x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended May 31, 2013
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TEXAS RARE EARTH RESOURCES CORP
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(Exact Name of Registrant as Specified in its Charter)
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Delaware
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87-0294969
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(State of other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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539 West El Paso Street
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Sierra Blanca, Texas
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79851
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(Address of Principal Executive Offices)
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(Zip Code)
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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Part I
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Page
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Item 1
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Financial Statements
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3
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Item 2
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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9
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Item 3
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Quantitative and Qualitative Disclosures About Market Risk
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15
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Item 4
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Controls and Procedures
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15
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Part II
|
||
Item 1
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Legal Proceedings
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16
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Item 1A.
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Risk Factors
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16
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Item 2
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Unregistered Sales of Equity Securities and Use of Proceeds
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16
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Item 3
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Defaults upon Senior Securities
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16
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Item 4
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Mine Safety Disclosures
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16
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Item 5
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Other Information
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16
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Item 6
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Exhibits
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17
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Signatures
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18
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Texas Rare Earth Resources Corp
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||||||||
BALANCE SHEETS
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||||||||
May 31, 2013
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August 31, 2012
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|||||||
(Unaudited)
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||||||||
ASSETS
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||||||||
CURRENT ASSETS
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||||||||
Cash and cash equivalents
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$ | 3,176,876 | $ | 6,517,935 | ||||
Prepaid expenses and other current assets
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80,176 | 74,149 | ||||||
Total current assets
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3,257,052 | 6,592,084 | ||||||
Property and equipment, net
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167,455 | 250,909 | ||||||
Mineral properties
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1,718,286 | 343,434 | ||||||
Deposits
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81,413 | 102,840 | ||||||
TOTAL ASSETS
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$ | 5,224,206 | $ | 7,289,267 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY
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||||||||
CURRENT LIABILITIES
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||||||||
Accounts payable and accrued liabilities
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$ | 192,117 | $ | 478,430 | ||||
Current portion of notes payable
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29,007 | - | ||||||
Total current liabilities
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221,124 | 478,430 | ||||||
Notes payable - net of current portion and discount
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290,845 | - | ||||||
Total liabilities
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511,969 | 478,430 | ||||||
COMMITMENTS AND CONTINGENCIES
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||||||||
SHAREHOLDERS' EQUITY
|
||||||||
Preferred stock, par value $0.001; 10,000,000 shares authorized, no
|
||||||||
shares issued and outstanding as of May 31, 2013 and
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||||||||
August 31, 2012, respectively
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- | - | ||||||
Common stock, par value $0.01; 100,000,000 shares authorized,
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||||||||
37,036,916 shares issued and outstanding as of
|
||||||||
May 31, 2013 and 36,550,009 issued and outstanding as of
|
||||||||
August 31, 2012, respectively
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370,370 | 365,501 | ||||||
Additional paid-in capital
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29,916,687 | 29,262,684 | ||||||
Accumulated deficit
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(25,574,820 | ) | (22,817,348 | ) | ||||
Total shareholders' equity
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4,712,237 | 6,810,837 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
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$ | 5,224,206 | $ | 7,289,267 | ||||
The accompanying notes are an integral part of these financial statements.
