Texas Rare Earth Resources Corp.

The ground water lease secures the right to develop the ground water within a 13,120-acre lease area located approximately 4 miles from the Round Top deposit. The lease area contains five existing water wells. It is anticipated that all potential water needs for the Round Top project mine operations would be satisfied by the existing wells covered by this water lease. This lease terms include an annual minimum production payment of $5,000 prior to production of water for the operation. After initiation of production, the Company will pay $0.95 per thousand gallons or $20,000 annually, whichever is greater. This lease remains in effect so long as the mineral lease is in effect. The minimum production payment for all fiscal years have been made as of the date of this filing.

For the avoidance of doubt, the Company and USARE agreed that USARE may exercise this additional option at any time following the date that USARE acquires seventy percent (70%) of the Round Top project until the 180 day anniversary of the date that the bankable feasibility study is completed.

In June 2020, TMRC led a consortium that included Penn State University and applied for a Department of Energy grant to evaluate the economic potential of rare earth elements associated with Appalachian coal deposits. Our group was awarded the first phase of this grant in September 2020 as were twelve other recipients. Work consisted of a conceptual study in the identification of a resource, developing the physical metallurgy to concentrate the rare earth minerals and then separating and refining both the rare earth elements as well as various other elements. The final report was delivered to the Department of Energy in December 2020. The Department of Energy has recently notified the consortium that it has been selected for the second phase of the grant, subject to final funding approval. For the six months ended February 28, 2021, we received $150,000 from the Department of Energy relating to this grant and incurred approximately $139,000 in grant related expenses.

For the six months ended February 28, 2021, we earned approximately $3,000 in interest income from depository accounts. For the six months ended February 29, 2020 we settled an outstanding payable of $45,000 for a past employee’s compensation, in exchange for 130,892 shares of our common stock valued at approximately $111,000 on the settlement date, resulting in a loss on settlement of approximately $66,000.

*Management contract or compensatory plan or arrangement. 

(1)Submitted Electronically Herewith. Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Balance Sheets at February 28, 2021 and August 31, 2020; (ii) Statements of Operations for the six and three months ended February 28, 2021 and February 29, 2020; (iii) Statements of Cash Flows for the six months ended February 28, 2021 and February 29, 2020; (iv) Statements of Shareholders’ Equity for the six months ended February 28, 2021 and February 29, 2020; and (v) Notes to Financial Statements.