Texas Mineral Resources Corp. - FORM 10-Q/A

Attached files

file	filename
EX-32.1 - Texas Mineral Resources Corp.	ex32-1.htm
EX-31.2 - Texas Mineral Resources Corp.	ex31-2.htm
EX-32.2 - Texas Mineral Resources Corp.	ex32-2.htm
EX-31.1 - Texas Mineral Resources Corp.	ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment #2)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2010

[ ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 0-53482

Texas Rare Earth Resources Corp.

(Exact name of registrant as specified in its charter)

Nevada, United States

87-0294969

(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)

304 Inverness Way South, Suite 365, Englewood, Colorado 80112

(Address of principal executive offices)

(303) 597-8737

(Issuer’s telephone number)

3 Riverway, Suite 1800, Houston, Texas 77056

(Former Address of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).

Large accelerated filer[ ]	Accelerated filer[ ]
Non-accelerated filer[ ]	Smaller reporting company[X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of June 20, 2011, the registrant had 34,455,009 shares of common stock, par value $0.01per share, outstanding.

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Explanatory Note

On November 1, 2010, the Company entered into a 24 month institutional public relations retainer agreement with Sunrise Securities Corp (“Sunrise”) for variously described services over a two year period as described in Note 4 to the Financial Statements. Pursuant to the agreement, the Company issued Sunrise five-year options to purchase 250,000 shares at $1.60 per share and 250,000 shares at $5.00 per share, the fair value of which on the measurement date was determined by management to be $960,000, The Company has measured the options issued to Sunrise in accordance with ASC 505-50-30-14 & 15. The Company has determined the measurement date of these options to be at the beginning of the agreement. The Company is filing amendment #2 to this Form 10-Q to reflect that the issuance of these options should be recognized as an immediate expense during the three months ended November 30, 2010 consistent with ASC 505-50-25.

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Table of Contents


Part I		Page

Item 1	Financial Statements (Restated)	4
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4	Controls and Procedures	19

Part II

Item 1	Legal Proceedings	20
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3	Defaults upon Senior Securities	21
Item 4	(Removed and Reserved)	21
Item 5	Other Information	21
Item 6	Exhibits	22

Signatures		23

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TEXAS RARE EARTH RESOURCES CORP
(Formerly Standard Silver Corporation)
BALANCE SHEETS

	November 30, 2010			August 31, 2010
	(Unaudited) (Restated)
ASSETS

CURRENT ASSETS
Cash & cash equivalents	$	737,999		$	74,434
Total current assets		737,999			74,434

Property, plant and equipment, net		25,326			26,559
Mineral properties		55,075			44,539

TOTAL ASSETS	$	818,400		$	145,532

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	11,057		$	20,624
Notes and interest payable to related parties		91,846			90,448
Total current liabilities		102,903			111,072

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preferred stock, par value $0.001; 10,000,000 shares authorized, no
shares issued and outstanding as of November 30, 2010 and
August 31, 2010		-			-
Common stock, par value $0.01; 100,000,000 shares authorized
25,176,260 and 23,670,260 issued and outstanding as of
November 30, 2010 and August 31, 2010, respectively		251,763			236,703
Additional paid-in capital		2,956,056			1,220,391
Accumulated deficit		(2,492,322	)		(1,422,634	)
Total shareholders' equity		715,497			34,460

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	818,400		$	145,532

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

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TEXAS RARE EARTH RESOURCES CORP
(Formerly Standard Silver Corporation)
UNAUDITED STATEMENTS OF OPERATIONS

	Three Months ended November 30,
	2010			2009
	(Restated)
OPERATING EXPENSES
Exploration costs	$	38,600		$	12,000
General & administrative expenses		1,031,130			47,052

Total operating expenses		1,069,730			59,052

LOSS FROM OPERATIONS		(1,069,730	)		(59,052	)

OTHER (INCOME) EXPENSE
Interest and other income		(777	)		(35	)
Interest expense		735			4,838

Total other (income) expense		(42	)		4,803

NET LOSS	$	(1,069,688	)	$	(63,855	)

Net loss per share:
Basic and diluted net loss per share	$	(0.04	)	$	(0.00	)

Weighted average shares outstanding:
Basic and diluted		24,192,403			23,061,908

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

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TEXAS RARE EARTH RESOURCES CORP
(Formerly Standard Silver Corporation)
UNAUDITED STATEMENTS OF CASH FLOWS

	Three Months Ended November 30,
	2010			2009
	(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,069,688	)	$	(63,855	)
Adjustment to reconcile net loss to net cash
used in operating activities:
Stock issued for services		969,600			13,500
Depreciation expense		1,233			246
Increase in liabilities:
Accounts payable and accrued expenses		(8,169	)		(2,776	)
Net cash used in operating activities		(107,024	)		(52,885	)

CASH FLOWS FROM INVESTING ACTIVITIES
Investment in mineral properties		(10,536	)		(2,418	)
Purchase of fixed assets		-			(22,329	)
Net cash used in investing activities		(10,536	)		(24,747	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock		453,000			275,000
Proceeds from exercise of common stock warrants		328,125			-
Net cash provided by financing activities		781,125			275,000
NET CHANGE IN CASH		663,565			197,368
CASH, BEGINNING OF PERIOD		74,434			-
CASH, END OF PERIOD	$	737,999		$	197,368


