STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

For the Nine and Three Months Ended Mary 31, 2020 and 2019

The accompanying notes are an integral part of these financial statements.

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Texas Mineral Resources Corp.

Notes to Interim Financial Statements

May 31, 2020

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Texas Mineral Resources Corp. (“we”, “us”, “our”, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in our annual report on Form 10-K/A, for the year ended August 31, 2019, dated June 3, 2020 as filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year ended August 31, 2019 as reported in our annual report on Form 10-K/A, have been omitted.

NOTE 2 – RESTATEMENT

The accompanying statements of operations, shareholders’ equity (deficit) and cashflows for the nine months ended May 31, 2019 have been restated to properly account for the issuance of common stock in connection with a debt modification of a long-term debt agreement with the Rio Grande Valley Foundation. The adjustment reflected in the below table properly recognizes the issuance of common stock valued at $105,000 as a reduction to the outstanding note payable balance in connection with a modification of the note. Previously the Company had accounted for the $105,000 as a consulting fee during the nine months ended May 31, 2019.

The above adjustments had no impact on total cash flows from operating activities, investing activities or financing activities for the nine months ended May 31, 2019.

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Texas Mineral Resources Corp.

Notes to Interim Financial Statements

May 31, 2020

(Unaudited)

NOTE 3 – 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, 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 (6 1/4%) of the market value of all other minerals removed and sold from Round Top.

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: 

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, 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 (6 1/4%) of the market value of all other minerals sold from Round Top.

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:

In August 2019, we paid a delay rental to the State of Texas of $6,750.

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Texas Mineral Resources Corp.

Notes to Interim Financial Statements

May 31, 2020

(Unaudited)

NOTE 3 – 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 Range & Wildlife Foundation, since renamed the Rio Grande 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. This commitment was treated as a note payable because it was in connection with obtaining the lease, see Note 4. 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. We are currently paying $13,235 monthly until the balance owed to the Foundation has been fully paid.

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 that we believe will be 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 4 – NOTE PAYABLE

In relation to the Foundation lease discussed in Note 3, the Company recorded a note payable for an amount for the initial $45,000 due upon signing of the lease and the nine (9) future payments due of $45,000 which was recorded at its present value discounted with an imputed interest rate of 5% for a total note payable of $364,852. The Company made payments of approximately $100,000 and was unable to pay as agreed and in January 2019 the Company entered into a settlement agreement with the Foundation and agreed to pay $225,000 in monthly installments of approximately $13,000, with the final payment to occur in July 2020.

The Company recognized accretion of the discount through interest expense of $11,291 and $11,250 for the nine months ended May 31, 2020 and May 31, 2019, respectively. As of May 31, 2020, the note payable balance is $26,875.

NOTE 5 – ADVANCES FROM RELATED PARTIES

During the nine months ended May 31, 2020, the Company received advances from its joint venture partner in the Round Top Project totaling approximately $101,000 which was primarily used to make monthly payments on the note payable discussed in Note 4. At May 31, 2020, total advances received from the joint venture partner were approximately $287,000.

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Texas Mineral Resources Corp.

Notes to Interim Financial Statements

May 31, 2020

(Unaudited)

NOTE 6 – SHAREHOLDERS’ EQUITY

Capital Stock

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.

On September 16, 2019, the holder of 10,000 of our common stock warrants converted these warrants into 10,000 shares of our common stock.

On October 29, 2019, 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 December 2019, 700,000 common stock options were exercised on a cashless basis by a consultant for 500,000 shares of our common stock.

In December 2019, 500,000 common stock options were exercised on a cashless basis by our chief financial officer for 410,377 shares of our common stock.

In January 2020, 130,892 shares of common stock valued at $111,335 was 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. The loss represents the difference in the carrying amount of the liability and the fair value of the stock issued.

In January and February 2020, 1,350,000 common stock warrants were exercised by investors at an exercise price of $0.35 per warrant for cash totaling $472,500.

In January and February 2020, 4,147,279 common stock warrants were exercised by investors on a cashless basis into 2,375,998 shares of our common stock.

In January 2020, we entered into three consulting agreements whereby the consideration was 699,999 shares of common stock (233,333 per agreement) that vest ratably over a 24-month period. At May 31, 2020, 116,664 shares had vested, 29,165 of which were unissued. We recognized $93,333 during the period related to these shares and included in general and administrative expenses. Subsequent to February 2020, the consultants have requested that we hold the remaining shares issuable over the contract period in trust or at a time sooner during the contract period whereby the contractors can request their shares in accordance with the agreements.

