non-governmental organizations, environmental groups, local groups or local inhabitants which may delay or prevent development
activities;
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potential increases
in exploration, construction and operating costs due to changes in the cost of fuel, power, materials and supplies; and
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potential shortages
of mineral processing, construction and other facilities related supplies.
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The
costs, timing and complexities of exploration, development and construction activities may be increased by the location of our
properties and demand by other mineral exploration and mining companies. It is common in exploration programs to experience unexpected
problems and delays during drill programs and, if warranted, development, construction and mine start-up. Accordingly, our activities
may not result in profitable mining operations and we may not succeed in establishing mining operations or profitably producing
metals at any of our properties.
If
we establish the existence of a mineral reserve on any of our properties in a commercially exploitable quantity, we will require
additional capital in order to develop the property into a producing mine. If we cannot raise this additional capital, we will
not be able to exploit the reserve, and our business could fail.
If
we do discover mineral reserves in commercially exploitable quantities on any of our properties, we will be required to expend
substantial sums of money to establish the extent of the reserve, develop processes to extract it and develop extraction and processing
facilities and infrastructure. We do not have adequate capital to develop necessary facilities and infrastructure and will need
to raise additional funds. Although we may derive substantial benefits from the discovery of a major mineral deposit, there can
be no assurance that such a deposit will be large enough to justify commercial operations, nor can there be any assurance that
we will be able to raise the funds required for development on a timely basis. If we cannot raise the necessary capital or complete
the necessary facilities and infrastructure, our business may fail.
Our
exploration activities may not be commercially successful.
Our
long-term success depends on our ability to identify mineral deposits on our existing properties and other properties we may acquire,
if any, that we can then develop into commercially viable mining operations. Our belief that our properties contain commercially
exploitable minerals has been based solely on preliminary tests that we have conducted and data provided by third parties, including
the data published in various third party reports, including but not limited to the GSA, Geological Society of America, Special
Paper 246, 1990. There can be no assurance that the tests and data upon which we have relied is correct or accurate. Moreover,
mineral exploration is highly speculative in nature, involves many risks and is frequently non-productive. Unusual or unexpected
geologic formations and the inability to obtain suitable or adequate machinery, equipment or labor are risks involved in the conduct
of exploration programs. The success of mineral exploration and development is determined in part by the following factors:
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the identification of potential mineralization
based on analysis;
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the availability of exploration permits;
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the quality of our management and our geological
and technical expertise; and
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the capital available for exploration.
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Substantial
expenditures and time are required to establish existing proven and probable reserves through drilling and analysis, to develop
metallurgical processes to extract metal, and to develop the mining and processing facilities and infrastructure at any site chosen
for mining. Whether a mineral deposit will be commercially viable depends on a number of factors, which include, without limitation,
the particular attributes of the deposit, such as size, grade and proximity to infrastructure; metal prices, which fluctuate widely;
and government regulations, including, without limitation, regulations relating to prices, taxes, royalties, land tenure, land
use, allowable production, importing and exporting of minerals and environmental protection. Any one or a combination of these
factors may result in us not receiving an adequate return on our investment capital. The decision to abandon a project may have
an adverse effect on the market value of our securities and our ability to raise future financing.
Increased
costs could affect our financial condition.
We
anticipate that costs at our projects that we may explore or develop, will frequently be subject to variation from one year to
the next due to a number of factors, such as changing ore grade, metallurgy and revisions to mine plans, if any, in response to
the physical shape and location of the ore body. In addition, costs are affected by the price of commodities such as fuel, rubber,
and electricity. Such commodities are at times subject to volatile price movements, including increases that could make production
at certain operations less profitable. A material increase in costs at any significant location could have a significant effect
on our profitability.
A
shortage of equipment and supplies could adversely affect our ability to operate our business.
We
are dependent on various supplies and equipment to carry out our mining exploration and, if warranted, development operations.
The shortage of such supplies, equipment and parts could have a material adverse effect on our ability to carry out our operations
and therefore limit or increase the cost of production.
Mining
and mineral exploration is inherently dangerous and subject to conditions or events beyond our control, which could have a material
adverse effect on our business and plans.
Mining
and mineral exploration involves various types of risks and hazards, including:
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metallurgical and other processing problems;
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unusual or unexpected geological formations;
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personal injury, flooding, fire, explosions,
cave-ins, landslides and rock-bursts;
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inability to obtain suitable or adequate machinery,
equipment, or labor;
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fluctuations in exploration, development and
production costs;
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unanticipated variations in grade;
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mechanical equipment failure; and
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periodic interruptions due to inclement or hazardous
weather conditions.
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These
risks could result in damage to, or destruction of, mineral properties, production facilities or other properties, personal injury,
environmental damage, delays in mining, increased production costs, monetary losses and possible legal liability. We may not be
able to obtain insurance to cover these risks at economically feasible premiums. Insurance against certain environmental risks,
including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from production,
may be prohibitively expensive. We may suffer a material adverse effect on our business if we incur losses related to any significant
events that are not covered by our insurance policies.
The
figures for our mineralization are estimates based on interpretation and assumptions and may yield less mineral production under
actual conditions than is currently estimated.
Unless
otherwise indicated, mineralization figures presented in this prospectus and in our filings with securities regulatory authorities,
press releases and other public statements that may be made from time to time are based upon estimates made by independent geologists
and our internal geologists. When making determinations about whether to advance any of our projects to development, we
must rely upon such estimated calculations as to the mineral reserves and grades of mineralization on our properties. Until
ore is actually mined and processed, mineral reserves and grades of mineralization must be considered as estimates only.
Estimates
can be imprecise and depend upon geological interpretation and statistical inferences drawn from drilling and sampling analysis,
which may prove to be unreliable. We cannot assure you that:
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these interpretations and inferences will be
accurate;
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mineralization estimates will be accurate; or
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this mineralization can be mined or processed
profitably.
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Any
material changes in mineralization estimates and grades of mineralization will affect the economic viability of placing a property
into production and a property’s return on capital.
Because
we have not completed feasibility studies on any of our properties and have not commenced actual production, mineralization estimates
for our properties may require adjustments or downward revisions. In addition, the grade of ore ultimately mined, if any, may
differ from that indicated by our feasibility studies and drill results. Minerals recovered in small scale tests may not be duplicated
in large scale tests under on-site conditions or in production scale.
The
mineralization estimates contained in this Annual Report have been determined and valued based on assumed future prices, cut-off
grades and operating costs that may prove to be inaccurate. Extended declines in market prices for rare earth minerals may render
portions of our mineralization estimates uneconomic and result in reduced reported mineralization or adversely affect the commercial
viability determinations we reach. Any material reductions in estimates of mineralization, or of our ability to extract this mineralization,
could have a material adverse effect on our share price and the value of our properties.
Analytical
Uncertainties
All
resource and grade estimates are based of state of the art analytical methods. However, any procedure for analyzing for small
amounts of metals in a chemically complex matrix may be subject to error and other uncertainties.
Our
operations contain significant uninsured risks which could negatively impact future profitability as we maintain no insurance
against our operations.
Our
exploration of our mineral properties contains certain risks, including unexpected or unusual operating conditions including rock
bursts, cave-ins, flooding, fire and earthquakes. It is not always possible to insure against these risks. Should events
such as these arise, they could reduce or eliminate our assets and shareholder equity as well as result in increased costs and
a decline in the value of our securities. We expect to maintain only general liability and director and officer insurance
but no insurance against our properties or operations. We may decide to take out this insurance in the future if it
is available at economically viable rates.
Mineral
operations are subject to market forces outside of our control which could negatively impact our operations
.
The
marketability of minerals is affected by numerous factors beyond our control including market fluctuations, government regulations
relating to prices, taxes, royalties, allowable production, imports, exports and supply and demand. One or more of
these risk elements could have an impact on the costs of our operations and if significant enough, reduce the profitability of
our operations.
We
may be adversely affected by fluctuations in demand for, and prices of, rare earth products.
We
expect to derive revenues, if any, from sale of rare earth and related minerals. Changes in demand for, and the market
price of, these minerals could significantly affect our profitability. The value and price of our common stock and our financial
results may be significantly adversely affected by declines in the prices of rare earth minerals and products. Rare earth minerals
and product prices may fluctuate and are affected by numerous factors beyond our control such as interest rates, exchange rates,
inflation or deflation, fluctuation in the relative value of the U.S. dollar against foreign currencies on the world market,
global and regional supply and demand for rare earth minerals and products, and the political and economic conditions of countries
that produce rare earth minerals and products.
A
prolonged or significant economic contraction in the United States or worldwide could put further downward pressure on market
prices of rare earth minerals and products. Protracted periods of low prices for rare earth minerals and products could significantly
reduce revenues and the availability of required development funds in the future. This could cause substantial reductions to,
or a suspension of, REO production operations, impair asset values and if reserves are established on our prospects, reduce our
proven and probable rare earth ore reserves.
In
contrast, extended periods of high commodity prices may create economic dislocations that may be destabilizing to rare earth minerals
supply and demand and ultimately to the broader markets. Periods of high rare earth mineral market prices generally are beneficial
to our financial performance. However, strong rare earth mineral prices also create economic pressure to identify or create alternate
technologies that ultimately could depress future long-term demand for rare earth minerals and products, and at the same time
may incentivize development of otherwise marginal mining properties.
Permitting,
licensing and approval processes are required for our operations and obtaining and maintaining these permits and licenses is subject
to conditions which we may be unable to achieve.
Both
mineral exploration and extraction require permits from various federal, state, provincial and local governmental authorities
and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport,
export, taxation, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection,
mine safety and other matters. Permits known to be required are (i) an operating plan for the conduct of exploration and development
approved by the Texas General Land Office, (ii) an operating plan for production approved by the Texas General Land Office, (iii)
various reporting to and approval by the Texas Railroad Commission regarding drilling and plugging of drill holes, and (v) reporting
to and compliance with regulations of the Texas Commission of Environmental Quality. If we recover uranium from our
mineral prospects, we will be required to obtain a source material license from the United States Nuclear Regulatory Commission. We
may also be subject to the reporting requirements and regulations of the Texas Department of Health.
Such
licenses and permits are subject to changes in regulations and changes in various operating circumstances. Companies
such as ours that engage in exploration activities often experience increased costs and delays in production and other schedules
as a result of the need to comply with applicable laws, regulations and permits. Issuance of permits for our activities is subject
to the discretion of government authorities, and we may be unable to obtain or maintain such permits. Permits required
for future exploration or development may not be obtainable on reasonable terms or on a timely basis. There can be
no assurance that we will be able to obtain or maintain any of the permits required for the continued exploration or development
of our mineral properties or for the construction and operation of a mine on our properties at economically viable costs. If we
cannot accomplish these objectives, our business could face difficulty and/or fail.
We
are subject to significant governmental regulations, which affect our operations and costs of conducting our business.
Our
current and future operations are and will be governed by laws and regulations, including:
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laws and regulations governing mineral concession
acquisition, prospecting, development, mining and production;
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laws and regulations related to exports, taxes
and fees;
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labor standards and regulations related to occupational
health and mine safety;
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environmental standards and regulations related
to waste disposal, toxic substances, land use and environmental protection; and
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Companies
engaged in exploration activities often experience increased costs and delays in production and other schedules as a result of
the need to comply with applicable laws, regulations and permits. Failure to comply with applicable laws, regulations and permits
may result in enforcement actions, including the forfeiture of claims, orders issued by regulatory or judicial authorities requiring
operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional
equipment or costly remedial actions. We may be required to compensate those suffering loss or damage by reason of our mineral
exploration activities and may have civil or criminal fines or penalties imposed for violations of such laws, regulations and
permits.
Existing
and possible future laws, regulations and permits governing operations and activities of exploration companies, or more stringent
implementation, could have a material adverse impact on our business and cause increases in capital expenditures or require abandonment
or delays in exploration.
Legislation
has been proposed that would significantly affect the mining industry.
Members
of the U.S. Congress have repeatedly introduced bills which would supplant or alter the provisions of the Mining Law of 1872.
If enacted, such legislation could change the cost of holding unpatented mining claims and could significantly impact our ability
to develop mineralized material on unpatented mining claims. Such bills have proposed, among other things, to either eliminate
or greatly limit the right to a mineral patent and to impose a federal royalty on production from unpatented mining claims. Although
we cannot predict what legislated royalties might be, the enactment of these proposed bills could adversely affect the potential
for development of unpatented mining claims and the economics of existing operating mines on federal unpatented mining claims.
Passage of such legislation could adversely affect our financial performance.
Regulations
and pending legislation governing issues involving climate change could result in increased operating costs, which could have
a material adverse effect on our business.
A
number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to various climate
change interest groups and the potential impact of climate change. Legislation and increased regulation regarding climate change
could impose significant costs on us, our venture partners and our suppliers, including costs related to increased energy requirements,
capital equipment, environmental monitoring and reporting and other costs to comply with such regulations. Any adopted future
climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to
such limitations. Given the emotion, political significance and uncertainty around the impact of climate change and how it should
be dealt with, we cannot predict how legislation and regulation will affect our financial condition, operating performance and
ability to compete. Furthermore, even without such regulation, increased awareness and any adverse publicity in the global marketplace
about potential impacts on climate change by us or other companies in our industry could harm our reputation. The potential physical
impacts of climate change on our operations are highly uncertain, and would be particular to the geographic circumstances in areas
in which we operate. These may include changes in rainfall and storm patterns and intensities, water shortages, changing sea levels
and changing temperatures. These impacts may adversely impact the cost, production and financial performance of our operations.
Our
exploration and development activities are subject to environmental risks, which could expose us to significant liability and
delay, suspension or termination of our operations.
The
exploration, possible future development and production phases of our business will be subject to federal, state and local environmental
regulation. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation.
They also set out limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental
legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance,
more stringent environmental assessments, and a heightened degree of responsibility for companies and their officers, directors
and employees. Future changes in environmental regulations, if any, may adversely affect our operations. If we fail to comply
with any of the applicable environmental laws, regulations or permit requirements, we could face regulatory or judicial sanctions.
Penalties imposed by either the courts or administrative bodies could delay or stop our operations or require a considerable capital
expenditure. Although we intend to comply with all environmental laws and permitting obligations in conducting our business, there
is a possibility that those opposed to exploration and mining will attempt to interfere with our operations, whether by legal
process, regulatory process or otherwise.
Environmental
hazards unknown to us, which have been caused by previous or existing owners or operators of the properties, may exist on the
properties in which we hold an interest. It is possible that our properties could be located on or near the site of a Federal
Superfund cleanup project. Although we will endeavor to avoid such sites, it is possible that environmental cleanup or other environmental
restoration procedures could remain to be completed or mandated by law, causing unpredictable and unexpected liabilities to arise.
U.S.
Federal Laws
The
Comprehensive Environmental, Response, Compensation, and Liability Act (CERCLA), and comparable state statutes, impose strict,
joint and several liability on current and former owners and operators of sites and on persons who disposed of or arranged for
the disposal of hazardous substances found at such sites. It is not uncommon for the government to file claims requiring cleanup
actions, demands for reimbursement for government-incurred cleanup costs, or natural resource damages, or for neighboring landowners
and other third parties to file claims for personal injury and property damage allegedly caused by hazardous substances released
into the environment. The Federal Resource Conservation and Recovery Act (RCRA), and comparable state statutes, govern the disposal
of solid waste and hazardous waste and authorize the imposition of substantial fines and penalties for noncompliance, as well
as requirements for corrective actions. CERCLA, RCRA and comparable state statutes can impose liability for clean-up of sites
and disposal of substances found on exploration, mining and processing sites long after activities on such sites have been completed.