SUPPLEMENTAL INFORMATION
Interest paid	$	662		$	-
Taxes paid	$	-		$	-
Issuance of 75,000 shares of common stock for cash previously received	$	750		$	-
Issuance of 61,000 shares of common stock for services previously recorded	$	610		$	-
Issuance of 300,000 shares of common stock for director compensation
previously recorded	$	3,000		$	-

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

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Texas Rare Earth Resources Corp

(formerly Standard Silver Corporation)

Notes to Interim Financial Statements

(Unaudited)

NOTE 1 – SUMMARY OF ACCOUNTING POLICIES

The accompanying unaudited interim financial statements of Texas Rare Earth Resources Corp (the "Company") (formerly Standard Silver 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 the Company's Form 10-K, dated August 31, 2010, 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 August 31, 2010 as reported in Form 10-K, have been omitted.

NOTE 2 – RELATED PARTY TRANSACTIONS

The Company has periodically received cash advances from the Company’s officers and relatives of the Company’s officers to fund operations. As of November 30, 2010, $91,846 in principal and interest is due and outstanding to the Company’s officers. The advances accrue interest at rates ranging from five percent (5%) to six percent (6%) per annum. In December 2010, the principal and accrued interest for these advances were paid in full.

NOTE 3 – INVESTMENTS

In August 2010, we entered into a 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 twenty years so long as minerals are produced in paying quantities.

Under the lease, we will pay the State of Texas a lease bonus of $197,800, $35,000 of which was paid upon the execution of the lease, $65,000 of which will be due when we submit our initial plan of operations to conduct exploration, and $97,800 of 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 ¼%) of the market value of all other minerals removed and sold from Round Top.

If production of paying quantities of minerals has not been obtained on or before August 17, 2011, we may pay the State of Texas a delay rental to extend the term of the lease in an amount equal to $44,718. Thereafter, assuming production of paying quantities has not been obtained, we may pay additional delay rental fees to extend the term of the lease for successive one (1) year periods pursuant to the following schedule:

	Per Acre Amount		Total Amount
August 17, 2012 – 2014	$	50	$	44,718
August 17, 2015 – 2019	$	75	$	67,077
August 17, 2019 – 2024	$	150	$	134,155
August 17, 2025 – 2029	$	200	$	178,873

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NOTE 4 – CAPITAL STOCK

The Company’s 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 the Board of Directors out of funds legally available. In the event of a liquidation, dissolution or winding up of the affairs of the Company, 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.

The Company received cash proceeds from the sale of its common stock during the three months ended November 30, 2010 as follows:

Description	Shares of Common Stock Issued	Cash Proceeds Received
2009-2010 Private Placement (issuances occurred in quarter ended November 30, 2010)(1)	1,132,500	$453,000
Total shares of common stock issued and cash proceeds received from sale of common stock during the three months ended November 30, 2010(2)	1,132,500	$453,000

(1) See “2009-2010 Private Placement” below.

(2) Does not include an aggregate of 366,000 shares of common stock issued for services rendered during the three months ended November 30, 2010. See “Other Equity Issues” below.

2009 – 2010 Private Placement

Between October 2009 and November 2010, the Company raised $905,500 through the issuance of 2,263,750 shares of common stock and the issuance of Class A Warrants to purchase 2,263,750 shares of common stock and Class B Warrants to purchase 1,131,875 shares of common stock. Of the $905,500 raised for this private placement, $452,500 was raised prior to September 1, 2010. The final closing of this private placement was January 10, 2011.

In November 2010, Class A Warrants to purchase 375,000 shares of the Company’s common stock and Class B Warrants to purchase 187,500 shares of the Company’s common stock were exercised by an investor, resulting in $187,500 of proceeds being raised by the Company for the Class A Warrants and $140,625 of proceeds being raised by the Company for the Class B Warrants. Total proceeds to the Company as a result of the Class A and Class B Warrant exercise was $328,125. The associated shares were issued during the quarter ended February 28, 2011.

In October 2010, the Company issued 75,000 shares to an investor in connection with our 2009 - 2010 Private Placement that were paid for in a prior period.

Other Equity Issues

In September 2010, the Company issued 300,000 common shares to a director for compensation recorded in the prior year at a fair value on the date of grant of $249,000.

In November 2010, the Company entered into a non-exclusive investment banking agreement with Sunrise Securities Corp. (“Sunrise”) pursuant to which it agreed to pay a sales commission with respect to certain financings effected, or alternative transactions entered into, by the Company through introductions by Sunrise. The Company agreed to pay Sunrise a monthly fee of 5,000 shares of restricted common stock beginning in November 2010. The Company accrued an expense of $9,600 in November related to this fee.

In November 2010, the Company also entered into a 24 month institutional public relations retainer agreement with Sunrise Financial Group, Inc., (“SFG”), an affiliate of Sunrise, pursuant to which it agreed to issue SFG five-year options to purchase 250,000 shares at $1.60 per share and 250,000 shares at $5.00 per share, with certain demand registration rights. The Black-Scholes pricing model was used to estimate the fair value of the 500,000 options, assuming a risk free interest rate of 1.1%, dividend yield of 0%, volatility of 425%, and an expected life of 5 years. The Company has determined these options to have an approximate fair value of $960,000, which was recognized as an immediate expense during the three months ended November 30, 2010.

