NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Texas Mineral Resources Corp. (the “Company”) was incorporated in the State of Nevada in 1970 as Standard Silver Corporation. In 2010, we changed our name from “Standard Silver Corporation” to “Texas Rare Earth Resources Corp”. In 2012, we changed our state of incorporation from Nevada to Delaware under a plan of conversion dated August 24, 2012. In 2016, we changed the name of the Company to Texas Mineral Resources Corp.
We are a mining company engaged in the business of the acquisition and development of mineral properties. We hold two nineteen-year leases, executed in September and November of 2011, to explore and develop a 950-acre rare earths project located in Hudspeth County, Texas known as the Round Top Project and prospecting permits covering an adjacent 9,345 acres. We also own unpatented mining claims in New Mexico. We are currently not evaluating any additional prospects, and our company’s focus is the development of the Round Top rare earth prospect.
NOTE 2 – SUMMARY OF ACCOUNTING POLICIES
Exploration-Stage Company
Since January 1, 2009, the Company has been classified as an “exploration stage” company for purposes of Industry Guide 7 of the U.S. Securities and Exchange Commission (“SEC”). Under Industry Guide 7, companies engaged in significant mining operations are classified into three categories, referred to as –stages” - exploration, development, and production. Exploration stage includes all companies that do not have established reserves in accordance with Industry Guide 7. Such companies are deemed to be “in the search for mineral deposits.” Notwithstanding the nature and extent of development-type or production-type activities that have been undertaken or completed, a company cannot be classified as a development or production stage company unless it has established reserves in accordance with Industry Guide 7.
Basis of Presentation
Our financial records are maintained on the accrual basis of accounting whereby revenues are recognized when earned and expenses are recorded when incurred, in accordance with generally accepted accounting principles (“GAAP”) – United States.
Cash and Cash Equivalents
We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist of demand deposits at commercial banks. We maintain our cash and cash equivalents at banks selected by management based upon their assessment of the financial stability of the institution. Balances periodically exceed the federal depository insurance limit; however, we have not experienced any losses on deposits.
Property and Equipment
Our property and equipment consist primarily of vehicles, furniture and equipment, and are recorded at cost. Expenditures related to acquiring or extending the useful life of our property and equipment are capitalized. Expenditures for repair and maintenance are charged to operations as incurred. Depreciation is computed using the straight-line method over an estimated useful life of 3-20 years.
Lease Deposits
From time to time, the Company makes deposits in anticipation of executing leases. The deposits are capitalized upon execution of the applicable agreements.
Long-lived Assets
F-6
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 2 – SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
The Company reviews the recoverability of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through operations. To determine if these costs are in excess of their recoverable amount, periodic evaluation of carrying value of capitalized costs and any related property and equipment costs are based upon expected future cash flows and/or estimated salvage value in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC 360”), Property, Plant and Equipment. The Company’s assets susceptible to impairment analysis are the mineral properties described in Note 6.
Revenue Recognition
Revenue is recognized when title passes to the buyer and when collectability is reasonably assured. Title passes to the buyer based on terms of the sales contract. Product pricing is determined based on contractual arrangements with the Company’s customers.
Effective September 1, 2018, the Company adopted ASC Topic 606. In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance on revenue recognition, which provides a single, comprehensive revenue recognition model for all contracts with customers and supersedes most existing revenue recognition guidance. The main principle under this guidance is that an entity should recognize revenue at the amount it expects to be entitled to in exchange for the transfer of goods or services to customers.
The Company identified the predominant changes to its accounting policies resulting from the application of this guidance and quantified the impact on its financial statements. The cumulative effect of the initial adoption of this guidance did not have any significant impact on the Company’s financial statements, as the Company did not have any significant customer contracts in place at August 31, 2018. As a result, comparative prior periods have not been adjusted and continue to be reported under FASB ASC Topic 605, Revenue Recognition (“ASC 605”).
The Company’s revenue recognition policies are established in accordance with the Revenue Recognition topics of ASC 606, and accordingly, revenue is recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
Mineral Exploration and Development Costs
All exploration expenditures are expensed as incurred. Costs of acquisition and option costs of mineral rights are capitalized upon acquisition. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. If the Company does not continue with exploration after the completion of the feasibility study, the mineral rights will be expensed at that time. Costs of abandoned projects are charged to mining costs including related property and equipment costs. To determine if these costs are in excess of their recoverable amount, periodic evaluation of carrying value of capitalized costs and any related property and equipment costs are based upon expected future cash flows and/or estimated salvage value in accordance with ASC 360-10-35-15, Impairment or Disposal of Long-Lived Assets.
Share-based Payments
We estimate the fair value of share-based compensation using the Black-Scholes valuation model, in accordance with the provisions of ASC 718, Stock Compensation and ASC 505, Share-Based Payments. Key inputs and assumptions used to estimate the fair value of stock options include the grant price of the award, the expected option term, volatility of our stock, the risk-free rate, and dividend yield. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the option holders, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by us.
Income Taxes
Income taxes are computed using the asset and liability method, in accordance with ASC 740, Income Taxes. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities, and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
F-7
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 2 – SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Basic and Diluted Loss Per Share
The Company computes loss per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share on the face of the Statements of Operations. Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period, including stock options and warrants using the treasury method. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management believes that these financial statements include all normal and recurring adjustments necessary for a fair presentation under Generally Accepted Accounting Principles.
Fair Value Measurements
We account for assets and liabilities measured at fair value in accordance with ASC 820, Fair Value Measurements and Disclosures. ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified with Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).The three levels of inputs used to measure fair value are as follows:
Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
Our financial instruments consist principally of cash, accounts payable and accrued liabilities and note payable. The carrying amounts of such financial instruments in the accompanying financial statements approximate their fair values due to their relatively short-term nature. It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.
