UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
For the Fiscal Year Ended November 30, 2020
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________________ to __________________________
Commission file number 000-55517
PUREBASE CORPORATION
(Exact name of registrant as specified in its charter)
| 27-2060863 | ||
| (State | or other jurisdiction | (I.R.S. Employer |
| of incorporation or organization) | Identification No.) |
8631 State Highway, 124 Ione, California | 95640 |
| (Address of Principal Executive Offices) | (Zip Code) |
(209) 257-4331
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of | Trading symbol(s) | Name of | ||
| None | N/A |
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $0.0001
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issued,issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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 of 1934 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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small reporting company, or a smaller reportingan emerging growth company. See the definitions of "large“large accelerated filer," "accelerated filer" and "smaller” “accelerated filer,” “smaller reporting company"company” or an “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | [ ] | Accelerated filer | [ ] |
| Non-accelerated filer | [X] | Smaller reporting company | [X] |
| Emerging Growth company | [X] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act: [ ]
Indicate by check ifmark whether the registrant has filed a smallerreport on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The aggregate market value of the voting stockand non-voting common equity held by non-affiliates of the Registrant, computed by reference to the closing price on such dateat which the common equity was approximately $6,314,233 based on alast sold, or the average bid and asked price of $0.18 per share. (The numbersuch common equity, as of shares traded is insignificant)
As of FebruaryMarch 16, 2018, the Registrant had outstanding 141,347,1732021, there were 214,950,751 shares of the registrant’s common stock.
TABLE OF CONTENTS
This Annual Report on Form 10-K includes forward-looking statements that reflect management’s current views with respect to future events and financial performance. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. Those statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based. Current and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and without limitation:
| ● | absence of contracts with customers or suppliers; |
| ● | our ability to maintain and develop relationships with customers and suppliers; |
| ● | the impact of competitive products and pricing; |
| ● | supply constraints or difficulties; |
| ● | the retention and availability of key personnel; |
| ● | general economic and business conditions; |
| ● | substantial doubt about our ability to continue as a going concern; |
| ● | our ability to successfully implement our business plan; |
| ● | our need to raise additional funds in the future; |
| ● | our ability to successfully recruit and retain qualified personnel in order to continue our operations; |
| ● | our ability to successfully acquire, develop or commercialize new products; |
| ● | the commercial success of our products; |
| ● | the impact of any industry regulation; |
| ● | our ability to develop existing mining projects or establish proven or probable reserves; |
| ● | our dependence on one vendor for our minerals for our products; |
| ● | the impact of potentially losing the rights to properties; |
| ● | the impact of the increase in the price of natural resources; and |
| ● | the continued impact of the COVID-19 pandemic. |
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. Readers are urged to carefully review and consider the various disclosures made by us in this Report and in our other reports filed with the Securities and Exchange Commission (the “SEC”). We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. However, no assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.
As used in this Annual Report on Form 10-K and unless otherwise indicated, the terms “Company,” “we,” “us,” and “our,” refer to PureBase Corporation ("Purebase"and its wholly-owned subsidiaries, PureBase Agricultural, Inc., the "Company", "we", or "our"a Nevada corporation (“PureBase AG”) and U.S. Agricultural Minerals, LLC, a Nevada limited liability company (“USAM”).
Corporate History
The Company was incorporated in the State of Nevada on March 2, 2010. On January 12, 20152010, under the name Port of Call Online, Inc. to create a web-based service that would offer boaters an easy, convenient, fun, easy to use, online resource to help them plan and organize their boating trips. Pursuant to a corporate reorganization consummated on December 23, 2014, the Company changed its business focus to the identification, acquisition, development and full-scale exploitation of industrial and natural mineral properties in the United States for the development of products for the construction and agriculture markets. In line with this business focus, the Company changed its name to PureBase Corporation in January 2015.
The Company is headquartered in Ione, California.
Business Overview
The Company, through its two divisions, Purebase Ag and was assignedPurebase SCM, is engaged in the new trading symbol "PUBC". The Company' executive offices are located at 8625 State Highway 124, Ione California 95640. The Company's telephone number is (209) 257-4331agricultural and atconstruction-materials sectors. In the Company's Web address, www.Purebase.com.
In the construction sector, relatedthe Company’s focus in 2020 has been to develop and test a kaolin-based product that will help create a lower CO2-emitting concrete (through the use of high-quality SCM’s.) The Company is developing a SCM that it believes can potentially replace up to 40% of cement, the most polluting part of concrete. As government agencies continue to enact stricter requirements for less-polluting forms of concrete, the Company believes there are significant opportunities for high-quality SCM products such as cements. Purebase will provide for distribution of those products into each industry related market. in the construction-materials sector.
In the future,agricultural sector, the Company may establish additional divisions or subsidiaries to develop other natural resource projects.
The Company willis building a brand family under the parent trade name “Purebase,” consisting of its Purebase Shade Advantage WP product, a kaolin-clay based sun protectant for crops. It is also seek to develop mineralized materialsinvolved in the early testing of pozzolan, potassium silicate sulfate forsoil amendment products based on humic and fulvic acids derived from leonardite. Other agricultural applications. While some ofproducts are in the Company's current properties which it owns or controls contain pozzolan, potassium silicate sulfate, among other minerals, such mineralizations have yet to be quantified and do not represent "proven" or "probable" reserves as defined in Industry Guide 7 of the federal securities regulations.
The Company utilizes the services of US Mine Corporation ("USMC"(“USMC”), a private company focusing onNevada corporation, and a significant shareholder of the Company for the development and contract mining of industrial mineral and metal projects throughout North America, to perform exploration drilling, preparation of feasibility studies, mine modeling, on-site construction, mine production, site reclamation and mine site reclamation.for product fulfillment. Exploration services would also include securing necessary permits, environmental compliance, and reclamation plans. In addition, a substantial portion of the minerals to be utilized by Purebase will bethe Company is obtained from properties owned or controlled by USMC of whichUSMC. A. Scott Dockter and John Bremer and Craig Barto are officers, directors, and owners.
PureBase Shade Advantage WP Purebase Potassium Silicate Sulfate Advantage , Purebase Humate Advantage, and Purebase Soil Advantage.
PureBase Shade Advantage WP
is a natural mineral plant protectant that reduces sunburn damage to plant tissue (including fruits and nuts) exposed to UV and infraredThe anticipated benefits of this product include:
| ● |
| ● |
| Designed for application on organic and sustainable crops |
| When sprayed on dormant trees, Shade Advantage WP has the potential of mitigating weather induced dormancy |
Shade Advantage WP is available in 25 lb. compostable and biodegradable bags.
To date, we have on going distributorship agreements withthe Company distributes its products through the Aligned Group,Ag Distributors, Helena Chemical, Salida Ag to consolidate our marketing strategy focused on the 10 western states.Agri Enterprises and other distributors. It also private labels product for other agricultural companies. We have also initiated exports of Purebase Soil Advantageexported limited product to Vietnam, Laos, and Cambodia. As partCambodia, and trials are being conducted in Peru to determine the effectiveness of our on-going research, we have successfully concluded product validation trials conducted by the Helena Research and Development Center.
