10-K: TMRC Faces Dilution, Going Concern Doubt Amid Rare Earths Quest

Texas Mineral Resources Corp. reports a significant net loss and accumulated deficit, raising substantial doubt about its ability to continue as a going concern, while its ownership in the key Round Top Project continues to be diluted.

Summary

• Texas Mineral Resources Corp. (TMRC) reported a net loss of approximately $1,933,253 for the fiscal year ended August 31, 2025, an increase from $833,009 in the prior year.
• The company has an accumulated deficit of approximately $45,110,284 as of August 31, 2025.
• TMRC's cash position was approximately $590,350 and working capital surplus was $506,000 as of August 31, 2025.
• There is substantial doubt about the company's ability to continue as a going concern for the next twelve months due to insufficient capital to fund operations and future cash calls.
• TMRC's membership interest in Round Top Mountain Development, LLC (RTMD) was diluted from 20% to 18.715% due to the company's election not to fund its portion of cash calls, including $631,042 in FY2025 and subsequent calls.
• The company expects further dilution of its Round Top membership interest in the current fiscal year (ending August 31, 2026) as it lacks sufficient capital to fund cash calls.
• Current cash is only sufficient to fund estimated general and administrative expenses and related costs through August 2026.
• The Round Top Project, TMRC's primary asset, remains in the exploration stage and has not established any probable or proven mineral reserves under SEC Item 1300 reporting standards.
• Progress at Round Top includes favorable breaker trials, CIX separation trials for rare earth elements, and membrane concentration trials.
• TMRC is pursuing a potential joint venture for the Alhambra silver project in New Mexico, having completed 20 diamond drill holes aggregating 2,751 feet, with planning for the next exploration phase ongoing.
• A non-binding letter of intent is in place for the Steeple Rock Project, involving four mines and a flotation mill, but a definitive agreement and capital procurement are pending.
• The company acquired the Carlisle mine and related real estate from its CEO, Dan Gorski, for a $75,000 promissory note due December 2025.
• In February 2025, TMRC raised $1,098,000 through unsecured promissory notes with detachable warrants, which were converted into 3,660,000 common shares by August 2025.
• Subsequent to August 31, 2025, warrant exercises generated $630,000 in cash from the purchase of 2,100,000 shares of common stock.
• Management identified material weaknesses in internal control over financial reporting, specifically insufficient personnel with technical accounting knowledge and a lack of segregation of duties.

Sentiment

Score: 2

Explanation: The sentiment is highly negative due to the company's explicit 'going concern' doubt, significant and increasing net losses, substantial accumulated deficit, and continuous dilution of its primary asset (Round Top Project) due to lack of funding. While there are some operational milestones in exploration, the severe financial distress and uncertainty about future capital raise overshadow any positive developments.

Positives

• Round Top Project achieved several milestones, including favorable breaker trials, CIX separation trials for rare earth elements, and favorable membrane concentration trials, indicating progress in metallurgical processing.
• The company successfully converted $1,098,000 in unsecured promissory notes into common stock, extinguishing the debt.
• Post-fiscal year end, warrant exercises generated $630,000 in cash, improving short-term liquidity.
• A Minimum Impact Exploration Permit was issued for the potential Alhambra silver project in New Mexico, allowing for drilling activities.
• The acquisition of the Carlisle mine and related real estate from the CEO adds another mineral property to the company's portfolio.

Negatives

• The company reported a significant net loss of $1,933,253 for FY2025 and an accumulated deficit of $45,110,284, indicating ongoing unprofitability.
• There is substantial doubt about the company's ability to continue as a going concern due to insufficient capital to meet future obligations.
• TMRC's cash position is only sufficient to fund general and administrative expenses through August 2026, with no capital for Round Top cash calls.
• The company's membership interest in the core Round Top Project has been diluted to 18.715% and is expected to be further diluted due to non-funding of cash calls.
• The Round Top Project remains in the exploration stage with no established proven or probable mineral reserves, meaning no current revenue generation from this asset.
• Material weaknesses in internal control over financial reporting were identified, including insufficient technical accounting personnel and lack of segregation of duties.
• The market for the company's common stock is limited, sporadic, and highly volatile, with a wide 52-week price range ($0.21 to $1.80) and a closing price of $0.90 as of November 25, 2025.
• Future capital raises, which are necessary, are likely to result in significant dilution to existing stockholders.