Joint Venture Arrangements
The accounting for the Company’s involvement in joint venture arrangements is determined by the amount of influence the Company exercises over the operations of the joint venture. The amount of influence the Company exercises depends on an evaluation of the Company’s representation on the joint venture’s board and ownership level. Joint ventures in which the Company holds a greater than 50% voting interest, are generally consolidated. Joint ventures that are not consolidated, but over which the Company exercises significant influence, which is generally those in which the Company’s interest is between 20% to 50%, are accounted for under the equity method of accounting. Under the equity method of accounting, the Company’s share of the earnings or losses of a joint venture is reflected in a single line item in the statements of operations. The Company’s carrying value in an equity method investment is reflected in a single line item in the Company’s balance sheets. Investments in joint ventures in which the Company does not exercise significant influence, generally those in which the Company owns less than a 20% interest, are accounted for at fair value, except for non-public joint ventures without readily determinable fair values. Investments in non-public joint ventures without readily determinable fair values are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment in the joint venture.
F-8
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 2 – SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Reclassification of Prior Year Presentation
Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications had no effect on the reported results of operations or cash flows.
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, modifies and adds disclosure requirements for fair value measurements. The amendments in this ASU are effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the effects of this ASU on its financial statements and related disclosures.
In August 2018, the SEC adopted amendments to certain disclosure requirements in Securities Act Release No. 33-10532, Disclosure Update and Simplification. The Company does not anticipate that the adoption of these SEC amendments will have a material effect on the Company’s financial position, results of operations, cash flows or shareholders’ equity.
In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this ASU expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. This new guidance is effective for the Company in fiscal years beginning after December 15, 2018, and interim periods within that fiscal year. Early adoption is permitted. The Company is currently evaluating the effects of this ASU on its financial statements and related disclosures.
In July 2017, the FASB issued ASU 2017-11, “Earnings per share”, which allows companies to exclude a down round feature when determining whether a financial instrument is considered indexed to the entity’s own stock. As a result, financial instruments with down round features may no longer be required to be accounted classified as liabilities. A company will recognize the value of a down round feature only when it is triggered and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, such as warrants, an entity will treat the value of the effect of the down round, when triggered, as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. The guidance in ASU 2017-11 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, and the guidance is to be applied using a full or modified retrospective approach. The Company is currently evaluating the effects of this ASU on its financial statements and related disclosures.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This ASU clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance is effective for the Company for fiscal years beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The Company adopted this ASU effective September 1, 2018 and its adoption did not have a significant impact on its financial statements and related disclosures.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230: Classification of Certain Cash Receipts and Cash Payments). This guidance addresses specific cash flow issues with the objective of reducing the diversity in practice for the treatment of these issues. The areas identified include: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and application of the predominance principle with respect to separately identifiable cash flows. The guidance will generally be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this ASU effective September 1, 2018 and its adoption did not have a significant impact on its financial statements.
F-9
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 2 – SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes the guidance in former ASC 840, Leases. The new standard, as amended by subsequent ASUs on the Topic, requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. For the Company, this standard is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted.
The FASB issued ASU No. 2018-10 “Codification Improvements to Topic 842, Leases” and ASU No. 2018-11 “Leases (Topic 842) Targeted Improvements” in July 2018. ASU 2018-10 provides certain amendments that affect narrow aspects of the guidance issued in ASU 2016-02. ASU 2018-11 provides an optional transition method allowing entities to apply the new lease standard at the adoption date with a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption (modified retrospective approach) as opposed to restating prior period financial statements. The Company elected to adopt the standard on September 1, 2019. The Company is finalizing its new accounting policies, processes and internal controls. The Company is in the process of quantifying the full impact of the application of the new guidance; however, it expects that adoption of the new standard will not have a material effect on its statements of operations, will result in a gross-up on its balance sheets and will have no effect on its statements of cash flows.
NOTE 3 – RESTATEMENT
The accompanying August 31, 2019 financial statements have been restated to properly account for the following:
Issuance of common stock for settlement of accrued compensation due employees, officers and directors
Modification of debt to related parties to include issuance of warrants and a conversion option that triggered the debt to be accounted for using extinguishment accounting
Issuance of common stock in connection with the modification of a long-term debt agreement with the Rio Grande Valley Foundation.
