TRX GOLDNPV : Gold Corporation Interim Condensed Consolidated Statements of Financial Position - Form 6-K

TRX Gold Corporation

Interim Condensed Consolidated Statements of Financial Position

(Unaudited)

(Expressed in Thousands of US Dollars)

		Note		November 30, 2022			August 31, 2022 (Note 2)
Assets
Current Assets
Cash				$	8,930			$	8,476
Amounts receivable		5			1,624				2,540
Prepayments and other assets		6			1,220				1,206
Inventories		7			3,831				3,630
Total current assets					15,605				15,852
Other long-term assets		5			4,976				4,359
Mineral property, plant and equipment		8			54,757				51,634
Total assets				$	75,338			$	71,845
Liabilities
Current Liabilities
Amounts payable and accrued liabilities				$	7,103			$	7,920
Withholding tax payable					181				181
Income tax payable					789				436
Current portion of deferred revenue		9			2,627				1,864
Current portion of lease liabilities					64				-
Derivative warrant liabilities		10			3,484				6,849
Total current liabilities					14,248				17,250
Lease liabilities					77				-
Deferred revenue		9			-				621
Deferred income tax liability					1,129				-
Provision for reclamation					2,850				2,815
Total liabilities					18,304				20,686
Equity
Share capital					164,173				163,946
Share-based payments reserve		12			7,313				6,825
Warrants reserve		13			1,700				1,700
Accumulated deficit					(120,161	)			(123,673	)
Equity attributable to shareholders					53,025				48,798
Non-controlling interests		14			4,009				2,361
Total equity					57,034				51,159
Total equity and liabilities				$	75,338			$	71,845

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

2

TRX Gold Corporation

Interim Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(Unaudited)

(Expressed in Thousands of US Dollars, except per share amounts)

				Three months ended November 30,
		Note		2022			2021 (Note 2)
Revenue		19		$	9,718			$	-
Cost of sales
Production costs					(3,518	)			-
Royalty					(697	)			-
Depreciation					(193	)			-
Total cost of sales					(4,408	)			-
Gross profit					5,310				-
General and administrative expenses		16			(1,837	)			(2,345	)
Gain on derivative warrant liabilities		10			3,365				208
Foreign exchange (losses) gains					(7	)			18
Interest and other expenses					(185	)			(39	)
Income (loss) before tax					6,646				(2,158	)
Income tax expense		17			(1,486	)			-
Net income (loss) and comprehensive income (loss)				$	5,160			$	(2,158	)
Net income (loss) and comprehensive income (loss) attributable to:
Shareholders				$	3,512			$	(2,022	)
Non-controlling interests					1,648				(136	)
Net income (loss) and comprehensive income (loss)				$	5,160			$	(2,158	)
Earnings (loss) per share attributable to shareholders
Basic and diluted earnings (loss) per share		11		$	0.01			$	(0.01	)

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

3

TRX Gold Corporation

Interim Condensed Consolidated Statements of Changes in Equity

(Unaudited)

(Expressed in Thousands of US Dollars, except share amounts)

		Share Capital			Reserves
			Number of Shares				Amount				Share-based payments				Warrants				Accumulated deficit				Owner's equity				Non- controlling interests				Total equity
Balance at August 31, 2021			254,870,556			$	158,129			$	5,680			$	1,606			$	(117,457	)		$	47,958			$	(1,533	)		$	46,425
Shares issued for settlement of debts			165,889				98				-				-				-				98				-				98
Share-based compensation expense (Note 12)			-				-				980				-				-				980				-				980
Net loss for the period			-				-				-				-				(2,022	)			(2,022	)			(136	)			(2,158	)
Balance at November 30, 2021			255,036,445			$	158,227			$	6,660			$	1,606			$	(119,479	)		$	47,014			$	(1,669	)			45,345
Shares issued for financing			909,901				373				-				-				-				373				-				373
Shares issued for cash, net of share issuance costs			17,948,718				3,867				-				-				-				3,867				-				3,867
Stock options exercised			450,000				258				(111	)			-				-				147				-				147
Shares issued for share-based payments			1,801,120				1,221				(1,221	)			-				-				-				-				-
Witholding tax impact on restricted share units			-				-				(636	)			-				-				(636	)			-				(636	)
Warrants issued			-				-				-				94				-				94				-				94
Share-based compensation expense			-				-				2,133				-				-				2,133				-				2,133
Net loss for the period			-				-				-				-				(4,194	)			(4,194	)			4,030				(164	)
Balance at August 31, 2022			276,146,184			$	163,946			$	6,825			$	1,700			$	(123,673	)		$	48,798			$	2,361			$	51,159
Shares issued for share-based payments			442,500				227				(227	)			-				-				-				-				-
Share-based compensation expense (Note 12)			-				-				809				-				-				809				-				809
Witholding tax impact on restricted share units			-				-				(94	)			-				-				(94	)			-				(94	)
Net income for the period			-				-				-				-				3,512				3,512				1,648				5,160
Balance at November 30, 2022			276,588,684			$	164,173			$	7,313			$	1,700			$	(120,161	)		$	53,025			$	4,009			$	57,034