Risks

• Failure to fund cash calls for the Round Top Project will result in significant dilution of the company's membership interest, potentially reducing it to a 3% minimum.
• If the company's ownership interest in Round Top falls below 15%, certain major decisions requiring unanimous management committee approval will no longer apply, reducing TMRC's control.
• There is a risk of being classified as an investment company under the Investment Company Act of 1940, which would severely limit business operations and incur significant compliance costs.
• The company's financial statements are prepared assuming it will continue as a going concern, but a history of losses and immediate need for additional financing raise substantial doubt about this ability.
• The Round Top Project is in the exploration stage, with no assurance of establishing commercially exploitable mineral reserves or achieving commercial production, which could lead to business failure.
• There is no history of producing metals from the Round Top Project, and advancing it to production requires significant capital, time, and successful feasibility studies.
• Additional capital is required to maintain the current membership interest in Round Top and fund development costs; failure to raise this capital will lead to further dilution and potential loss of value.
• Exploration activities for all projects (Round Top, Alhambra, Steeple Rock) may not be commercially successful, leading to a loss on investment.
• Increased operating costs due to factors like changing ore grade, metallurgy, and commodity prices (fuel, rubber, electricity) could negatively impact financial condition.
• Macroeconomic conditions, including inflation, high interest rates, tariffs, and global political turbulence, could adversely affect business, financial condition, or results of operations.
• There is no assurance that the company will enter into a definitive agreement for the Alhambra project or that it will be economically feasible or commercially successful.
• The non-binding letter of intent for the Steeple Rock project may not result in a definitive agreement or a materialized mining venture.
• Licensing and permitting of mining operations in New Mexico are difficult and could significantly delay and increase the cost of securing required permits for the Alhambra project.
• Shortages of equipment and supplies could adversely affect the ability to operate the business.
• Mining and mineral exploration are inherently dangerous and subject to various hazards (environmental, power outages, personal injury, etc.) that could result in damage, delays, increased costs, and legal liability, with potentially insufficient insurance coverage.
• Mineralization figures are estimates based on interpretation and assumptions, which may prove unreliable and yield less mineral production than estimated.
• Round Top operations may contain significant uninsured risks that could negatively impact future profitability.
• Mineral operations are subject to market forces beyond control, including fluctuations in demand and prices for rare earth minerals and products, which could significantly affect revenues.
• Obtaining and maintaining required permits and licenses for the Round Top Project is subject to conditions that may be difficult to achieve, potentially delaying or terminating operations.
• Round Top is subject to significant governmental and environmental regulations, with potential for increased costs, liabilities, and operational delays or termination due to non-compliance or stricter standards.
• Potential environmental lawsuits from neighboring landowners or third parties could lead to significant liability and adversely affect business prospects.
• Land reclamation requirements for the Round Top Project may be burdensome and expensive, diverting financial resources.
• Mining presents potential health risks, and liabilities arising from these risks could materially impact Round Top, as no insurance is currently maintained against them.
• Challenges to the title of the Round Top Project or any other acquired mineral properties could have a material adverse effect.
• Increased competition in the mining industry, particularly from larger, better-capitalized companies, could adversely affect the ability to attract capital or acquire suitable properties.
• Cybersecurity threats, breaches, and disruptions could adversely affect the company, as specific processes for managing these risks have not been established.
• The company's resources may be insufficient to manage its existing business and any future growth, potentially leading to ineffective management and adverse financial conditions.
• Difficulty attracting and retaining qualified management and key personnel (such as Daniel Gorski) could be detrimental to the business, especially given the lack of non-competition agreements.
• The company's stock price is highly volatile, and the market for its common stock is limited, sporadic, and may not be sustained, making it difficult for investors to sell shares.
• The sale of substantial shares of common stock or the exercise of common stock equivalents will cause immediate and substantial dilution to existing stockholders and may depress the market price.
• A low market price (below $5.00 per share) subjects the common stock to 'penny stock' rules, discouraging broker-dealers and limiting market potential.
• The company does not currently intend to pay cash dividends, meaning investors will only see a return through stock appreciation.
• Control by current stockholders could discourage acquisition attempts and depress the stock price.
• The Board is empowered to issue preferred stock with rights that could adversely affect common stockholders' voting power or other rights.

Future Outlook

The company anticipates continued dilution of its membership interest in the Round Top Project during the current fiscal year due to insufficient capital to fund cash calls. It estimates that current cash is only sufficient to cover general and administrative expenses through August 2026, necessitating additional capital raises for future operations and project funding. The Round Top Project is expected to require additional time and expenditure to complete a bankable feasibility study, with no assurance of commercial production. The company also faces uncertainty regarding definitive agreements and financing for the potential Alhambra and Steeple Rock projects.