F-10
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 3 – RESTATEMENT (CONTINUED)
The following summarizes the effects of the adjustments on our previously issued August 31, 2019 financial statements:
BALANCE SHEET
|
|
As Previously
Reported
|
|
Adjustments
|
|
|
As Restated
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
$
|
1,828,996
|
$
|
-
|
|
$
|
1,828,996
|
Mineral properties, net
|
|
354,234
|
|
-
|
|
|
354,234
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
2,183,230
|
$
|
-
|
|
$
|
2,183,230
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
1,181,820
|
$
|
(63,750)
|
(a)
|
$
|
1,118,070
|
Advances from related parties
|
|
5,000
|
|
185,454
|
(b)
|
|
190,454
|
Current portion of note payable
|
|
193,760
|
|
(70,218)
|
(c)
|
|
123,542
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
1,380,580
|
|
51,486
|
|
|
1,432,066
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
1,380,580
|
|
51,486
|
|
|
1,432,066
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity (deficit)
|
|
|
|
|
|
|
|
Preferred stock
|
|
-
|
|
-
|
|
|
-
|
Common stock
|
|
562,050
|
|
-
|
|
|
562,050
|
Additional paid-in capital
|
|
36,817,096
|
|
1,123,713
|
(d)
|
|
37,940,809
|
Accumulated deficit
|
|
(36,576,496)
|
|
(1,175,199)
|
(d)
|
|
(37,751,695)
|
|
|
|
|
|
|
|
|
Total shareholders’ equity (deficit)
|
|
802,650
|
|
(51,486)
|
|
|
751,164
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity (deficit)
|
$
|
2,183,230
|
$
|
-
|
|
$
|
2,183,230
|
|
|
|
|
|
|
|
|
F-11
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 3 – RESTATEMENT (CONTINUED)
STATEMENT OF OPERATIONS
|
|
As Previously
Reported
|
|
Adjustments
|
|
|
As Restated
|
Operating expenses:
|
|
|
|
|
|
|
|
Exploration costs
|
$
|
139,198
|
$
|
-
|
|
$
|
139,198
|
General and administrative expenses
|
|
785,112
|
|
80,454
|
(e)
|
|
865,566
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
924,310
|
|
80,454
|
|
|
1,004,764
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
(924,310)
|
|
(80,454)
|
|
|
(1,004,764)
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
-
|
|
(721,689)
|
(f)
|
|
(721,689)
|
Loss on settlement of accrued liabilities
|
|
-
|
|
(641,677)
|
(g)
|
|
(641,677)
|
Non-cash interest expense
|
|
(268,621)
|
|
268,621
|
(h)
|
|
-
|
Interest and other income
|
|
6,874
|
|
893
|
(i)
|
|
7,767
|
Interest and other expense
|
|
(20,118)
|
|
(893)
|
(i)
|
|
(21,011)
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
(281,865)
|
|
(1,094,745)
|
|
|
(1,376,610)
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,206,175)
|
$
|
(1,175,199)
|
|
$
|
(2,381,374)
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted
|
$
|
(0.03)
|
$
|
(0.02)
|
|
$
|
(0.05)
|
Weighted average shares outstanding -
|
|
|
|
|
|
|
|
basic and diluted
|
|
46,737,894
|
|
|
|
|
46,737,894
|
(a)To reclassify accrued interest improperly included in accrued liabilities rather than as a reduction in discount on the note.
(b)To properly recognize amounts received from a related party (joint venture partner) as a related party advance rather than as a reduction of expenses because it was received outside of the joint venture arrangement and not subject to a separate agreement. See Note 8 for additional discussion.
(c)To properly recognize: 1) the discount on the note payable shown in (a) above, 2) a $105,000 payment on the note made in common stock of the Company in connection with the modification of the note and 3) an increase in the discount on the note balance of $28,968 as a result of the modification. See Note 8 for additional discussion.
(d)To properly recognize the changes to paid in capital related to: 1) settlement of accrued compensation to officers, directors and employees based on the estimated fair value of the common stock issued at the date the settlements were negotiated rather than the balance of the liability, 2) extinguishment of related party debt based on the estimated fair value of common stock and common stock warrants issued to change the terms of the related party debt to include a conversion feature, waive existing defaults and facilitate the conversion of the debt to equity.
(e) To properly recognize: 1) an increase of $185,454 in expenses of the Company that were improperly offset by advances described in (b) above and 2) a decrease of $105,000 for the issuance of common stock to the Rio Grande Valley Foundation that were improperly recorded as consulting fees but have been recognized as a component of a debt modification discussed in (c) above.
(f)To properly recognize the loss on debt extinguishment transactions related to $415,365 of notes payable to related parties. See Note 8 for additional discussion.
(g)To properly recognize the settlement of accrued compensation as described in (d) above.
F-12
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 3 – RESTATEMENT (CONTINUED)
(h)To properly remove non-cash interest expense that was recognized for warrants issued in connection with the extinguishment of related party debt described in (d) above and considered these warrants in the extinguishment transaction.
(i)To properly reclassify interest expense and interest income.
NOTE 4 – JOINT VENTURE ARRANGEMENTS
In August 2018, we executed a joint venture agreement (the “USARE Agreement”), with Morzev Pty Ltd (Morzev”) to develop the Round Top Deposit. The terms of the JV Agreement require Morzev to expend up to $10 million, in two tranches, to produce a bankable feasibility study, as follows:
$2.5 million to optimize and finalize the metallurgical processing and
$7.5 million to fund the engineering, design, geotechnical work, and permitting necessary for a bankable feasibility study.
Upon completion of these funding milestones, Morzev will earn and own 70% of the Round Top Project as well as a $3 million six-month option to purchase an additional 10% ownership interest (bringing its total ownership interest in the Round Top Project to 80%). In August 2019, Morzev assigned its ownership right to a wholly owned subsidiary, USA Rare Earth LLC (“USARE”). In connection with the JV Agreement, Morzev also purchased 646,054 shares of our Common Stock for $140,000.
On July 15, 2015, we entered into an operating agreement with K-Technologies, Inc. (“K-Tech”), to formalize our joint venture company, Reetech, LLC, a Delaware limited liability company (“Reetech”). Reetech will develop, refine and market K-Tech’s Continuous Ion Exchange (CIX) and Continuous Ion Chromatography (CIC) technology as it applies to the extraction of rare earth elements (REE) from native ores (the “Technology”). The JV intends to license the Technology to TMRC, as well as other rare earth production companies. Reetech may also build and operate processing facilities to separate and purify mixed rare earth concentrates into individual purified rare earth oxides for rare earth production companies other than TMRC.
Our operating agreement K-Tech is still in effect; however, due to the inactivity of our Round Top project, there has been no ongoing advancement under the operating agreement during the years ended August 31, 2019 and 2018.
We incurred significant costs in establishing Reetech which were expensed in prior years as exploration expenses. Based upon our assessment we have determined that there are currently no significant future potential loss liabilities. The Company’s interest in the joint venture remains $-0-.