The
Clean Air Act, as amended, restricts the emission of air pollutants from many sources, including mining and processing activities.
Our mining operations may produce air emissions, including fugitive dust and other air pollutants from stationary equipment, storage
facilities and the use of mobile sources such as trucks and heavy construction equipment, which are subject to review, monitoring
and/or control requirements under the Clean Air Act and state air quality laws. New facilities may be required to obtain permits
before work can begin, and existing facilities may be required to incur capital costs in order to remain in compliance. In addition,
permitting rules may impose limitations on our production levels or result in additional capital expenditures in order to comply
with the rules.
The
National Environmental Policy Act (NEPA) requires federal agencies to integrate environmental considerations into their decision-making
processes by evaluating the environmental impacts of their proposed actions, including issuance of permits to mining facilities,
and assessing alternatives to those actions. If a proposed action could significantly affect the environment, the agency must
prepare a detailed statement known as an Environmental Impact Statement (EIS). The U.S. Environmental Protection Agency, other
federal agencies, and any interested third parties will review and comment on the scoping of the EIS and the adequacy of and findings
set forth in the draft and final EIS. This process can cause delays in issuance of required permits or result in changes to a
project to mitigate its potential environmental impacts, which can in turn impact the economic feasibility of a proposed project.
The
Clean Water Act (CWA), and comparable state statutes, imposes restrictions and controls on the discharge of pollutants into waters
of the United States. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of
a permit issued by the Environmental Protection Agency (EPA) or an analogous state agency. The CWA regulates storm water mining
facilities and requires a storm water discharge permit for certain activities. Such a permit requires the regulated facility to
monitor and sample storm water run-off from its operations. The CWA and regulations implemented thereunder also prohibit discharges
of dredged and fill material in wetlands and other waters of the United States unless authorized by an appropriately issued permit.
The CWA and comparable state statutes provide for civil, criminal and administrative penalties for unauthorized discharges of
pollutants and impose liability on parties responsible for those discharges for the costs of cleaning up any environmental damage
caused by the release and for natural resource damages resulting from the release.
The
Safe Drinking Water Act (SDWA) and the Underground Injection Control (UIC) program promulgated thereunder, regulate the drilling
and operation of subsurface injection wells. EPA directly administers the UIC program in some states and in others the responsibility
for the program has been delegated to the state. The program requires that a permit be obtained before drilling a disposal or
injection well. Violation of these regulations and/or contamination of groundwater by mining related activities may result in
fines, penalties, and remediation costs, among other sanctions and liabilities under the SWDA and state laws. In addition, third
party claims may be filed by landowners and other parties claiming damages for alternative water supplies, property damages, and
bodily injury.
We
could be subject to environmental lawsuits.
Neighboring
landowners and other third parties could file claims based on environmental statutes and common law for personal injury and property
damage allegedly caused by the release of hazardous substances or other waste material into the environment on or around our properties.
There can be no assurance that our defense of such claims will be successful. A successful claim against us could have an
adverse effect on our business prospects, financial condition and results of operation.
Land
reclamation requirements for our properties may be burdensome and expensive.
Although
variable depending on location and the governing authority, land reclamation requirements are generally imposed on mineral exploration
companies (as well as companies with mining operations) in order to minimize long term effects of land disturbance.
Reclamation
may include requirements to:
|
●
|
control dispersion of potentially deleterious
effluents;
|
|
●
|
treat ground and surface water to drinking water
standards; and
|
|
●
|
reasonably re-establish pre-disturbance land
forms and vegetation.
|
In
order to carry out reclamation obligations imposed on us in connection with our potential development activities, we must allocate
financial resources that might otherwise be spent on further exploration and development programs. We plan to set up a provision
for our reclamation obligations on our properties, as appropriate, but this provision may not be adequate. If we are required
to carry out unanticipated reclamation work, our financial position could be adversely affected.
In accordance
with our GLO lease/prospecting permits all the areas impacted by the surface operations shall be reclaimed upon completion of
the activity such that: (a) Remove all trash, debris, plastic and contaminated soil by off-site disposal; and (b) Upon completion
of surface grading, the soil surface shall be left in a roughened condition to negate wind and enhance water infiltration.
Rare
earth and beryllium mining presents potential health risks. Payment of any liabilities that arise from these health
risks may adversely impact our Company.
Complying
with health and safety standards will require additional expenditure on testing and the installation of safety equipment. Moreover,
inhalation of certain minerals, such as beryllium can result in specific potential health risks ranging from acute pneumonitis,
tracheobronchitis, and chronic beryllium disease to an increased risk of cancer. Symptoms of these diseases may take
years to manifest. Failure to comply with health and safety standards could result in statutory penalties and civil
liability. We do not currently maintain any insurance coverage against these health risks. The payment of any liabilities
that arise from any such occurrences would have a material, adverse impact on our Company.
There
may be challenges to the title of our mineral properties.
We
will acquire most of its properties by unpatented claims or by lease from those owning the property. The lease of our
Round Top property was issued by the State of Texas. The validity of title to many types of natural resource property
depends upon numerous circumstances and factual matters (many of which are not discoverable of record or by other readily available
means) and is subject to many uncertainties of existing law and its application. We cannot assure you that the validity
of our titles to our properties will be upheld or that third parties will not otherwise invalidate those rights. In the event
the validity of our titles are not upheld, such an event would have a material adverse effect on us.
We
are developing our metallurgical processes through a joint venture with K-Technologies, Inc, which is subject to the risks normally
associated with the conduct of joint ventures.
Our
metallurgical processing efforts are currently focused on CIX/CIC processing through a joint venture with K-Technologies, Inc.
and is subject to the risks normally associated with the conduct of joint ventures. Such risks include: inability to exert control
over strategic decisions made in respect of the development and use of the processes; disagreement with partners on how to develop
and operate the processes efficiently; inability of partners to meet their obligations to the joint venture or third parties;
and litigation between partners regarding joint venture matters. Any failure of such other companies to meet their obligations
to us, the joint venture or to third parties, or any disputes with respect to the parties’ respective rights and obligations,
could have a material adverse effect on the joint venture or the development and use of the processes, which could have a material
adverse effect on our results of operations and financial condition.
Increased
competition could adversely affect our ability to attract necessary capital funding or acquire suitable producing properties or
prospects for mineral exploration in the future.
The
mining industry is intensely competitive. Significant competition exists for the acquisition of properties producing or capable
of producing, REE, gold or other metals. We may be at a competitive disadvantage in acquiring additional mining properties because
we must compete with other individuals and companies, many of which have greater financial resources, operational experience and
technical capabilities than us. We may also encounter increasing competition from other mining companies in our efforts to hire
experienced mining professionals. Competition for exploration resources at all levels is currently very intense, particularly
affecting the availability of manpower, drill rigs, mining equipment and production equipment. Increased competition could adversely
affect our ability to attract necessary capital funding or acquire suitable producing properties or prospects for mineral exploration
in the future.
We
compete with larger, better capitalized competitors in the mining industry.
The
mining industry is competitive in all of its phases, including financing, technical resources, personnel and property acquisition.
We will require significant capital, technical resources, personnel and operational experience to effectively compete in the mining
industry. Because of the high costs associated with exploration, the expertise required to analyze a project’s potential
and the capital required to develop a mine, larger companies with significant resources may have a competitive advantage over
us. We face strong competition from other mining companies, some with greater financial resources, operational experience and
technical capabilities than us. As a result of this competition, we may be unable to maintain or acquire financing, personnel,
technical resources or attractive mining properties on terms we consider acceptable or at all.
Current
economic conditions and capital markets are in a period of disruption and instability which could adversely affect our ability
to access the capital markets, and thus adversely affect our business and liquidity.
The
current economic conditions and financial crisis have had, and will continue to have, a negative impact on our ability to access
the capital markets, and thus have a negative impact on our business and liquidity. The shortage of liquidity and credit combined
with substantial losses in worldwide equity markets could lead to an extended worldwide recession. We may face significant challenges
if conditions in the capital markets do not improve. Our ability to access the capital markets has been and continues to be severely
restricted at a time when we need to access such markets, which could have a negative impact on our business plans. Even if we
are able to raise capital, it may not be at a price or on terms that are favorable to us. We cannot predict the occurrence of
future financial disruptions or how long the current market conditions may continue.
Our
resources may not be sufficient to manage our expected growth; failure to properly manage our potential growth would be detrimental
to our business
.
We
may fail to adequately manage our anticipated future growth. Any growth in our operations will place a significant strain on our
administrative, financial and operational resources, and increase demands on our management and on our operational and administrative
systems, controls and other resources. We cannot assure you that our existing personnel, systems, procedures or controls will
be adequate to support our operations in the future or that we will be able to successfully implement appropriate measures consistent
with our growth strategy. As part of this growth, we may have to implement new operational and financial systems, procedures and
controls to expand, train and manage our employee base, and maintain close coordination among our staff. We cannot guarantee that
we will be able to do so, or that if we are able to do so, we will be able to effectively integrate them into our existing staff
and systems.
If
we are unable to manage growth effectively, our business, operating results and financial condition could be materially adversely
affected. As with all expanding businesses, the potential exists that growth will occur rapidly. If we are unable to effectively
manage this growth, our business and operating results could suffer. Anticipated growth in future operations may place a significant
strain on management systems and resources. In addition, the integration of new personnel will continue to result in some disruption
to ongoing operations. The ability to effectively manage growth in a rapidly evolving market requires effective planning and management
processes. We will need to continue to improve operational, financial and managerial controls, reporting systems and procedures,
and will need to continue to expand, train and manage our work force.
We
may experience difficulty attracting and retaining qualified management to meet the needs of our anticipated growth, and the failure
to manage our growth effectively could have a material adverse effect on our business and financial condition.
Competition
for additional qualified management is intense, and we may be unable to attract and retain additional key personnel, or to attract
and retain personnel on terms acceptable to us. Management personnel are currently limited and they may be unable to
manage our expansion successfully and the failure to do so could have a material adverse effect on our business, results of operations
and financial condition. We have not entered into non-competition agreements. As our business is substantially
dependent upon the directors, executive officers and consultants, the lack of non-competition agreements poses a significant risk
to us in the event such persons were to resign or be terminated from such positions. Under such circumstances, such
persons may provide confidential information and key contacts to our competitors and we may have difficulties in preventing the
disclosure of such information. Such disclosure would have a material adverse effect on our business and operations.
Our
operations are dependent upon key personnel, the loss of which would be detrimental to our business.
The
nature of our business, including our ability to continue our exploration and development activities, depends, in large part,
on the efforts of key personnel such as Daniel Gorski, our Chief Executive Officer. The loss of Mr. Gorski could have
a material adverse effect on our business. We do not maintain “key man” life insurance policies on any
of our officers or employees.
Our
stock price is highly volatile
.
The
market price of our common stock has fluctuated and may continue to fluctuate. These fluctuations may be exaggerated
since the trading volume of its common stock is volatile, limited, and sporadic. These fluctuations may or may not
be based upon any business or operating results. Our common stock may experience similar or even more dramatic price
and volume fluctuations in the future.
The
market for the common stock is limited, sporadic and volatile. Any failure to develop or maintain an active trading
market could negatively affect the value of our shares and make it difficult or impossible for you to sell your shares.
Our
common stock is currently traded on the OTCQX U.S., a centralized quotation service maintained by OTC Markets Group Inc. that
collects and publishes market maker quotes for over-the-counter securities. Although our common stock is traded on the OTCQX U.S.,
a regular trading market for our securities may not be sustained in the future. Specifically, we currently are not in compliance
with the continued trading requirements of the OTCQX U.S. and may be removed from quotations on the OTCQX if we do not regain
compliance in the near future. If we are removed from the OTCQX, we anticipate that our stock would continue to be
quoted on the OTCQB. Quotes for stocks traded on the OTCQX U.S. or OTCQB generally are not listed in the financial sections of
newspapers and newspapers often devote very little coverage to stocks quoted solely on the OTCQX U.S. or OTCQB. Accordingly, prices
for, and coverage of, securities quoted solely on the OTCQX U.S. or OTCQB may be difficult to obtain. In addition, stocks quoted
solely on the OTCQX U.S. or OTCQB tend to have a limited number of market makers and a larger spread between the bid and ask prices
than those listed on an exchange. All of these factors may cause holders of our common stock to be unable to resell their securities
at any price. This limited trading also could decrease or eliminate our ability to raise additional funds through issuances of
our securities.
Failure
to develop or maintain an active trading market could negatively affect the value of our shares and make it difficult for you
to sell your shares or recover any part of your investment in us. Even if an active market for our common stock does
develop, the market price of our common stock may be highly volatile. In addition to the uncertainties relating to
our future operating performance and the profitability of our operations, factors such as variations in our interim financial
results, or various, as yet unpredictable factors, many of which are beyond our control, may have a negative effect on the market
price of our common stock. Accordingly, there can be no assurance as to the liquidity of any active markets that may
develop for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which holders
may be able to sell our common stock.
The
sale of substantial shares of our common stock or the issuance of shares upon exercise of our warrants will cause immediate and
substantial dilution to our existing stockholders and may depress the market price of our common stock
.
In
order to provide capital for the operation of our business, we may enter into additional financing arrangements. These
arrangements may involve the issuance of new common stock, preferred stock that is convertible into common stock, debt securities
that are convertible into common stock or warrants for the purchase of common stock. Any of these items could result
in a material increase in the number of shares of common stock outstanding which would in turn result in a dilution of the ownership
interest of existing common stockholders. In addition, these new securities could contain provisions, such as priorities
on distributions and voting rights, which could affect the value of our existing common stock.
As of August 31, 2017, we
have approximately 44.9 million shares of common stock outstanding. In addition to our common stock, we have
(i) warrants that may be exercised into 4,272,275 shares of common stock exercisable at $0.35 per share, (ii) warrants that
may be exercised into 4,272,275 shares of common stock exercisable at $0.50 per share, (iii) note warrants that may be
exercised into 678,660 shares of common stock at $0.20 - $0.22 per share, (iv) note warrants that may be exercised into
307,000 shares of common stock at $0.10 per share, (v) warrants that may be exercised into 6,595,000 shares of common stock
at $0.35 per share, (vi) options that may be exercised into 5,220,000 shares of common stock at $0.21 to $0.50 per share
issued to directors, officers and consultants, and (vii) options that may be exercised into 535,000 shares of common stock at
$0.30 per share issued to an advisor. The issuance of shares upon exercise of these options and warrants may
result in substantial dilution to the interests of other stockholders and may adversely affect the market price of our common
stock.
A
low market price may severely limit the potential market for our common stock.
An
equity security that trades below a certain price per share is subject to SEC rules requiring additional disclosures by broker-dealers. These
rules generally apply to any non-Nasdaq equity security that has a market price of less than $5.00 per share, subject to certain
exceptions (a “penny stock”). Such rules require the delivery, prior to any penny stock transaction, of
a disclosure schedule explaining the penny stock market and the risks associated therewith and impose various sales practice requirements
on broker-dealers who sell penny stocks to persons other than established customers and institutional or wealthy investors. For
these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received
the purchaser’s written consent to the transaction prior to the sale. The broker-dealer also must disclose the
commissions payable to the broker-dealer, current bid and offer quotations for the penny stock and, if the broker-dealer is the
sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Such
information must be provided to the customer orally or in writing before or with the written confirmation of trade sent to the
customer.
Monthly
statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited
market in penny stocks. Since our common stock trades at a price of less than $5.00 per share, the additional burdens
imposed upon broker-dealers by such requirements could discourage broker-dealers from effecting transactions in our common stock.
We
do not currently intend to pay cash dividends.