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

4

TRX Gold Corporation

Interim Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Expressed in Thousands of US Dollars)

				Three months ended November 30,
		Note		2022			2021
Operating
Net income (loss)				$	5,160			$	(2,158	)
Adjustments for items not involving cash:
Non-cash items		21			(1,016	)			887
Changes in non-cash working capital:
Decrease (increase) in amounts receivable					915				(42	)
Increase in inventories					(125	)			(338	)
(Increase) decrease in prepaid and other assets					(14	)			182
Increase (decrease) in amounts payable and accrued liabilities					1,371				(1,486	)
Increase in income tax payable					357				-
Cash provided by (used in) operating activities				$	6,648			$	(2,955	)
Investing
Exploration and evaluation assets and expenditures				$	-			$	(2,192	)
Proceeds from gold sales					-				535
Purchase of mineral property, plant and equipment					(5,419	)			(906	)
Increase in other long-term assets					(617	)			-
Cash used in investing activities				$	(6,036	)		$	(2,563	)
Financing
Withholding taxes on settlement of restricted share units				$	(94	)		$	-
Lease payments					(64	)			-
Cash used in financing activities				$	(158	)		$	-
Net increase (decrease) in cash				$	454			$	(5,518	)
Cash at beginning of the period					8,476				13,447
Cash at end of the period				$	8,930			$	7,929

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

5

TRX Gold Corporation

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2022 and 2021

(Unaudited)

(Expressed in Thousands of US dollars, except for share and per share amounts)

1.	Nature of operations

TRX Gold Corporation ("TRX Gold", "Group" or the "Company") was incorporated in the Province of Alberta on July 5, 1990 under the Business Corporations Act (Alberta). The Company's principal business activity is the exploration, development and production of mineral property interests in the United Republic of Tanzania ("Tanzania"). On November 1, 2022, the Company declared commercial production on the 1,000+ tonnes per day process plant at its Buckreef Gold Project ("Buckreef") in Tanzania.

The Company's registered office is 400 3^rd Avenue SW, Suite 3700, Calgary, Alberta, T2P 4H2, Canada and the Company's principal place of business is 277 Lakeshore Road E, Suite 403, Oakville, Ontario, L6J 6J3, Canada.

The Company's common shares are listed on the Toronto Stock Exchange in Canada (TSX: TNX) and NYSE American in the United States of America (NYSE American: TRX).

The Company is primarily focused on development and mining operations, exploring, and evaluating its mineral properties. The business of exploring and mining for minerals involves a high degree of risk. The underlying value of the mineral properties is dependent upon the existence and economic recovery of mineral resources and reserves, the ability to raise long-term financing to complete the development of the properties, government policies and regulations, and upon future profitable production or, alternatively, upon the Company's ability to dispose of its interest on an advantageous basis; all of which are uncertain.

2.	Basis of preparation

a)	Statement of compliance

The Company's interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standards ("IAS") 34, Interim Financial Reporting, as issued by the International Accounting Standards Board. The interim condensed consolidated financial statements do not include all disclosures required by International Financial Reporting Standards ("IFRS") for annual financial statements and should be read in conjunction with the Company consolidated financial statements for the year ended August 31, 2022.