NOTE 5 – PROPERTY AND EQUIPMENT, NET
Property and equipment consist of office furniture, equipment and vehicles. The property and equipment are depreciated using the straight-line method over their estimated useful life of 3-20 years. Our property and equipment, net consist of the following:
|
|
August 31,
|
|
August 31,
|
|
2019
|
|
2018
|
Furniture & office equipment
|
$
|
75,606
|
$
|
75,606
|
Vehicles
|
|
89,185
|
|
89,185
|
Computers & software
|
|
48,711
|
|
48,711
|
Field equipment
|
|
71,396
|
|
71,396
|
Total cost basis
|
|
284,898
|
|
284,898
|
Less: Accumulated depreciation
|
|
(284,898)
|
|
(284,898)
|
Property & equipment, net
|
$
|
-
|
$
|
-
|
Depreciation expense for the years ending August 31, 2019 and 2018 was $-0- and $5,421, respectively and is included in general and administrative expenses.
F-13
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 6 – MINERAL PROPERTIES
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 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, if paying quantities of minerals are obtained, 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. If paying quantities have 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
|
|
Total
|
|
Amount
|
|
Amount
|
September 2, 2015 – 2019
|
$
|
75
|
$
|
67,077
|
September 2, 2020 – 2024
|
|
150
|
|
134,155
|
September 2, 2025 – 2029
|
|
200
|
|
178,873
|
In August 2019, we paid a delay rental to the State of Texas in the amount 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 is adjacent to the land 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, if paying quantities of minerals are obtained, 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 quar¼ percent (6 1/4%) of the market value of all other minerals sold from Round Top. If paying quantities have 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 schedule¼:
|
|
Per Acre
|
|
Total
|
|
|
Amount
|
|
Amount
|
November 1, 2015 – 2019
|
$
|
75
|
$
|
6,750
|
November 1, 2020 – 2024
|
|
150
|
|
13,500
|
November 1, 2025 – 2029
|
|
200
|
|
18,000
|
In August 2019, we paid a delay rental to the State of Texas of $6,750.
F-14
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 6 – MINERAL PROPERTIES (CONTINUED)
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, since renamed the Rio Grande 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. Through our JV partner, we are currently paying $13,235 monthly until the balance owed to the Foundation has been fully paid. 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.
October 2014 Surface Option and Water Lease
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 purchase price will be the appraised value of the surface at the time of exercising the option. All annual payments have been made as of the date of this filing.
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. 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. The minimum production payment for all the fiscal years have been made as of the date of this filing.
NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following:
|
|
August 31,
|
|
August 31,
|
|
2019
|
|
2018
|
Accounts payable – trade
|
$
|
376,077
|
$
|
419,191
|
Accrued payroll and related expenses
|
|
731,011
|
|
872,517
|
Other
|
|
10,982
|
|
23,055
|
|
|
|
|
|
Total accounts payable and accrued liabilities
|
$
|
1,118,070
|
$
|
1,314,763
|
F-15
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 8 – NOTES PAYABLE
In relation to the Foundation lease discussed in Note 6, the Company recorded a note payable for an amount for the initial $45,000 due upon signing of lease and the nine (9) future payments due of $45,000 which has been recorded at its present value discounted with an imputed interest rate of 5% for a total note payable of $364,852. As of the date of this filing, we have not paid the June 2018, 2017 or 2016 installments of our surface lease, in the amount of $45,000 each, to the Rio Grande Foundation, formerly the Southwest Range & Wildlife Foundation. As a result, the full amount of the note payable has been classified as currently due. In October 2018, the Company issued 500,000 shares with a fair value of $105,000 to the director of the Rio Grande Foundation as consideration for not placing the Company in default on the note and in connection with settlement negotiations. In January 2019, the Company and the Rio Grande Foundation reached a settlement agreement pursuant to which the Company agreed to pay the three (3) past installments totaling $135,000 and two (2) future installments of $45,000, for a grand total of $225,000, and two (2) installments of $45,000, each, totaling $90,000 were waived. The outstanding balance is payable in one (1) payment of $10,000 upon signing the settlement agreement and sixteen (16) monthly installments of approximately $13,000 beginning March 1, 2019. During the year ended August 31, 2019, the Company made five (5) monthly installments with advances received from USARE totaling $66,626. Pursuant to ASC 470-50, the modification was accounted for as a modification of the note payable. At August 31, 2019, the principal amount owed on the note is $148,374, the unamortized discount on the note is $24,832 and the carrying amount is $123,542.
Related Party Notes Payable and Advances
We had notes payable to directors totaling $421,415 at August 31, 2018. The loans were due March 1, 2017, are non-interest bearing, and unsecured.
In July 2019, we amended notes payable totaling $415,365 to include a conversion option allowing the holders to convert the outstanding principal at a rate of $0.20 per share. As additional consideration for the loans, we issued in total 832,830 common stock purchase warrants. The warrants have an exercise price of $0.20 and term of five years. The warrants have a fair value of $268,621 at the date of issuance determined using the Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 1.880% (ii) estimated volatility of 91% (iii) dividend yield of 0.00% and (iv) expected life of the warrants of five years.
We determined that the added conversion option was substantive, as defined in ASC 470, and the debt modification requires extinguishment accounting. The new debt instrument was recorded at its fair value which was determined to be the value of the common stock on the modification date multiplied by the number of shares issuable upon conversion, or $868,433. In addition, the $268,621 fair value of the warrants was included in the extinguishment transaction resulting in a loss on extinguishment of $721,689.