During the quarter ended November 30, 2010, the Company issued 61,000 shares of common stock to two external consultants as payment for services performed in a prior period.

NOTE 5 – CONTINGENCIES AND COMMITMENTS

Registration Rights

In connection with the 2009-2010 Private Placement, the Company entered into certain registration rights agreements. Key provisions of these registration rights are as follows:

· Equity instruments subject to registration rights:

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o The 1,132,500 shares of the Company’s common stock subscribed to under the 2009-2010 Private Placement are subject to registration rights;

o The shares underlying the Class A Warrants, expiring December 31, 2011, entitle the holders to purchase 1,132,500 shares of common stock;

o The shares underlying the Class B Warrants, also expiring December 31, 2011, entitle the holders to purchase 566,250 shares of common stock.

· Term – The Company is required to file a registration statement covering the resale of the shares of common stock and shares of common stock underlying the warrants by February 9, 2011, and the registration is required to be deemed effective by the Securities and Exchange Commission (SEC) on or before the 150th calendar day after the filing of such registration statement. The initial registration was filed February 8, 2011.

· Events requiring transfer of consideration – Failure of the Company to file a registration statement by February 9, 2011 and/or the registration statement not deemed effective by the SEC on or before the 150th calendar day after the filing of such registration statement. The initial registration was filed February 8, 2011.

· Settlement alternatives – There are no alternative settlement arrangements.

· Maximum potential amount of consideration – In the event that transfer of consideration is required under the registration rights agreement, the Company is obligated to issue, as liquidated damages on a pro-rata basis to the subject investors, approximately 290,000 shares for each month, or pro-rated for a period less than one month, the registration is late up to a maximum of approximately 1,450,000 shares.

· Liability – Management estimates that transfer of consideration will not be required. Accordingly, the Company has not accrued a liability related to the registration rights agreements.

NOTE 6 – SUBSEQUENT EVENTS

In December 2010, the Company hired a new Chief Financial Officer.

In December 2010, the principal and accrued interest for the advances to certain officers was paid in full.

January 2011 Private Placement

As additional consideration for the purchase of the shares and warrants, the Company issued to the investors an option for 120 days from the date of investment to purchase up to 6,400,000 shares of common stock at $2.50 per share with 100% warrant coverage through the issuance of warrants to purchase up to 6,400,000 shares of common stock at an exercise price of $2.50 per share. The Company has determined these warrants to have an approximate relative fair value of $2,250,000 using a Black-Scholes model.

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NOTE 6 – SUBSEQUENT EVENTS (Continued)

The Company paid cash commissions of $318,000 and issued five year warrants to purchase up to 305,000 shares of its common stock at an exercise price of $2.50 per share in connection with the sale of its securities in the January 2011 Private Placement. The Company has determined these warrants to have an approximate fair value of $900,000 using a Black-Scholes model.

The Black-Scholes pricing model was used to estimate the fair value of the 1,600,000 and 305,000 warrants issued during the period, using the assumptions of a risk free interest rate of 1.1%, dividend yield of 0%, volatility of 404%, and an expected life of 5 years.

The Black-Scholes pricing model was used to estimate the fair value of the 6,400,000 warrants issued during the period, using the assumptions of a risk free interest rate of 1.1%, dividend yield of 0%, volatility of 265%, and an expected life of 4 months.

In connection with the January 2011 Private Placement, the Company entered into certain registration rights agreements. Key provisions of these registration rights are as follows:

Equity instruments subject to registration rights:

o 800,000 shares of the Company’s common stock issued under the January 2011 Private Placement are subject to registration rights;

o The shares underlying the warrants, expiring December 31, 2011, which entitle the holders to purchase 800,000 shares of common stock.

· Term – The Company is required to file a registration statement covering the resale of the shares of common stock and shares of common stock underlying the warrants by February 9, 2011, and the registration is required to be deemed effective by the SEC on or before the 150th calendar day after the filing of such registration statement.

· Settlement alternatives – There are no alternative settlement arrangements.

· Maximum potential amount of consideration – In the event that transfer of consideration is required under the registration rights agreement, the Company is obligated to issue, as liquidated damages, a number of shares of common stock equal to ten percent of the shares of common stock purchased by the respective investors and issued upon the exercise of the warrants for a 30-day period or pro-rated for a period less than one month. However, in no event shall that amount exceed five times the first month’s liquidated damages amount.

· Liability – Management estimates that transfer of consideration will not be required. Accordingly, the Company has not accrued a liability related to the registration rights agreements.

In January 2011, we entered into a finders agreement with Aspenwood Capital (“Aspenwood”) under which Aspenwood would introduce potential investors to the Company. The Company agreed to pay up to a 10% cash fee and to issue a five year warrant to purchase up to 10% of the number of shares sold to investors introduced to the Company by Aspenwood at an exercise price equal

to 100% of the equity purchase price. The warrant may be exercised on a cashless basis at any time subsequent to August 31, 2011 in the event the Company does not maintain an effective registration statement on file with the SEC. The Company has paid $5,000 under this agreement as of May 24, 2011.

Between January and May 2011, the Company issued 45,000 shares of restricted common stock to a consulting firm for investment banking services.

In February 2011, the Company issued a five-year option to purchase 60,000 shares of common stock at a purchase price of $2.50 per share to a director as director’s compensation.