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TEXAS RARE EARTH RESOURCES CORP
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||||||||||||||||
UNAUDITED STATEMENTS OF OPERATIONS
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||||||||||||||||
Nine Months Ended May 31
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Three Months Ended May 31
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|||||||||||||||
2013
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2012
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2013
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2012
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|||||||||||||
OPERATING EXPENSES
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||||||||||||||||
Exploration costs
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$ | 837,049 | $ | 6,878,097 | $ | 380,487 | $ | 3,124,604 | ||||||||
General and administrative expenses
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1,924,931 | 5,104,333 | 493,620 | 1,951,843 | ||||||||||||
Total operating expenses
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2,761,980 | 11,982,430 | 874,107 | 5,076,447 | ||||||||||||
LOSS FROM OPERATIONS
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(2,761,980 | ) | (11,982,430 | ) | (874,107 | ) | (5,076,447 | ) | ||||||||
OTHER (INCOME) EXPENSE
|
||||||||||||||||
Interest and other income
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(8,699 | ) | (24,029 | ) | (7,217 | ) | (6,037 | ) | ||||||||
Interest and other expense
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4,191 | 216 | - | 82 | ||||||||||||
Total other (income) expense
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(4,508 | ) | (23,813 | ) | (7,217 | ) | (5,955 | ) | ||||||||
NET LOSS
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$ | (2,757,472 | ) | $ | (11,958,617 | ) | $ | (866,890 | ) | $ | (5,070,492 | ) | ||||
Net loss per share:
|
||||||||||||||||
Basic and diluted net loss per common share
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$ | (0.08 | ) | $ | (0.33 | ) | $ | (0.02 | ) | $ | (0.13 | ) | ||||
Weighted average common shares outstanding:
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||||||||||||||||
Basic and diluted
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36,546,294 | 35,745,570 | 36,967,536 | 36,550,009 | ||||||||||||
The accompanying notes are an integral part of these financial statements.
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||||||||||||||||
TEXAS RARE EARTH RESOURCES CORP
|
||||||||
UNAUDITED STATEMENTS OF CASH FLOWS
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||||||||
Nine Months Ended May 31
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||||||||
2013
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2012
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
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||||||||
Net loss
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$ | (2,757,472 | ) | $ | (11,958,617 | ) | ||
Adjustment to reconcile net loss to net cash
|
||||||||
used in operating activities:
|
||||||||
Depreciation expense
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59,742 | 63,765 | ||||||
Loss on disposition of fixed assets
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21,003 | - | ||||||
Stock-based compensation
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291,564 | 2,808,921 | ||||||
Changes in operating assets and liabilities:
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||||||||
Prepaid expenses and other assets
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15,399 | (88,890 | ) | |||||
Accounts payable and accrued expenses
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(286,312 | ) | 813,318 | |||||
Net cash used in operating activities
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(2,656,076 | ) | (8,361,503 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES
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||||||||
Investment in mineral properties
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(510,000 | ) | (197,578 | ) | ||||
Purchase of fixed assets
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(696 | ) | (158,226 | ) | ||||
Proceeds from sale of fixed assets
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3,405 | - | ||||||
Net cash used in investing activities
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(507,291 | ) | (355,804 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES
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||||||||
Proceeds from exercise of common stock warrants
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- | 1,103,124 | ||||||
Payment on note payable
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(45,000 | ) | - | |||||
Purchase of common stock
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(132,692 | ) | - | |||||
Net cash provided by financing activities
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(177,692 | ) | 1,103,124 | |||||
NET CHANGE IN CASH AND CASH EQUIVALENTS
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(3,341,059 | ) | (7,614,183 | ) | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
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6,517,935 | 16,886,066 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD
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$ | 3,176,876 | $ | 9,271,883 | ||||
SUPPLEMENTAL INFORMATION
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||||||||
Interest paid
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$ | 137 | $ | 217 | ||||
Taxes paid
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$ | - | $ | - | ||||
Issuance of common stock for lease assignment
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$ | 500,000 | $ | - | ||||
Note payable for lease assignment
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$ | 364,852 | $ | - | ||||
The accompanying notes are an integral part of these financial statements.
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||||||||
Per Acre Amount
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Total Amount
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|||||||
September 2, 2013 – 2014
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$
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50
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$
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44,718
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||||
September 2, 2015 – 2019
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$
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75
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$
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67,077
|
||||
September 2, 2020 – 2024
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$
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150
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$
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134,155
|
||||
September 2, 2025 – 2029
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$
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200
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$
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178,873
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Per Acre Amount
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Total Amount
|
|||||||
November 1, 2013 – 2014
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$
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50
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$
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4,500
|
||||
November 1, 2015 – 2019
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$
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75
|
$
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6,750
|
||||
November 1, 2020 – 2024
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$
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150
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$
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13,500
|
||||
November 1, 2025 – 2029
|
$
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200
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$
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18,000
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Future maturities
|
||
Year
|
Principle amount due
|
|
2014
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$29,007
|
|
2015
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$30,458
|
|
2016
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$31,981
|
|
2017
|
$33,580
|
|
2018
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$35,259
|
|
2019 thereafter
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$159,567
|
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Total
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$319,852
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·
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the progress, potential and uncertainties of our 2012-2013 rare-earth exploration plans at our Round Top project in Hudspeth County, Texas (the “Round Top Project”);
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·
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the success of getting the necessary permits for future drill programs and future project development;
|
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·
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expectations regarding our ability to raise capital and to continue our exploration plans on our properties;
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·
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plans regarding anticipated expenditures at the Round Top Project; and
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·
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plans outlined under the section heading “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Plan of Operation”.