Upon conversion of the notes, the Company issued 2,076,825 common shares to the various directors. The following summarizes warrants issued with the modification of the debt and common stock issued upon conversion, by director:
|
|
|
|
Common
|
|
|
|
Warrants
|
|
|
Amount
|
|
Shares
|
|
Warrants
|
|
Fair Value
|
Director
|
$
|
3,000
|
|
15,000
|
|
6,000
|
$
|
1,919
|
Director
|
|
165,500
|
|
827,500
|
|
333,000
|
|
107,627
|
Director
|
|
5,000
|
|
25,000
|
|
10,000
|
|
4,155
|
Director
|
|
1,000
|
|
5,000
|
|
2,000
|
|
831
|
Director
|
|
89,625
|
|
448,125
|
|
179,250
|
|
57,336
|
Director
|
|
151,240
|
|
756,200
|
|
302,580
|
|
96,753
|
Total converted
|
$
|
415,365
|
|
2,076,825
|
|
832,830
|
$
|
268,621
|
On January 12, 2017 the Company entered into a loan totaling $10,000 from an officer of the Company. The loans are due July 12, 2017, are non-interest accruing, and unsecured. As of this filing the loans are in default and due upon demand. At origination, as additional consideration for the loans, we issued 20,000 common stock purchase warrants. The warrants have an exercise price of $0.10 and term of five years. The loans have a relative fair value of $6,771 and the warrants have a relative fair value of $3,229 at the date of issuance determined using the Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 1.87% (ii) estimated volatility of 240% (iii) dividend yield of 0.00% and (iv) expected life of the warrants of five years. The notes payable balance as of August 31, 2019 and August 31, 2018 was $4,000 and $10,000. The value of the warrant was amortized to interest expense over the term of the note payable.
F-16
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 8 – NOTES PAYABLE (CONTINUED)
During the year ended August 31, 2019, the Company received $185,454 in advances from its joint venture partner, USARE, to pay certain deferred lease rental costs and amounts due under the Rio Grande Foundation note discussed above.
The Company has an advance due upon demand of $1,000 as of August 31, 2019 and 2018.
NOTE 9 – INCOME TAXES
The following table sets forth a reconciliation of the federal income tax benefit to the United States federal statutory rate of 21% for the years ended August 31, 2019 and 2018:
|
|
2019
|
|
2018
|
Income tax benefit at 21% statutory rate
|
$
|
500,088
|
$
|
155,050
|
Stock-based compensation
|
|
-
|
|
(22,981)
|
Non-deductible loss on extinguishment of debt
|
|
(151,555)
|
|
-
|
Non-deductible loss on settlement of accrued compensation
|
|
(315,014)
|
|
-
|
Change in statutory rate
|
|
-
|
|
(3,237,348)
|
Other
|
|
11,831
|
|
-
|
Decrease (increase) in valuation allowance
|
|
(45,350)
|
|
3,105,279
|
|
|
|
|
|
|
$
|
-
|
$
|
-
|
The tax effects of the temporary differences between reportable financial statement income and taxable income are recognized as a deferred tax asset and liability. Significant components of the deferred tax assets are set out below along with a valuation allowance to reduce the net deferred tax asset to zero.
Management has established a valuation allowance because of the potential that the tax benefits underlying deferred tax asset may not be realized. Significant components of our deferred tax asset at August 31, 2019 and 2018 are as follows:
|
|
2019
|
|
2018
|
Net operating loss carryforward
|
$
|
3,126,016
|
$
|
3,070,952
|
Assets, exploration cost, depreciation and amortization
|
|
2,187,841
|
|
2,158,610
|
Accrued liabilities
|
|
(38,945)
|
|
-
|
Less valuation allowance
|
|
(5,274,912)
|
|
(5,229,562)
|
|
|
|
|
|
Net deferred tax asset
|
$
|
-
|
$
|
-
|
As a result of a change in control effective in April 2007, our net operating losses prior to that date may be partially or entirely unavailable, by law, to offset future income and, accordingly, are excluded from the associated deferred tax asset.
On December 22, 2017, the U.S. Congress enacted the Tax Cuts and Jobs Act (the “Act”) which made significant changes to U.S. federal income tax law, including lowering the federal statutory corporate income tax rate to 21% from 35% beginning January 1, 2018. The income tax effects of changes in tax laws are recognized in the period when enacted. While the Company continues to assess the impact of the tax reform legislation on its business and consolidated financial statements, the Company re-measured its deferred tax balances by applying the reduced rate and recorded a deferred tax expense of $3,237,348 during the year ended August 31, 2018. This provisional deferred tax expense was fully offset by a $3,237,348 deferred tax benefit as a result of the associated change in the valuation allowance against the net deferred tax assets. As reflected in the rate reconciliation above, the change in the deferred tax balances due to the rate reduction had no impact on the net deferred tax balances reported in the consolidated balance sheets as of August 31, 2018 and no impact in the consolidated statements of operations for the year ended August 31, 2018.
F-17
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 9 – INCOME TAXES (CONTINUED)
The net operating loss carryforward in the approximate amount of $14,886,000 will begin to expire in 2022. We file income tax returns in the United States and in one state jurisdiction. With few exceptions, we are no longer subject to United States federal income tax examinations for fiscal years ending before 2011 and are no longer subject to state tax examinations for years before 2010.
We also record any financial statement recognition and disclosure requirements for uncertain tax positions taken or expected to be taken in a tax return. Financial statement recognition of the tax position is dependent on an assessment of a 50% or greater likelihood that the tax position will be sustained upon examination, based on the technical merits of the position. Any interest and penalties related to uncertain tax positions are recorded as interest expense. We believe we have no uncertain tax positions at August 31, 2019 and 2018.