These interim condensed consolidated financial statements were approved by the Board of Directors of the Company on January 12, 2023.

b)	Comparative figures

Certain comparative amounts have been restated to conform to the current period's presentation.

The reclassification in presentation resulted in the following impact on the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the three months ended November 30, 2021:

			Reported at November 30, 2021				Reclassification				Restated at November 30, 2021
General and administration expenses		$	(2,345	)		$	-			$	(2,345	)
Financial instrument related costs and other			174				(174	)			-
Gain on derivative warrant liabilities			-				208				208
Foreign exchange gains			18				-				18
Interest and other expenses			(5	)			(34	)			(39	)
Net loss and comprehensive loss		$	(2,158	)		$	-			$	(2,158	)

The reclassification in presentation resulted in the following impact on the Consolidated Statements Financial Position as at August 31, 2022:

			Reported at August 31,2022				Reclassification				Restated at August 31, 2022
Amounts receivable		$	40			$	2,500			$	2,540
Other receivables			2,500				(2,500	)			-

c)	Basis of presentation and measurement

These interim condensed consolidated financial statements have been prepared on a going concern basis under the historical cost basis, except for certain financial assets and liabilities which are measured at fair value, as disclosed in Note 18. All amounts in these interim condensed consolidated financial statements are presented in U.S. dollars with all amounts rounded to the nearest thousand, except for share and per share data, or as otherwise noted. Reference herein of $ or USD is to US dollars and C$ or CAD is to Canadian dollars.

6

TRX Gold Corporation

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2022 and 2021

(Unaudited)

(Expressed in Thousands of US dollars, except for share and per share amounts)

3.	Significant accounting policies

The accounting policies applied in these interim condensed consolidated financial statements are consistent with those applied in the preparation of the Company's annual consolidated financial statements for the year ended August 31, 2022.

4.	Significant accounting judgments, estimates and assumptions

The preparation of consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the carrying amount of assets and liabilities and the reported amount of revenues and expenses. The following discusses the most significant accounting policy judgments and accounting estimates that the Company has made in the preparation of these interim condensed consolidated financial statements.

a)	Production Start Date

Management assesses the stage of each mine development project to determine when a mine moves into the production stage. The criteria used to assess the start date of a mine are determined based on the unique nature of each mine development project. The Company considers various relevant criteria to assess when the mine is substantially complete, ready for its intended use and moves into the production phase. Some of the criteria include, but are not limited to, the following:

·	A significant level of capital expenditures compared to construction cost estimates are complete,

·	Ability to produce gold in saleable form within specifications has been achieved,

·	Reasonable period for testing has been completed, and

·	Reasonable level of ongoing production based on mill throughput, recovery rates and mill availability.

On November 1, 2022, the Company declared commercial production for the 1,000+ tonnes per day ("tpd") processing plant at Buckreef after successful construction, commissioning and ramp-up of processing to a steady state throughput of 1,000+ tpd. The processing plant was running consistently at or above nameplate capacity since October 2022 with gold recoveries exceeding 90%. All major construction activities were completed and Buckreef demonstrated its ability to sustain ongoing production levels.

b)	Units-of-Production

Management estimates recoverable proven and probable mineral reserves in determining the depreciation and amortization of certain mineral property, plant and equipment that is expected to be used for the duration of the mine life. This results in a depreciation charge proportional to the recovery of the anticipated ounces of gold. The life of the asset is assessed annually and considers its physical life limitations and present assessment of economically recoverable reserves of the mine property at which the asset is located. The calculations require the use of estimates and assumptions, including the amount of recoverable proven and probable mineral reserves. The Company's units of production calculations are based on recovered ounces of gold poured.