We
have not declared any dividends since incorporation and do not anticipate that we will do so in the foreseeable future. Our
present policy is to retain all available funds for use in our operations and the expansion of our business. Payment
of future cash dividends, if any, will be at the discretion of our Board and will depend on our financial condition, results of
operations, contractual restrictions, capital requirements, business prospects and other factors that our Board considers relevant.
Accordingly, investors will only see a return on their investment if the value of our securities appreciates.
Control
by current stockholders.
The
current stockholders have elected the directors and the directors have appointed current executive officers to serve our Company.
The voting power of these stockholders could also discourage others from seeking to acquire control of us through the purchase
of our common stock which might depress the price of our common stock.
Investment
in our Company has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described
below. If any of the following risks actually occur, our business, operating results and financial condition could be harmed and
the value of our stock could go down.
ITEM
1B. UNRESOLVED STAFF COMMENTS
Not
applicable.
ITEM
2. PROPERTIES
Executive
and Field Offices
Our
headquarters are located at 539 El Paso Street, Sierra Blanca, Texas 79851. Our accounting functions are conducted by personnel
in Galveston and Tyler, Texas, Denver, Colorado, all under the supervision of our CFO, Wm Chris Mathers.
Overview
of the Round Top Rare Earth-Uranium-Beryllium Project
We
are currently in the exploration stage and have not established that our Round Top Project contains Proven or Probable Reserves
as defined under SEC Guide 7.
Description
and Access
Round
Top is a small mountain, one of a group of five that comprises the Sierra Blanca, located in Hudspeth County approximately eight
miles northwest of the town of Sierra Blanca. The property is reached by truck on a private dirt road that turns north off Interstate
10 access road approximately one mile west of the town of Sierra Blanca. A railroad line is located approximately one
to three miles from the Round Top Project and a spur line stops at a stone quarry within three miles of the Round Top Project.
On March 6, 2013, we purchased the surface lease at the Round Top Project, known as the West Lease, from the Foundation for
$500,000 cash and 1,063,830 shares of our common stock. We also agreed to support the Foundation through an annual payment of
$45,000 for ten years to support conservation efforts within the Rio Grande Basin and in particular engaging in stewardship
of 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 us unrestricted surface access for the potential development and mining
of our 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.
Figure
1 - Round Top Location Map
Acquisition
and Ownership
Prospecting
Permits
TMRC
currently holds prospecting permits covering land in Hudspeth County. The prospecting permits allow for exploration activities
on approximately 7,110 acres. Currently, TMRC has yet to complete drilling on lands identified within the permits due to the requirement
of completing archeological studies. TMRC intends to complete archeological studies in all areas for future exploration. To date,
all exploration work has occurred on areas with approved archeological assessments. A summary of the prospecting permits is listed
in Table 1 below:
Table
1 TMRC Permit Numbers and Associated Acres
Permit
#
|
Acres
|
M-114639
|
640
|
M-114640
|
640
|
M-
114641
|
250
|
M-114642
|
640
|
M-114643
|
400
|
M-114644
|
360
|
M-114645
|
340
|
M-115990
|
640
|
M-115991
|
640
|
M-115992
|
640
|
M-115993
|
640
|
M-115994
|
640
|
M-115995
|
640
|
September
2011 Lease
On
September 2, 2011, we entered into 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 us 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 from execution date of lease so long as minerals are produced in paying quantities.
Under
the lease, we will pay the State of Texas a lease bonus of $142,518; $44,718 of which was paid upon the execution of the lease, and
$97,800 which will be due when we submit a supplemental plan of operations to conduct mining. Upon the sale of minerals
removed from Round Top, we will pay the State of Texas a $500,000 minimum advance royalty.
Thereafter,
we will pay the State of Texas a production royalty equal to eight percent (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%) of the market value of all other minerals removed
and sold from Round Top.
Thereafter,
assuming production of paying quantities has not been obtained, we may pay additional delay rental fees to extend the term of
the lease for successive one (1) year periods pursuant to the following schedule:
|
|
|
Per Acre
Amount
|
|
|
Total
Amount
|
|
September
2, 2015 – 2019
|
|
|
$
|
75
|
|
|
$
|
67,077
|
|
September 2, 2020 –
2024
|
|
|
$
|
150
|
|
|
$
|
134,155
|
|
September 2, 2025 –
2029
|
|
|
$
|
200
|
|
|
$
|
178,873
|
|
In
August 2017, we paid the State of Texas a delay rental of $67,077.
November
2011 Lease
On
November 1, 2011, we entered into a mining lease with the State of Texas covering 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. Under
the lease, we paid the State of Texas a lease bonus of $20,700 which was paid upon the execution of the lease. Upon
the sale of minerals removed from Round Top, we will pay the State of Texas a $50,000 minimum advance royalty. Thereafter,
we will pay the State of Texas a production royalty equal to eight percent (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%) of the market value of all other minerals sold
from Round Top. The term of the lease is nineteen years from execution date of lease so long as minerals are produced in paying
quantities.
Thereafter,
assuming production of paying quantities has not been obtained, we may pay additional delay rental fees to extend the term of
the lease for successive one (1) year periods pursuant to the following schedule:
|
|
|
Per
Acre Amount
|
|
|
Total
Amount
|
|
November
1, 2015 – 2019
|
|
|
$
|
75
|
|
|
$
|
6,750
|
|
November 1, 2020 –
2024
|
|
|
$
|
150
|
|
|
$
|
13,500
|
|
November 1, 2025 –
2029
|
|
|
$
|
200
|
|
|
$
|
18,000
|
|
In
October 2017, we paid the State of Texas a delay rental to extend the term of the lease in an amount equal to $6,750.
March
2013 Lease
On March 6, 2013, we purchased the surface lease at the Round Top Project, known as the West Lease, from the Southwest Wildlife
and Range Foundation (the “Foundation”) for $500,000 cash and 1,063,830 shares of our common stock. We also
agreed to support the Foundation through an annual payment of $45,000 for ten years to support conservation efforts within
the Rio Grande Basin and in particular engaging in stewardship of 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 us unrestricted surface access for the potential development and mining
of our 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
In
October 2014, we executed an agreement with the Texas General Land Office securing the option to purchase the surface rights covering
the potential Round Top project mine and plant areas, and separately a lease to develop the water necessary for the potential
Round Top project 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. We may exercise the option
for all or part of the option acreage at any time during the sixteen year primary term of the mineral lease.
The option can be kept current by an annual payment of $10,000, which has not been paid as of the date of this filing. The purchase price will be the appraised value of the surface at the time of exercising the option.
The
ground water lease secures our right to develop the ground water within a 13,120 acre lease area located approximately 4 miles
from the Round Top deposit. The lease area contains five existing water wells. It is anticipated that all potential water needs
for the Round Top project mine operations would be satisfied by the existing wells covered by this water lease. This
lease has an annual minimum production payment of $5,000 prior to production of water for the operation, which has not been paid
as of the date of this filing. After initiation of production we will pay $0.95 per thousand gallons or $20,000 annually,
whichever is greater. This lease remains effective as long as the mineral lease is in effect.
Existing
Infrastructure
The
Round Top rare earth prospect was initially developed in the late 1980s as a beryllium resource. As a result, several
pieces of equipment were present at the property when we acquired the lease, some of which we have repaired as described below. The
previous operators had also built out several roads at the prospect site, which we believe are suitable for our current exploration
plans.
There
exists on the Round Top site a 1,115 foot, 10 foot by 10 foot decline from the surface into the Round Top prospect. There are
steel sets every five feet, in some cases less, and the entire working is lagged with timber. There are “escape holes”
at intervals to allow personnel to avoid equipment. The escape holes are all in good operating condition. There is
also a 36 foot steel ventilation line in place that runs for approximately 75 feet into the prospect. There is a 125 hp axial
plane ventilation fan in place. We have leveled the fan and rehabilitated the control panel, and have operated this
ventilation system during the evaluation of the historic Cabot-Cyprus work. We intend to install a “soft start” motor
starter switch for the vent fan in the future in order to be able to use a 100kw generator.
A
bag house is also located on the property that will need its electronic controls rehabilitated and modernized and filters installed.
There is a 6” Victaulic compressed air line extending from the compressor station outside to the faces. There are numerous
valves at strategic locations underground. There is one 2’ steel Victaulic water line for drill water and an additional
partly plastic Victaulic water line for dust suppression sprayers, which also has sprayers in place.
There
is electric cable from the portal to the face and a switch box underground. Some additional switching gear will need to be installed
at the portal. The mine portal has a sturdy locking steel door in place that we have reconditioned.
There
is a 500 barrel (23,000 gal) water tank below the mine dump for water to be hauled in and stored. This tank appears to be in good
shape. The water line from the tank to the mine portal is missing and will have to be replaced. The water system will need a submersible
pump, switching gear and approximately 1000 ft of 2” poly line to render the water system serviceable.
The
nearest population center to the Round Top Project is Sierra Blanca, Texas. The town of Sierra Blanca is approximately six miles
to the southeast of the Round Top Project site. The population was 533 in 2000 and 510 during the 2007 census. Skilled mining
labor and support could be found in El Paso, approximately 85 miles to the northeast.
A
major rail line parallels Interstate 10 approximately three to four miles west and south of the mine site. Approximately three
miles from the Project site is a commercial rock quarry in operation which produces ballast for the railroad. The rock quarry
operation has a rail road spur which is approximately two to three miles from the Project.
Power
is currently supplied to Sierra Blanca through El Paso Electric Services. El Paso Electric Services has approximately 1,643 megawatts
of generating capacity. As the greater power needs of a floatation operation have been eliminated by the proposed heap leach mine
plan the existing 69 kV is thought to be adequate to supply the envisioned heap leach operation.
Water
for the project may be obtained from a well field approximately 3 miles east of the mine site. In October of 2014, we executed
a lease with the Texas General Land Office to develop the water necessary for the potential Round Top project mine operations.
The ground water lease secures our right to develop the ground water within a 13,120 acre lease area located approximately 4 miles
from the Round Top deposit. The lease area contains five existing water wells. It is anticipated that all potential water needs
for the Round Top project mine operations would be satisfied by the existing wells covered
by this water lease. This lease has an annual minimum production payment of $5,000 prior to production of water for the operation,
which has not been paid as of the date of this filing. After initiation of production we will pay $0.95 per thousand gallons
or $20,000 annually, whichever is greater. This lease remains effective as long as the mineral lease is in effect.
This
well field was originally developed to supply water for a proposed real estate project in the late 1970’s. One of the existing
wells is reported to have pump tested 950 gallons per minute and another 450 gallons per minute. This water is high enough in
total dissolved solids to not meet drinking water standards, thus there is no competition for its use. The quality of the water
is expected to be adequate for process water needs and the water will require treatment to be potable.
Geology
The
Round Top Project area lies within the Texas Lineament Zone or Trans-Pecos Trend. The lineament is a northwest trending
structural zone where Laramide thrust faulting followed by basin and range normal faulting were active. Tertiary igneous
activity is also associated with the lineament zone, both intrusive and extrusive.
Locally
the project area is characterized by five Tertiary microgranite bodies that intruded Cretaceous sedimentary rocks. The microgranites
occur as laccoliths, mushroom-shaped bodies emplaced at relatively shallow depths. At the current erosional levels, laccoliths
form resistant peaks with relief up to 2,000 feet. The microgranites, which are called rhyolites in the literature,
are enriched with various metals which may or not be economical to recover. The rare earth elements are located with-in
the intrusive rhyolite body.
Tertiary
Diorite which predate the microgranites are intruded the cretaceous section. The diorites occur as sills, five to 100
feet thick and less frequently as dikes and plugs. Sedimentary rocks exposed in the area are middle to upper Cretaceous
limestones shales and sandstones. The limestone, where it is in contact with the microgranites, is the host for Beryllium
and uranium mineralization.
The
Round Top Project was initially developed in the late 1980’s as a beryllium resource. During the course of the beryllium
exploration, approximately 200 drill holes penetrated varying thicknesses of the rhyolite volcanic rock that makes up the mass
of Round Top Mountain and caps the beryllium-uranium deposits which occur in the underlying limestone; some 50 more holes were
drilled on Little Round Top, Sierra Blanca and Little Blanca Mountains.
The
Texas Bureau of Economic Geology, working with the project geologists, conducted an investigation of the rhyolite to better understand
its rare metal content. This research shows that the rhyolite laccoliths at Sierra Blanca are enriched in a variety of REEs and
other rare elements such as tantalum, niobium, thorium and lithium. They analyzed a series of samples from outcrop and drill holes
and studied the geochemistry and mineralogy of the rhyolite. The results of their research were published in the GSA, Geological
Society of America, Special Paper 246, 1990.
Mineralization
Round
Top rhyolite is enriched in Heavy Rare Earth Elements (HREEs). Statistical review of the current data shows that an estimated
70% of the total REE’s grade being HREEs. REE mineralization occurs primarily as disseminated microcrystals of varieties
of fluorite (such as yttrium-rich yttrofluorite) where HREEs have substituted for calcium, and as other REE-bearing accessory
minerals. REE minerals occur mainly in vugs and as crystal coatings, suggesting late-stage crystallization from an incompatible
element-rich fluid.
The
Round Top rhyolite was divided into five different alteration phases based on the intensity of hematitic and hydrothermal alteration:
red rhyolite, pink rhyolite, tan rhyolite; brown rhyolite and gray rhyolite. Hematitic alteration is a replacement of the magnetite
by hematite and gives the rhyolite a red to pink color. Hydrothermal alteration was late and gives the rhyolite a tan to brown
color. Mostly unaltered, gray rhyolite was also documented.
Initial
geochemical testwork, presented in Section 13, suggests that the gray and pink rhyolite units have the highest REE content, averaging
between 554 and 615 parts per million (ppm) total REE + Yttrium (Y). Red and tan rhyolites, which may be strongly vapor-phase
altered, contain about 8% lower abundance of REE and the brown rhyolite, which may be altered hydrothermally or by groundwater,
contains about 23% less REE than the gray and pink varieties.
Metallurgy
The
Round Top Project rhyolite requires further evaluation of its mineralogical makeup and economic modeling to determine the appropriate
course for potential future commercial development. However, the size of this rhyolite deposit, the high percentage
(68-72%) of heavy rare earth elements to the total rare earth elements and the leaching characteristics of the host rock could
make a heap leach mine a viable option at lower capital costs than the mine plan described in our current PEA released June 22
2012. The Preliminary Economic Assessment is mentioned here for informational purposes only and is not incorporated herein by
reference.
On
October 27, 2011, we announced that we had completed Phase I of its metallurgical testing and characterization. This
mineralogical study reconfirmed that the rare earth minerals are finely disseminated throughout the rhyolite host rock. Based
on the initial ore characterization, this testing reconfirms the simplistic rare earth element mineral associations, which suggests
favorable metallurgical processing options. Phase II was focused on pre-concentration evaluation and other diagnostic testing
including acid leaching of the rare earth minerals. The results of this testing is described in the PEA.