NOTE 10 – SHAREHOLDERS’ EQUITY
Our authorized capital stock consists of 100,000,000 shares of common stock, with a par value of $0.01 per share, and 10,000,000 preferred shares with a par value of $0.001 per share.
All shares of common stock have equal voting rights and, when validly issued and outstanding, are entitled to one non-cumulative vote per share in all matters to be voted upon by shareholders. The shares of common stock have no pre-emptive, subscription, conversion or redemption rights and may be issued only as fully paid and non-assessable shares. Holders of the common stock are entitled to equal ratable rights to dividends and distributions with respect to the common stock, as may be declared by our Board of Directors (our “Board”) out of funds legally available. In the event of a liquidation, dissolution or winding up of the affairs of the Corporation, the holders of common stock are entitled to share ratably in all assets remaining available for distribution to them after payment or provision for all liabilities and any preferential liquidation rights of any preferred stock then outstanding.
There were no issuances of our common stock for the year ended August 31, 2018. Following is an analysis of our common stock issuances during the year ended August 31, 2019:
In October 2018, we issued 500,000 common shares valued at $105,000 to the director of the Rio Grande Foundation as consideration for not placing us in default on the note payable to the Foundation and in connection with settlement negotiations.
In June 2019, we issued 22,500 shares of our common stock for website services recognizing an expense of $11,500.
In June 2019, we received proceeds in the amount of $35,317 for 100,907 shares of our Common Stock issued upon the exercise of common stock warrants.
In July 2019, we issued 122,811 shares for a cashless exercise of 122,811 Common Stock warrants.
In August 2019, we issued 2,084,073 shares of our common stock to our directors for director’s fees in arrears recognizing a loss on settlement of accrued liability in the amount of $641,677.
In August 2019, we issued 2,076,825 shares of our common stock to certain directors for the conversion of notes owed to them.
In August 2019, we issued 5,757,680 shares of our common stock for $1,971,785 to an investor, including cost of capital in the amount of $8,400 and 598,666 shares of our common stock.
We have 56,204,994 shares of our common stock outstanding as of August 31, 2019.
During the fiscal year ended August 31, 2019, we issued 1,300,000 options to our directors and issued 830,000 options for services.
F-18
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 10 – SHAREHOLDERS’ EQUITY (CONTINUED)
The following table sets forth certain information as of August 31, 2019 and 2018 concerning our common stock that may be issued upon the exercise of options not covered by the Amended 2008 plan and pursuant to purchases of stock under the Amended 2008 Plan (All options are fully vested and exercisable at August 31, 2019 and 2018):
|
Shares
|
|
Weighted
Average
Exercise Price
|
|
Weighted
Average
Remaining
Contractual Life
(In Years)
|
|
Grant
Date
Fair
Value
|
Outstanding at August 31, 2017
|
5,085,000
|
$
|
0.36
|
|
5.37
|
$
|
1,808,350
|
|
|
|
|
|
|
|
|
Vested and exercisable at August 31, 2017
|
5,085,000
|
|
0.36
|
|
5.37
|
|
1,808,350
|
Options granted
|
620,000
|
|
0.21
|
|
7.77
|
|
109,431
|
Options exercised
|
-
|
|
-
|
|
-
|
|
-
|
Options cancelled/forfeited/expired
|
1,785,000
|
|
0.44
|
|
-
|
|
533,296
|
Outstanding at August 31, 2018
|
3,920,000
|
|
0.32
|
|
4.31
|
|
1,384,485
|
Vested and exercisable at August 31, 2018
|
3,920,000
|
|
0.32
|
|
4.31
|
|
1,384,485
|
Options granted
|
2,130,000
|
|
0.21
|
|
7.48
|
|
524,517
|
Options exercised
|
-
|
|
-
|
|
-
|
|
-
|
Options cancelled/forfeited/expired
|
340,000
|
|
0.41
|
|
-
|
|
146,162
|
Vested and exercisable at August 31, 2019
|
5,710,000
|
$
|
0.28
|
|
5.41
|
$
|
1,762,840
|
|
|
|
|
|
|
|
|
Amended 2008 Stock Option Plan
In September 2008, the Board adopted our 2008 Stock Option Plan (the “2008 Plan”), which was approved by our shareholders and provided 2,000,000 shares available for grant. In 2011, 2012, and 2016 our board of directors adopted amendments to the 2008 Plan, approved by the shareholders, that increased the shares available for issuance under the 2008 Plan by 3,000,000, 2,000,000 and 2,000,000, respectively. Accordingly, at August 31, 2019 and 2018, 9,000,000 shares were designated for issuance under the 2008 Plan as amended. At August 31, 2019, a total of 4,635,000 shares of our common stock remained available for future grants under the Amended 2008 Plan.
During the year ended August 31, 2019, the Company granted a total of 2,130,000 stock options with a fair value of approximately $524,000 on the date of grant. The fair value of the options was determined using the Black-Scholes option-pricing model. The weighted average assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 2.5 to 2.9% (ii) estimated volatility of 84% (iii) dividend yield of 0.00% and (iv) expected life of all options of 5 years.
During the year ended August 31, 2018, the Company granted a total of 620,000 stock options with a fair value of approximately $109,000 on the date of grant. The fair value of the options was determined using the Black-Scholes option-pricing model. The weighted average assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 2.9% (ii) estimated volatility of 102% (iii) dividend yield of 0.00% and (iv) expected life of all options of 5 years.
During the years ended August 31, 2019 and 2018, the Company recognized total stock based compensation expenses of $535,767 and $109,431, respectively, for vesting options.