In March 2011, the Company issued a five-year option to purchase 150,000 shares of common stock at a purchase price of $2.50 per share to a director as director’s compensation.

In March 2011, the Company issued a five-year option to purchase 60,000 shares of common stock at a purchase price of $2.50 per share to a director as director’s compensation.

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NOTE 6 – SUBSEQUENT EVENTS (Continued)

In March 2011, we granted to our chief financial officer, as a part of his employment arrangement, a five year option to purchase up to 400,000 shares of our common stock at an exercise price of $2.50 per share. These options vest 1/36 each month provided he is employed by the Company on the vesting dates.

In April 2011, the Company issued a five-year option to purchase 60,000 shares of common stock at a purchase price of $4.00 per share to a director as director’s compensation.

In April 2011, the Company issued a five year option to purchase up to 90,000 shares of common stock at an exercise price of $4.70 to a director as directors compensation. The option vests 1/3 each year, with 30,000 shares vesting immediately upon the issuance of the option, and the remaining 60,000 vesting equally on the second and third anniversary following the issuance date.

In May 2011, the Company issued a five-year option to purchase 175,000 shares of common stock at a purchase price of $4.15 per share to a director as director’s compensation for his appointment as non-executive Chairman of the Board.

In May 2011, the Company entered into a three-year employment agreement with its new chief executive officer. The Company granted a 10-year option to purchase 2,500,000 shares of the Company’s common stock at an exercise price of $2.50 per share as a part of his employment arrangement.

In May 2011, the Company entered into 1-year agreement with a company to provide investor relations services. As a part of the agreement, the Company issued the consulting firm a 3-year option to purchase 200,000 shares of the Company’s common stock at an exercise price of $3.75 per share. The options vest monthly over the term of the agreement.

In May 2011, the Company issued 15,000 shares of restricted common stock to a consulting firm for investment banking services.

In May and June 2011, certain investors participating in the January 2011 Private Placement exercised their options and were issued an aggregate of 6,240,000 shares of common stock and five-year warrants to purchase up to 6,240,000 shares of common stock, exercisable at $2.50 per share, resulting in aggregate gross proceeds to the Company of $15,600,000. In connection with the option exercises, the Company paid sales commissions of $872,000 in cash and issued five-year warrants to purchase up to 1,192,000 shares of common stock at an exercise price of $2.50 per share.

In June 2011, Sunrise performed a cashless exercise of its option to purchase 250,000 shares of common stock at $1.60 per share, resulting in the issuance of 175,000 shares of the Company’s common stock.

In June 2011, certain investors exercised 302,500 of their $0.50 Class A Warrants and 141,250 of their $0.75 Class B Warrants associated with the Company’s 2009 Private Placement, for total proceeds to the Company of $257,188. Proceeds from the Class A Warrants exercised were $151,250 and proceeds from the Class B warrants exercised were $105,938.

NOTE 7 – RESTATEMENT OF FINANCIAL STATEMENTS

The Company is filing this Amendment #2 to its Quarterly Report on Form 10-Q for the quarter ended November 30, 2010 to restate the financial results. The restatement includes the following adjustment:

On November 1, 2010, the Company entered into a 24 month institutional public relations retainer agreement with Sunrise Securities Corp (“Sunrise”) for variously described services over a two year period as described in Note 4 to the Financial Statements. Pursuant to the agreement, the Company issued Sunrise five-year options to purchase 250,000 shares at $1.60 per share and 250,000 shares at $5.00 per share, the fair value of which on the measurement date was determined by management to be $960,000. The Company has measured the options issued to Sunrise in accordance with ASC 505-50-30-14 & 15. The Company has determined the measurement date of these options to be at the beginning of the agreement. For accounting recognition purposes, we reviewed ASC section 505-50-25, specifically 25-7, which requires either immediate expense recognition or prepaid asset, depending on the facts and circumstances. The Company is filing amendment #2 to this Form 10-Q to reflect that the issuance of these options should be recognized as an immediate expense during the three months ended November 30, 2010 consistent with ASC 505-50-25.

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A summary of the significant effects of the restatement are presented below:

	As Restated under						As
	Amendment #1			Change			Restated

November 30, 2010 unaudited balance sheet
Accounts payable and accrued liabilities	$	51,057		$	(40,000)		$	11,057
Accumulated Deficit		(1,572,322	)		(920,000	)		(2,492,322	)

Statement of Operations for the three months ended November 30, 2010
General and administrative expenses		111,130			920,000			1,031,130
Net loss		(149,688	)		(920,000	)		(1,069,688	)
Net loss per share – basic and diluted		(0.01	)		(0.03	)		(0.04	)

Statement of Cash Flows for the three months ended November 30, 2010
Cash flows from operating activities:
Net loss		(149,688	)		(920,000	)		(1,069,688	)
Stock issued for services		49,600			920,000			969,600
Net cash used in operating activities		(107,024	)		0			(107,024	)

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary statement regarding forward-looking statements

In this Quarterly Report on Form 10-Q/A, unless the context requires otherwise, references to “Texas Rare Earth Resources Corp,” “we,” “our” or “us” refer to Texas Rare Earth Resources Corp.