On
May 8, 2013, we announced independent confirmation of potential favorable heap leach characteristics, based on coarse leach testing
at an independent lab. The results are summarized below:
|
La
|
Ce
|
Pr
|
Nd
|
Sm
|
Eu
|
Gd
|
Tb
|
Dy
|
Ho
|
Ore Grade
|
ppm
|
ppm
|
ppm
|
ppm
|
ppm
|
ppm
|
ppm
|
ppm
|
ppm
|
ppm
|
|
31
|
98
|
12.2
|
34.8
|
11.1
|
0.6
|
11.5
|
3.77
|
30.7
|
7.98
|
Recovery 1
|
21
|
65
|
8.4
|
25.3
|
8.6
|
<0.4
|
9.5
|
3.2
|
25.3
|
6.37
|
Recovery 2
|
16
|
55
|
7.7
|
22.8
|
8.3
|
0.4
|
9.3
|
3.11
|
24.7
|
6.2
|
Average Recovery
|
18.5
|
60
|
8.05
|
24.05
|
8.45
|
NA
|
9.4
|
3.155
|
25
|
6.285
|
% Recovery
|
60%
|
61%
|
66%
|
69%
|
76%
|
67%
|
82%
|
84%
|
81%
|
79%
|
|
Er
|
Tm
|
Lu
|
Yb
|
Y
|
Th
|
U
|
Be
|
Li
|
|
Ore Grade
|
ppm
|
ppm
|
ppm
|
ppm
|
ppm
|
ppm
|
ppm
|
ppm
|
ppm
|
|
|
33.8
|
7.37
|
9.12
|
57
|
218
|
183.5
|
40.7
|
32.2
|
410
|
|
Recovery 1
|
25.8
|
5.09
|
5.32
|
36.4
|
185
|
146.5
|
20
|
6.5
|
270
|
|
Recovery 2
|
25.1
|
5.04
|
5.33
|
36.5
|
184
|
143.9
|
21.5
|
4.8
|
270
|
|
Average Recovery
|
25.45
|
5.065
|
5.325
|
36.45
|
184.5
|
145.2
|
20.75
|
5.65
|
270
|
|
% Recovery
|
75%
|
69%
|
58%
|
64%
|
85%
|
79%
|
51%
|
18%
|
66%
|
|
*
La=Lanthanum,
Ce= Cerium, Pr= Praseodymium, Nd= Neodymium, Sm= Samarium, Eu= Europium, Gd= Gadolinium, Tb= Terbium, Dy=Dysprosium, Ho= Holmium,
Er= Erbium, Tm= Thulium, Lu= Lutetium, Yb= Ytterbium, Y= Yttrium, Th=Thorium, U= Uranium, Be= Beryllium, Li= Lithium
A
sieved 2 to 4 mm (~1/8th to 1/4 inch) fraction of the composite rhyolite sample being used for all metallurgical testing was submitted.
This sample was leached in 14.7 gm/l (14.7% by wt) sulfuric acid at room temperature for two weeks.
On
July 16, 2013, we announced the results of an independent heap leach scoping study static leach test which confirmed recoveries
up to 79.9%. The test results indicated the following:
|
1.
|
Comparison of the
calculated heads and the assayed heads for the elements of interest are similar. Hence, it is reasonable to conclude that
the minerals are fairly uniformly distributed in the deposit.
|
|
2.
|
Extractions for
Yttrium varied from 20.8 to 61.1% for the different sizes with a combined extraction of 48.6%. Extractions for
Dysprosium varied from 23.8% t o57.7% with a combined extraction of 44.5%.
|
|
3.
|
The highest extractions
for all minerals of interest were in the 2 in X 1/2 in size fractions. The extractions dropped significantly in the minus
1/2in size fraction.
|
|
4.
|
The acid consumption
was reasonable for the coarse size fractions (>1/2 inch) and more than doubled for the minus 1/2inch material.
|
On
September 30, 2013, we announced the results of preliminary column leach testing. Preliminary column leach testing
of Round Top rhyolite crushed to 1/2 inch has yielded the following recoveries of the heavy rare earth elements (terbium and heavier)
plus yttrium. These tests were run for 60 days with 7.5 wt. percent sulfuric acid. Recoveries of the heavy rare earth elements
plus Yttrium were as follows:
Yttrium
(Y):
|
91%
|
Dysprosium
(Dy):
|
87%
|
Lutetium (Lu):
|
67%
|
Holmium (Ho):
|
86%
|
Erbium (Er):
|
83%
|
Thulium (Tm):
|
77%
|
Ytterbium
(Yb):
|
74%
|
Terbium (Tb):
|
87%
|
While
concurrent work on the froth floatation and agitated leaching of the concentrates yielded acceptable recoveries, the whole rock
column leach testing indicates better overall recoveries at potentially lower capital and operating costs. This rock also shows
other very favorable heap leach characteristics with ore slump of 0.18%, ore wt. loss of 2.25% and retained moisture of 6.4%.
Work
will continue to optimize the recoveries of the heavy rare earth elements (HREE) and yttrium as well as potentially valuable by-products
such as uranium, beryllium and lithium and the light rare earth elements (LREE).
Project
Exploration History and Timeline
The
Round Top rare earths and uranium-beryllium prospects were initially drilled in 1984 and 1985, during which time the ore body
known as the “West End Ore Zone” was discovered by Cabot Corporation. In subsequent years, Cyprus Minerals Corporation
took over the exploration activities. Cyprus drilled additional exploration holes and also put an adit into the ore zone
where 1,115 feet of underground workings were driven. Cyprus developed the underground workings in order to obtain bulk
samples for pilot plant testing and beryllium oxide concentrate generation. Cyprus ultimately put the project on hold as
a result of poor beryllium market conditions. Cyprus eventually allowed the lease with the state of Texas to lapse.
In
March 2011, the Company completed an analysis of 1,103 drill samples from the 1984-88 drilling program initially conducted on
the Round Top Project by third party operators. All or a portion of forty-six out of an estimated two hundred fifty existing drill
holes have been re-logged and re-analyzed. The rare earth element and other metals are consistent with the original study by the
Texas Bureau of Geology that was published in the Geological Society of America, Special Paper 246 in 1990. This study first described
the rare metal content of the large mass of intrusive igneous rock that makes up the body of Round Top Mountain, and is the basis
for our interest in this deposit. The nine drill holes cited below were selected because they are widely distributed and roughly
define an area approximately six thousand feet by four thousand feet within the approximate seven thousand foot known diameter
of the intrusive rhyolite body. They intersected the entire body of the rhyolite.
On
October 27, 2011, we announced favorable results of our Phase I metallurgical testing and characterization that reconfirmed that
the rare earth minerals are finely disseminated throughout the rhyolite host rock at our Round Top Project.
On
November 8, 2011, we announced that our supplementary operating plan to expand exploration activities at our Round Top Project
had been approved by the Texas General Land Office (GLO); the expanded development and exploration drill plan now calls for an
additional 40 drill holes and 4 diamond core holes for an estimated planned drilled footage of 20,000 feet.
On
November 10, 2011, we announced that Gustavson Associates, LLC, a subsidiary of Walsh Environmental Scientists and Engineers and
its parent company, Ecology and Environment, Inc. (NASDAQ: EEI) had been contracted to perform the scoping study at the Round
Top Project. On June 15, 2012, we issued a press release regarding the results of our Preliminary Economic Assessment.
On
June 22, 2012, we published our PEA for our Round Top Project, entitled “NI 43-101 Preliminary Economic Assessment Round
Top Project, Sierra Blanca, Texas,” dated June 22, 2012, effective as of May 15, 2012.
On
October 3, 2012, our management released updated economic projections related to various revisions to the proposed mine plan presented
in the PEA.
Throughout
2013, management focused on developing metallurgical processes and refining the mine plan in anticipation of releasing an updated
PEA.
On
March 6, 2013, we purchased the surface lease at the Round Top Project, known as the
West Lease, from the Foundation for $500,000 cash and 1,063,830 shares of our common stock. We also agreed to support the
Foundation through an annual payment of $45,000 for ten years to support conservation efforts within the Rio Grande Basin and
in particular engaging in stewardship of Lake Amistad, a large and well-known fishing lake near Del Rio, Texas. The West
Lease comprises approximately 54,990 acres. Most importantly, purchase of the surface lease gave us unrestricted surface
access for the potential development and mining of our 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.
On May 8, 2013, we released testing results
by an independent laboratory of the leaching characteristic of the rhyolite at our Round Top Project, which demonstrates characteristics
that may be favorable to heap leach mining at the Round Top Project. These leaching characteristics are described in greater detail
below under the section heading “Properties – Round Top Project – Metallurgy”.
On
September 30, 2013 we released the results on column leach testing by an independent laboratory and announced our intention to
issue a revised PEA based on a heap leach operation designed to produce approximately 2,500 tons per year of heavy rare earth
elements plus yttrium. The column leach testing results are described in greater detail below under the section heading “Properties
– Round Top Project – Metallurgy”.
On
December 23, 2013, we published a revised version of the June 2012 Preliminary Economic Assessment (the “Revised PEA”)
based on a 20,000 tonne per day heap leach operation using a conventional element separation plant. The mineralized material estimate
was recalculated to include uranium, niobium, tantalum and tin. The Revised PEA assesses the potential economic viability of the
simplified and “scaled down” operation which we believe is a much better fit with the present rare earth market.
On
June 22, 2017 we announced the establishment of American Mineral Reclamation LLC. This subsidiary has the mission to seek out
and develop lower cost projects involving metals and mineral recovery and production from coal by-products, acid mine drainage
waters and sludges, mine waste and tailings, industrial wastewater and recovery of strategic metals from scrap from various sources.
In addition to REE and scandium we intend to include other important “tech” metals such as Lithium, Cobalt, Vanadium,
Gallium and others as conditions dictate. We have executed a co-operation agreement to work jointly with Inventure Renewals.
Cautionary
Note to Investors:
The PEA and Revised PEA have been prepared in accordance with Canadian National Instrument 43-101 —
Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum
(the “CIM”) —
CIM Definition Standards on Mineral Resources and Mineral Reserves
, adopted by the CIM
Council, as amended.
The Company has voluntarily had the PEA and Revised PEA prepared in accordance with NI 43-101 but the
Company is not subject to regulation by Canadian regulatory authorities and no Canadian regulatory authority has reviewed the
PEA or Revised PEA or passed upon its accuracy or compliance with NI 43-101.
The terms “mineral reserve”, “proven
mineral reserve” and “probable mineral reserve” are Canadian mining terms as defined in accordance with NI 43-101.
These definitions differ from the definitions in SEC Industry Guide 7 under the United States Securities Act of 1933, as amended
(the “Securities Act”). Under SEC Industry Guide 7 standards, a “final” or “bankable” feasibility
study is required to report reserves, the three-year historical average price is used in any reserve or cash flow analysis to
designate reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority.
In addition, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource”
and “inferred mineral resource” are defined in NI 43-101; however, these terms are not defined terms under SEC Industry
Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned
not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves. “Inferred
mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic
and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher
category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility
studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists
or is economically or legally mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under
Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves”
by SEC Industry Guide 7 standards as in place tonnage and grade without reference to unit measures. Accordingly, information in
the PEA and Revised PEA contains descriptions of our mineral deposits that may not be comparable to similar information made public
by United States companies subject to the reporting and disclosure requirements under the United States federal securities laws
and the rules and regulations thereunder. Our project as described in the PEA and Revised PEA currently does not contain any known
proven or probable ore reserves under SEC Industry Guide 7 reporting standards. U.S. investors are urged to consider closely the
disclosure in the Registrant’s latest reports and registration statements filed with the SEC.
U.S. Investors are cautioned
not to assume that any defined resources in these categories will ever be converted into SEC Guide 7 compliant reserves.
Current
and Planned Metallurgical Activities
Metallurgical
research done leading to the publication of our Revised PEA of December 2013 has shown the possibility of heap leaching at the
Round Top Project. This first step of “dissolving” the REE bearing mineral is the critical factor in the determination
to develop REE projects. The type of solvent, its strength and other conditioning necessary to render the elements soluble is,
in our opinion, what most affects the ultimate feasibility of a project. TMRC has been able to extract a high percentage of the
REE and other elements from the mineralized rock at the Round Top Project, and test work to date also indicates it can be done
easily and at projected low operating costs.
Process
development was scheduled as follows:
Stage
1a.
Treat the primary leach solution to remove the impurity elements and to produce a feedstock solution at concentrations and
flow rate acceptable to feed the processing plant.
Stage
1b.
Desktop study of the CAPEX and OPEX of the plant envisioned at Round Top.
Stage
2a
. Bench scale production of high purity separated elements
Stage
2b.
Optimize leach recoveries of REE and other elements by large scale column leach testing. Primary leach solution produced
during this phase will be used to refine the CIX/CIC recoveries of the various heavy elements and to develop methods for recovering
the “light” elements, lithium in particular, by a variety of techniques including evaporation “salt out”
and membrane filtration.
Stage
2c
. Pilot plant testing using trial leach pads with solutions to be processed at the Tuscaloosa facility of Inventure Renewals.
Stage
3
. Publication of a bankable feasibility study of the CIX/CIC processing plant.
Results
to Date
Stage
1a.
The Round Top pregnant leach solution (PLS) obtained by leaching the crushed ore with dilute sulfuric acid extracts
the rare earth elements at high recoveries but also recovers high concentrations of aluminum, calcium, magnesium, iron, potassium
and sodium. The PLS produced from the leach operation is expected to be at flow rates on the order of 600 gallons per minute with
concentrations of rare earth elements in the range of 1,000 to 3,500 parts per million (ppm). First experimental run produced
a solution that averaged approximately 1,000 ppm (.1%) rare earth and approximately 30,000 ppm (3%) impurities, a ratio of 30:1
impurities to REE. The Stage 1a processing was able to change this ratio to approximately 0.3:1 impurities to REE. This level
of impurity rejection greatly exceed our target expectations and we believe demonstrates that the Round Top PLS can be relatively
easily and economically processed into a feedstock compatible with any type of refining plant.
We
believe that accomplishing this step of directly extracting the REE from the PLS without prior treatment or conditioning has accomplished
the most difficult part of process design.
Stage
1a.
The desktop economic model is kept current by factoring in any project progress and any variation of product mix and
price as the project develops.
Stage
2a
. The bench-scale separation of the rare earth elements into groups was completed in May 2015, through the rejection
of the low value rare earth elements lanthanum and cerium from the Stage 1a solution.
Stage
2b
. In late 2015 TMRC (then TRER) applied for and was granted a contract from the Defense Logistics Agency (DLA), Broad
Agency Announcement – 2016-2017-01 for bench scale IX and IC purification and separation of REE from primary leach solution
derived from crushed Round Top rock, which was successfully completed in mid-2016. This DLA sponsored work has accomplished Stage
2, milestone 1. This work resulted in the production of 99.999+ yttrium, 99.99% ytterbium and 99.999+% of an undisclosed REE element.
Current
Status of the Round Top Project
Metallurgical
development at Round Top is suspended pending the acquisition of additional financing. When started, this work will complete Stage
2 and is designed to result in a bankable feasibility study.
Costs
At
the end of fiscal year 2017 we had incurred exploration costs at the Round Top Project of approximately $11.8 million. In
the fiscal year ending August 31, 2017 there have been minimal exploration costs.
At
the present time based on our current understanding of the project, we estimate the funding need to complete Stage 3 of the Round
Top Project to be approximately $6.5 million including Corporate G&A. This estimate may and probably will change as more data
is acquired.
Metal
Recovery Methods
There
are two options for extracting the REE from the leach solution, solvent extraction (SX) and ion exchange (IX).
SX
is widely used in the REE industry. SX is a process whereby the water/acid leach solution is mixed with a kerosene based solution
containing the active organic agents (extractants) and then allowed to settle and separate into the water and oil phase. The extractants
carried in the kerosene selectively remove the REE’s and other sought after elements from the water/acid solution leaving
the impurities in the original solution. The economic elements move from the aqueous sulfuric acid leach solution into the kerosene
solution and are then transferred from the kerosene solution back into an aqueous solution, this time a hydrochloric acid solution
at higher concentrations. This process is repeated over and over until all the individual REE’s are separated into their
purified individual oxides and then sold.