F-19
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 10 – SHAREHOLDERS’ EQUITY (CONTINUED)
Warrants
Warrant activity for the years ended August 31, 2019 and 2018 are as follows:
|
Shares
|
|
Weighted
Average
Exercise Price
|
|
Weighted
Average
Remaining
Contractual Life
(In Years)
|
|
Grant
Date
Fair
Value
|
Outstanding at August 31, 2017
|
16,148,010
|
$
|
0.38
|
|
0.84
|
$
|
3,180,071.35
|
|
|
|
|
|
|
|
|
Vested and exercisable at August 31, 2017
|
16,148,010
|
|
0.38
|
|
0.84
|
|
3,180,071
|
Warrants granted
|
701,000
|
|
0.2
|
|
3.72
|
|
97,508
|
Outstanding at August 31, 2018
|
16,849,010
|
|
0.37
|
|
0.96
|
|
3,277,579
|
Vested and exercisable at August 31, 2018
|
16,849,010
|
|
0.37
|
|
0.96
|
|
3,277,579
|
Warrants granted
|
832,830
|
|
0.2
|
|
4.88
|
|
268,621
|
Warrants exercised
|
(223,718)
|
|
0.35
|
|
-
|
|
(44,868)
|
Outstanding at August 31, 2019
|
17,458,122
|
$
|
0.36
|
|
1.16
|
$
|
3,501,332
|
During the year ended August 31, 2019, the Company granted a total of 832,830 common stock warrants with a fair value of approximately $269,000 on the date of grant. The fair value of the options was determined using the Black-Scholes option-pricing model. The weighted average assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 2.5 to 2.9% (ii) estimated volatility of 84% (iii) dividend yield of 0.00% and (iv) expected life of all warrants of 5 years.
During the year ended August 31, 2018, the Company granted a total of 701,000 stock options with a fair value of approximately $98,000 on the date of grant. The fair value of the options was determined using the Black-Scholes option-pricing model. The weighted average assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 2.9% (ii) estimated volatility of 102% (iii) dividend yield of 0.00% and (iv) expected life of all warrants of 5 years.
During the year ended August 31, 2019, the fair value of the warrants totaling $268,621 were treated as a component of a debt extinguishment transaction more fully described in Note 8 and included in loss on extinguishment of debt. During the year ended August 31, 2018, the Company recognized total non-cash interest expense of $97,508 related to the warrants.
NOTE 11 – RELATED PARTY TRANSACTIONS
In July 2019, as additional consideration for the loans, we issued in total 832,830 common stock purchase warrants. The warrants have an exercise price of $0.40 and term of five years. The warrants have a fair value of $268,621 at the date of issuance determined using the Black-Scholes option-pricing model. The assumptions used to calculate the fair market value are as follows: (i) risk-free interest rate of 1.880% (ii) estimated volatility of 91% (iii) dividend yield of 0.00% and (iv) expected life of the warrants of five years. The $268,621 was recognized as loss on extinguishment of debt during the year ended August 31, 2019.
The Company issued 2,076,825 common shares to various directors upon conversion of $415,365 in notes payable on August 16, 2019.
F-20
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 12 – QUARTERLY DATA (UNAUDITED) (RESTATED)
The following tables reconcile our previously reported quarterly financial information with the restated quarterly financial information as of and for the nine months ended May 31, 2019, six months ended February 28, 2019 and three months ended November 30, 2018:
|
|
Nine Months Ended May 31, 2019
|
|
|
Previously
|
|
|
|
|
|
|
Reported
|
|
Adjustments
|
|
Restated
|
Operating Expenses
|
|
|
|
|
|
|
Exploration costs
|
$
|
48,437
|
$
|
-
|
$
|
48,437
|
General and administrative expenses
|
|
595,476
|
|
(105,000)
|
|
490,476
|
|
|
|
|
|
|
|
Total operating expenses
|
|
643,913
|
|
(105,000)
|
|
538,913
|
|
|
|
|
|
|
|
Loss from operations
|
|
(643,913)
|
|
105,000
|
|
(538,913)
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
Interest and other expense
|
|
(15,695)
|
|
-
|
|
(15,695)
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
(15,695)
|
|
-
|
|
(15,695)
|
|
|
|
|
|
|
|
Net loss
|
$
|
(659,608)
|
$
|
105,000
|
$
|
(554,608)
|
|
|
|
|
|
|
|
Net loss per share
|
|
|
|
|
|
|
Basic and diluted loss per share
|
$
|
(0.01)
|
$
|
-
|
$
|
(0.01)
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
Basic and diluted
|
|
45,956,600
|
|
-
|
|
45,956,600
|
|
|
|
|
|
|
|
Balance Sheet Data (at end of period):
|
|
|
|
|
|
|
Current assets
|
$
|
24,987
|
$
|
-
|
$
|
24,987
|
Total assets
|
|
383,221
|
|
-
|
|
383,221
|
Current and total liabilities
|
|
2,176,676
|
|
(105,000)
|
|
2,071,676
|
Total shareholders' equity (deficit)
|
|
(1,793,455)
|
|
105,000
|
|
(1,688,455)
|
F-21
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 12 – QUARTERLY DATA (UNAUDITED) (RESTATED) (CONTINUED)
The following tables reconcile our previously reported quarterly financial information with the restated quarterly financial information as of and for the nine months ended May 31, 2019, six months ended February 28, 2019 and three months ended November 30, 2018:
|
|
Six Months Ended February 28, 2019
|
|
|
Previously
|
|
|
|
|
|
|
Reported
|
|
Adjustments
|
|
Restated
|
Operating Expenses
|
|
|
|
|
|
|
Exploration costs
|
$
|
30,109
|
$
|
-
|
$
|
30,109
|
General and administrative expenses
|
|
510,877
|
|
(105,000)
|
|
405,877
|
|
|
|
|
|
|
|
Total operating expenses
|
|
540,986
|
|
(105,000)
|
|