7

TRX Gold Corporation

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2022 and 2021

(Unaudited)

(Expressed in Thousands of US dollars, except for share and per share amounts)

5.	Amounts receivable

		November 30, 2022			August 31, 2022
Receivable from precious metal sales		$	1,515			$	-
Sales tax receivable(1)			5,044				4,359
Prepaid gold purchase receivable (Note 9)			-				2,500
Other			41				40
			6,600				6,899
Less: Long-term portion			(4,976	)			(4,359	)
Total amounts receivable		$	1,624			$	2,540

(1)

Sales tax receivables consist of harmonized services tax and value added tax ("VAT") due from Canadian and Tanzanian tax authorities, respectively. Tanzanian tax regulations allow for VAT receivable to be refunded or set-off against taxes due to the Tanzania Revenue Authority ("TRA"). VAT which still need to be verified by the TRA have been classified as long-term assets as the Company does not expect to recover these amounts within the next 12 months.

As at November 30, 2022 and August 31, 2022, no impairment has been recorded against these receivables and the Company held no collateral for any receivables.

6.	Prepayments and other assets

		November 30, 2022			August 31, 2022
Prepaid expenses		$	713			$	699
Commitment fees(1)			507				507
Total prepayments and other assets		$	1,220			$	1,206

(1)	Consists of commitment fees paid with respect to a share purchase agreement whereby the Company, at its sole discretion, has the right to sell up to $10 million of its shares over a 36-month period.

7.	Inventories

		November 30, 2022			August 31, 2022
Ore stockpile		$	1,745			$	2,643
Gold in circuit			1,255				210
Gold doré			-				253
Total precious metals inventories			3,000				3,106
Supplies			831				524
Total inventories		$	3,831			$	3,630

8

TRX Gold Corporation

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2022 and 2021

(Unaudited)

(Expressed in Thousands of US dollars, except for share and per share amounts)

8.	Mineral property, plant and equipment

		Construction in progress			Mineral properties			Processing plant and related infrastructure			Machinery and equipment			Other			Total
Cost
As at August 31, 2022		$	45,239			$	-			$	7,076			$	1,396			$	143			$	53,854
Additions			-				822				2,378				21				211				3,432
Transfers(1)			(45,239	)			45,239				-				-				-				-
As at November 30, 2022		$	-			$	46,061			$	9,454			$	1,417			$	354			$	57,286
Accumulated depreciation
As at August 31, 2022		$	-			$	-			$	1,566			$	619			$	35			$	2,220
Depreciation			-				112				95				31				71				309
As at November 30, 2022		$	-			$	112			$	1,661			$	650			$	106			$	2,529
Net book value
As at August 31, 2022		$	45,239			$	-			$	5,510			$	777			$	108			$	51,634
As at November 30, 2022		$	-			$	45,949			$	7,793			$	767			$	248			$	54,757

(1)	On November 1, 2022, Buckreef achieved commercial production at which point development expenditures were subject to depreciation.

9.	Deferred revenue

On August 11, 2022, the Company entered into a $5million prepaid Gold Doré Purchase Agreement ("Agreement") with OCIM Metals and Mining S.A. ("OCIM"). The Agreement requires funds to be made available to the Company in two tranches. The Company drew down the first tranche of $2.5 million in exchange for delivering 434 ounces of gold per quarter, commencing February 2023, for a total of 1,735 ounces of gold over four quarters.

The Agreement has been accounted for as a contract in accordance with IFRS 15, Revenue from Contracts with Customers. As the total amount paid up-front by OCIM for the future deliveries of gold differs from the stand-alone selling price of the gold, the Company concluded the Agreement contains a significant financing component ("SFC"). Gold deliveries due in connection with the up-front payment are recorded in revenue based on the gold spot price originally established at the time of each advance, being the estimated stand-alone selling price of gold deliveries as determined at inception (after separating the SFC). The outstanding deferred revenue liability will accrue interest reflecting the cost of financing.

		Amount
As at August 31, 2022		$	2,485
Accretion of deferred revenue			127
Transaction costs expensed			15
As at November 30, 2022		$	2,627

9

TRX Gold Corporation

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2022 and 2021

(Unaudited)

(Expressed in Thousands of US dollars, except for share and per share amounts)

10.	Derivative warrant liabilities

		Amount
As at August 31, 2022		$	6,849
Change in fair value			(3,365	)
As at November 30, 2022		$	3,484

Derivative warrant liabilities of $3.5million will only be settled by issuing equity of the Company.