IX
is a process whereby the leach solution is passed through a tank or column containing small beads of an ion exchange resin. The
ion exchange resin has the active extracting agents embedded within the beads. The resin beads adsorb the metal ions of interest
from the leach solution. When the beads are loaded to their maximum carrying capacity the loaded column is exchanged for a column
containing fresh beads. The elements “loaded” on the resin are then stripped back into another aqueous solution, again
hydrochloric acid, at high concentrations for further processing. The column with the “stripped” beads is then ready
to be recycled back into the process. In the IX process the stripped beads are normally loaded with hydrogen ions which, when
exchanged with the REEs in the PLS, does not affect the acidity of the solution, thus the acid is also recycled back into the
process, further lowering the operational costs.
The
aluminum, iron and other elements can be chemically precipitated and removed by raising the pH and adding other elements such
as magnesium. The “cleaned” solution is then further refined by SX or IX methods. Precipitation has been successfully
used to clean the Round Top solutions but it results in approximately a 20% loss of some of the REE via co-precipitation with
the less desirable elements. TMRC consultants are confident with additional work these losses will be reduced to 15% or lower.
A disadvantage of this procedure is that most or all of the acid is neutralized and lost. Developing a procedure to use SX or
IX to remove the REEs directly from the PLS will improve overall recoveries, simplify the process and significantly improve the
operational economics.
SX
has the advantage of being the process used in other REE operations, thus there is a considerable base of knowledge and experience
to be relied on. We believe it has some disadvantages, however. SX plants, while being simple in concept, consist of many repetitive
stages which result in a relatively large operation with many steps which in turn require close control and supervision. They
are both labor and capital intensive.
IX
has the advantage of being simpler and the plants physically much smaller. IX also is more forgiving operationally because it
is less sensitive to variations in flow rate and REE grade than SX. Both capital and operating costs are generally lower than
equivalent SX plants. However, IX has not, to date, been applied to an REE operation.
Our
joint venture with K-Tech has the goal of developing an IX process for REE operations. K-Tech has wide experience with continuous
ion exchange and continuous ion chromatography separation of rare earth and other elements from phosphate leach solutions. Insofar
as phosphate leach solutions are chemically similar to the primary leach solution produced from leaching Round Top rhyolite, the
decision was made to test the Round Top PLS using K-Tech’s process.
The
process itself can be summarized as follows: In the first step the raw, high volume, high impurity, low REE grade PLS from the
leached rock is converted to a relatively clean, high-grade sulfate solution. This is accomplished by loading the PLS onto a strong
cat-ionic resin which, in the case of the Round Top PLS produces about a 4.5 to 1 concentration over the PLS. The resin is then
subjected to a “crowding” step whereby most of the impurity elements are forced off the resin, followed by a gradational
elution step where the resin is regenerated by sequentially stronger sulfuric acid whereby almost all the remaining impurities
are first removed by the weak acid and then the REE themselves removed by strong acid.
The
next step, now in progress, will employ CIC to produce 3 high purity products, a light rare earth solution, a mid-range rare earth
product solution, and a heavy rare earth solution consisting of the elements terbium and those heavier, plus yttrium. The solution
from the first step is fed to and loaded onto the resin as an acid sulfate solution. Once loaded and washed, the column is eluted
by a chelating solution which causes the individual REE, because of the small differences in their cation attraction properties,
to separate and exit the column at different times. The 3 classes are determined by splitting the streams based on their exit
times.
The
third step, the element separation stage, consists of more precise and slower reiterations of step two where the elements are
tapped individually as they exit the column. High purity is achieved by repeating the process through several columns. The only
limitation in the purity is the number of times the process is repeated. All solutions are recirculated, so there is no process
loss.
CIX/CIC
technology holds promise of revolutionizing the processing and separation of rare earth elements from their ores and then individually.
Lower capital and operating costs, simplicity and flexibility, smaller size, and potential for lessening environmental risk are
the decisive features recommending this technology. CIX/CIC has a long and well-established track record in other extractive industries,
and relies on readily available equipment, resins, and reagents. There is nothing proprietary or “tailor made” in
either the equipment, resins, or reagents used in this process.
Work
completed in December 2014 has shown that the dilute REE bearing sulfate leach solution can be efficiently treated to produce
a purified solution exceeding specifications for feedstock for a separation plant employing either a solvent extraction (SX) or
a continuous ion exchange process. We regard the successful completion of Phase 1 of Stage 1 a technological breakthrough in that
we were able use conventional ion exchange procedures (CIX) employing readily available, mass produced ion exchange resin to produce
the feedstock solution from an impure low grade leach solution. This was step one of a three step program whose objective is to
produce 4-9’s (99.99%) pure separated rare earth elements in either oxide or carbonate form.
After
the Stage 1 processing, accomplished in January 2015, separated the REE’s from the pregnant leach solution (PLS), resulting
in a relatively pure, concentrated mixed rare earths feedstock solution at flow rates suitable for feeding to either a solvent
extraction (SX) plant or, as planned by TMRC, to a CIC plant work continued to define stages 2 and three. Uranium in the sulfate
feedstock solution was not detected by ICP-MS analysis, inferring that neither it nor the chemically similar thorium is captured
in Stage 1 and does not enter the REE processing plant.
The
first part of stage 2 refining was achieved in May 2015. This involved the splitting of the feedstock solution from Stage 1 into
two parts: (a) a low value branch consisting of lanthanum and cerium that could be warehoused, or sold at a discount; and (b)
a high value branch consisting of the remaining rare earths profile (plus yttrium),which can be further refined.
The
overall bench procedure used was to (1) produce a pregnant leach solution (PLS) by irrigating crushed ore from the
Round Top deposit with dilute sulfuric acid in columns set up in K-Tech’s testing facilities; (2) process this PLS in the
initial CIX Stage 1 system to remove the rare earth elements (REEs) from the PLS; (3) feed the rare earth solution to the initial
step within the stage 2 ion chromatography (IC) testing system for further rare earths isolation and impurity rejection;
(4) further processing to separate the contained rare earths into separate selected groups. This operation is carried
out so that the first step is to isolate the lanthanum and cerium.
Using
this procedure, K-Tech has produced a mids/heavies steam with a lanthanum/cerium content of less than 8% of the total rare earths
present. The rare earth elements that TMRC considers economically important,
i.e.
praseodymium, neodymium, gadolinium,
terbium, dysprosium, and yttrium make up approximately 68% of this product stream. This low lanthanum/cerium solution could then
be immediately treated to produce a marketable mids/heavies (M/H) rare earth concentrate for sale to other rare earth producers
or consumers. Work continues to further improve the efficiency of this step.
Alternatively,
the resulting praseodymium/neodymium plus mid and heavy product stream from the stage 2 system could then be further refined in
Stage 2 and 3 to ultimately produce selected individual high purity rare earth oxides. Rare earths which are not separated to
individual products could be stockpiled as a concentrate for possible future processing, based on developing market conditions,
either as individual elemental products or as selected heavy rare earth mixtures.
Most
importantly, the materials used in the K-Tech separation processes are non-toxic, non-flammable and readily available from multiple
suppliers, in large quantities and at competitive prices, thus limiting single source risks and dependence on a sole supplier
of critical materials needed for the process. The principal equipment used in the production process is also commercially available
and does not require specialty engineering or manufacturing. TMRC’s confidence in K-Tech’s ability to scale the process
up to full commercial volumes is supported by their wide experience in the application of these same materials and processing
techniques in other large-scale industrial separation processes. These include food; fertilizer; industrial chemical; hydrometallurgical;
bioprocessing; and other applications requiring continuous processing techniques using ion exchange and ion chromatography as
the basis for component separations. This assertion will be borne out in subsequent pilot plant testing where much larger quantities
of feedstock will be tested.
The
K-Tech JV
The
striking success of this process led TMRC to propose a processing joint venture to introduce this technology to the larger rare
earth industry. In July TMRC and K-Tech signed a definitive joint venture agreement venture to develop, refine and market K-Tech’s
Continuous Ion Exchange (CIX) and Continuous Ion Chromatography (CIC) technology as it applies mostly to the extraction of rare
earth elements (REE) from native ores. The JV will license the technology to TMRC, as well as other rare earth production companies. Subject
to agreement by TMRC, the JV may also elect to build and operate processing facilities to separate and purify mixed rare earth
concentrates into individual purified rare earth oxides for other rare earth production companies in addition to TMRC.
On
July 15, 2015, we entered into an operating agreement (“Operating Agreement”) with K-Tech, to formalize our joint
venture company, Reetech, LLC, a Delaware limited liability company (the “Reetech”), for the purposes of developing,
refining and marketing K-Tech’s CIX/CIC process pursuant to the February 24, 2015 letter of intent with K-Tech. Pursuant
to the Operating Agreement, K-Tech holds an initial interest of 97.21% of Reetech for the contribution of its technology pursuant
to a license to Reetech (the “Reetech License) and TMRC holds an initial interest of 2.79% pursuant to its contribution
of cash payment of $391,000 to the prior development of the contributed Technology for the purposes of the joint venture. TMRC
has the ability to earn a 49.9% interest in Reetech by contributing up to $7.0 million in cash contributions upon the satisfaction
of certain development milestones. Reetech is governed by a board of managers comprised of three managers: one manager appointed
by the Company, one manager appointed by K-Tech and one manager appointed by mutual agreement of the Company and K-Tech.
In
connection with the execution of the Operating Agreement, K-Tech granted to Reetech the Reetech License. The Reetech
License is a perpetual license regarding K-Tech’s CIX/CIC process within the field of use of the joint venture for the production
of rare earths and other products of value. Additionally, in connection with the execution of the Operating Agreement, Reetech
granted to TMRC a perpetual license to use the technology within the field of use of the Reetech License for the development and
operation of TMRC’s projects, including the TMRC’s Round Top project (“TMRC License”). Use of the TMRC
License granted to TMRC is contingent upon TMRC paying to Reetech a one-time fee of $5 million at startup of the initial processing
plant.
On
October 18, 2015, we entered into an amendment agreement (the “Amendment”), effective August 27, 2015, with K-Tech,
regarding certain amendments to the Operating Agreement. Concurrently with the execution of the Amendment, TMRC, K-Tech
and Reetech entered into amendments to the Reetech License and the TMRC License.
Pursuant
to the Amendment, K-Tech has agreed to amend the Agreement to change the conditions upon which TMRC may earn its 49.9% membership
percentage interest in Reetech through special capital contributions. The Amendment provides that TMRC may now earn
additional membership percentage interests in Reetech, up to the maximum percentage interest of 49.9%, through both (i) the cash
contributions towards development of the Technology upon the occurrence of certain development milestones (same as in the Agreement
prior to Amendment) and (ii) by TMRC being the procuring cause of third-party business for Reetech, in which case TMRC will be
credited with capital contributions on a dollar-for-dollar basis for the revenue generated by such third-party business. To
be the “procuring cause” of business, Reetech and the third-party business client must have been brought together
and the third-party business client must have become a client of Reetech as the result of the continuous efforts of TMRC.
In
consideration of the expansion of TMRC’s right to earn additional membership percentage interests in Reetech, TMRC and K-Tech
have further amended the Agreement to provide the following:
|
●
|
The Amendment provides
that until such time as TMRC has been credited with the cumulative contribution to Reetech of either (i) $2.0 million in capital
contributions made by TMRC, (ii) $3.5 million in collected revenue from third-party business clients of which TMRC was the
procuring cause (as defined in the Amendment), or (iii) a combination of (i) and (ii) that total $3.5 million, one manager
shall be appointed by TMRC and the remaining two managers shall be appointed by K-Tech. Following such contribution conditions
being met, the Agreement will revert back to its original manager appointment provisions.
|
|
●
|
The Agreement has
been amended to provide that until such time as TMRC shall have earned its 49.9% interest in Reetech, K-Tech shall supervise
the business of Reetech and K-Tech shall be the sole recipient of any profits realized from the business of Reetech.
|
The
Amended TMRC License amends the one-time license fee payable by TMRC to Reetech for the use of the technology within the field
of use by TMRC for its projects. Under the Amended TMRC License, TMRC will pay a one-time fee of $5.0 million payable
at plant start-up for the annual (calendar year) production of up to 3,000 metric tons of rare earth oxides. In the
event that TMRC subsequently desires to produce more than 3,000 metric tons, TMRC agrees to pay Reetech an additional market-based
license fee to be negotiated by TMRC and Reetech before TMRC exceeds the 3,000 metric ton annual limit.
The operating agreement between TMRC and K-Tech is still in effect, but due to the inactivity of our Round Top project, there has
been no ongoing advancement under the operating agreement as of August 31, 2017.
Based
on the success of this process, TMRC, in conjunction with its joint venture partner K-Tech Inc., submitted a proposal to the Defense
Logistics Agency of the Department of Defense to employ CIX/CIC to conduct research to demonstrate, at the bench scale level,
the ability to separate and refine yttrium (Y) oxide to a minimum of 99.999% purity, ytterbium (Yb) oxide to a minimum of 99.99%
purity and an undisclosed oxide to a minimum of 99.999% purity, using continuous ion exchange (CIX) and continuous ion chromatography
(CIC).
Northeast
Pennsylvania REE and Scandium Project
On
June 28, 2016 TMRC executed a Memorandum of understanding with Pagnotti Enterprises Inc. 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 of 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 application 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
cold 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 a 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 has been executed.
Fundamentals
of the Scandium Market
Scandium,
like yttrium, is not technically a rare earth element but shares their exceptional chemical properties. The useful properties
of scandium (Sc) are well known but its wide use has been retarded by lack of supply. Currently almost all is supplied principally
by Russia and also by China. Russia’s supply is a by-product of uranium mining and China’s is from the Bataou Iron
mine along with rare earth.
Scandium
excels in two uses: solid oxide fuel cells and high strength aluminum alloy. Solid oxide fuel cells (SOFC’s) can efficiently
produce electricity using a mixture of zirconium oxide and scandium oxide as the solid electrolyte layer of the cell. This technology
has been known for a long time but its use has been restricted by their high operating temperatures. The use of scandium oxide
lowers the operating temperature of these cells to an operationally practical level.
The
other, and at the present time, far more important, use of scandium is an alloy of aluminum. This technology originated in Russia
(USSR at that time), owing to their source of Sc, where it was discovered that these alloys have high-strength, stress resistance,
temperature resistance and have superior welding characteristics. The USSR employed these alloys in a number of military applications
including the MIG 29 (while U.S. aerospace designers understood the superiority of scandium for high-stress fighter aircraft,
the inability to reliably source scandium led the U.S. to use a heavier titanium alloy instead). Again, supply was the main drawback,
even for the Soviets. Today, global production in the opaque scandium market is estimated to run between 400 kg of virgin scandium,
to a high end of 10 metric tons. In terms of potential demand, as one study notes:
“
If only a tiny fraction (0.1%)
of the annual aluminum market absorbed scandium in alloy at a 0.5% level, it would represent 350 tonnes ($700M) in global scandium
demand.”
In
recent years, Airbus has extensively researched these Sc-Al alloys and has expressed high interest in using it in their airframes
if a reliable supply can be developed. The American aircraft industry uses an inferior titanium-aluminum alloy. Besides its superiority
as a structural alloy, the Sc-Al alloy is capable of making effective armor plate.
There
is a growing interest in Sc for these reasons and there is a general consensus that as soon as a reliable supply can be found,
the Sc-Al alloy usage will rapidly grow. The technology is ready, only the supply is lacking.
Scandium
Pricing
Current
scandium pricing is approximately $2000 per kilogram. The preliminary economic analysis (PEA) is based on this price. Although
the projected expansion of usage of scandium is driven by availability rather than price, there is a possibility that at some
time in the future the scandium price will seek lower levels. Because of the extremely favorable operating conditions at the Upper
Lehigh property we estimate that the “break even” price for Scandium is approximately $550 per kilogram.