Management Comments

• "We currently expect to incur continued dilution to our membership interest in Round Top rather than to fund our cash call obligations during the fiscal year ending August 31, 2026."
• "We estimate that our current cash position is only sufficient to fund estimated general and administrative expenses and related costs through August 2026."
• "The Company likely will decide to incur dilution to its then current membership interest in lieu of funding in cash its Round Top Budget obligations during this fiscal year, as it currently does not have sufficient capital to fund any cash calls during this current fiscal year."
• "We will be required to raise additional capital to fund future cash calls from Round Top (unless we elect in lieu of making cash contributions to dilute our membership interest percentage, which dilution could be significant), and there can be no assurance that we will be able to raise the necessary capital to fund future Round Top cash calls (or to fund estimated general and administrative expenses subsequent to August 2026)."

Industry Context

Global demand for rare earth elements (REE) is projected to steadily increase due to growth in existing applications and development of new end uses, making domestic resource development a strategic necessity given limited production outside of China. The mining industry is highly competitive, with TMRC operating at a significant disadvantage against larger, better-capitalized competitors who dominate REE production, particularly China. This competitive landscape, coupled with potential price reductions and supply chain control by dominant players, poses a challenge for TMRC's ability to attract capital and compete effectively.

Comparison to Industry Standards

• NA

Corporate Governance

Related Party Transactions

• In December 2024, CEO Daniel Gorski assigned his ownership interest in the Carlisle mine and related real estate to a wholly-owned subsidiary of the company in consideration for a $75,000 promissory note, without interest, due December 2025.
• Four directors (Mr. Marchese, Mr. Wall, Mr. Gorski, Mr. Malhotra) participated in the February 2025 debt financing, receiving notes totaling $203,000 and warrants for 2,030,000 shares of common stock.
• Adult family members of Mr. Marchese also participated in the February 2025 debt financing, receiving notes totaling $225,000 and warrants for 2,250,000 shares of common stock.
• An adult son-in-law of Mr. Wall participated in the February 2025 debt financing, receiving a note for $50,000 and warrants for 500,000 shares of common stock.
• During the fiscal year ended August 31, 2025, the company engaged a family member of a board member for consulting services, incurring and paying $1,500.

Stakeholder Impact

• Shareholders face significant risk of further dilution of their equity ownership due to the company's ongoing need for capital and its election to dilute its interest in the Round Top Project instead of funding cash calls.
• Shareholders are exposed to high volatility and limited liquidity in the market for the company's common stock, with no expectation of cash dividends.
• Employees, particularly key personnel, are critical to the company's operations, and their loss could be detrimental, especially given the lack of non-competition agreements.
• Creditors face increased risk due to the company's 'going concern' doubt and history of losses, which could impact its ability to meet financial obligations.
• The company's ability to attract and retain qualified personnel and management may be impacted by its financial condition and limited resources.

Next Steps

• USA Rare Earth, LLC (USARE) will continue process design work for the Round Top Project, with plans to relocate or replicate the pilot plant at USARE's Oklahoma facility.
• Further exploration for the Santa Fe Gold Corporation/Alhambra silver project will be guided by analysis of the drill core from the recently completed diamond drilling campaign.
• The company needs to complete legal, regulatory, business, and financial diligence and procure necessary capital to proceed with the potential Steeple Rock mining venture.
• TMRC will be required to raise additional capital to fund future cash calls from Round Top (unless it elects to incur dilution) and to cover general and administrative expenses subsequent to August 2026.
• Management plans to increase personnel resources and technical accounting expertise within the accounting function to remedy identified material weaknesses in internal control over financial reporting.

Key Dates

Recommendation

The company faces severe financial distress, explicitly stating 'substantial doubt' about its ability to continue as a going concern. It has a history of significant and increasing net losses, a large accumulated deficit, and critically, insufficient cash to fund its core Round Top Project beyond general administrative expenses for the next year. This has led to continuous dilution of its ownership in the project, which is still in the exploration stage with no proven reserves. The identified material weaknesses in internal controls further compound the risk. While there are some operational milestones, the fundamental financial instability and the high likelihood of further shareholder dilution make this a high-risk investment with a strong negative outlook.

Keywords

Rare earth elements, REE, Mining, Exploration, Texas, Round Top Project, Hudspeth County, Mineral resources, USA Rare Earth, Silver, New Mexico, Alhambra Project, Steeple Rock Project, Critical minerals, TMRC