The Company currently has fivethree full-time employees. Employees include a CEO, a CFO and a Vice President of Agricultural Products Research and Development. We currently anticipate hiring additional employees duringfor the current year to work the Company's agriculturalCompany’s production operations, assubject to sufficient funding, if our agricultural products development and distribution programs continue to expand. While skilled equipment and operations personnel are in demand, we believe we will be able to hire the necessary workers to sustain our current product development and production programs. In the meantime, theThe Company will relycurrently relies on USMC to provide the Company'sCompany’s mining services. Our employees are not expected to be subject to a labor contract or collective bargaining agreements. We consider our employee relations to be good.
Outside services, relating primarily to agricultural market research and product development, and relating to the development and application of SCMs, as well as other technical matters as may be deemed useful in therelated to product development and branding activities, will be provided by various independent contractors.
Competition in the U.S. are estimated at $346.9 billion for 2016, down from $ 362.8 billion in 2015. In 2016, crop farms expenditures decreased to $ 177.0 billion, down 1.8%. Combined crop inputs (chemicals, fertilizers, and seeds) are $52.8 billion, accounting for 29.8 % of crop farms total expenses. California contributed most to the 2016 United States total expenditures, with expenses of $34.2 billion (9.9%). California expenditures are down 3.8% from the 2015 estimate of $35.5 billion. Iowa, the next leading state, has $26.3 billion in expenses (7.6%) and Texas with $23.9 billion.
Major competitors in the Purebasewith our agricultural products include:
| ● | ||
| ● | Surround: A kaolin-clay-based sun protectant |
| ● | BioFlora: a comprehensive agricultural products company based in Arizona. |
| ● | Mesa Verde Humates, a division of Bio Huma Netics, a manufacturer of humate-based products based in New Mexico. |
| ● | The Andersons Humic |
Agricultural Industry Overview
The Company’s current product, Shade Advantage WP, is a sun-protectant for various crops such as walnuts, watermelons, citrus, tomatoes, apples, cherries, and more. Under development is a number of organic products that will be classified as soil amendments. The overview below shows the size and scope of the crops that could potentially use products that we develop.
The Company’s agricultural products are primarily sold in the California market. According to the California Department of Food and Agriculture, in 2019 (the latest year for which statistics are available) California’s farms and ranches received more than $50 billion in cash receipts for their output. According to the University of California, Davis, Agricultural Issues Center. California agricultural exports totaled $21.7 billion in 2019. Top commodities for export included almonds, pistachios, dairy and dairy products, wine and walnuts. California organic product sales totaled more than $10.4 billion in 2019and organic production encompassed over 2.5 million acres in California, which is the only state with a USDA National Organic Program.
According to the California Department of Food and Agriculture, in its 2019 Crop year report, over a third of the country’s vegetables and two-thirds of the country’s fruits and nuts are grown in California. California’s top-10 valued commodities for the 2019 crop were:
| ● | Dairy Products, Milk — $7.34 billion |
| ● | Almonds — $6.09 billion |
| ● | Grapes — $5.41 billion |
| ● | Cattle and Calves — $3.06 billion |
| ● | Strawberries — $2.22 billion |
| ● | Pistachios — $1.94 billion |
| ● | Lettuce — $1.82 billion |
| ● | Walnuts — $1.29 billion |
| ● | Floriculture — $1.22 billion |
| ● | Tomatoes — $1.17 billion |
Construction Industry Overview
We are developing SCMs for the construction material markets, particularly the cement markets.
Domestic Production and Use:
According to the United States Geological Survey in a 2020 Mineral Commodity Summary, in 2019, U.S. portland cement production increased by 2.5% to 86 million tons, and masonry cement production continued to remain steady at 2.4 million tons. Portland cement is the most common type of cement in general use around the world as a basic ingredient of concrete, mortar, stucco, and non-specialty grout. Cement was produced at 96 plants in 34 States, and at 2 plants in Puerto Rico. U.S. cement production continued to be limited by closed or idle plants, underutilized capacity at others, production disruptions from plant upgrades, and relatively inexpensive imports.
In 2019, sales of cement increased slightly and were valued at $12.5 billion. Most cement sales were to make concrete, worth at least $65 billion. In 2019, it was estimated that 70% to 75% of sales were to ready-mixed concrete producers, 10% to concrete product manufactures, 8% to 10% to contractors, and 5% to 12% to other customer types. Texas, California, Missouri, Florida, Alabama, Michigan, and Pennsylvania were, in descending order of production, the seven leading cement-producing states and accounted for nearly 60% of U.S. production.
Construction spending decreased in 2019, due to a decline in private residential and nonresidential spending. Cement shipments into North Carolina and South Carolina increased due to reconstruction following a hurricane in 2018. The leading cement-consuming states were Texas, California, and Florida, in descending order by tonnage.
Most portland cement is used to make concrete, mortars, or stuccos, and competes in the construction sector with concrete substitutes, such as aluminum, asphalt, clay brick, fiberglass, glass, gypsum (plaster), steel, stone, and wood. Certain materials, especially fly ash and ground granulated blast furnace slag, develop good hydraulic cementitious properties by reacting with lime, such as that released by the hydration of portland cement. Where readily available (including as imports), these SCMs are increasingly being used as partial substitutes for portland cement in many concrete applications and are components of finished blended cements.
Competition in the Construction Materials Sector
Potential competitors in the Cement Additive Industry include:
Currently in price
Newer technology could produce further competition, such as CO2-entrained concrete products that are produced by companies like Carbon Cure, a new company that has received significant investments by Bill Gates, Microsoft, Amazon, and others.
Pricing Competition
Many of our competitors have greater exploration, production, and capital resources than we do, and may be able to compete more effectively in any of these areas. For example, these competitors may be able to spend greater amounts on acquisition of desirable mineral properties, on exploration of their mineral properties and on development of their mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance the exploration and development of their mineral properties. Our inability to secure capital to fund exploration and, if warranted, development costs for our mineral properties would create a competitive cost disadvantage in the marketplace which would have a material adverse effect on our operations and potential profitability.
Government Controls and Regulations
Natural resource exploration, mining and processing operations are subject to various federal, state and local laws and regulations governing prospecting, exploration, development, production, labor standards, occupational health, mine safety, control of toxic substances, and other matters involving environmental protection and employment. United States environmental protection laws address the maintenance of air and water quality standards, the preservation of threatened and endangered species of wildlife and vegetation, the preservation of certain archaeological sites, reclamation, and limitations on the generation, transportation, storage and disposal of solid and hazardous wastes, among other things. There can be no assurance that all the required permits and governmental approvals necessary for any mining project with which we may be associated can be obtained on a timely basis, or maintained in good standing. Delays in obtaining or failure to obtain necessary government permits and approvals may adversely impact our operations. The regulatory environment in which we operate could change in ways that would substantially increase costs to achieve compliance. In addition, significant changes in regulationregulations could have a material adverse effect on our operations and ability to timely and effectively implement our drilling/mapping programs and develop our mining properties.
The following governmental controls and regulations which materially affect the mining properties we or our third party mineral suppliers will seek to explore and develop.