This Quarterly Report on Form 10-Q/A contains forward-looking statements that represent our beliefs, projections and predictions about future events or our future performance. You can identify forward-looking statements by terminology such as “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms or other similar expressions or phrases. These forward-looking statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements or industry results to differ materially from any future results, performance or achievement described in or implied by such statements. Factors that may cause actual results to differ materially from expected results described in forward-looking statements include, but are not limited to: our ability to secure sufficient capital to implement our business plans; our ability to maintain appropriate relations with unions and employees; environmental laws, regulations and permits affecting our business, directly and indirectly, including, among others, those relating to mine reclamation and restoration, climate change, emissions to the air and water and human exposure to hazardous substances used, released or disposed of by us and uncertainties associated with unanticipated geological conditions related to mining.

Any forward-looking statement you read in this Quarterly Report on Form 10-Q/A reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, operating results, growth strategy and liquidity. You should not place undue reliance on these forward-looking statements because such statements speak only as to the date when made. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future, except as otherwise required by applicable law.

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included herein.

This Quarterly Report on Form 10-Q/A 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.

Overview

The Company changed its name from “Standard Silver Corporation” to “Texas Rare Earth Resources Corp.” effective as of September 1, 2010. Our common stock is currently listed for quotation in the Pink Sheets, a centralized quotation service maintained by OTC Markets Inc. that collects and publishes market maker quotes for over-the-counter securities (PK:TRER).

The Company was incorporated in the State of Nevada in 1970. In July 2004, our articles of incorporation were amended and restated to increase the authorized capital to 25,000,000 common shares and, in April 2007, we affected a 1-for-2 reverse stock split. In September 2008, our articles of incorporation were further amended and restated to increase the authorized capital to 100,000,000 common shares with a par value of $0.01 per share and to authorize 10,000,000 preferred shares with a par value of $0.001 per share. The Company’s fiscal year-end is August 31.

We are a mining company engaged in the business of the acquisition and development of mineral properties. We currently hold a twenty year lease, executed in August 2010, to explore and develop an 860 acre rare earth uranium-beryllium prospect located in Hudspeth County, Texas known as “Round Top” and prospecting permits covering an adjacent 9,345 acres. We also hold prospecting permits on certain other mineral properties located in Texas and New Mexico. We are currently not evaluating any additional prospects, and intend to focus the primarily on the development of our Round Top rare earth prospect. We currently have limited operations and have not established that our Round Top property contains any proven reserves or probable reserves. The strategic necessity of developing rare earth resources, the compelling fundamentals of uranium and the future potential for beryllium in the nuclear fuel cycle all present what we believe to be excellent opportunities for us.

We intend to (i) conduct a geologic, and radiometric study of the surface of the rhyolite to define areas where beryllium, rare earth minerals and thorium are concentrated in fractures, breccias or magmatic segregations, and to understand the distribution of uranium in this rock (ii) conduct radiation and geologic mapping underground to better define the distribution and habit of occurrence of the uranium, (iii) re-log drill samples that are stored on the property with emphasis on uranium and rare metal distribution (iv) conduct a sampling and laboratory examination program to determine the precise mineralogy of the rare elements in the rhyolite and (v) use these results to develop a drill program to test higher grade rare earth targets deeper in the rhyolite.

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Results of Operations

General & Revenue

We had no operating revenues during the three months ended November 30, 2010 and 2009. We are not currently profitable. As a result of ongoing operating losses, we had an accumulated deficit of $2,492,322 as of November 30, 2010.

Operating expenses and resulting losses from Operations.

We incurred exploration costs for the three months ended November 30, 2010 and 2009 in the amount of $38,600 and $12,000, respectively. These expenditures were primarily related to outside consulting services relating to our Round Top project.

Our general and administrative expenses for the three months ended November 30, 2010 and 2009 were $1,031,130 and $47,052, respectively, which included $73,000 for public relations fees, of which $969,600 of this amount was stock compensation for services, and $23,991 for fees associated with the audit and review of our historical financial statements as we prepared to bring our SEC filings current.. The remainder of our general and administrative expenses for the three months ended November 30, 2010 were expenses incurred that was necessary for us to carry out our operations. Our general and administrative expenses for the three months ended November 30, 2009 included approximately $12,000 of expenses, such as travel, necessary to raise additional capital for the company. We recorded $15,000 related to shares issued for services for outside internet and website consulting.

We accrued interest expense on related party notes payable in the amount of $735 and $4,838 for the three months ended November 30, 2010 and 2009, respectively. In December 2010, the principal and accrued interest for the advances to certain officers was paid in full.

Our loss from operations for the three months ended November 30, 2010 and 2009 was $1,069,730 and $59,052, respectively.

Liquidity and Capital Resources

As of November 30, 2010, we a working capital surplus of approximately $635,096. We invested approximately $10,536 and $2,418 in mineral properties for the three months ending November 30, 2010 and 2009, respectively. We purchased transportation equipment for our Round Top property in the approximate amount of $22,000 during the three months ended November 30, 2009.

Over the next twelve to eighteen months we plan to conduct significant geological studies, sampling and drilling at our Round Top property. The timing of these expenditures is dependent upon a number of factors, including the availability of drilling contractors. We estimate these expenditures will total approximately $2,200,000 for exploration costs, $150,000 relating to the approval of our initial plan of operations and permitting fees, $170,000 in capital expenditures, and approximately $1,325,000 in general and administrative expenditures.