The
Department of Energy Grant
In
September of 2016 the Department of energy issued a Funding Opportunity Announcement (FOA) whereby they intended to grant up to
$27.75 million for the siting of a pilot plant at a selected location within the Appalachian Coal fields. This grant was to be
in two stages, the first for $1 million to establish the basic engineering parameters and the second of up to $22.75 million to
commission the pilot plant. TMRC took the lead and assembled a team consisting of itself, K-Tech, Penn State University and Inventure
Renewables of Tuscaloosa. Inventure is closely associated with K-Tech and shares officers and directors. Inventure was chosen
as the lead investigator in the project because of its large, research oriented facility and its considerable experience in securing
and executing grants of this nature. In December of 2016 the consortium was awarded the
phase 1 grant and funds were disbursed in September of 2017. TMRC‘s role in the venture will be as a subcontractor and is
not the direct recipient of the grant funds. TMRC has begun the work of collecting the metallurgical samples and the first of
these samples were delivered to Penn State in early October 2017.
Establishment
of American Mineral Reclamation LLC
On
June 22, 2017 we announced the establishment of American Mineral Reclamation LLC. This subsidiary has the mission to seek out
and develop lower cost projects with shorter development times involving metals and mineral recovery and production from coal
by-products, acid mine drainage waters and sludges, mine waste and tailings, industrial wastewater and recovery of strategic metals
from scrap from various sources. In addition to REE and scandium we intend to include other important “tech” metals
such as Lithium, Cobalt, Vanadium, Gallium and others as conditions dictate. We have executed a co-operation agreement to work
jointly with Inventure Renewals. As of August 31, 2017, no activity has taken place within this LLC.
ITEM
3. LEGAL PROCEEDINGS
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 fiscal year ended August
31, 2015, our U.S. exploration properties were not subject to regulation by the Federal Mine Safety and Health
Administration (“MSHA”) under the
Federal Mine Safety and Health Act of 1977
(the “Mine Act”).
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The
following table sets forth certain information with respect to our current directors and executive officers. The term
for each director expires at our next Annual Meeting or until his or her successor is appointed and qualified. The
ages of the directors and officers are shown as of December 2017:
Name
|
|
Age
|
|
Current
Office with Company
|
|
Positions
Held Since
|
Daniel
E. Gorski
|
|
80
|
|
Director
Chief Executive Officer
|
|
January
2007
August 2012
|
Anthony
Marchese
|
|
61
|
|
Director
|
|
December
2009
|
Cecil
Wall
|
|
86
|
|
Director
|
|
August
2012
|
Nicholas
Pingitore
|
|
73
|
|
Director
|
|
August
2012
|
James
Wolfe
|
|
81
|
|
Director
|
|
August
2012
|
Wm
Chris Mathers
|
|
58
|
|
Chief
Financial Officer
|
|
February
2016
|
Directors
Daniel
E. Gorski –
Mr. Gorski has served as a director of the Company since January 2006 and as the Company’s chief executive
officer since August 2012. Prior thereto, Mr. Gorski served as the Company’s president and chief executive officer
from January 2007 to May 2011 and chief operating officer from May 2011 to December 2011. From July 2004 to January
2006, Mr. Gorski was the co-founder and vice president of operations for High Plains Uranium Inc., a uranium exploration and development
company that went public on the Toronto Stock Exchange in December 2005. Between June 1996 to May 2004, Mr. Gorski
served as an officer and director of Metalline Mining Co., a publicly traded mining and development company with holdings in the
Sierra Mojada Mining District, Coahuila, Mexico. From January 1992 to June 1996, Mr. Gorski was the exploration geologist
under contract to USMX Inc. and worked exclusively in Latin America. Mr. Gorski earned a BS in 1960 from Sul Ross State
College, in Alpine, Texas and an MA in 1970 from the University of Texas in Austin, Texas. Mr. Gorski has over forty-three
years of experience in the mining industry.
Mr.
Gorski’s extensive technical knowledge and experience in the mining industry combined with his historical relationship with
the Company’s principal property, the Round Top project, permits Mr. Gorski to provide the Board with valuable insight to
the exploration and development of the Round Top project. Accordingly, the Board believes that Mr. Gorski should serve on the
Board.
Anthony
Marchese
– Mr. Marchese has served as a director since December 2009. Since May 2012, Mr. Marchese has served
as a Managing Director of the Capital Markets Group at TriPoint Global Equities, LLC, a New York based FINRA member broker/dealer. Mr.
Marchese also serves as the general partner and chief investment officer of the Insiders Trend Fund, LP, an investment partnership
whose mandate is to invest in those public companies whose officers and/or directors have been active acquirers of their own stock. Mr.
Marchese’s prior experience includes Axiom Capital Management, Inc. (Managing Director – 2011-2012), Monarch Capital
Group, LLC (President and Chief Operating Officer – 2003 to 2011), Laidlaw Equities (senior vice president - April 1997
to March 2002), Southcoast Capital (senior vice president – May 1988 to April 1997), Oppenheimer & Co (limited partner
– September 1982 to May 1988), Prudential-Bache (vice president – July 1981 to August 1982) and the General Motors
Corporation (analyst – June 1980 to June 1981). Mr. Marchese served in the military with the Army Security Agency
and the U.S. Army Intelligence and Security Command. Mr. Marchese received an MBA in Finance from the University of
Chicago.
Mr.
Marchese provides the Board with exceptional leadership and management knowledge, having gained extensive management and corporate
finance experience during the course of his career. Mr. Marchese’s specific experience, qualifications, attributes and skills
described above led the Board to conclude that Mr. Marchese should serve as a member of the Board of Directors.
Cecil
C. Wall
– Cecil C. Wall was born in Duchene County, Utah in 1931. Mr. Wall attended Carbon County College and Utah State
University. In 1969, he acquired control of a publicly traded company, Altex Oil Co. (formerly known as Mountain Valley Uranium),
listed on the American Stock Exchange. Under Mr. Wall’s leadership, Altex established a 20,000 acre position in what became
the Greater Altamont Field at Altamont, Utah. Mr. Wall sold his interest in Altex in 1985. Mr. Wall was also part of the founding
group for the 2007 reorganization of Standard Silver Corp. which became TMRC. He sat on the TMRC board of directors and served
as the Secretary and Treasurer from January 2004 to April 2012. He is currently the manager for C-Wall Investment Company, LLC,
a Utah Limited Liability Company. In addition, he is the president of several family-owned private companies, and he brings wide
business experience and close relations with many of the original shareholders.
Mr.
Wall’s past experience with the Company as its Secretary and Treasurer and his past experience with public companies serve
the Board at this time by providing needed guidance on public company matters and insight into the Company’s historical
operations. Mr. Wall’s specific experience, qualifications, attributes and skills described above led the Board to conclude
that Mr. Wall should serve as a member of the Board of Directors.
Dr.
Nicholas Pingitore
– Dr. Nicholas Pingitore was born in New York City in 1944. Dr. Pingitore holds an AB degree from
Columbia College (NYC, 1965) and a Masters (ScM) and PhD from Brown University (Providence RI, 1968 & 1973) in Geology. Since
1977, he has held a full-time faculty appointment at UTEP. In addition to being a Texas Licensed Geoscientist, Dr. Pingitore is
a member of the American Chemical Society, Geochemical Society, American Association for the Advancement of Science, American
Geophysical Union, Materials Research Society, Mineralogical Society of America, Society for American Archaeology, Society for
Commercial Archaeology, American Rock Art Research Association, International Society for Reef Studies, Society of Economic Paleontologists
and Mineralogists, and Society of the Sigma Xi. He has served for 25 years as Director of UTEP’s Electron Microprobe Laboratory,
and he expects to use this instrument to study the Round Top minerals. The 2,500-foot-square geochemical laboratory that Dr. Pingitore
also anticipates using to conduct research sponsored by TMRC includes three x-ray fluorescence units, a high resolution inductively
coupled plasma mass spectrometer, various optical microscopes, and sample preparation facilities. Since 2000, he has been project
director of approximately $7,000,000 in research funding, and a co-investigator on another $10,000,000 in grants. He has established
a record for successfully managing and completing large institutional projects on time and on budget. Dr. Pingitore considers
Round Top to be a national treasure. He is ready to bring his wide geologic and chemical experience, his project skills, and his
insight from decades of investment in the extractive industries, to help unlock the riches of this deposit.
Mr.
Pingitore’s extensive experience and education in geology bring valuable expertise to the Board in relation to the Board’s
oversight of the Company’s exploration and potential development activities at its Round Top project. Mr. Pingitore’s
specific experience, qualifications, attributes and skills described above led the Board to conclude that Mr. Pingitore should
serve as a member of the Board of Directors.
Dr.
James R. Wolfe
– Dr. Wolfe and the firm he co-founded in 1995, Pacific Materials Resources, Inc. (“PMR”),
were among the pioneers of the China-U.S. rare earth industry and trade. As Vice President of PMR from 1995 to 2010, Dr. Wolfe
interfaced between the major rare earth producers in China and a broad spectrum of rare earth consumers in the U.S. Prior to founding
PMR, from 1992 to 1995, Dr. Wolfe was President of MPV Lanthanides, Inc., a rare earth joint venture between China Metallurgical
Import/Export of Inner Mongolia and U.S. interests. From 1979 to 1995, Dr. Wolfe’s professional interests centered on resource
recovery from industrial and mining wastes. He served as a consultant to the steel industry, co-founded Exmet Corporation (zinc
from smelter dust) and served as Executive Vice President of Williams Strategic Metals, Inc. and its predecessor, Nedlog Technology
Group, Inc. Dr. Wolfe developed and implemented projects for the recovery of cobalt from slags, indium from smelter dusts, and
rare earths from mine tailings. In 1970, while he was employed by the Lawrence Livermore Laboratory, Dr. Wolfe invented and patented
a plasma method for producing ultra-fine refractory metal carbides. He co-founded Cal-Met Industries, Inc. in 1973 to commercialize
the plasma technology. Cal-Met was bought by Fansteel Corporation in 1975. Dr. Wolfe was employed by Fansteel from 1975 to 1979
to implement the plasma technology for the manufacture of drill bits and cutting tools. Dr. Wolfe was employed by the AVCO Corporation
as a space research scientist from 1965 to 1968, while working for his doctorate. Dr. Wolfe received his BS and MS in Metallurgical
Engineering from the University of Washington and his PhD from the University of Missouri-Rolla in 1968. He is currently the Secretary
and Trustee of The Biella Foundation.
Mr.
Wolf’s experience and knowledge in the rare earth sector and his education metallurigcal engineering are valuable to the
Board as it assesses its potential mine development plan at its exploration stage Round Top project. Mr. Wolf’s
specific experience, qualifications, attributes and skills described above led the Board to conclude that Mr. Wolf should serve
as a member of the Board of Directors.
Arrangements
between Officers and Directors
To
our knowledge, there is no arrangement or understanding between any of our officers and any other person, including directors,
pursuant to which the officer was selected to serve as an officer.
Family
Relationships
None
of our Directors are related by blood, marriage, or adoption to any other Director, executive officer, or other key employees.
Other
Directorships
Except
as listed below, no directors of the Company are also directors of issuers with a class of securities registered under Section 12
of the United States
Securities Exchange Act of 1934
, as amended (the “
Exchange Act
”) (or which otherwise
are required to file periodic reports under the Exchange Act).
Anthony
Marchese GeoTech
Solutions, Inc.
Legal
Proceedings
No
director or officer of the Company is a party adverse to the Company or any of its subsidiaries, or has a material interest adverse
to the Company or any of its subsidiaries. During the past ten years, no director or executive officer of the Company has:
(a)
|
filed
or has had filed against such person, a petition under the U.S. federal bankruptcy laws or any state insolvency law, nor has
a receiver, fiscal agent or similar officer been appointed by a court for the business or property of such person, or any
partnership in which such person was a general partner, at or within two years before the time of filing, or any corporation
or business association of which such person was an executive officer, at or within two years before such filings;
|
(b)
|
been
convicted or pleaded guilty or
nolo contendere
in a criminal proceeding or is a named subject of a pending criminal
proceeding (excluding traffic violations and other minor offences);
|
(c)
|
been
the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting such person’s activities
in any type of business, securities, trading, commodity or banking activities;
|
(d)
|
been
the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any U.S. federal or state
authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any type of
business, securities, trading, commodity or banking activities, or to be associated with persons engaged in any such activity;
|
(e)
|
been
found by a court of competent jurisdiction in a civil action or by the U.S. Securities and Exchange Commission (the “SEC”),
or by the U.S. Commodity Futures Trading Commission to have violated a U.S. federal or state securities or commodities law,
and the judgment has not been reversed, suspended, or vacated;
|
|
|
(f)
|
been
the subject of, or a party to, any U.S. federal or state judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged violation of: (i) any U.S. federal or state securities
or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies
including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty
or temporary or permanent cease-and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting
mail or wire fraud or fraud in connection with any business entity; or
|
(g)
|
been
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C.78c(a)(26))), any registered entity (as defined
in Section 1(a)(29) of the U.S.
Commodity Exchange Act
(7 U.S.C.1(a)(29))), or any equivalent exchange, association,
entity or organization that has disciplinary authority over its members or persons associated with a member.
|
CORPORATE
GOVERNANCE
Board
of Directors Structure
The
Company’s current bylaws require the Board to consist of one or more directors, the number of directors to be determined
from time to time by resolution of the stockholders or by resolution of the Board. The current Board is composed of
five directors.
Director
Independence
The
Company has four
directors as of December 11, 2017, including four independent directors, as follows:
|
–
|
Anthony
Marchese
|
|
–
|
Cecil
Wall
|
|
–
|
Nicholas
Pingitore
|
|
–
|
James
R Wolfe
|
An
“independent” director is a director whom the Board has determined satisfies the requirements for independence under
Section 803A of the NYSE MKT Company Guide.
Meetings
of the Board and Board Member Attendance at Annual Meeting
During
the fiscal year ending August 31, 2017, the Board held two (2) meetings of the Board. None of the incumbent Directors
attended fewer than 75% of the board meetings which occurred during their tenure on the Board.
Board
members are not required to attend the Annual Meeting.
We
did not hold an annual meeting of the shareholders during the year ended August 31, 2017.
Communications
to the Board
Stockholders
who are interested in communicating directly with members of the Board, or the Board as a group, may do so by writing directly
to the individual Board member c/o Corporate Secretary, at 1124 24
th
Street, Galveston, Texas 77550. The Company’s
Secretary will forward communications directly to the appropriate Board member. If the correspondence is not addressed
to the particular member, the communication will be forwarded to a Board member to bring to the attention of the Board. The
Company’s Secretary will review all communications before forwarding them to the appropriate Board member.
Board
Committees
The
Board has established three board committees: an Audit Committee, a Compensation Committee, and a Corporate Governance and Nominating
Committee.
The
information below sets out the current members of each of the Company’s board committees and summarizes the functions of
each of the committees in accordance with their mandates.
Audit
Committee and Audit Committee Financial Experts
The
Company has a standing Audit Committee and audit committee charter, which complies with Rule 10A-3 of the Securities Exchange
Act of 1934, as amended (the “
Exchange Act
”), and the requirements of the NYSE MKT. The Audit Committee
was established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee is comprised of three (3) directors
all of whom, in the opinion of the Board, are independent (in accordance with Rule 10A-3 of the Exchange Act and the requirements
of Section 803A the NYSE MKT Company Guide) and financially literate (pursuant to the requirements of Section 803B of the NYSE
MKT Company Guide): Anthony Marchese (Chairman), Cecil Wall and Nicholas Pingitore. Mr. Marchese is a “financial
expert” as defined under Item 407(d)(5) of Regulation S-K and meets the requirements for financial sophistication under
the requirements of Section 803B of the NYSE MKT Company Guide.