Mining operations are subject to numerous federal, state and local laws and regulations. At the federal level, mining properties are subject to inspection and regulation by the Division of Mine Safety and Health Administration of the Department of Labor ("MSHA"(“MSHA”) under provisions of the Federal Mine Safety and Health Act of 1977. The Occupation and Safety Health Administration ("OSHA"(“OSHA”) also has jurisdiction over certain safety and health standards not covered by MSHA. Mining operations and all proposed exploration and development will require a variety of permits. In addition, any mining operations occurring on federal property are subject to regulation and inspection by the Bureau of Land Management ("BLM"(“BLM”). While we have considerable experience in the mining permitting process, permitting procedures are complex, costly, time consuming and subject to potential regulatory delay. We currently own mining rights in several properties having existing permits in place or properties where existing permitting requirements and other applicable environmental protection laws and regulations would not pose a material hindrance to our ability to explore and develop such properties. As part of our initial evaluation of suitable projects, we will ascertain a property'sproperty’s regulatory compliance status and any issues affecting current or future permitting requirements. However, we cannot be certain that future changes in laws and regulations would not result in significant additional expenses, capital expenditures, restrictions or delays associated with the exploration and development of our current or future projects. We cannot predict whether we will be able to obtain new permits or whether material changes in permit conditions will be imposed. Obtaining new mining permits or the imposition of additional conditions could have a material adverse effect on our ability to develop the mining properties in which we have an interest or ownership or could increase the costs charged by third party suppliers or decrease the amount of minerals available from third party suppliers.
Legislation has been introduced in prior sessions of the U.S. Congress to make significant revisions to the U.S. General Mining Law of 1872 that would affect our potential development of unpatented mining claims on federal lands, including any royalty on mineral production. It cannot be predicted whether any of these proposals will become law. Any levy of the type proposed would only apply to unpatented federal lands and accordingly could adversely affect the profitability of any future mineral production from projects being explored by the Company on federal property.
All of our current mining projects will beare governed by the Bureau of Land ManagementBLM and the US Forest Service. The Federal Land Policy and Management Act (1976) established the BLM'sBLM’s multiple-use mandate to manage the public lands "in“in a manner that will protect the quality of scientific, scenic, historical, ecological, environmental, air and atmospheric, water resource, and archeological values; that, where appropriate, will preserve and protect certain public lands in their natural condition"condition”. The Lands, Minerals & Water Rights branch coordinates with BLM planning and resource specialists to manage surface resources, minerals and water rights to ensure that authorized uses of public lands do nothinglands.
We may not be able to diminish their health and productivity or impair their use and enjoyment by present and future generations.
Item 1A. "Risk Factors" for more information.
Mining activities, including drilling, mapping and development and production activities are subject to environmental laws, policies and regulations. These laws, policies and regulations affect, among other matters, emissions to the air, discharges to water, management of waste, management of hazardous substances, protection of natural resources, protection of endangered species, protection of antiquities and reclamation of mined land. Legislation and implementation of regulations adopted or proposed by the United States Environmental Protection Agency ("EPA"(“EPA”), the BLM and by comparable agencies in various states, directly and indirectly affect the mining industry in the United States. These laws and regulations address the environmental impact of mining and mineral processing, including potential contamination of soil and water from tailings, discharges and other wastes generated by the mining process. In particular, legislation such as the Clean Water Act, the Clean Air Act, the Federal Resource Conservation and Recovery Act ("RCRA"(“RCRA”), and the National Environmental Policy Act require analysis and/or impose effluent standards, new source performance standards, air quality standards and other design or operational requirements for various components of mining and mineral processing, including natural resource mining and processing of the type presently or to be conducted by the Company. Such statutes also may impose liability on mine developers for remediation of waste they have created.
Mining projects also are subject to regulations under (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"(“CERCLA” or "Superfund"“Superfund”) which regulates and establishes liability for the release of hazardous substances and (ii) the Endangered Species Act ("ESA"(“ESA”) which identifies endangered species of plants and animals and regulates activities to protect these species and their habitats. Revisions to "CERCLA"“CERCLA” and "ESA"“ESA” are being considered by Congress; however, the impact of these potential revisions on our business is not clear at this time.
The Clean Air Act, as amended, mandates the establishment of a Federal air permitting program, identifies a list of hazardous air pollutants, including various metals and pollutants, and establishes new EPA enforcement authority. The EPA has published final regulations establishing the minimum elements of state operating permit programs. We will be required to comply with these EPA standards to the extent adopted by the State in which development projects are located.
Future regulations are unknown but expected to occur. The new U.S. Administration has rejoined the Paris Climate Accord and placed further restrictions on carbon-emitting activities. Future restrictions and higher standards could negatively impact our ability to bring new products to market, as well as bring new opportunities for products that can reduce cO2 emissions.
In addition, developing mining sites requires mitigation of long-term environmental impacts by stabilizing, contouring, re-sloping, and revegetating various portions of a site. While a portion of the required work can be performed concurrently with developing the property, completion of the environmental mitigation occurs once removal of all materials and facilities has been completed. These reclamation efforts are conducted in accordance with detailed plans which have been reviewed and approved by the appropriate regulatory agencies. The mining developer must insureensure that all necessary cash deposits and financial resources to cover the estimated costs of such reclamation as required by permit are made.
We intend that any exploration and development of mining projects by the Company will be conducted in substantial compliance with federal and state regulations and be consistent with the need to remediate any environmental impact.
Agricultural Products Certifications
All sales of agricultural products have to be registered in order to be sold, distributed and /or applied in farming operations. Standards for registration are set by and regulated by the USDA (UnitedUnited States Department of Agriculture)Agriculture (“USDA”) at the federal level. All state agencies must also comply with federal guidelines. There are guidelines for the registration and labelling of the products for agriculture use, some of which are federal, others are State. Our product(s) which are organic must meet several additional qualifications in order to become registered.
In California, for example, the task of regulating the registration processes is carried out by the California Department of Food and Agriculture (CDFA)(“CDFA”). There are some activities within the regulatory process that are executed by recognized and licensed private entities such as chemical laboratories and certifying laboratories. In some instances, perin accordance with various international treaties, some of bilateral and some by regional structures (European Union, etc)etc.) and some governmental and private organizations are recognized and licensed to play particular roles in certifying and/or in the certifying processes.
Currently Purebase has two productswe have one product fully registered as an organic plant protectant: Purebase Soil Advantage and PurebasePureBase Shade Advantage WP. The WP stands for Wettable Powder which means the powder goes into suspension when mixed with water. We have registration certificates for this product in several states including California and Washington. PurebaseOur product is currently pursuingregistered in the US and California registration of its otheras agricultural products.
An investment in our common stock involves a number of very significant risks. You should carefully consider the following risk factorsrisks and uncertainties in addition to other information in this report in evaluating our business. We have described the risks we considercompany and its business before purchasing shares of our common stock. Our business, operating results and financial condition could be seriously harmed due to be material. However, there may be additional risks that we view as not material or of which we are not presently aware. If any of the risks described below werefollowing risks. You could lose all or part of your investment due to occur, our business, prospects, financial condition, resultsany of operations or cash flow could be materially adversely affected.
Risks Related to Our Business
The Company is a limited operating historydevelopment stage company which makes the evaluation of its future business prospects difficult.