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·
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risks associated with our history of losses and need for additional financing;
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·
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risks associated with our limited operating history;
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·
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risks associated with our properties all being in the exploration stage;
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·
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risks associated with our lack of history in producing metals from our properties;
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·
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risks associated with a shortage of equipment and supplies;
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·
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risks associated with our need for additional financing to develop a producing mine, if warranted;
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·
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risks associated with our exploration activities not being commercially successful;
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·
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risks associated with the ownership of surface rights at our Round Top Project;
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·
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risks associated with increased costs affecting our financial condition;
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·
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risks associated with a shortage of equipment and supplies adversely affecting our ability to operate;
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·
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risks associated with mining and mineral exploration being inherently dangerous;
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·
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risks associated with mineralization estimates;
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·
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risks associated with changes in mineralization estimates affecting the economic viability of our properties;
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·
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risks associated with uninsured risks;
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·
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risks associated with mineral operations being subject to market forces beyond our control;
|
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·
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risks associated with fluctuations in commodity prices;
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|
·
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risks associated with permitting, licenses and approval processes;
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|
·
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risks associated with the governmental and environmental regulations;
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|
·
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risks associated with future legislation regarding the mining industry and climate change;
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·
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risks associated with potential environmental lawsuits;
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·
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risks associated with our land reclamation requirements;
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·
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risks associated with rare earth and beryllium mining presenting potential health risks;
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·
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risks related to title in our properties;
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·
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risks related to competition in the mining and rare earth elements industries;
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·
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risks related to economic conditions;
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·
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risks related to our ability to manage growth;
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·
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risks related to the potential difficulty of attracting and retaining qualified personnel;
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·
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risks related to our dependence on key personnel;
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|
·
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risks related to our Securities and Exchange Commission (“SEC”) filing history;
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|
·
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risks and uncertainties related to our self-reporting with the SEC;
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·
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risks related to our securities.
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1.
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For any transactions in which the net aggregate consideration received by us is equal to or greater than $100 million, the representative shall receive (a) one million options, issued at closing and exercisable for one year, to purchase shares of common stock of the Corporation at $1.00 per share and (b) a cash fee equal to 2% of the net aggregate consideration received by us.
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2.
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For any transactions in which the net aggregate consideration received by us is equal to or greater than $200 million, the representative shall receive (a) two million options, issued at closing and exercisable for one year, to purchase shares of common stock of the Corporation at $1.00 per share and (b) a cash fee equal to 2% of the net aggregate consideration received by us.
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3.
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For any transactions in which the net aggregate consideration received by us is less than $100 million, the representative shall receive (a) 500,000 options, issued at closing and exercisable for one year, to purchase shares of common stock of the Corporation at $1.00 per share and (b) a cash fee equal to 2% of the net aggregate consideration received by us.
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Exhibit Number
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Description
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10.1
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Lease Assignment Agreement, dated March 6, 2013, incorporated by reference to Exhibit 10.1 of our Form 8-K filed with the SEC on March 12, 2013
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10.2
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Consulting Agreement with G.W. “Mike” McDonald dated May 1, 2013, incorporated by reference to Exhibit 10.3 of our Form 8-K filed with the SEC on June 10, 2013.