435,986
|
|
|
|
|
|
|
|
Loss from operations
|
|
(540,986)
|
|
105,000
|
|
(435,986)
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
Interest and other expense
|
|
(10,790)
|
|
-
|
|
(10,790)
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
(10,790)
|
|
-
|
|
(10,790)
|
|
|
|
|
|
|
|
Net loss
|
$
|
(551,776)
|
$
|
105,000
|
$
|
(446,776)
|
|
|
|
|
|
|
|
Net loss per share
|
|
|
|
|
|
|
Basic and diluted loss per share
|
$
|
(0.01)
|
$
|
-
|
$
|
(0.01)
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
Basic and diluted
|
|
45,585,727
|
|
-
|
|
45,585,727
|
|
|
|
|
|
|
|
Balance Sheet Data (at end of period):
|
|
|
|
|
|
|
Current assets
|
$
|
72,116
|
$
|
-
|
$
|
72,116
|
Total assets
|
|
430,350
|
|
-
|
|
430,350
|
Current and total liabilities
|
|
2,124,543
|
|
(105,000)
|
|
2,019,543
|
Total shareholders' equity (deficit)
|
|
(1,694,193)
|
|
105,000
|
|
(1,589,193)
|
F-22
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 12 – QUARTERLY DATA (UNAUDITED) (RESTATED) (CONTINUED)
|
|
Three Months Ended November 30, 2018
|
|
|
Previously
|
|
|
|
|
|
|
Reported
|
|
Adjustments
|
|
Restated
|
Operating Expenses
|
|
|
|
|
|
|
Exploration costs
|
$
|
6,750
|
$
|
-
|
$
|
6,750
|
General and administrative expenses
|
|
442,675
|
|
(105,000)
|
|
337,675
|
|
|
|
|
|
|
|
Total operating expenses
|
|
449,425
|
|
(105,000)
|
|
344,425
|
|
|
|
|
|
|
|
Loss from operations
|
|
(449,425
|
|
105,000
|
|
(344,425)
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
Interest and other expense
|
|
(5,575)
|
|
-
|
|
(5,575)
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
(5,575)
|
|
-
|
|
(5,575
|
|
|
|
|
|
|
|
Net loss
|
$
|
(455,000)
|
$
|
105,000
|
$
|
(350,000)
|
|
|
|
|
|
|
|
Net loss per share
|
|
|
|
|
|
|
Basic and diluted loss per share
|
$
|
(0.01)
|
$
|
-
|
$
|
(0.01)
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
Basic and diluted
|
|
45,183,290
|
|
-
|
|
45,183,290
|
|
|
|
|
|
|
|
Balance Sheet Data (at end of period):
|
|
|
|
|
|
|
Current assets
|
$
|
125,060
|
$
|
-
|
$
|
125,060
|
Total assets
|
|
483,294
|
|
-
|
|
483,294
|
Current and total liabilities
|
|
2,079,003
|
|
(105,000)
|
|
1,974,003
|
Total shareholders' equity (deficit)
|
|
(1,595,709)
|
|
105,000
|
|
(1,490,709)
|
NOTE 13 – SUBSEQUENT EVENTS
During the period from September 1, 2019 through February 29, 2020, we had the following equity transactions:
a.710,000 common stock options were exercised on a cashless basis by a consultant into 510,000 shares of our common stock,
b.500,000 common stock options were exercised on a cashless basis by our CFO into 410,377 shares of our common stock,
c.130,892 shares of common stock were issued to settle accrued compensation payable to an ex-employee in the amount of $45,000, resulting in a loss on settlement of $66,335 representing the difference in the carrying amount of the liability and the fair value of the stock issued,
d.1,350,000 common stock warrants were exercised by investors at an exercise price of $0.35 per warrant for cash totaling $472,500,
e.4,147,279 common stock warrants were exercised by investors on a cashless basis into 2,375,998 shares of our common stock, and
F-23
TEXAS MINERAL RESOURCES CORP.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2019 AND 2018
NOTE 13 – SUBSEQUENT EVENTS (CONTINUED)
f.We agreed to issue 699,999 shares of common stock to consultants that vest ratably over a 24-month period. At February 29, 2020, 29,165 shares had vested and were unissued. The grant date fair value of the shares totaled approximately $450,000. When issued, we will hold these shares in trust until the end of the two-year term, or if requested by the contractor, such shares will be issued in tranches throughout the term of the agreements.
g.We issued 13,514 shares of our common stock to a new Advisory Board Member.
In December 2019, we announced the extension of the expiration date of the Class A and Class B warrants to December 7, 2020. As of May 1, 2020, there are issued and outstanding Class A warrants to purchase an aggregate of 1,556,507 shares of Company common stock at an exercise price of $0.35 per share, and Class B warrants to purchase an aggregate of 1,579,225 shares of Company common stock at an exercise price of $0.50 per share.
In March 2020, the World Health Organization designated the new coronavirus (“COVID-19”) as a global pandemic. Federal, state and local governments have mandated orders to slow the transmission of the virus, including but not limited to shelter-in-place orders, quarantines, restrictions on travel, and work restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic effects of the pandemic has resulted in significant volatility in the financial markets.
The restrictions put in place by federal, state and local governments could delay our exploration and development plans related to the Round Top Project. We continue to move forward on the project in an effort to obtain a bank feasibility study; however, restrictions on the number of personnel that can gather in a single location and work restrictions on vendor businesses may delay aspects of the project until such restrictions are lifted. Furthermore, the impact of the pandemic on the global economy could also negatively impact the availability and cost of future borrowings should the need arise.
F-24