The Company changed its business focus to its current business of developing industrialagricultural and natural resources as a result of a reorganization with Purebaseits wholly owned subsidiary PureBase Ag which occurred in December 2014. Most of the Company's current agricultural business is conducted through its wholly-owned subsidiary Purebase Ag which is a development stage company which commenced its business in 2014. Consequently, the Company2014, and its subsidiaries have only limited operating history and an unproven business strategy and mining properties and production facilities that are currently being developed. Our primary activities to date have been the design of our business plan and identifying and acquiring various natural mineral property rights or leases relating to mining projects which fit our project profile as well as developing agricultural supplements and SCM's. The Company commenced selling its agricultural products during FY 2017. As such we may2017 and has not be ableyet achieved profitable operations. In 2019, the Company began developing a SCM for the construction materials market. Final testing for two SCM products have been submitted to achieve positive cash flows and our lackthe California Department of Transportation for inclusion on its Approved Materials List.
Our recent operating history makes evaluation of our future business and prospects difficult. The Company'sCompany’s success is dependent upon the successful development of suitable mineral projects, establishing its mineral production capability and sellingestablishing a customer base for its agricultural products. Any future success that we might achieve will depend upon many factors, including factors beyond our control which cannot be predicted at this time. These factors may include but are not limited to: changes in or increased levels of competition; the availability and cost of bringing mineral projects into production; the amount of industrialagricultural and/or natural resources identifiedavailable and the market price of and the uses for such minerals. These conditionsfactors may have a material adverse effect upon our business operating results and financial condition.
Our independent registered public accounting firm has expressed doubt about our ability to accurately forecast revenues is very difficult. Future variables includecontinue as a going concern.
Our audited consolidated financial statements as of November 30, 2020 have been prepared under the developmentassumption that we will continue as a going concern. Our independent registered public accounting firm has issued a report that included an explanatory paragraph referring to our recurring losses from operations and production of minerals from the Company's mining projects, the market for the natural resources being acquired from third party suppliers, the price of various mineral resources, building its production facilitiesnet capital deficiency and establishing a customer base. To the extent we are unsuccessful in establishing our business strategy and generating revenues through development of our own mining property or through our subsidiaries, Purebase Ag and Purebase Build, we may be unable to appropriately adjust spending in a timely manner to compensate for any revenue shortfall or will have to reduce our operating expenses, causing us to forego potential revenue generating activities, either of which could have a material adverse effectexpressing substantial doubt in our business, results of operations and financial condition.
We will need to raise additional capital for the foreseeable future in order to continue operations and realize our business plans, the failure of which could adversely impact our operations.
Although we have started to generate revenue, such revenue is not sufficient to cover our operating expenses and financing costs. As of November 30, 2020, we had liabilities of $1,937,014 and a working capital deficiency of $1,792,674. To stay in business, we will need to raise additional capital through public or private sales of our securities, debt financing or short-term bank loans, or a combination of the foregoing. In the past, we have financed our operations by issuing secured and unsecured convertible debt and equity securities in private placements, in some cases with equity incentives for the investor in the form of warrants to purchase our common stock and have borrowed from related parties. We have sought and will continue to seek various sources of financing but there are no commitments from anyone to provide us with financing. We can provide no assurance as to whether our capital raising efforts will be successful or as to when, or if, we will be profitable in the future. Even if the Company achieves profitability, it may not be able to sustain such profitability. If we are unable to obtain financing or achieve and sustain profitability, we may have to suspend operations, sell assets and will not be able to execute our business plan. Failure to become and remain profitable may adversely affect the market price of our common stock and our ability to raise capital and continue operations.
We will need to grow the size and capabilities of our company, and we may experience difficulties in managing this growth.
If and when our marketing plans and business strategies develop, we may need to recruit additional managerial, operational, sales and marketing, financial, condition.
We depend on third parties for services.
We currently rely, and for the foreseeable future will continue to rely, in substantial part on advisors and consultants to provide certain services. There can be no assurance that the services of these independent advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our business operations may be interrupted. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, if at all. If we are not able to effectively expand our company by hiring new employees and expanding our consultants and contractors, we may not be able to successfully implement the tasks necessary to achieve our marketing, research, development, and expansion goals, and we may face loss and be liable for deficiencies in service caused by the lack of capable personnel or errors made by third parties.
If we lose key employees and consultants or are unable to attract or retain qualified personnel, our business could suffer.
Our future success depends, in part, on our ability to attract, retain and motivate highly qualified technical, marketing, engineering, and management personnel. Any inability in hiring and retaining qualified personnel could result in delays in development or fulfillment of any current strategic and operational plans.
Our officers and directors are able to control the Company.
Our officer and directors and their affiliates control the vast majority of common stock of our company. As a result, they have significant influence over the management and affairs of the Company and control over matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets. Their interests may differ from the interests of other stockholders and thus result in corporate decisions that are disadvantageous to other shareholders. This concentration of ownership may also have the effect of delaying or preventing a change in control of the Company that may be favored by other stockholders. This could prevent transactions in which stockholders might otherwise recover a premium for their shares over current market prices. This concentration of ownership and influence in management and board decision-making could also harm the price of our capital stock by, among other things, discouraging a potential acquirer from seeking to acquire shares of our capital stock (whether by making a tender offer or otherwise) or otherwise attempting to obtain control of our company.
Raising funds through debt or equity financings in the future, would dilute the ownership of our existing stockholders and possibly subordinate certain of their rights to the rights of new investors or creditors.
We expecthope to raise additional funds in debt or equity financings if they are available to us on terms we believe reasonable to provide for working capital, carry out mining development and production programs, expandexpansion of our marketing efforts or to make acquisitions. Any sales of additional equity or convertible debt securities would result in dilution of the equity interests of our existing stockholders, which could be substantial. Additionally, if we issue shares of preferred stock or convertible debt to raise funds, the holders of those securities might be entitled to various preferential rights over the holders of our Common Stock, including repayment of their investment,common stock and possibly additional amounts, before any paymentssuch debt instruments may contain negative covenants restricting corporate actions which could be made to holders of our Common Stock in connection withhave an acquisition of the Company. Incurring additional debt, if authorized, would create rights and preferences that would be senior to, or otherwise adversely affect,adverse effect on the rights and the value of our Common Stockcommon stock and wouldour operations.
We face increased competition.
At the present time the Company is aware of other companies providing similar agricultural and natural resources to those of the Company’s. In addition, other entities not currently offering the minerals or product uses similar to the Company’s may enter the industrial and agricultural markets. The Company’s natural resources and products will also have to be repaid from future cash flow before therecompete with established minerals (such as fly ash for use in making cement) which are already in commercial and agricultural use. Any such competitors would be any return to investors.
At present, our businesssales are concentrated in a few customers.
The Company’s sales are presently concentrated within a few customers. If any of these customers, in particular, the customers that provide the most significant percentage of revenue, are no longer customers, for any reason, and operating results.
An increase in the price of natural resources will adversely affect our chances of success.