During May 2020, 28,000 common stock warrants were exercised by investors on a cashless basis for 16,173 shares of our common stock.

During the third quarter, we issued 30,000 options to a consultant valued at $8,570.

We had 61,099,449 shares of our common stock outstanding as of May 31, 2020.

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Texas Mineral Resources Corp.

Notes to Interim Financial Statements

May 31, 2020

(Unaudited)

NOTE 7 – UNCERTAINTIES

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.

NOTE 8 – SUBSEQUENT EVENTS

During June 2020, warrants to purchase 4,200,000 shares of common stock were exercised by investors at an exercise price of $0.35 per warrant for cash totaling $1,470,000.

During June 2020, an option to purchase 70,000 shares of common stock was exercised by a consultant at an exercise price of $0.30 per option for cash totaling $21,000.

During June 2020, options to purchase 2,210,000 shares of common stock were exercised by certain directors on a cashless basis into 2,055,408 shares of our common stock.

During June 2020, warrants to purchase 2,574,190 shares of common stock were exercised by certain directors and officers on a cashless basis for 2,251,922 shares of our common stock.

During June 2020, warrants to purchase 2,871,314 shares of common stock were exercised by investors on a cashless basis.

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In this Quarterly Report on Form 10-Q, unless the context requires otherwise, references to “Texas Mineral Resources Corp,” “the Company,” “we,” “our” or “us” refer to Texas Mineral Resources Corp. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this quarterly report. This Quarterly Report on Form 10-Q may also contain statistical data and estimates we obtained from industry publications and reports generated by third parties. Although we believe that the publications and reports are reliable, we have not independently verified their data.

Forward-Looking Statements

This Quarterly Report on Form 10-Q and the exhibits attached hereto contain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, “forward-looking statements”). Such forward-looking statements concern our anticipated results and developments in our operations in future periods, planned exploration and development of our properties, plans related to our business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q, include, but are not limited to:

·the progress, potential and uncertainties of our 2019-2020 rare-earth exploration plans at our Round Top project in Hudspeth County, Texas (the “Round Top Project”); 

·timing for a completed feasibility study for our Round Top Project; 

·the success of getting the necessary permits for future drill programs and future project development; 

·expectations regarding our ability to raise capital and to continue our exploration plans on our properties; and 

·plans regarding anticipated expenditures at the Round Top Project; 

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation:

·risks associated with our history of losses and need for additional financing; 

·risks associated with our limited operating history; 

·risks associated with our properties all being in the exploration stage; 

·risks associated with our lack of history in producing metals from our properties; 

·risks associated with our need for additional financing to develop a producing mine, if warranted; 

·risks associated with our exploration activities not being commercially successful; 

·risks associated with increased costs affecting our financial condition; 

·risks associated with a shortage of equipment and supplies adversely affecting our ability to operate; 

·risks associated with mining and mineral exploration being inherently dangerous; 

·risks associated with mineralization estimates; 

·risks associated with changes in mineralization estimates affecting the economic viability of our properties; 

·risks associated with uninsured risks; 

·risks associated with mineral operations being subject to market forces beyond our control; 

·risks associated with fluctuations in commodity prices; 

·risks associated with permitting, licenses and approval processes; 

·risks associated with the governmental and environmental regulations; 

·risks associated with future legislation regarding the mining industry and climate change; 

·risks associated with potential environmental lawsuits; 

·risks associated with our land reclamation requirements; 

·risks associated with rare earth and beryllium mining presenting potential health risks; 

·risks related to title in our properties; 

·risks related to competition in the mining and rare earth elements industries; 

·risks related to economic conditions; 

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·risks related to our ability to manage growth; 

·risks related to the potential difficulty of attracting and retaining qualified personnel; 

·risks related to our dependence on key personnel; 

·risks related to our United States Securities and Exchange Commission (the “SEC”) filing history; and 

·risks related to our securities. 

This list is not exhaustive of the factors that may affect our forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the section heading “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report and “Item 1A. Risk Factors” in our Annual Report on Form 10-K/A for the year ended August 31, 2019, filed with the SEC on June 3, 2020. Although we have attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Except as required by law, we disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. We qualify all the forward-looking statements contained in this Quarterly Report by the foregoing cautionary statements.

Overview

We are a mining company engaged in the business of the acquisition, exploration and development of mineral properties. We currently hold two nineteen-year leases with the GLO, 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 in conjunction with our joint venture partner, USA Rare Earth, is on developing a metallurgical process to concentrate or otherwise extract the metals from the Round Top Project’s rhyolite, and to conduct additional engineering, design, geotechnical work and permitting necessary for a bankable feasibility study. We currently have limited operations and have not established that any of our projects or properties contain any Proven or Probable Reserves under Guide 7.