Our exploration costs are estimated to be approximately $2,200,000, and our timeline includes (i) conducting and interpreting an airborne geophysical survey planned for the third quarter of this fiscal year, (ii) drilling approximately 12,000 feet and the collection of approximately 5,000 samples that will be ongoing through January 2012, (iii) metallurgical analysis of these samples that will take place during this timeframe, (iv) onsite contract geological services that will be ongoing through February 2012, and (v) ongoing other expenditures over the next twelve months that are necessary to accomplish our exploration efforts. There is no assurance that we will be able to complete these activities in the timeframe set forth above, or at all. Our airborne geophysical survey was completed in June 2011 and we are awaiting its interpretation.

We estimate that we will incur approximately $150,000 in expenditures to file our initial plan of operations with the State of Texas and to acquire necessary permits. Our initial plan of operations was approved in April 2011 and triggered an additional one time property cost of $65,000. We will be required to pay a $45,000 lease payment to the State of Texas in August 2011 for our Round Top project. We estimate that in July 2011 we will be required to pay a $20,000 permitting and compliance fee to the Texas Railroad Commission, and in September and October 2011, we will be required to pay approximately $20,000 for prospecting permits to the State of Texas for our Round Top project. The estimated timeframe for these payments, including the amounts, may change.

Our capital expenditures for the next twelve months are estimated to be $170,000, which will include the following: (i) in July and August 2011, we intend to spend approximately $75,000 to purchase transportation equipment and to construct a field office; (ii) in September 2011 we intend to purchase ventilation equipment for our Round Top project for approximately $10,000, and (iii) approximately $75,000 for additional office and field equipment necessary to carry out our operations. The remaining $10,000 will be spent on other miscellaneous equipment necessary for us to conduct our exploration. The estimated timeframe for these payments, including the amounts, may change.

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We have estimated that our general and administrative expenditures, which will be spent ratably over the next twelve months, to total approximately $1,325,000. Payroll, payroll taxes, benefits and associated travel for four employees is estimated to be $520,000 over this period of time. We estimate that we will incur professional fees of approximately $120,000 over the next twelve months. These fees will be primarily associated with the audit and reviews of our financial statements and Exchange Act filings, which will occur after each quarter end and after our fiscal year end. We estimate that we will incur approximately $600,000 for professional fees associated with the assistance of the management and supervision of our field operations. The remainder of our general and administrative expenditures totaling $85,000 will be spent on items necessary for us to conduct our general business affairs. Our exploration activities will be carried out by our geologic staff and such qualified outside contractors as is necessary. We have an office/lab trailer at the site. We will expand these facilities as the project develops. We believe that we have sufficient capital to fund operations and exploration activity on our Round Top prospect through the end of calendar year 2011. We will, however, need to raise additional funding subsequent to calendar year 2011 to continue our exploration and development activities.

As of the date hereof, the Company is not able to quantify the amount of capital needed to fund its working capital needs after calendar 2011, nor is it able to quantify the amount of capital needed to develop the Round Top project. The amount of capital will be dependent upon the Company’s business strategy to exploit the Round Top project. The Company intends to raise additional working capital through best efforts debt or equity financing, as we have no firm commitments for equity capital investments to any established credit facility. No assurance can be given that additional financing will be available, on terms acceptable to the Company. The Company’s viability is contingent upon its ability to receive external financing. Failure to obtain sufficient working capital may result in management resorting to the sale of assets or otherwise curtailing operations.

For the three months ended November 30, 2010, the Company raised $453,000 through the subscription of 1,132,500 shares of common stock and the issuance of Class A Warrants to purchase 1,132,500 shares of common stock and Class B Warrants to purchase 566,250 shares of common stock. Between November 2010 and January 2011, Class A Warrants to purchase 437,500 shares were exercised, and Class B Warrants to purchase 218,750 shares were exercised, resulting in $382,813 of proceeds being raised by the Company. The Company has, and will continue to, use these proceeds for working capital purposes.

Recent Financings

Between October 2009 and November 2010, the Company raised $905,500 through the issuance of 2,263,750 shares of common stock and the issuance of Class A Warrants to purchase 2,263,750 shares of common stock and Class B Warrants to purchase 1,131,875 shares of common stock. Between November 2010 and January 2011, Class A Warrants to purchase 437,500 shares were exercised, and Class B Warrants to purchase 218,750 shares were exercised, resulting in $382,813 of proceeds being raised by the Company. The final closing of this private placement was January 10, 2011.

Between January and February 2011, we entered into a series of transactions with accredited investors pursuant to which we sold an aggregate of 1,600,000 shares of our common stock and five year warrants to purchase up to 1,600,000 shares of common stock, exercisable at $2.50 per share, for gross proceeds of $4,000,000. As additional consideration for the purchase of the shares and warrants, the Company issued to the investors an option for 120 days from the date of investment to purchase up to 6,400,000 shares of common stock at $2.50 per share with 100% warrant coverage through the issuance of warrants to purchase up to 6,400,000 shares of common stock at an exercise price of $2.50 per share. The Company intends to use proceeds from this financing to fund working capital needs for the balance of calendar 2011. The Company paid cash commissions of $318,000 and issued five year warrants to purchase up to 305,000 shares of its common stock at an exercise price of $2.50 per share in connection with the sale of its securities in the January 2011 Private Placement. The Company has determined these warrants to have an approximate fair value of $900,000 using a Black-Scholes model.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