Fair values of derivative warrant liabilities were calculated using the Black-Scholes option pricing model with the following assumptions:

		November 30, 2022			August 31, 2022
Share price		$	0.34			$	0.48
Risk-free interest rate			3.91% - 4.66%				3.32% - 3.44%
Dividend yield			0%				0%
Expected volatility			55% - 57%				55% - 60%
Remaining term (in years)			0.7- 4.2				0.9- 4.4

The fair value is classified as level 3 as the expected volatility is determined using adjusted historical volatilities and were therefore not an observable input.

Sensitivity analysis

If expected volatility, the significant unobservable input, had been higher or lower by 10% and all other variables were held constant, net income and net assets for the three months ended November 30, 2022 would increase or decrease by:

		November 30, 2022
10% change in expected volatility			Increase				Decrease
(Loss) income		$	(467	)		$	468

11.	Earnings (loss) per share

		Three months ended November 30,
		2022			2021
Net income (loss) attributable to shareholders		$	3,512			$	(2,022	)
Weighted average number of common shares for purposes of basic EPS			276,477,860				254,983,579
Effect of dilutive stock options and warrants			1,221,178				-
Weighted average number of common shares for purposes of diluted EPS			277,699,038				254,983,579

The determination of weighted average number of common shares for the purpose of diluted EPS excluded 7.4million share options and 42.0million warrants that were anti-dilutive for the period (2021: 7.4million share options and 23.4million share warrants).

12.	Share-based payments reserve

Share-based compensation expense for the three months ended November 30, 2022 totaled $0.8million (November 30, 2021: $1.0million).

As at November 30, 2022, the Company had 2,910,925(August 31, 2022 - 2,106,675) share awards available for issuance under the Omnibus Equity Incentive Plan.

10

TRX Gold Corporation

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2022 and 2021

(Unaudited)

(Expressed in Thousands of US dollars, except for share and per share amounts)

a)	Stock options

Canadian Dollars denominated stock options

		Number of stock options			Weighted average exercise price per share
Balance - November 30, 2022 and August 31, 2022			5,336,000			CAD $0.41

Options to purchase common shares carry exercise prices and terms to maturity as follows:

							Remaining
		Number of options			Expiry		contractual
Exercise price		Outstanding			Exercisable			Date		life (years)
C$0.40			2,454,000				2,454,000			October 11, 2026			3.9
C$0.43			2,782,000				2,782,000			September 29, 2026			3.8
C$0.35			100,000				100,000			January 2, 2027			4.1
C$0.41(1)			5,336,000				5,336,000						3.9	(1)

(1)	Total represents weighted average.

US Dollars denominated stock options

		Number of stock options			Weighted average exercise price per share
Balance - November 30, 2022 and August 31, 2022			7,375,000				$0.50

Options to purchase common shares carry exercise prices and terms to maturity as follows:

Remaining

Exercise price

Number of options

Expiry

contractual

Outstanding $

Outstanding

Exercisable

Date

life (years)

USD $0.50

7,375,000

1,475,000

August 17, 2027

4.7

Share-based payment expenses related to stock options amounted to $0.1million for the three-month period ended November 30, 2022 (November 30, 2021 - nil).

b)	Restricted Share Units ("RSUs"):

The following table sets out activity with respect to outstanding RSUs:

		Number of RSUs
Balance - August 31, 2022			1,855,276
Vested			(600,000	)
Forfeited			(160,000	)
Balance - November 30, 2022			1,095,276

Share-based payment expenses related to RSUs amounted to $0.2million for the three-month period ended November 30, 2022 (November 30, 2021 - nil).

11

TRX Gold Corporation

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2022 and 2021

(Unaudited)

(Expressed in Thousands of US dollars, except for share and per share amounts)

13.	Warrants reserve

		Number of warrants			Weighted average exercise price per share
Balance - November 30, 2022 and August 31, 2022			41,970,074				0.72

As at November 30, 2022, the following warrants were outstanding:

		Number of Warrants			Exercise price			Expiry date
Convertible debenture warrants - July 27, 2020			3,002,037			$	1.21			July 27, 2023
Private placement financing warrants - December 23, 2020			2,777,268			$	1.50			December 23, 2023
Private placement financing warrants - February 11, 2021			16,461,539			$	0.80			February 11, 2026
Private placement financing broker warrants - February 11, 2021			1,152,307			$	0.80			February 11, 2026
Private placement financing warrants - January 26, 2022			17,948,718			$	0.44			January 26, 2027
Private placement financing placement agent warrants - January 26, 2022			628,205			$	0.44			January 26, 2027
Balance - November 30, 2022			41,970,074

The outstanding warrants have a weighted average exercise price of $0.72and weighted average remaining contractual life of 3.3 years.