Rare earth elements (“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 critical in a wide range of technologies, products, and applications and are critical inputs in existing and emerging applications. Without these elements, multiple high-tech technologies would not be possible. These technologies include:

·Cell phones,  

·Computer and television screens, 

·Battery operated vehicles, 

·Clean energy technologies, such as hybrid and electric vehicles and wind power turbines,  

·Fiber optics, lasers and hard disk drives, 

·Numerous defense applications, such as guidance and control systems and global positioning systems, 

·Advanced water treatment technology for use in industrial, military and outdoor recreation applications 

Because of these applications, global demand for REE is projected to steadily increase due to continuing growth in existing applications and increased innovation and development of new end uses. Interest in developing resources domestically has become a strategic necessity as there is limited production of these elements outside of China. According to a report issued by Reuters in June 2019, China supplied approximately 80% of the rare earths imported by the United States from 2014 to 2017, and China processes at least 85% of the world’s capacity of REEs.

As discussed in the filing of our Form 10-K/A as of and for the year ended August 31, 2019, our joint venture partner, USA Rare Earth, is currently funding and engaging in the advancement of the Round Top Project in an effort to obtain a definitive banking feasibility study per its agreement. Our financial obligation is currently for the Company’s general and administrative expenses.

Since we are currently in the exploration stage with our joint venture partner, we currently do not have any producing properties and consequently, we have no current operating income or cash flow and have not generated any revenues. Further exploration will be required before a final evaluation as to the economic and practical feasibility of any of our properties is determined.

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Liquidity and Capital Resources

As of May 31, 2020, our accumulated deficit was approximately $38.4 million, and our cash position was approximately $1.4 million. We had a working capital surplus of approximately $0.39 million. We, nor our joint venture partner, have not commenced commercial production on any of our mineral properties. We have no revenues from operations and anticipate we will have no operating revenues until we place one or more of our properties into production. All properties are in the exploration stage.

Other than the financial commitment from USA Rare Earth to fund operations to earn a 70% interest in the Round Top Project, we currently do not have funds to pursue exploration or development work on the Round Top Project, which means that we will be required to raise additional capital on best efforts terms if USA Rare Earth ceases funding, or find alternative means to finance the Round Top Project’s continued exploration activities, if warranted. Subsequent to the funding of the USA Rare Earth amount, we will need to raise a significant amount of additional capital to exploit the Round Top Project. Failure to obtain required and sufficient financing may result in the (i) delay or indefinite postponement of exploration and, if warranted, development or production in the Round Top Project and/or (ii) curtailment or cessation of our operations. This includes our leases over claims covering the Round Top Project. 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 is dependent upon third parties. Failure of obtaining the required capital will result in the curtailment or cessation of our business operations.

As of May 1, 2020, we have warrants outstanding to purchase an aggregate of 4,152,732 shares of Company common stock held by investors at exercise prices between $0.35 per share and $0.50 per share, all of which expire in December 2020. Of these securities: (i) warrants to purchase an aggregate of 1,045,000 shares of Company common stock were privately placed and are exercisable for cash at $0.35 per share and there is no effective resale registration statement registering the resale of the underlying shares of common stock upon exercise of these warrants; and (ii) Class A warrants to purchase an aggregate of 1,542,507 shares of Company common stock at an exercise price of $0.35 per share and Class B warrants to purchase an aggregate of 1,565,225 shares of Company common stock at an exercise price of $0.50 per share were issued pursuant to a registration statement and as there is no effective registration statement registering the issuance of the shares of Company common stock upon exercise of the Class A warrants and Class B warrants, holders may exercise for cash if an exemption is available from the registration requirements or on a net exercise basis, with the Company having a redemption right as set forth in the indenture.

As of May 31, 2020, we had $1,393,000 of cash on hand. During June 2020, warrants to purchase 4,200,000 shares of common stock were exercised by investors at an exercise price of $0.35 per warrant for cash totaling $1,470,000.

Results of Operations

Nine months ended May 31, 2020 and May 31, 2019

General & Revenue 

Operating expenses and resulting losses from Operations.

We incurred exploration costs for the nine months ended May 31, 2020 and May 31, 2019, in the amount of approximately $75,000 and $48,000, respectively. Expenditures for the nine months ended May 31, 2020 and May 31, 2019 were primarily for lease payments to the GLO and property taxes for our Round Top project.