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31.1(1)
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Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)
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31.2(1)
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Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)
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32.1(1)
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Certification of Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350, adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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32.2(1)
|
Certification of Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350, adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101.INS(1) (2)
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XBRL Instance Document
|
101.SCH(1) (2)
|
XBRL Taxonomy Extension — Schema
|
101.CAL(1) (2)
|
XBRL Taxonomy Extension — Calculations
|
101.DEF(1) (2)
|
XBRL Taxonomy Extension — Definitions
|
101.LAB(1) (2)
|
XBRL Taxonomy Extension — Labels
|
101.PRE(1) (2)
|
XBRL Taxonomy Extension — Presentations
|
(1)
|
Submitted Electronically Herewith.
|
(2)
|
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Texas Rare Earth Resources Corp.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Texas Rare Earth Resources Corp.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
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NOTE PAYABLE (Details) (USD $)
|
May 31, 2013
|
---|---|
Debt Disclosure [Abstract] | |
2014 | $ 29,007 |
2015 | 30,458 |
2016 | 31,981 |
2017 | 33,580 |
2018 | 35,259 |
2019 thereafter | 159,567 |
Total | $ 319,852 |
STATEMENTS OF OPERATIONS (Unaudited) (USD $)
|
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
May 31, 2013
|
May 31, 2012
|
May 31, 2013
|
May 31, 2012
|
|
OPERATING EXPENSES | ||||
Exploration costs | $ 380,487 | $ 3,124,604 | $ 837,049 | $ 6,878,097 |
General and administrative expenses | 493,620 | 1,951,843 | 1,924,931 | 5,104,333 |
Total operating expenses | 874,107 | 5,076,447 | 2,761,980 | 11,982,430 |
LOSS FROM OPERATIONS | (874,107) | (5,076,447) | (2,761,980) | (11,982,430) |
OTHER (INCOME) EXPENSE | ||||
Interest and other income | (7,217) | (6,037) | (8,699) | (24,029) |
Interest and other expense | 82 | 4,191 | 216 | |
Total other (income) expense | (7,217) | (5,955) | (4,508) | (23,813) |
NET LOSS | $ (866,890) | $ (5,070,492) | $ (2,757,472) | $ (11,958,617) |
Net loss per share: | ||||
Basic and diluted net loss per common share | $ (0.02) | $ (0.13) | $ (0.08) | $ (0.33) |
Weighted average common shares outstanding: | ||||
Basic and diluted | 36,967,536 | 36,550,009 | 36,546,294 | 35,745,570 |
SUBSEQUENT EVENTS
|
9 Months Ended |
---|---|
May 31, 2013
|
|
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 5 – SUBSEQUENT EVENTS
On June 17, 2013, the Board of Directors approved and granted options to Mr. Marchese, Mr. Pingitore and Mr. Wolfe for their service to the Board. Each of these three members are to receive 250,000 options exercisable at $0.50 per share for a period of five years, vesting 1/36 at the end of each month of service as a director of the corporation and 225,000 options exercisable at $1.00 per share for a period of five years, vesting 1/36 at the end of each month of service as a director of the corporation.
On June 17, 2013, the Board of Directors approved and granted a total of 300,000 options to consultants. The options are exercisable at $0.40 per share for a period of five years. All options vest 1/12 at the end of each month of consulting services.
On June 5, 2013, we entered into a consulting agreement, effective May 1, 2013 (the “Consulting Agreement”), with G.W. “Mike” McDonald, our Chief Financial Officer. The Consulting Agreement provides for a monthly retainer in the amount of $2,000 (the “Retainer”). In addition to the Retainer, we agreed to reimburse Mr. McDonald for reasonable expenses incurred by Mr. McDonald in performance of his duties under the Consulting Agreement. The Consulting Agreement is for an initial term of one year but may be extended by written agreement of us and Mr. McDonald.