14.	Non-controlling interest

Summarized financial information for Buckreef is disclosed below:

		Three months ended November 30,
Income Statement		2022			2021
Revenue		$	9,718			$	-
Comprehensive earnings (loss) for the period			3,662				(301	)

Statement of Financial Position		November 30, 2022			August 31, 2022
Current assets		$	8,283			$	7,253
Non-current assets			57,430				53,789
Current liabilities			(8,448	)			(8,602	)
Non-current liabilities			(3,995	)			(2,815	)
Advances from parent, net			(37,709	)			(37,725	)

12

TRX Gold Corporation

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2022 and 2021

(Unaudited)

(Expressed in Thousands of US dollars, except for share and per share amounts)

15.	Related party transactions

Related parties include the Board of Directors and officers, extended relatives and enterprises that are controlled by these individuals as well as certain consultants performing similar functions.

Remuneration of Directors and key management personnel of the Company was as follows:

		Three months ended November 30,
Directors and key management personnel		2022			2021
Remuneration (1)		$	459			$	399
Share-based compensation expense			714				980
Total directors and key management personnel		$	1,173			$	1,379

(1)

Remuneration includes salaries and benefits for certain key management personnel and director fees. Certain members of the board of directors have employment or service contracts with the Company. Directors are entitled to director fees and share based payments for their services and officers are entitled to cash remuneration and share based payments for their employment services.

As at November 30, 2022, included in amounts payable is $0.2million of board fees (August 31, 2022 - $0.2million) due to related parties with no specific terms of repayment.

During the three-month period ended November 30, 2022, $0.1million for the stock options granted to key management personnel was expensed (November 30, 2021 - nil) and $0.2million for RSUs granted to directors was expensed (November 30, 2021 - nil).

During the year ended August 31, 2021, the Company granted common shares upon hiring key management personnel in the aggregate of:

a)	1.56 million common shares having a fair market value of $1.1 million on the respective start dates of the key Management (December 1, 2020 to May 18, 2021).

b)

Common shares on the first, second and third anniversary dates of the greater of up to 2.02 million, 3.55 million and 2.82 million common shares; or common shares having a fair market value of to $1.4 million, $2.5 million and $2.0 million provided that 80% of such issuance shall be guaranteed and 20% shall be subject to certain financial milestones to be determined by the Board of Directors respectively.

The common shares had a value of $7.0million at grant date that is amortized over the service period.

During the three-month period ended November 30, 2022, $0.8million related to common shares granted to key management personnel was expensed (November 30, 2021 - $1.0million).

13

TRX Gold Corporation

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2022 and 2021

(Unaudited)

(Expressed in Thousands of US dollars, except for share and per share amounts)

16.	General and administrative expenses

		Three months ended November 30,
		2022			2021
Directors' fees (Note 15)		$	107			$	73
Insurance			99				122
Office and general			19				108
Shareholder information			128				113
Professional fees			101				152
Salaries and benefits(1) (Note 15)			484				628
Consulting			51				45
Share-based compensation expense(1) (Note 15)			753				980
Travel and accommodation			47				43
Depreciation(1)			40				81
Other			8				-
Total general and administrative expenses		$	1,837			$	2,345

(1)	As a result of adoption to amendments to IAS 16, Property, Plant and Equipment, during the year ended August 31, 2022, certain costs incurred related to Buckreef's operating costs, post adoption, were recorded in cost of sales.

17.	Income tax

Income tax expense is recognized based on management's estimate of the weighted average annual income tax rate expected for the full financial year. The maximum amount of tax losses that a business can utilize in Tanzania is 70% of its taxable profit for the current year. The remaining 30% of taxable profit is subject to a statutory tax rate of 30%. As a result, Buckreef's current income tax is calculated at an effective tax rate of 9% until Buckreef's tax loss carryforwards are fully utilized. Tax losses in Tanzania can only be utilized by the entity to which the tax losses relate to.