As smaller reporting company, as defined by Rule 229.10(f)(1), we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

(A) Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, accumulated and communicated to the Company’s management, including its Chief Executive Officer ("CEO") and the Company’s Interim Chief Financial Officer ("CFO"), as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, the Company's management carried out an evaluation, under the supervision and with the participation of the Company's CEO and CFO, of the effectiveness of the design and operation of the Company's system of disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the material weaknesses described herein, the Company's CEO and CFO has concluded that the Company's disclosure controls and procedures were not effective, as of the date of that evaluation, for the purposes of recording, processing, summarizing and timely reporting of material information required to be disclosed in reports filed by the Company under the Exchange Act.

Because of its size, the Company did not have the resources necessary to hire full-time accounting personnel. On December 1, 2010, the Company hired a full-time CFO and employs the services of a contract bookkeeper. Because of the structure of our staff, we have a failure to maintain effective controls over the selection, application and monitoring of our accounting policies to assure that certain complex equity transactions are accounted for in accordance with generally accepted accounting principles.

Material Weaknesses Identified

We had significant deficiencies constituting material weaknesses as defined by the standards of the Public Company Accounting Oversight Board.

The material weaknesses identified were the lack of segregation of duties necessary to maintain proper checks and balances between functions and the lack of procedures to properly account for non-routine transactions.

The absence of qualified full time accounting personnel was a contributing factor to the problems identified. The specific circumstances giving rise to the weaknesses include utilizing the services of contract accountants on a part time basis in the absence of internal accounting personnel.

(B) Changes in Internal Controls over Financial Reporting

In connection with the evaluation of the Company's internal controls during the Company's last fiscal quarter covered by this report required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, the Company's CEO and CFO has determined that there were no changes to the Company's internal controls over financial reporting that have materially affected, or are reasonably likely to materially effect, the Company's internal controls over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table describes all securities we issued during the period covered by this report without registering the securities under the Securities Act.

Date	Description	Number	Purchaser	Proceeds ($)	Consideration	Exemption (A)
September 2010	Common Stock	25,000	Henry C. Bradbury	-	Services rendered	4(2)
September 2010	Common Stock	300,000	Anthony Marchese	-	Services rendered	4(2)
September 2010	Common Stock	162,500	Private Placement Investors (2)	65,000	Cash	4(2)
September 2010	Class A Warrants	162,500	Private Placement Investors	-	Issued as part of placement	4(2)
September 2010	Class B Warrants	81,250	Private Placement Investors	-	Issued as part of placement	4(2)
October 2010	Common Stock	36,000	DRC Partners, LLC	-	Services rendered	4(2)
October 2010	Common Stock	857,500	Private Placement Investors (7)	338,000	Cash	4(2)
October 2010	Class A Warrants	845,000	Private Placement Investors	-	Issued as part of placement	4(2)
October 2010	Class B Warrants	422,500	Private Placement Investors	-	Issued as part of placement	4(2)
November 2010	Common Stock	125,000	Private Placement Investors (2)	50,000	Cash	4(2)
November 2010	Class A Warrants	125,000	Private Placement Investors	-	Issued as part of placement	4(2)
November 2010	Class B Warrants	62,500	Private Placement Investors	-	Issued as part of placement	4(2)

(A) With respect to sales designated by “Sec. 4(2),” these shares were issued pursuant to the exemption from registration contained in to Section 4(2) of the Securities Act of 1933 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. We requested our stock transfer agent to affix appropriate legends to the stock certificate issued to each purchaser and the transfer agent affixed the appropriate legends. Each purchaser was given adequate access to sufficient information about us to make an informed investment decision. None of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved.

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Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. (Removed and Reserved)

Item 5. Other Information

Between September 2009 and November 2010, the Company raised $905,500 through the issuance of 2,263,750 shares of common stock and the issuance of Class A Warrants to purchase 2,263,750 shares of common stock and Class B Warrants to purchase 1,131,875 shares of common stock (“2009-2010 Private Placement”). The final closing of this private placement was January 10, 2011.

In January 2011, Class A Warrants to purchase 62,500 shares of the Company’s common stock and Class B warrants to purchase 31,250 shares of the Company’s common stock were exercised by an investor, resulting in $31,250 of proceeds being raised by the Company for the Class A warrants and $23,438 of proceeds being raised by the Company for the Class B Warrants. Total proceeds to the Company as a result of the Class A and Class B Warrant exercise was $54,688. In February 2011, Class A Warrants to purchase 375,000 shares of the Company’s common stock and Class B Warrants to purchase 187,500 shares of the Company’s common stock were exercised by an investor, resulting in $187,500 of proceeds being raised by the Company for the Class A Warrants and $140,625 of proceeds being raised by the Company for the Class B Warrants. Total proceeds to the Company as a result of the Class A and Class B Warrant exercise was $328,125. The total number of Class A and Class B warrants exercised by these two investors was 437,500 and 218,750, respectively, resulting in $382,813 of total proceeds to the Company. In June 2011, certain investors exercised 302,500 of their $0.50 Class A Warrants and 141,250 of their $0.75 Class B Warrants associated with the Company’s 2009 Private Placement, for total proceeds to the Company of $257,188. Proceeds from the Class A Warrants exercised were $151,250 and proceeds from the Class B warrants exercised were $105,938.