The Company'sCompany’s business plan is based on current development costs and current prices of the natural resources being developed or purchased by the Company. However, the price of minerals can be very volatile and subject to numerous factors beyond our control including industrial and agricultural demand, inflation, the supply of certain minerals in the market, and the costs of mining, refining and shipping of the minerals. Since the Company will be obtaining the majorityall of its minerals from third party suppliers, any significant increase in the price of these natural resources will have a materially adverse effect on the results of the Company'sCompany’s operations unless it is able to offset such a price increase by implementing other cost cutting measures or passing such increases on to its customers. While the Company has attempted to secure stable pricing and supply pursuant to its long term agreement with USMC, there is no assurance that the Company will not incur future price increases or supply shortages of its raw materials.
We may lose rights to properties if we fail to meet payment requirements or development and/or production schedules.
We expect to acquire rights to some of our mineral properties from leaseholds or purchase mining rights that require the payment of royalties, rent, minimum development expenditures or other installment fees or specified expenditures. If we fail to make these payments/expenditures when they are due, our mineral rights to the property may be terminated. This would be true for any other mineral rights which require payments to be made in order to maintain such rights.
The Company'sCompany’s business strategy is to develop and extract or obtain certain minerals which they believe can have significant commercial applications and value. The Company'sCompany’s business strategy also includes developing new uses and products derived from these mineral resources, such as the use of pozzolan as an ingredient for cement or sulfate and Humate for agricultural uses. There is no assurance that we will be able to identify and/or develop commercially viable uses for the minerals we will be mining or obtaining. In addition, even if we identify and/or develop commercial uses and markets for our minerals, the time and cost of mining or otherwise obtaining, refining, blending and distributing such minerals may exceed our expectations or, when developed, the amount of minerals available may fall significantly short of our expectations thus providing a lower return on investment or a loss to the Company.
We have not yet established sustained and increasing sales from our customer base or distribution system.
During the past yearfiscal 2020 we have prepared and sent samples of our agricultural products to several potential industrial and retail customers and have established a customer base and distribution system for our agricultural products.products but have experienced a decrease in sales. However, we are now engaged in promoting sales and marketing in orderan effort to increase the sales revenue of our agricultural products to customers and through the distribution system. To date, we have not obtained anyone long term supply contractscontract for our minerals and agricultural products and sales increases have been modest. With regard to our SCM products, while we believe our other mineral resources will have significant markets for SCM and agricultural applications, wewith USMC. We have not yet entered into any agreements tofor the purchase of our minerals or SCM products nor have we established a distribution system to deliver our minerals and SCM products to customers. Our inability to attract additional customers orfor our agricultural products, to deliver products in a time and cost effectivecost-effective manner or develop our SCM business would have an adverse effect on our potential revenues from andthe growth of our business.
Mineral exploration and mining are highly regulated industries.
Mining is subject to extensive regulation by state and federal regulatory authorities. State and federal statutes regulate environmental quality, safety, exploration procedures, reclamation, employees'employees’ health and safety, use of explosives, air quality standards, pollution of stream and fresh water sources, noxious odors, noise, dust, and other environmental protection controls as well as the rights of adjoining property owners. We will strive to verify that projects currently owned or being considered, are currently operating or can be operated in substantial compliance with all known safety and environmental standards and regulations applicable to such mining properties and activities. We will also seek suppliers and service providers, such as USMC, who we believe are operating in substantial compliance with all safety and environmental standards and regulations applicable to such mining properties and activities. However, there can be no assurance that our compliance efforts regarding our own properties couldwould not be challenged or that future changes in federal or state laws, regulations or interpretations thereof will not have a material adverse effect on our ability to establish and sustain mining operations of our own properties or adversely affect the mining properties of our suppliers.
Certain of our current and proposed products will require certifications before being suitable for intended purposes.
Some of our agricultural products and our SCM'sSCM’s will require certain certifications before being suitable for labellinglabeling and usage. For example, our SCM must be certified by the ASTM International (American Society for Testing and Materials International)California Department of Transportation to meet certain strength standards in order to be certified for use in large government projects. Similarly, our agricultural products must be certified under US Department of Agriculture ("USDA"(“USDA”) and CDFACalifornia Department Of Food and Agriculture (“CDFA”) specifications and properly labeled. While the Company ashas certified twoone of its agricultural products under USDA and CDFA specifications and is currently working with various laboratories and agencies to acquire future certifications, there is no assurance as to if or when suchthat future certifications will be obtained.
We are a public "reporting company"“reporting company” with the US Securities and Exchange Commission ("SEC"(“SEC”). As a public reporting company, we will incur significant legal, accounting, reporting and other expenses not generally applicable to a private company. We also will incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) as well as other rules implemented by the SEC. We expect theseThese rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We
The outbreak of the COVID-19 coronavirus could continue to negatively impact our business and the global economy. In addition, the COVID-19 pandemic could negatively impact our ability to obtain financing when required.
The COVID-19 coronavirus has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19 or other public health epidemic, poses the risk that we or our employees, consultants, suppliers, customers, and other commercial partners may be prevented from conducting business activities for an indefinite period of time, including due to the spread of the disease or shutdowns requested or mandated by governmental authorities. While our operations have not been significantly affected by the COVID-19 pandemic, there can be no assurance that this trend will continue. COVID-19 has had an adverse impact on global economic conditions, which could impair our ability to raise capital when needed.
Risks Related to Our Common Stock and Its Market Value
Our common stock is subject to the “penny stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
SEC Rule 15g-9 establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
| ● | that a broker or dealer approve a person’s account for transactions in penny stocks; and |
| ● | the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. |
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
| ● | obtain financial information and investment experience objectives of the person; and |
| ● | make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. |
The broker or dealer must also expectdeliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:
| ● | sets forth the basis on which the broker or dealer made the suitability determination; and |
| ● | that the broker or dealer received a signed, written agreement from the investor prior to the transaction. |
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors.” The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities.
Our securities are quoted on the OTCQB, which may not provide us as much liquidity for our investors as an exchange, such as the NASDAQ Stock Market or other national or regional exchanges.
Our securities are quoted on the OTCQB, which provides significantly less liquidity than the NASDAQ Stock Market or other national or regional exchanges. Securities quoted on the OTC are usually thinly traded, highly volatile, have fewer market makers and are not followed by analysts. The SEC’s order handling rules, which apply to NASDAQ-listed securities, do not apply to securities quoted on the OTCQB. Quotes for stocks included on the OTC markets are not listed in newspapers. Therefore, prices for securities traded solely on the OTC Market may be difficult to obtain and holders of our securities may be unable to resell their securities at or near their original acquisition price, or at any price. We cannot assure you a liquid public trading market will develop.
The market price of our common stock may be adversely affected by several factors.
The market price of our common stock could fluctuate significantly in response to various factors and events, including:
| ● | our ability to execute our business plan; |
| ● | operating results below expectations; |
| ● | announcements of technological innovations or new products by us or our competitors; |
| ● | loss of any strategic relationship; |
| ● | industry developments; |
| ● | economic and other external factors; and |
| ● | period-to-period fluctuations in our financial results. |
In addition, the securities markets have, at times, experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our stockholders have limited protections against interested director transactions, conflicts of interest and similar matters.