The
Audit Committee is responsible for the oversight of the Company’s accounting and financial reporting processes. This
includes the selection and engagement of the Company’s independent registered public accounting firm and review of the scope
of the annual audit, audit fees and results of the audit.
The
Audit Committee meets with our management and our external auditors to review matters affecting financial reporting, the system
of internal accounting and financial controls and procedures and the audit procedures and audit plans. The Audit Committee reviews
our significant financial risks, is involved in the appointment of senior financial executives and annually reviews our insurance
coverage and any off-balance sheet transactions.
The
Audit Committee monitors the Company’s audit and the preparation of financial statements and all financial disclosure contained
in the Company’s SEC filings. The Audit Committee appoints the Company’s external auditors, monitors their qualifications
and independence and determines the appropriate level of their remuneration. The external auditors report directly to the Audit
Committee. The Audit Committee has the authority to terminate the Company’s external auditors’ engagement and approve
in advance any services to be provided by the external auditors that are not related to the audit.
During
the fiscal year ended August 31, 2017, the Audit Committee did not meet.
Audit
Committee Report
The
Company’s Audit Committee oversees the Company’s financial reporting process on behalf of the Board. The
Committee has three (3) members, each of whom is “independent” as determined under Rule 10A-3 of the Exchange Act
and the rules of the NYSE MKT. The Committee operates under a written charter adopted by the Board.
The
Committee assists the Board by overseeing the (1) integrity of the Company’s financial reporting and internal control, (2)
independence and performance of the Company’s independent auditors, (3) and provides an avenue of communication between
management, the independent auditors and the Board.
In
the course of providing its oversight responsibilities regarding the audited annual financial statements for the year ended August
31, 2017, the Committee reviewed the audited annual financial statements for the year ended August 31, 2017 with management and
the Company’s independent auditors. The Committee reviewed accounting principles, practices, and judgments as well as the
adequacy and clarity of the notes to the financial statements.
The
Committee reviewed the independence and performance of the independent auditors who are responsible for expressing an opinion
on the conformity of those audited financial statements with accounting principles generally accepted in the United States, and
such other matters as required to be communicated by the independent auditors in accordance with Statement of Auditing Standards
61, as superseded by Statement of Auditing Standard 114 – the Auditor’s Communication With Those Charged With Governance,
as modified or supplemented.
The
Committee meets with the independent auditors to discuss their audit plans, scope and timing on a regular basis, with or without
management present. The Committee has received the written disclosures and the letter from the independent auditors required by
applicable requirements of the Public Company Accounting Oversight Board for independent auditor communications with Audit Committees
concerning independence, as may be modified or supplemented.
In
reliance on the reviews and discussions referred to above, the Committee recommended to the Board, and the Board has approved,
that the audited financial statements be included in the Annual Report to the Securities and Exchange Commission on Form 10-K
for the year ended August 31, 2017. The Committee and the Board have also recommended the selection of LBB & Associates Ltd.,
LLP as independent auditors for the Company for the fiscal year ending August 31, 2017.
Submitted
by the Audit Committee Members
|
–
|
Anthony
Marchese (Chairman)
|
|
–
|
Nicolas
Pingitore
|
|
–
|
Cecil
Wall
|
Compensation
Committee
The
Company has a Compensation Committee comprised of three (3) directors, each of whom, in the opinion of the Board, are independent
(under Section 803A of the NYSE MKT Company Guide): Cecil Wall (Chairman), James Wolfe and Anthony Marchese.
The
Compensation Committee charter that complies with the requirements of the NYSE MKT. The Compensation Committee is responsible
for considering and authorizing terms of employment and compensation of executive officers and providing advice on compensation
structures in the various jurisdictions in which the Company operates. The Company’s Chief Executive Officer may not be
present during the voting determination or deliberations of his or her compensation; however, the Compensation Committee does
consult with the Company’s Chief Executive Officer in determining and recommending the compensation of directors and other
executive officers.
In
addition, the Company’s Compensation Committee reviews both our overall salary objectives and significant modifications
made to employee benefit plans, including those applicable to executive officers, and proposes awards of stock options. The
Compensation Committee has determined that the Company’s compensation policies and practices for its employees generally,
not just executive officers, are not reasonably likely to have a material adverse effect on the Company.
The
Compensation Committee does not and cannot delegate its authority to determine director and executive officer compensation. Our
Compensation Committee and management did not engage the services of an external compensation consultant during fiscal year 2017.
During
the fiscal year ended August 31, 2017, the Compensation Committee did not meet. A copy of the Compensation Committee charter is
available on the Company’s website at www.TMRC.com.
Compensation
Committee Interlocks and Insider Participation
There
are no Compensation Committee or Board interlocks among the members of the Company’s Board.
Corporate
Governance and Nominating Committee
General
The
Company has a Corporate Governance and Nominating Committee composed of 2 directors, James Wolfe and Nicholas Pingitore. It is
the opinion of the Board that these two individuals are independent (under Section 803A of the NYSE MKT Company Guide).
The
Company’s Corporate Governance and Nominating Committee are responsible for developing the Company’s approach to corporate
governance issues. The Committee evaluates the qualifications of potential candidates for director and recommends to the Board
nominees for election at the next annual meeting or any special meeting of stockholders, and any person to be considered to fill
a Board vacancy resulting from death, disability, removal, resignation or an increase in Board size. The Committee has not adopted
a formal policy which sets forth the criteria the Board will assess in connection with the consideration of a candidate. Instead
the Committee considers a multitude of qualifications and characteristics, including the candidate’s integrity, reputation,
judgment, knowledge, independence, experience, accomplishments, commitment and skills, all in the context of an assessment of
the perceived needs of the Board at that time.
During
the fiscal year ended August 31, 2017, the Corporate Governance and Nominating Committee did not meet. A copy of the Corporate
Governance and Nominating Committee charter is available on the Company’s website at
www.TMRC.com
.
Board
Diversity
The
Company does not have a formal policy regarding diversity in the selection of nominees for directors. The Corporate
Governance and Nominating Committee does, however, consider diversity as part of its overall selection strategy. In
considering diversity of the Board as a criteria for selecting nominees, the Corporate Governance and Nominating Committee takes
into account various factors and perspectives, including differences of viewpoint, professional experience, education, skills
and other individual qualities and attributes that contribute to Board heterogeneity, as well as race, gender and national origin.
The Corporate Governance and Nominating Committee seeks persons with leadership experience in a variety of contexts. The Corporate
Governance and Nominating Committee believes that this conceptualization of diversity is the most effective means to implement
Board diversity. The Corporate Governance and Nominating Committee will assess the effectiveness of this approach as part of its
annual review of its charter.
Recommendations
to the Board
The
Committee will consider recommendations for director nominees made by stockholders and others if these individuals meet the criteria
for consideration. For consideration by the Committee, the nominating stockholder or other person must provide the Corporate Secretary
at the Company’s principal offices with information about the nominee, including the detailed background of the suggested
candidate that will demonstrate how the individual meets the Company’s director nomination criteria. If a candidate proposed
by a stockholder meets the criteria, the individual will be considered on the same basis as other candidates.
Board
Leadership Structure
The
Board has reviewed the Company’s current Board leadership structure in light of the composition of the Board, the Company’s
size, the nature of the Company’s business, the regulatory framework under which the Company operates, the Company’s
stockholder base, the Company’s peer group and other relevant factors. Considering these factors the Board has
determined to have a separate Chief Executive Officer and Chairman of the Board. The Chairman of the Board is a non-executive
position. The Board has determined that this structure is currently the most appropriate Board leadership structure
for the Company. The Board noted the following factors in reaching its determination:
|
●
|
The
Board acts efficiently and effectively under its current structure.
|
|
●
|
A
structure of a separate Chief Executive Officer and non-executive Chairman of the Board puts the Company in the best position
efficiently handle major issues facing the Company on a day-to-day and long-term basis, and still ensure that the Board is
in the best position to have an independent director identify key risks and developments facing the Company and have those
risks and developments brought promptly to the Board’s attention.
|
|
|
|
|
●
|
This
structure eliminates the potential for confusion and duplication of efforts at the highest executive level.
|
|
|
|
|
●
|
Companies
within the Company’s peer group utilize similar Board structures.
|
The
Company’s non-executive Chairman of the Board acts as a lead independent director. Given the size of the Board,
the Board believes that having a non-executive Chairman of the Board combined with the presence of three other independent directors
out of the five directors on the Board and independent directors sitting on all of the Board’s committees is sufficient
independent oversight of the Chief Executive Officer. The independent directors work well together in the current board
structure and the Board does not believe that selecting a lead independent director outside of the non-executive Chairman of the
Board would add significant benefits to the Board’s oversight role.
The
Board of Director’s Role in Risk Management Oversight
The
understanding, identification and management of risk are essential elements for the successful management of the Company. Risk
oversight begins with the Board and the Audit Committee. The Audit Committee consists of Anthony Marchese, Nicolas Pingitore and
Cecil Wall, each an independent director.
The
Audit Committee reviews and discusses policies with respect to risk assessment and risk management. The Audit Committee also has
oversight responsibility with respect to the integrity of the Company’s financial reporting process and systems of internal
control regarding finance and accounting, as well as its financial statements.
At
the management level, an internal audit provides reliable and timely information to the Board and management regarding the Company’s
effectiveness in identifying and appropriately controlling risks. Annually, management presents to the Audit Committee a report
summarizing the review of the Company’s methods for identifying and managing risks.
Additionally,
the Company’s Corporate Governance and Nominating Committee reviews the risks related to succession planning and the independence
of the Board. The Compensation Committee reviews the risks related to the Company’s various compensation plans.
In
the event that a committee is allocated responsibility for examining and analyzing a specific risk, such committee reports on
the relevant risk exposure during its regular reports to the entire Board to facilitate proper risk oversight by the entire Board.
Based
on a review of the nature of operations, the Board does not believe that any areas of the Company have incentive to take excessive
risks that would likely have a material adverse effect on the Company’s operations.
ITEM
11. EXECUTIVE COMPENSATION
The
following summary compensation tables set forth information concerning the annual and long-term compensation for services in all
capacities to the Company for the years stated for those persons who were, at August 31, 2017 named executive officers. ”Named
Executive Officer” means: (a) each Chief Executive Officer, (b) each Chief Financial Officer, (c) each of the three most
highly compensated executive officers, or the three most highly compensated individuals acting in a similar capacity, other than
the Chief Executive Officer and Chief Financial Officer, at the end of the most recently completed financial year; and (d) each
individual who would be an NEO under paragraph (c) but for the fact that the individual was neither an executive officer of the
Company, nor acting in a similar capacity, at the end of that financial year.
Summary
Compensation Table
Name
and principal position
(a)
|
|
Year
(b)
|
|
Salary
(US$)
(c)
|
|
|
Option
Awards
(US$)
(f)
|
|
|
All
Other
Compensation
(US$)
(i)
|
|
|
Total
compensation
(US$)
(j)
|
|
Daniel
Gorski
|
|
2017
|
|
$
|
120,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
120,000
|
|
|
|
2016
|
|
$
|
120,000
|
|
|
$
|
0
|
|
$
|
0
|
|
|
$
|
120,000
|
|
Chief
Executive Officer
|
|
2015
|
|
$
|
120,000
|
|
|
$
|
55,000
|
(1)(2)
|
$
|
0
|
|
|
$
|
175,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wm
Chris Mathers
|
|
2017
|
|
$
|
60,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
60,000
|
|
Chief
Financial Officer
|
|
2016
|
|
$
|
60,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
60,000
|
|
(1)
|
On
December 8, 2013, our Board approved and granted 60,000 options Mr. Gorski. These options were originally exercisable at $0.50
per share for a period of ten years, vesting immediately and at a fair value of $30,000 using the Black-Sholes pricing model.
On March 3, 2014, our Board approved the repricing of these 60,000 options to $0.45. With respect to the repricing
of these options, the Black-Scholes pricing model was used to estimate the fair value of the 60,000 options, using the assumptions
of a risk free interest rate of 0.39%, a dividend yield of 0%, volatility of 290% and an expected life of 9.75 years. The
options were expensed in full during the third quarter 2014 in the amount of approximately $26,400.
|
|
|
(2)
|
On
February 19, 2015, our Board approved and granted 250,000 options to Mr. Gorski. These options are exercisable at $0.22 per
share for a period of ten years, vesting immediately and at a fair value of $55,000 using the Black-Sholes pricing model.
With respect to these options, the Black-Scholes pricing model was used to estimate the fair value of the 250,000 options,
using the assumptions of a risk free interest rate of 0.39%, a dividend yield of 0%, volatility of 268% and an expected life
of 10 years.
|
Executive
Compensation Agreements and Summary of Executive Compensation
Report
on Executive Compensation
During
the year ended August 31, 2017, the Board and the Company’s Compensation Committee, was responsible for establishing a compensation
policy and administering the compensation programs of the Company’s executive officers.
Salary
The
amount of compensation paid by the Company to each of the Company’s officers and the terms of those persons’ employment
is determined by the Compensation Committee. The Compensation Committee evaluates past performance and considers future incentive
and retention in considering the appropriate compensation for the Company’s officers. The Company believes that
the compensation paid to the Company’s directors and officers is fair to the Company.
Stock
Incentive Awards
The
Compensation Committee believes that the use of direct stock awards is at times appropriate for employees, and in the future intends
to use direct stock awards to reward outstanding service or to attract and retain individuals with exceptional talent and credentials.
The use of stock options and other awards is intended to strengthen the alignment of interests of executive officers and other
key employees with those of our stockholders.
In
this regard, during the fiscal year ended August 31, 2017, Compensation Committee and the Board did not authorize the issuance
of stock option awards to named executive officers.
Executive
Compensation Agreements
Agreement
with Mr. Gorski
On
August 16, 2012, the Company agreed to pay Mr. Daniel Gorski, in the amount of $120,000 annually in connection with his appointment
as Chief Executive Officer of the Company. The Company and Mr. Gorski have not entered into a formal written employment
agreement in relation to Mr. Gorski’s compensation and employment terms as Chief Executive Officer.
Outstanding
Equity Awards At Fiscal Year-End
There
were 5,755,000 stock options fully vested and outstanding as of August 31, 2017.
Nonqualified
Deferred Compensation
The
Company does not offer nonqualified deferred compensation to any of its named executive officers.
DIRECTOR
COMPENSATION
The
following table sets forth the compensation granted to our directors during the fiscal year ended August 31, 2017. Compensation
to directors that are also named executive officers is detailed above and is not included on this table.
Name
|
|
Fees
Paid or
Earned
in Cash
($)
|
|
|
Fee
Paid or Earned in Stock
($)
|
|
|
Option
Awards
($)
|
|
|
Total
($)
|
|
(a)
|
|
|
(b)
|
|
|
|
(c)
|
|
|
|
(d)
|
|
|
|
(h)
|
|
Anthony
Marchese
|
|
$
|
25,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
25,000
|
|
Cecil
Wall
|
|
$
|
14,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
14,000
|
|
Nicholas
Pingitore
|
|
$
|
10,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
10,000
|
|
James
Wolfe
|
|
$
|
10,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
10,000
|
|
Laura
Lynch
|
|
$
|
8,167
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
8,167
|
|
Compensation
of Directors
The
Company has agreed to pay its directors $10,000 annually, $1,000 for in person board meetings, $500 for telephonic board meetings
and $500 for committee meetings (both in person and telephonic). Independent directors will be offered the option to
elect to receive any cash compensation as restricted stock at a 20% discount to the closing price on the date of grant. Each
of our directors are reimbursed reasonable out of pocket expenses associated with attending our board meetings.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following tables set forth information as of December 4, 2017, regarding the ownership of the Company’s common stock by:
(i) each named officer, each director and all of the Company’s directors and executive officers as a group; and (ii) each
person who is known by us to own more than 5% of the Company’s shares of common stock. The number of shares beneficially
owned and the percentage of shares beneficially owned are based on 44,941,532 shares of common stock outstanding as of December
11, 2017.