The carrying value of Buckreef's Mineral Property, Plant and Equipment is higher than their tax written down values due to historical mining incentives in Tanzania and accelerated depreciation for tax purposes. The taxable temporary difference between the carrying value of Mineral Property, Plant and Equipment and its tax basis in excess of available tax loss carryforwards resulted in a deferred tax liability.

For the three months ended November 30, 2022, the Company recorded income tax expense of $1.5million, comprised of current income tax expense of $0.4million and deferred income tax expense of $1.1million (November 30, 2021 - nil).

18.	Financial instruments

Fair value of financial instruments

Cash and derivative warrant liabilities are classified as measured at fair value through profit and loss. Amounts receivable and amounts payable are classified as measured at amortized cost. The carrying value of the Company's cash, amounts receivable, amounts payable approximate their fair value due to the relatively short-term nature of these instruments.

Fair value estimates are made at a specific point in time based on relevant market information and information about financial instruments. These estimates are subject to and involve uncertainties and matters of significant judgment, and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

The Company classifies its financial instruments carried at fair value according to a three-level hierarchy that reflects the significance of the inputs used in making the fair value measurements. The three levels of fair value hierarchy, giving the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs, are as follows:

·	Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;

·	Level 2 - Inputs other than quoted prices that are observable for assets and liabilities, either directly or indirectly; and

·	Level 3 - Inputs for assets or liabilities that are not based on observable market data.

As at November 30, 2022 and August 31, 2022, cash was classified as Level 1 and derivative warrant liabilities (Note 10) were classified as Level 3 under the fair value hierarchy.

14

TRX Gold Corporation

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2022 and 2021

(Unaudited)

(Expressed in Thousands of US dollars, except for share and per share amounts)

19.	Segmented information

Operating segments

The Company's Chief Operating Decision Maker, its Chief Executive Officer, reviews the operating results, assesses the performance and makes capital allocation decisions of the Company viewed as a single operating segment engaged in mineral exploration and development in Tanzania. All amounts disclosed in the interim condensed consolidated financial statements represent this single reporting segment. The Company's corporate division only earns interest revenue that is considered incidental to the activities of the Company and does not meet the definition of an operating segment as defined in IFRS 8, Operating Segments.

Geographic segments

The Company is in the business of mineral exploration and production in Tanzania. Information regarding the Company's geographic locations are as follows:

		Three months ended November 30,
Revenue		2022			2021
Tanzania		$	9,718			$	-
Total revenue		$	9,718			$	-

Non-current assets		November 30, 2022			August 31, 2022
Canada		$	65			$	-
Tanzania			59,668				55,993
Total non-current assets		$	59,733			$	55,993

20.	Commitments and contingencies

Commitments:

In order to maintain its existing mining and exploration licenses, the Company is required to pay annual license fees totalling $24. As at November 30, 2022 and August 31, 2022, these licenses remained in good standing and the Company is up to date on its license payments.

Contingencies:

The Company is involved in litigation and disputes arising in the normal course of operations. Management is of the opinion that the outcome of any potential litigation will not have a material adverse impact on the Company's financial position or results of operations. Accordingly, no provisions for the settlement of outstanding litigation and potential claims have been accrued as at November 30, 2022 and August 31, 2022.

15

TRX Gold Corporation

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2022 and 2021

(Unaudited)

(Expressed in Thousands of US dollars, except for share and per share amounts)

21.	Non-cash items

		Three months ended November 30,
		2022			2021
Depreciation		$	233			$	81
Gains on derivative warrant liabilities (Note 10)			(3,365	)			(208	)
Share-based compensation expense (Note 12)			809				980
Accretion of provision for reclamation			35				34
Deferred income tax expense (Note 17)			1,129				-
Accretion of lease liabilities			5				-
Accretion of deferred revenue (Note 9)			127				-
Foreign exchange gains			(4	)			-
Other expenses			15				-
Total non-cash items		$	(1,016	)		$	887

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