In January and February 2011, we entered into a series of transactions with accredited investors pursuant to which we sold an aggregate of 1,600,000 shares of our common stock and five year warrants to purchase up to 1,600,000 shares of common stock, exercisable at $2.50 per share, for gross proceeds of $4,000,000 (“January 2011 Private Placement”). As additional consideration for the purchase of the shares and warrants, the Company issued to the January 2011 investors an option for 120 days to purchase up to 6,400,000 shares of common stock at $2.50 per share with 100% warrant coverage through the issuance of warrants to purchase up to 6,400,000 shares of common stock at an exercise price of $2.50 per share. The Company paid cash commissions of $318,000 and issued five year warrants to purchase up to 305,000 shares of its common stock at an exercise price of $2.50 per share in connection with the sale of its securities in the January 2011 Private Placement.

During May and June 2011, the Company realized $15,600,000 from the exercise of options associated with its January 2011 Private Placement. In June 2011, the Company issued 1,192,000 warrants and paid $872,000 in commissions to certain brokers in association with the exercise of the options.

In connection with 2009-2010 Private Placement, the Company also entered into certain registration rights agreements. Under the registration rights agreements, the Company is required to file a registration statement covering the resale of the shares of common stock and shares of common stock underlying the warrants by February 9, 2011, and the registration is required to be deemed effective by the SEC on or before the 150 th calendar day after the filing of such registration statement. In the event these milestones are not met by the Company, the Company is obligated to issue, as liquidated damages on a pro-rata basis to these investors, approximately 290,000 shares for each month, or pro-rated amount if less than one month, the registration is late up to a maximum of approximately 1,450,000 shares. In connection with the January 2011 private placement, we have granted the same demand registration rights with respect to the 800,000 shares of common stock and five year warrants to purchase up to 800,000 shares of common stock. If a registration statement is not filed with the SEC on or before February 9, 2011, or if such registration statement is not deemed effective by the SEC on or before the 150 th calendar day after the filing of the registration statement, the Company has agreed to make pro rata payments to the investors, as liquidated damages, of a number of shares of Company common stock equal to ten percent of the shares of common stock purchased by the respective investors and issued upon the exercise of the warrants for each 30-day period or pro rata for any portion thereof for which no registration statement has been filed or has not been declared effective by the SEC, as the case may be, provided that such amount shall not exceed five times the liquidated damages amount. There can be no assurance that the Company’s registration statement will be effective within 150 days after February 9, 2011.

The sales described above were made pursuant to the exemption from registration contained in to Section 4(2) of the Securities Act of 1933 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. We requested our stock transfer agent to affix appropriate legends to the stock certificate issued to each purchaser and the transfer agent affixed the appropriate legends. Each purchaser was given adequate access to sufficient information about us to make an informed investment decision. Except as described above, no underwriting discounts, commissions, or finder’s fees were involved.

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Item 6. Exhibits

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

Exhibit Number	Description
3.1	Amended and Restated Bylaws (filed as Exhibit 3.1 to the Form 10 filed with the SEC on October 10, 2008)
3.2	Amended and Restated Articles of Incorporation (filed as Exhibit 3.2 to the Form 10 filed with the SEC on October 10, 2008)
3.3	Amendment to Articles of Incorporation (filed as Exhibit 3.3 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
4.1	Form of Common Stock Certificate (filed as Exhibit 4.1 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.1*	Stock Option Plan (filed as Exhibit 10.1 to the Form 10 filed with the SEC on October 10, 2008)
10.2	Lease (filed as Exhibit 10.2 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.3	Form of Class A Warrant (filed as Exhibit 10.3 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.4	Form of Class B Warrant (filed as Exhibit 10.4 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.5	Form of Registration Rights Agreement (filed as Exhibit 10.5 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.6*	Director’s Agreement (filed as Exhibit 10.6 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.7	Form of Subscription Agreement for January 2011 Investment (filed as Exhibit 10.7 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.8	Form of Warrant for January 2011 Investment (filed as Exhibit 10.8 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.9	Form of Registration Rights Agreement for January 2011 Investment (filed as Exhibit 10.9 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.10	Shareholders’ Agreement (filed as Exhibit 10.10 to the Form 10-K for the fiscal year ended August 31, 2008 filed with the SEC on February 8, 2011)
10.11*	Director’s Agreement for General Martin (filed as Exhibit 10.1 to the Form 8-K filed with the SEC on February 23, 2011)
31.1(1)	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)
31.2(1)	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)
32.1(1)	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.
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.

* Management contract or compensatory plan or arrangement.

(1)	Filed as an exhibit to the Form 10-Q for the quarter ended November 30, 2010 filed with the SEC on June 24, 2011.

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Signatures

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 RARE EARTH RESOURCES CORP.

Date: June 23, 2011

/s/ K. Marc LeVier

K. Marc LeVier, duly authorized officer

and Principal Executive Officer

Date: June 23, 2011

/s/ Wm. Chris Mathers

Wm. Chris Mathers, Principal Financial Officer

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Texas Mineral Resources Corp. - FORM 10-Q/A - June 23, 2011

Attached files

Texas Mineral Resources Corp. Reports