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SHAREHOLDERS' EQUITY (Details Narrative) (USD $)
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0 Months Ended | 9 Months Ended | 0 Months Ended | |||||||||
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Dec. 27, 2012
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May 31, 2013
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May 31, 2012
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Aug. 31, 2012
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Dec. 19, 2012
Stock Options
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Dec. 19, 2012
Stock Options
Lower Range
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Dec. 19, 2012
Stock Options
Upper Range
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Dec. 19, 2012
Cecil Wall, Director
Stock Options
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Dec. 19, 2012
Anthony Marchese, Director and Chairman
Stock Options
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Dec. 19, 2012
Anthony Marchese, Director and Chairman
Stock Options - 2nd Tranche
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Dec. 19, 2012
Anthony Marchese, Director and Chairman
Stock Options - 3rd Tranche
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Dec. 19, 2012
Anthony Marchese, Director and Chairman
Stock Options - 4th Tranche
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Preferred stock, par value | $ 0.001 | $ 0.001 | ||||||||||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | ||||||||||
Common stock, par value | $ 0.01 | $ 0.01 | ||||||||||
Common stock, shares authorized | 100,000,000 | 100,000,000 | ||||||||||
Stock based compensation | $ 291,564 | $ 2,808,921 | ||||||||||
Stock Options outstanding | 560,000 | 90,000 | 45,000 | 175,000 | 150,000 | 100,000 | ||||||
Exercise Price | $ 1.00 | $ 4.70 | $ 2.60 | $ 4.15 | $ 2.50 | $ 1.51 | ||||||
Stock options expected term | 5 years | 5 years | 5 years | 5 years | 10 years | |||||||
Fair Value estimation method | Black-Scholes | |||||||||||
Risk-free interest rate | 1.10% | |||||||||||
Dividend yield | 0.00% | |||||||||||
Expected volatility | 324.00% | |||||||||||
Expected term | 3 years 6 months | 10 years | ||||||||||
Shares repurchased | 576,923 | |||||||||||
Percentage of outstanding stock repurchased | 1.58% | |||||||||||
Price per share repurchased | $ 0.23 | |||||||||||
Aggregate purchase amount of shares | $ 132,692 | |||||||||||
Common stock, shares outstanding | 35,973,086 | 37,036,916 | 36,550,009 |
BASIS OF PRESENTATION
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9 Months Ended |
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May 31, 2013
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Basis Of Presentation | |
Basis of Presentation |
NOTE 1 – BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Texas Rare Earth Resources Corp. (“we”, “us”, “our”, the “Corporation”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in our annual report on Form 10-K, for the year ended August 31, 2012, dated November 15, 2012 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, 2012 as reported in our annual report on Form 10-K, have been omitted.
Treasury Stock
We account for treasury stock acquisitions using the cost method. Under this method, for reissuance of treasury stock, to the extent that the reissuance price was more than cost, the excess is recorded as an increase to paid-in capital. If the reissuance price is less than cost, the difference is recorded to paid-in capital to the extent there is a cumulative treasury stock paid-in capital balance. Once the cumulative balance is reduced to zero, any remaining difference resulting from the sale of treasury stock below cost is recorded to retained earnings. When we purchase treasury stock and subsequently retire and cancel the shares, the transaction is recorded against common stock for the par value of the shares canceled with the remaining balance recorded against paid-in capital. |
NOTE PAYABLE
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9 Months Ended | |||||||||||||||||||||||||||
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May 31, 2013
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||
Note Payable | NOTE
3 – NOTE PAYABLE
In relation to the Foundation lease discussed in Note 2 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. At May 31, 2013 the current portion due is $29,007 and long-term portion due is $290,845. The total note payable due at May 31, 2013 is $319,852. The Company has also accrued interest expense of $4,000 as of period end which is included in accrued liabilities.
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BASIS OF PRESENTATION (Policies)
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9 Months Ended |
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May 31, 2013
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Basis Of Presentation Policies | |
Basis of Presentation |
The accompanying unaudited interim financial statements of Texas Rare Earth Resources Corp. (“we”, “us”, “our”, the “Corporation”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in our annual report on Form 10-K, for the year ended August 31, 2012, dated November 15, 2012 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, 2012 as reported in our annual report on Form 10-K, have been omitted. |
Treasury Stock | Treasury Stock
We account for treasury stock acquisitions using the cost method. Under this method, for reissuance of treasury stock, to the extent that the reissuance price was more than cost, the excess is recorded as an increase to paid-in capital. If the reissuance price is less than cost, the difference is recorded to paid-in capital to the extent there is a cumulative treasury stock paid-in capital balance. Once the cumulative balance is reduced to zero, any remaining difference resulting from the sale of treasury stock below cost is recorded to retained earnings. When we purchase treasury stock and subsequently retire and cancel the shares, the transaction is recorded against common stock for the par value of the shares canceled with the remaining balance recorded against paid-in capital. |
SHAREHOLDERS' EQUITY
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9 Months Ended |
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May 31, 2013
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Shareholders Equity | |
SHAREHOLDERS' EQUITY | NOTE 4 – 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.