Beneficial
ownership is determined in accordance with the rules and regulations of the Securities and Exchange Commission. Shares subject
to options that are exercisable within 60 days following December 11, 2017 are deemed to be outstanding and beneficially owned
by the optionee for the purpose of computing share and percentage ownership of that optionee but are not deemed to be outstanding
for the purpose of computing the percentage ownership of any other person. Except as indicated in the footnotes to this table,
and as affected by applicable community property laws, all persons listed have sole voting and investment power for all shares
shown as beneficially owned by them.
Name
and Address of Beneficial Owner
|
|
Number
of
Shares
of
Common
Stock
Beneficially
Owned
|
|
|
Percent
of
Class
Beneficially
Owned
|
|
G.W.
McDonald
|
|
|
5,066,750
|
|
|
|
11.3
|
%
|
Daniel
E. Gorski
|
|
|
5,873,640
|
(1)
|
|
|
12.9
|
%
|
Anthony
Marchese
|
|
|
2,327,500
|
(2)
|
|
|
5.0
|
%
|
Cecil
Wall
|
|
|
899,923
|
(3)
|
|
|
2.0
|
%
|
Nicholas
Pingitore
|
|
|
978,940
|
(4)
|
|
|
2.1
|
%
|
James
Wolfe
|
|
|
690,000
|
(5)
|
|
|
1.5
|
%
|
Laura
Lynch
|
|
|
212,000
|
(6)
|
|
|
*
|
|
Wm
Chris Mathers
|
|
|
—
|
|
|
|
*
|
|
All
directors and executive officers as a group (7 persons)
|
|
|
10,982,003
|
|
|
|
36.9
|
%
|
John
C Tumazos
|
|
|
2,513,597
|
(7)
|
|
|
5.7
|
%
|
SC
Fundamental Value Fund LP
|
|
|
10,557,900
|
(8)
|
|
|
21.0
|
%
|
*
Less than 1%.
(1)
|
Represents
5,200,000 shares of common stock, (i) 60,000 shares of common stock acquirable upon exercise of a 10 year option at an exercise
price of $0.50 per share,, (ii) 250,000 shares of common stock acquirable upon exercise of a 10 year option at an exercise
price of $0.22 per share, and (iii) 363,640 shares of common stock acquirable upon exercise of 5 year warrants at an exercise
price of $0.35 per share.
|
|
|
(2)
|
Represents
(i) the following securities registered in the name of Mr. Marchese (a) 435,000 shares of common stock, (b) a 3.5 year option
to purchase up to 45,000 shares of common stock at an exercise price of $0.45 per share, (c) a ten year option to purchase
up to 100,000 shares of common stock at an exercise price of $0.45 per share (d) a five year option to purchase up to 150,000
shares of common stock at an exercise price of $0.45 (e) a five year option to purchase up to 175,000 shares of common stock
at an exercise price of $0.45, (f) a five year option to purchase up to 250,000 shares of common stock at an exercise price
of $0.45, (g) a five year option to purchase up to 225,000 shares of common stock at an exercise price of $0.45 and (h) a
ten year option to purchase up to 240,000 shares of common stock at an exercise price of $0.45; (i) two five year warrants
to purchase up to 145,000 shares of common stock at an exercise price of $0.35; (j ) a ten year option to purchase up to 250,000
shares of common stock at an exercise price of $0.22 and (ii) the following securities registered in the name of
the Insiders Trend Fund, LP., an entity in which Mr. Marchese serves as general partner and chief investment officer: 312,500
shares of common stock.
|
|
|
(3)
|
Consists
of (i) 599,923 shares of common stock, (ii) a five year option to purchase up to 90,000 shares of common stock at an exercise
price of $0.45; (iii) a ten year option to purchase up to 100,000 shares of common stock at an exercise price of $0.45; (iv)
a ten year option to purchase up to 60,000 shares of common stock at an exercise price of $0.45; and (v) a ten year option
to purchase up to 50,000 shares of common stock at an exercise price of $0.22.
|
|
|
(4)
|
Consists
of (i) 193,940 shares of common stock; (ii) a ten year option to purchase up to 100,000 shares of common stock at an exercise
price of $0.45, (iii) a five year option to purchase up to 250,000 shares of common stock at an exercise price of $0.45, (iv)
a five year option to purchase up to 225,000 shares of common stock at an exercise price of $0.45;(v) a ten year option to
purchase up to 160,000 shares of common stock at an exercise price of $0.45, and (vi) two five year warrants to purchase up
to 70,000 shares of common stock at an exercise price of $0.35, (v) a ten year option to purchase up to 160,000 shares of
common stock at an exercise price of $0.45, (vi) two five year warrants to purchase up to 76,944 shares of common stock at
an exercise price of $0.35, and (vii) ) a ten year option to purchase up to 50,000 shares of common stock at an exercise price
of $0.22.
|
(5)
|
Consists
of 5,000 shares of common stock and (i) a ten year option to purchase up to 100,000 shares of common stock at an exercise
price of $0.45, (ii) a five year option to purchase up to 250,000 shares of common stock at an exercise price of $0.45, (iii)
a five year option to purchase up to 225,000 shares of common stock at an exercise price of $0.45; and (iv) a ten year option
to purchase up to 60,000 shares of common stock at an exercise price of $0.45; and (v) a ten year option to purchase up to
50,000 shares of common stock at an exercise price of $0.22.
|
(6)
|
Consists
of 2,000 shares of common stock and (i) a ten year option to purchase up to 100,000 shares of common stock at an exercise
price of $0.45 and (ii) a ten year option to purchase up to 60,000 shares of common stock at an exercise price of $0.45; and
(iii) a ten year option to purchase up to 50,000 shares of common stock at an exercise price of $0.22.
|
(7)
|
Includes
1,889,597 shares of common stock, 149,000 shares of common stock underlying warrants and 475,000 Shares underlying options
that are currently exercisable.
|
(8)
|
Represents
shares held by related persons and entities SC Fundamental Value Fund, L.P., SC Fundamental LLC, Peter M. Collery, Neil H.
Koffler, John T. Bird, David Hurwitz and SC Fundamental LLC Employee Savings & Profit Sharing Plan. Represents (i) 5,181,276
shares of common stock, (ii) 3,500,000 common stock purchase warrants exercisable at $0.20 per share for a period of five
years, (iii) 938,312 Class A Warrant exercisable at $0.35 per share for a period of five years and (v) 938,312 Class B Warrants
exercisable at $0.50 per share for a period of five years.
|
It
is believed by the Company that all persons named have full voting and investment power with respect to the shares indicated,
unless otherwise noted in the table and the footnotes thereto. Under the rules of the Securities and Exchange Commission, a person
(or group of persons) is deemed to be a “beneficial owner” of a security if he or she, directly or indirectly, has
or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition
of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security. A person is also
deemed to be a beneficial owner of any security, which that person has the right to acquire within 60 days, such as options or
warrants to purchase our common stock.
The
Company is not, to the best of our knowledge, directly or indirectly owned or controlled by another corporation or foreign government.
Change
in Control
The
Company is not aware of any arrangement that might result in a change in control in the future. The Company has no knowledge of
any arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent date result
in a change in the Company’s control.
OTHER
GOVERNANCE MATTERS
Code
of Business and Ethical Conduct
The
Company has adopted a corporate Code of Business and Ethical Conduct administered by its President and Chief Executive Officer,
Daniel Gorski. The Company believes its Code of Business and Ethical Conduct is reasonably designed to deter wrongdoing and promote
honest and ethical conduct, to provide full, fair, accurate, timely and understandable disclosure in public reports, to comply
with applicable laws, to ensure prompt internal reporting of code violations, and to provide accountability for adherence to the
code. The Company’s Code of Business and Ethical Conduct provides written standards that are reasonably designed to deter
wrongdoing and to promote:
|
–
|
Honest
and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional
relationships;
|
|
–
|
Full,
fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the Commission
and in other public communications made by an issuer;
|
|
–
|
Compliance
with applicable governmental laws, rules and regulations; and
|
|
–
|
The
prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
|
|
–
|
Accountability
for adherence to the code.
|
The
Company’s Code of Business and Ethical Conduct is available on its web site at www.TMRC.com. A copy of the Code
of Business and Ethical Conduct will be provided to any person without charge upon written request to the Company at its executive
offices: 516 S. Spring Avenue, Tyler, Texas 75702. We intend to disclose any waiver from a provision of the Code of
Business and Ethical Conduct that applies to any of the Company’s principal executive officer, principal financial officer,
principal accounting officer or controller or persons performing similar functions that relates to any element of the Company’s
Code of Business and Ethical Conduct on the Company’s website. No waivers were granted from the requirements of the Code
of Business and Ethical Conduct during the year ended August 31, 2017, or during the subsequent period to the date of this Proxy
Statement.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s officers, directors, and persons who beneficially
own more than 10% of the Company’s common stock (“10% Stockholders”), to file reports of ownership and changes
in ownership with the Securities and Exchange Commission (“SEC”). Such officers, directors and 10% Stockholders are
also required by SEC rules to furnish us with copies of all Section 16(a) forms that they file.
Based
solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, the
Company believes that during fiscal year ended August 31, 2017 the filing requirements applicable to its officers, directors and
greater than 10% percent beneficial owners were complied with.
EQUITY
COMPENSATION PLANS
In
September 2008, the Board adopted our 2008 Stock Option Plan (the “2008 Plan”), which was also approved by our shareholders
in September 2008. In May 2011, the board of directors adopted an amendment to our 2008 Plan (the “Amended 2008
Plan”), which was also approved by our shareholders in August 2011. The Amended 2008 Plan increased the number of shares
available for grant from 2,000,000 to up to 5,000,000 shares of our common stock for awards to our officers, directors, employees
and consultants. On February 15, 2012, our stockholders approved an increase of 2,000,000 of shares of common stock
available for issuance under the amended 2008 Stock Option Plan (the “Plan”). As amended, the Plan provides
for 7,000,000 shares of common stock for all awards. On February 24, 2016, the stockholders of the Company approved
an amendment to the Company’s 2008 Stock Option Plan, pursuant to which the number of shares available under the plan was
increase from 7,000,000 to 9,000,000 shares of common stock. Other provisions of the Amended 2008 Plan remain the same as under
our 2008 Plan. As of August 31, 2017, a total of 3,780,000 shares of our common stock remained available for future
grants under the Amended 2008 Plan.
The
following table sets forth certain information as of August 31, 2017 concerning our common stock that may be issued upon the exercise
of options or warrants or pursuant to purchases of stock under the Amended 2008 Plan:
Plan
Category
|
|
(a)
Number
of
Securities
to be
Issued
Upon the
Exercise
of
Outstanding
Options
|
|
|
(b)
Weighted-
Average
Exercise
Price
of
Outstanding
Options
|
|
|
(c)
Available
for
Future
Issuance
Under
Equity
Compensation
Plans
(Excluding
Securities
Reflected
in
Column
(a))
|
|
Equity
compensation plans approved by stockholders
|
|
|
5,220,000
|
|
|
$
|
0.63
|
|
|
|
3,780,000
|
|
Equity
compensation plans not approved by stockholders
|
|
|
535,000
|
|
|
|
0.31
|
|
|
|
—
|
|
Total
|
|
|
5,755,000
|
|
|
$
|
0.47
|
|
|
|
3,780,000
|
|
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
During
the fiscal year ended August 31, 2017 we had advances from certain Officers and Directors totaling $169,665.
Except
as indicated herein, no officer, director, promoter, or affiliate of the Company has or proposes to have any direct or indirect
material interest in any asset acquired or proposed to be acquired by the Company through security holdings, contracts, options,
or otherwise.
Policy
for Review of Related Party Transactions
The
Company has a policy for the review of transactions with related persons as set forth in the Company’s Audit Committee Charter
and internal practices. The policy requires review, approval or ratification of all transactions in which the Company is a participant
and in which any of the Company’s directors, executive officers, significant stockholders or an immediate family member
of any of the foregoing persons has a direct or indirect material interest, subject to certain categories of transactions that
are deemed to be pre-approved under the policy - including employment of executive officers, director compensation (in general,
where such transactions are required to be reported in the Company’s proxy statement pursuant to SEC compensation disclosure
requirements), as well as certain transactions where the amounts involved do not exceed specified thresholds. All related
party transactions must be reported for review by the Audit Committee pursuant to the Audit Committee’s charter and the
rules of the NYSE MKT.
Following
its review, the Audit Committee determines whether these transactions are in, or not inconsistent with, the best interests of
the Company and its stockholders, taking into consideration whether they are on terms no less favorable to the Company than those
available with other parties and the related person’s interest in the transaction. If a related party transaction is to
be ongoing, the Audit Committee may establish guidelines for the Company’s management to follow in its ongoing dealings
with the related person.
Our
policy for review of transactions with related persons was followed in all of the transactions set forth above and all such transactions
were reviewed and approved in accordance with our policy for review of transactions with related persons.
Director
Independence
Our
board of directors has determined that four of five of our present board members are “independent directors” as defined
by Rule 4200(a)(15) of the Rules of Nasdaq Marketplace Rules.
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
LBB
& Associates Ltd., LLP was the Independent Registered Public Accounting Firm for the Company in the fiscal year ended August
31, 2017.
The
Company’s financial statements have been audited by LBB & Associates Ltd., LLP, independent registered public accounting
firm, for the years ended August 31, 2016 and 2017.
The
following table sets forth information regarding the amount billed to us by our independent auditor, LBB & Associates Ltd.,
LLP for our two fiscal years ended August 31, 2017 and 2016, respectively:
|
|
Years
Ended August 31,
|
|
|
|
2017
|
|
|
2016
|
|
Audit
Fees
|
|
$
|
37,500
|
|
|
$
|
38,950
|
|
|
|
|
|
|
|
|
|
|
Audit
Related Fees
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
Tax
Fees
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
All
Other Fees
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
37,500
|
|
|
$
|
38,950
|
|
Audit
Fees
Consist
of fees billed for professional services rendered for the audit of our financial statements and review of interim consolidated
financial statements included in quarterly reports and services that are normally provided by the principal accountants in connection
with statutory and regulatory filings or engagements.
Audit
Related Fees
Consist
of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our
consolidated financial statements and are not reported under “Audit Fees”.
Tax
Fees
Consist
of fees billed for professional services for tax compliance, tax advice and tax planning. These services include preparation of
federal and state income tax returns.
All
Other Fees
Consist
of fees for product and services other than the services reported above.
Policy
on Pre-Approval by Audit Committee of Services Performed by Independent Auditors
The
Audit Committee has adopted procedures requiring the Audit Committee to review and approve in advance, all particular engagements
for services provided by the Company’s independent auditor. Consistent with applicable laws, the procedures permit limited
amounts of services, other than audit, review or attest services, to be approved by one or more members of the Audit Committee
pursuant to authority delegated by the Audit Committee, provided the Audit Committee is informed of each particular service. All
of the engagements and fees for 2017 were pre-approved by the Audit Committee. The Audit Committee reviews with LBB & Associates
Ltd., LLP whether the non-audit services to be provided are compatible with maintaining the auditor’s independence.