Sarbanes-Oxley, as well as rule changes proposed and enacted by the SEC, the New York Stock Exchange, the Amex Equities Exchanges and NASDAQ, as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities which are listed on those exchanges or the NASDAQ. Because we will not be seeking to be listed on any of the exchanges in the near term, we are not presently required to comply with many of the corporate governance provisions. We do not currently have independent audit or compensation committees. Until then, the directors who are part of management have the ability, among other things, to determine their own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations.
We have not paid dividends in the past and do not expect to pay dividends in the foreseeable future. Any return on investment may be limited to the value of our common stock.
We have never paid cash dividends on our capital stock and do not anticipate paying cash dividends on our capital stock in the foreseeable future. The payment of dividends on our capital stock will depend on our earnings, financial condition and other business and economic factors affecting us at such time as the board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on any investment in our common stock will only occur if our common stock price appreciates.
A sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
If our stockholders sell substantial amounts of our common stock in the public market under Rule 144 or upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
We may, in the future, issue additional shares of common stock, which would reduce the percent of ownership held by current stockholders.
Our Articles of Incorporation authorizes the issuance of 520,000,000 shares of common stock of which as of March 16, 2021, 214,950,751 shares are issued and outstanding. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors and may have an adverse effect on any trading market of our common stock.
Compliance with changing regulations concerning corporate governance and public disclosure may result in additional expenses.
In recent years, there have been several changes in laws, rules, regulations, and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), Sarbanes-Oxley and various other new regulations promulgated by the SEC and rules promulgated by the national securities exchanges. The Dodd-Frank Act, enacted in July 2010, expands federal regulation of corporate governance matters and imposes requirements on publicly-held companies, including us, to, among other things, provide stockholders with a periodic advisory vote on executive compensation and also adds compensation committee reforms and enhanced pay-for-performance disclosures. Sarbanes-Oxley specifically requires, among other things, that we maintain effective internal control over financial reporting and disclosure of controls and procedures. Compliance may result in higher costs necessitated by ongoing revisions to disclosure and governance practices. Our efforts to comply with evolving laws, regulations and standards are likely to continue to result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.
Compliance with new rules may make it more difficult to attract and retain directors.
Compliance with new and existing laws, rules, regulations and standards may make it more difficult and more expensive for us to obtainmaintain director and officer liability insurance, and we may be required to accept reduced policy limitscoverage or incur substantially higher costs to obtain coverage. Members of our board of directors and coverage.our principal executive officer and principal financial officer could face an increased risk of personal liability in connection with the performance of their duties. As a result, we may experiencehave difficulty attracting and retaining qualified individuals to serve ondirectors and executive officers, which could harm our board of directors or as executive officers.business. We continually evaluate and monitor regulatory developments and cannot predict or estimate the amounttiming or magnitude of these continuingadditional costs we willmay incur as a resultresult.
We have reported material weaknesses in internal controls in the past.
We have reported material weaknesses in internal controls over financial reporting as of beingNovember 30, 2020, and we cannot provide any assurances that additional material weaknesses will not be identified in the future or that we can effectively remediate our reported weaknesses. If our internal controls over financial reporting or disclosure controls and procedures are not effective, there may be errors in our financial statements that could require a public company.
Section 404 of Sarbanes-Oxley requires us to evaluate the effectiveness of our internal control over financial reporting every quarter and as of the Company's outstanding shares were issued with resale restrictions whichend of each year, and to include a management report assessing the effectiveness of our internal controls over financial reporting in each Annual Report on Form 10-K. Our management, including our Chief Executive Officer, and Chief Financial Officer, do not expect that our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Furthermore, the design of a control system must reflect the fact that there are now eligible for removal.
As a result, these shares are deemed towe cannot assure you that additional significant deficiencies or material weaknesses in our internal control over financial reporting will not be "restricted"identified in the future or "control" shares as defined in Rule 144 under the Securities Act and subject to resale restrictions. Consequently, these shares cannot be freely sold unless registered under the Securities Act of 1933 or sold pursuant to an available exemption under Rule 144. However, since the Company has been previously designated as a "shell company" under the Securities Act, the resale exemption under Rule 144(i) continues to be available only for so long as the Company remains current in all of its reporting requirements. Approximately 20,403,854 shares of the Company's restricted common stock held by non-affiliate stockholders are eligible for resale pursuant to Rule 144 without resale restrictions. The price of the Company's common stock traded on the OTCQB trading market could be adversely affected should a significant number of non-affiliate stockholders choose to sell their shares pursuant to Rule 144.
None.
The Company’s principal offices are located at 86258631 State Highway 124 Ione, CACalifornia 95640. The Company's telephone number is (209) 257-4331 and on the Web at www.Purebase.com.
Mineral Properties and the other in Southern California to serve those areas as primary markets for the agricultural and construction sectors. The Company's potassium sulfate project is located in south central Nevada which is close to the central valley markets we expect to serve with our agricultural products. While all of the properties contain mineralized material, all of the Company's properties are exploration stage properties under Industry Guide 7 unless and until "proven or probable reserves" are defined.
Company Right to Acquire Properties
Snow White Mine in San Bernardino County, CA
On November 28, 2014 USU.S. Mining and Minerals Corporation, entered into a Purchase Agreement in which US Mining and Minerals Corp. (as "Seller") agreed to sellNevada company, sold its fee simple property interest and certain mining claims relating to its Snow White Mine property to US Mine CorpUSMC for a purchase price of $650,000. On December 1, 2014, US Mine CorpUSMC assigned its rights and obligations under the Purchase Agreement to the Company pursuant to an Assignment of Purchase Agreement at which time the Company paid a $50,000 down payment to the Seller.US Mining and Minerals Corporation. As a result of the Assignment, the Company assumed the purchaser position under the Purchase Agreement and the obligation to pay the remaining $600,000 of the purchase price. There was a delay in the Selleroriginal seller, Joseph Richard Mathewson, in receiving a clear title to the property and a fully permitted project, both of which were conditions to closing. In light ofConsidering the foregoing and upon the payment of anotheran additional $25,000 (which was advanced by John Bremer), the parties agreed to extend the closing. Due to delays in the Company securing the necessary funding to close the purchase of the Snow White Mine property, John Bremer a director of both Purebase and US Mine Corp, acquired the property on or about October 15, 2015 by payingfor the remaining purchase price balance of $575,000 to the Seller.$575,000. During the year ended November 30, 2017, US Mine Corp.USMC agreed to offset the $75,000 deposit against money owed to US Mine Corp.USMC. As a result, the purchase price to be paid to Mr. Bremer is $650,000. Upon payment by the Company of $650,000 plus expenses incurred while holding the Snow White property, and will transfer title to the Company whenproperty will be transferred to the Company reimburses Mr. Bremer for his acquisition expenses.Company. Mr. Bremer has not restrictedpermitted the Company from continuingto continue its exploration on the property or access to property in any way.property. The mining claims require a minimum royalty payment of $3,500 per year.
The Snow White Mine property consists of approximately 280 acres of mining property containing 5 placer mining claims known as the Snow White Mine. The Snow White Mine property is located 17 miles north of Hinkley, California in San Bernardino County. This 280 acre combination of owned property (80 acres) and Non-Patented Placer Claims (200 acres) includes 8.33 acres which are conditionally permitted and ready for further development. The Projectproject entry is made on Hinkley Road which is a 4 mile paved county-maintained road which converts to an existing unpaved road for the remaining 13 miles to the mine site.