During the nine months ended May 31, 2013, we expensed approximately $292,000 for stock based compensation to one director and one former executive officer for stock options previously issued.
On December 12, 2012, our Board authorized, on recommendation of the Compensation Committee, that all of our issued and outstanding stock options issued to our directors be exercisable on a cashless basis by permitting the Corporation to withhold shares of common stock with a fair market value equal to the exercise price as determined on the date of exercise.
On December 19, 2012, our Board re-priced Mr. Cecil Wall’s five year options to purchase up to 90,000 shares at a price of $4.70 such that all such options are now exercisable at a price of $1.00 per share. The other terms and conditions of these options remain the same. On December 19, 2012, our Board also re-priced Mr. Anthony Marchese’s five year options to purchase up to 45,000 shares of common stock at an exercise price of $2.60, five year option to purchase up to 175,000 shares of common stock at an exercise price of $4.15, five year option to purchase up to 150,000 shares of common stock at an exercise price of $2.50 per share, and ten year option to purchase up to 100,000 shares of common stock at an exercise price of $1.51 per share, such that all such options are now exercisable at a price of $1.00 per share. The other terms and conditions of these options remain the same. With respect to the options held by Mr. Wall and Mr. Marchese, the Black-Scholes pricing model was used to estimate the fair value of the 560,000 options issued during the period to these directors, using the assumptions of a risk free interest rate of 1.1%, dividend yield of 0%, volatility of 324%, and an expected life ranging from 3.5 to 10 years. We have determined that the expense associated with the repricing of these options to be immaterial.
On December 27, 2012, we repurchased 576,923 shares of our common stock from a private investor, representing approximately 1.58% of our issued and outstanding shares of common stock, at a price of $0.23 per share for an aggregate purchase amount of $132,692. Following the repurchase, we canceled the entire amount of shares from treasury, resulting in the Corporation having 35,973,086 shares of common stock issued and outstanding. The repurchase was made pursuant to a privately negotiated stock repurchase agreement. The per share repurchase price for the shares repurchased was determined through arms-length negotiations with the private investor. The stock repurchase agreement and the related transactions were approved by our Board. The repurchase price was paid through cash on hand from our available surplus. Other than this private transaction as described in this report, our Board has not authorized any stock repurchase program or plan, and we have no current plans to effect any open-market purchases of our common stock or other repurchases of our common stock.
On March 6, 2013, we entered into a lease assignment (the “Lease Assignment Agreement”) with Southwest Range & Wildlife Foundation, Inc., a Texas non-profit corporation (the “Foundation”), pursuant to which the Foundation agreed to assign to us a surface lease identified with the State of Texas as Surface Lease SL20040002 (the “West Lease”), which covers 54,990.11 acres in Hudspeth County, Texas. In exchange for the West Lease, we agreed to: (i) pay the Foundation $500,000 in cash; (ii) issue 1,063,830 of our common shares, par value $0.01 (the “Common Shares”); and (iii) make ten (10) payments to the Foundation of $45,000 each, with the first such payment due on or before June 1, 2013, and the nine (9) subsequent payments due on or before June 1 of each of the following years, such payments to be used by the Foundation to support conservation efforts within the Rio Grande Basin. The common shares were valued at $500,000 based on the market price on March 6, 2013. The Lease Assignment Agreement contains standard representations, warranties and covenants. The closing of the transaction contemplated by the Lease Assignment Agreement was completed on March 8, 2013. Future payments due on the lease assignment have been recorded as a note payable with an imputed interest rate of 5%. |