Our general and administrative expenses for the nine months ended May 31, 2020 and May 31, 2019, were approximately $543,000 and $490,000, respectively. For the nine months ended May 31, 2020 and May 31, 2019, this amount included approximately $98,000 and $275,000, respectively, in stock-based compensation to directors and consultants. The remaining expenditures totaling approximately $445,000 and $215,000 for the nine months ended May 31, 2020 and May 31, 2019, respectively, were primarily for compensation, professional fees and other general and administrative expenses necessary for our operations. 

We had losses from operations for the nine months ended May 31, 2020 and May 31, 2019 totaling approximately $618,000 and $539,000, respectively, and net losses for the nine months ended May 31, 2020 and May 31, 2019 totaling approximately $694,000 and $555,000, respectively. For the nine months ended May 31, 2020, we settled an outstanding payable of $45,000 for a past employee’s compensation, in exchange for 130,892 shares of our common stock valued at approximately $111,000 on the settlement date, resulting in a loss on settlement of approximately $66,000, and incurred $10,000 in interest expense on the note payable to the Foundation. For the nine months ended May 31, 2019 we recorded interest expense of approximately $16,000. 

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Three months ended May 31, 2020 and May 31, 2019

General & Revenue

We had no operating revenues during the three months ended May 31, 2020 and May 31, 2019. We are not currently profitable. As a result of ongoing operating losses, we had an accumulated deficit of approximately $38.4 million as of May 31, 2020.

Operating expenses and resulting losses from Operations.

We incurred exploration costs for the three months ended May 31, 2020 and May 31, 2019, in the amount of approximately $69,000 and $18,000, respectively, primarily for lease payments to the GLO and property taxes for our Round Top project.

Our general and administrative expenses for the three months ended May 31, 2020 and May 31, 2019, were approximately $227,000 and $85,000, respectively. For the three months ended May 31, 2020 and May 31, 2019, this amount included approximately $56,000 and $9,000, respectively, in stock-based compensation to outside consultants. The remaining expenditures totaling approximately $171,000 during the three months ended May 31, 2020 and $76,000 for the three months ended May 31, 2019 were primarily for compensation, professional fees and other general and administrative expenses necessary for our operations.

We had losses from operations for the three months ended May 31, 2020 and May 31, 2019 totaling approximately $296,000 and $103,000, respectively, and net losses for the three months ended May 31, 2020 and May 31, 2019 totaling approximately $299,000 and $108,000, respectively.

Off-Balance Sheet Arrangements

For the three and nine months ended May 31, 2020 and May 31, 2019, we have off-balance sheet arrangements for annual payments in relation to the mineral leases as disclosed in Note 3 of the unaudited interim financial statements.

Critical Accounting Estimates

Management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. Preparation of financial statements requires management to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and the related disclosures of contingencies. Management bases its estimates on various assumptions and historical experience, which are believed to be reasonable; however, due to the inherent nature of estimates, actual results may differ significantly due to changed conditions or assumptions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are fairly presented in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Management believes that the following critical accounting estimates and judgments have a significant impact on our financial statements: valuation of options granted to directors, officers and consultants using the Black-Scholes model.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

At the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision of and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) under the Exchange Act). Based on that evaluation, and in light of the material weakness existing in our internal controls over financial reporting as of August 31, 2019 (as described in greater detail in our annual report on Form 10-K/A for the year ended August 31, 2019), the CEO and CFO have concluded that as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were not effective in providing reasonable assurance that: (i) information required to be disclosed by us in our reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

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

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings 

None.

Item 1A. Risk Factors

There have been no material changes from the risk factors as previously disclosed in our Form 10-K/A for the year ended August 31, 2019 as filed with the SEC on June 3, 2020.

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.

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

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

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

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosure

Pursuant to Section 1503(a) of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (The “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the quarter ended May 31, 2020, our U.S. exploration properties were not subject to regulation by the Federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977.

Item 5. Other Information

None.

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Item 6. Exhibits

The following exhibits are attached hereto or are incorporated by reference:

(1)Filed herewith. 

(2)Submitted Electronically Herewith. Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Balance Sheets at May 31, 2020 and August 31, 2019; (ii) Statements of Operations for the nine months and three months ended May 31, 2020 and 2019; (iii) Statements of Cash Flows for the nine months ended May 31, 2020 and 2019; (iv) Statements of Shareholders’ Equity for the nine months and three months ended May 31, 2020 and 2019; and (v) Notes to Interim Financial Statements. 

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TEXAS MINERAL RESOURCES CORP.

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