The property is covered by a Conditional Use Permit allowing the mining of the property and a Plan of Operation and Reclamation Plan has been approved by San Bernardino County and the US Bureau of Land Management ("BLM").BLM. The fee property comes with clear title to surface and mineral rights. The claims are situated on federal BLM land. These claims are held with annual maintenance payments to the BLM and annual filings of intent to hold and affidavit assessment work. There is no expiration date on ownership of the leases as long as the annual payments are made and the annual filings are completed. They are both current. There is no equipment present at the claims location. No improvements have been made at the claims location. Power when needed, is from portable generators. Processing equipment when onsite is self-powered.
On September 5, 2019, the California Journal of Mines and Geology, Vol. No. 49, and the California State Department of Natural Resources Bulletin#174 prepared in 1959, the property was formerly known as the Williams Brothers Quarry and classified as a very large pumicite deposit approximately 70 foot in thickness underlain by Rhyolitic tuffaceous beds and overlain by layers of Perlite and Rhyolite,Company discontinued all minerals which are classified as Aluminum Silicate due to their primary chemical and petrographic constituents. There are no current records of production for the early operation of this mine. The Snow White Mine was previously owned by MATCON, US Mining and Materials Corporation.
PureBase Ag Properties
Placer Mining Claims USMC 1-50
On July 30, 2014 PurebasePureBase Ag entered into a Placer Claims Assignment Agreement pursuant to which A. Scott Dockter and Teresa Dockter assigned their rights to certain Placer Mining Claim Notices filed and recorded with the US Bureau of Land Management (the "BLM")BLM relating to 50 Placer mining claims identified as "USMC" 1"“USMC 1” thru "USMC 50"“USMC 50” (the "USMC“USMC Placer Claims"Claims”) for which PurebasePureBase Ag issued 12,118,000 shares of its common stock to A. Scott Dockter and Teresa Dockter in exchange for these Mining Rights.
The USMC Placer Mining Claims is a placer claims resource covering 1,145 acres of mining property located in Lassen County, California and located in an area known as the "Long“Long Valley Pozzolan Deposit"Deposit”. PurebasePureBase Ag holds non-patented mining rights to the property consisting of contiguous placer claims within the boundaries of a known and qualified Pozzolan deposit. This property can be accessed at multiple entry points. At the Northernnorthern portion of the property at the intersection of HwyHighway 70 and HwyHighway 395 there is a paved entrance that leads to an off- roadoff-road entry to the claims area. At the Southernsouthern end of the property there is a paved entry off the HwyHighway that leads to an off-road entry to the site. Approximately 6.5 miles north of the California and Nevada state line is this Southern Paved Hwysouthern paved Highway entrance that also permits access to the property. These claims are situated on federal BLM land requirerequiring annual maintenance payments to the BLM and annual filings of intent to hold and affidavit assessment work. There is no expiration date on ownership of the leases as long as the annual payments are made and the annual filings are completed. They are both current. There have been no previous operators at these claim locations, consequently no improvements have been made at the claims location.made. There is no equipment present at the claims location. Power when needed, is from portable generators. Processing equipment when onsite is self-powered.
On September 5, 2019, the USMC Placer Claims property is nativeCompany discontinued all mining and undisturbed and has not been previously explored or mined, this area is included in a State sponsored report showing this area is underlain by mineral deposits for which geological information indicates that significant inferred resources of natural pozzolan are present. The State sponsored report was previously filed as Exhibit 10.6. Therelated activities at the Long Valley Pozzolan Deposit isproperty. As a lacustrine diatomaceous and tuffaceous siltstone which is exposed in a north-south trend for a distance of nearly 10 miles. Long Valley is one of several Miocene-Pliocene age sedimentary basins in northeastern California and northwestern Nevada. The area is marked byresult, the complex structural styles of the Sierra Nevada Basin and Range transition zone. Among the leading structural styles are northerly trending normal faulting characteristic of the eastern Sierra Nevada and north-northeast trending extensional normal faulting characteristic of the Basin and Range. The project is in an area defined in a State sponsored report as an area containing a unique blend of volcanic origin and diatoms. Based on visual and geological evidence suggesting these minerals are present along with the information contained within the state sponsored report, the Company believes this data indicates that mineralization does exist which could be economically and legally extracted and produced once necessary permits are obtained.
Vegetation: The area has vegetative cover of approximately 50%. The primary form of vegetation observed was creosote bush and sage. Some minor grasses and forbs were observed but were not identified.
On October 6, 2014, PurebasePureBase Ag entered into an Assignment of Lease from US Mine Corp.USMC pursuant to which PurebasePureBase Ag acquired the rights to a Preference Rights Lease granted by the BLM covering approximately 2,500 acres of land located on the western side of the Weepah Hills in the Mount Diablo Meridian area of Esmeralda County, Nevada (referred to as the "Esmeralda Project"(the “Esmeralda Project”). In exchange for the Assignment of Lease, PurebasePureBase Ag assumed the obligation to pay all future annual lease payments of $7,503 each and to assume all other ongoing fees and expenses relating to the development of the Esmeralda Project.
Contained in the Esmeralda Project'sProject’s leased property is the mining property known as the "Chimney“Chimney 1 Potassium/Sulfur Deposit"Deposit” which consists of 15.5 acres of land fully permitted for mining operation which is situated within the 2,500 acres under a Federal Mineral Preference RightRights Lease. There are annual minimum royalty and rental payments. The project has an approved Reclamation Plan – Nevada Division of Environmental Protection Permit #0192 – and an approved Plan of Operations, BLM Case Number N65-99-001P. There is a reclamation bond in place in the amount of $47,310.30. The BLM is the bond holder.
The current operation is an open pit mine site which is fully permitted and partially developed. The total allowed disturbed acreage for the existing and approved reclamation plan is 14.45 acres. The site entrance is located approximately 10 miles south of HwyHighway 95/6 on HwyHighway 265 on the Easteast side of the Hwy.Highway. The mine site location is 3.4 miles of unpaved road from the Hwy.Highway. The existing site equipment consists of a 40'40’ storage container, aan 8,000 gallon water tank and portable single axelaxle truck scale. Pit development has begun and rectified drawings have been recorded to the existing site disturbance. Power when needed, is from portable generators. Processing equipment when onsite is self-powered.
According to records publicly available, the property is known to contain large amounts of altered volcanic tuff composed of Alunite, K-Alum, Jarosite, Gypsum, Native Sulfur and K-feldspar. The geology of the area around the mine site includes deposits of potassium and sulfur described as being in an elongated dike like or neck like mass of rhyolite having the appearance of being intrusive into gently folded white and red sedimentary rhyolitic tuffs of Tertiary age. Sulfur occurs in this area as irregular seams and blebs in altered Tertiary sedimentary rocks and welded tuffs (Albers and Stewart 1972). The area has been mapped as Tertiary Esperanza Formation. Much of the area is covered with quaternary alluvium partially obscuring the relationships of the underlying rocks. It appears that these fumarolic deposits are related to plutonic outcrops in the area, specifically the Weepah Hills Pluton.
Except as described below, there are no material pending legal proceedings in which we or any of those entities were named as defendantsour subsidiaries is a party or in which any director, officer or affiliate of ours, any owner of record or beneficially of more than 5% of any class of our voting securities, or security holder is a Complaint filed in the Second Judicial District Court in Washoe County, Nevada (Case # CV14 01348) on June 23, 2014. The Complaint was filed by Madelaine and Edwin Durand alleging various causes of action including breach of contract and misrepresentations by various defendants and certain principals of Purebase Ag and USAM. The substance of the Complaint involves the alleged breach and other wrongful acts including the staking and attempted recordation of claims by Defendants pertainingparty adverse to us or has a Non-Disclosure, Confidentiality and Non-Compete Agreement entered into between the Plaintiffs and the Defendants on June 26, 2012 and a Mineral Lease contract dated July 10, 2012 relatingmaterial interest adverse to certain mining claims allegedly owned by Plaintiffs and known as the Sierra Lady Mining Claims. The Plaintiffs are seeking an injunction to prevent further staking and disclosure of confidential information relating to the Sierra Lady
On September 21, 2016, the Company'sCompany terminated its employment agreement with its then President, David Vickers was terminated by the Company. Subsequent to his termination, Mr.(“Vickers”). Subsequently, Vickers retained legal counsel and is now allegingalleged claims of age discrimination, fraud in the inducement, violation of California Labor Code §970 and breach of contract against the Company.Company (collectively, the “Vicker Claims”). On April 14, 2017,14,2017, Vickers served the Company was served by Mr. Vickers' attorney with a demand for arbitration of the above referenced claims. The arbitration proceeding will be handled byVicker Claims before the Judicial Arbitration and Mediation Services, Inc. (JAMS)On June 5, 2018, the parties participated in a voluntary mediation but were unable to reach a resolution. An arbitration hearing was held on August 6, 2019 to August 8, 2019. An interim-preliminary decision was rendered in connection with the arbitration however, a final award was not determined and is currently midway throughjudicial proceedings were not initiated. On June 25, 2020, the discovery phase. An evidentiary hearing is currently scheduledparties entered into a written settlement agreement pursuant to which the Company agreed to pay Vickers the sum of $580,976, including interest of $13,079, (the “Settlement Sum”) in exchange for May 23, 2018.a general release of all Vicker Claims and a covenant to forebear all litigation against Company. The range of loss could not be determined, but Mr. Vickers'Company timely paid the Settlement Sum and the case was terminated effective November 25, 2020.
On July 8, 2020, our former Chief Financial Officer, Al Calvanico (“Calvanico”), filed a demand for arbitration statedalleging retaliation, wrongful termination, and demand for a claimminimum amount of over $1,000,000.$600,000 in alleged stock value, plus interest, recovery of past and future wages, attorneys’ fees, and punitive damages (collectively, the “Calvanico Claims”). The Company plansdenied all Calvanico Claims. The Company believes Calvanico is owed nothing because it takes the position that Calvanico was not terminated, but rather, his employment contract expired on September 21, 2019 in the normal course, and was not renewed by Company and because Calvanico never exercised his stock options. On February 14, 2020, the Company requested in writing that Calvanico exercise his stock options within 30 days. Calvanico failed to vigorously defend thesedo so. To date, Calvanico has not exercised his stock options. This dispute is currently in the early stages of arbitration. An arbitration hearing date has not yet been assigned.
On August 30, 2018 the Company was named as a defendant in a complaint filed by Tessenderlo Kerley, Inc. (“Tessenderlo”) in the United States District Court for the District of Arizona (Case # CV-18-2756-PHX-DJH) alleging trademark infringement relating to the plaintiff’s trademark PURSHADE and the Company’s product PureBase Shade Advantage. The Company filed its answer on September 21, 2018, denying the allegations set forth in the complaint. A settlement conference was held on June 11, 2019. The Company entered into a settlement agreement and release (the “Settlement Agreement”) with Tessenderlo effective July 8, 2019. Pursuant to the Settlement Agreement the Company agreed, among other requirements for dissemination of information with its product, to make various changes to the packaging of its Purebase Shade Advantage products relating to the visual representation of the product’s names. Under the Settlement Agreement, each party fully released the other party from all existing claims and liabilities. There were no monetary damages as part of the Settlement Agreement. As a result of the Settlement Agreement, the case was dismissed on July 9, 2019.
On January 11, 2019, the Company filed a complaint in arbitration proceeding.
On March 29, 2019, the Company was served with a complaint filed by Superior Soils Supplements LLC (“Superior Soils”) in the Superior Court of the State of California in and for the County of Kings(Case # 19C-0124) relating to 64 truckloads of soil amendments delivered to a customer by the Company on behalf of Superior Soils. Superior Soils alleged that the soil amendments were not labeled correctly requiring the entire shipment of product to be returned to the Company. The complaint alleges breach of contract, misrepresentations, fraudulent concealment and unfair competition. The complaint seeks damages of approximately $300,000. The Company filed its answer on May 6, 2019, denying responsibility for the mis-labelling and denying any liability for damages therefrom. The parties are currently in settlement negotiations.
The Company has appropriately accrued for all potential liabilities as of November 30, 2020.
The exploration and development of our mining projects will be subject to regulation by the Federal Mine Safety and Health Administration ("MSHA"(“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the "Mine Act"“Mine Act”). MSHA'sMSHA’s activities include the inspection of mining operations on a regular basis and the issuance of various citations and orders when it believes a violation has occurred under the Mine Act. Following passage of the Mine Improvement and New Emergency Response Act of 2006, MSHA has significantly increased its inspection and enforcement programs.
The Company and its mining service provider, USMC, as natural resource mining operators, will be required to report certain mine safety violations or other regulatory matters as mandated by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 4104 of Regulation S-K. AnyThere are currently no such violations or regulatory matters must be disclosed in Exhibit 95 to be included with the Company's Annual Report on Form 10-K.
Since the Company has only conducted limited mining operations, only the Chimney 1 sulfate mineral project is MSHA approved for operation. The Company'sCompany’s remaining mining projects have not been inspected by MSHA. The Company or its project operators have not received any citations or orders pertaining to any violation of the Mine Act or any other federal or state regulation relating to its mining activities during FY 2017.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.SECURITIES
Market for Our Common Stock
Our Common Stock is approved for quotationquoted on the OTCQB (operated by the OTC Markets Group) where it is traded under the symbol "PUBC". As of February 16, 2018“PUBC.” On March 15, 2021, the most recent tradeclosing price of our Common Stock was at $0.10 per share for an insignificant number of shares traded.
Holders of Common Stock in the periods indicated below. The quotations below reflect inter-dealer selling prices, without retail mark-up, markdown or commission, and may not represent actual transactions.
| Company's Common Stock | High | Low | ||||||
| December 1, 2015-February 29, 2016 | $ | 4.00 | $ | 1.92 | ||||
| March 1, 2016 – May 31, 2016 | $ | 2.20 | $ | 0.60 | ||||
| June 1, 2016 – August 31, 2016 | $ | 2.00 | $ | 0.25 | ||||
| September 1, 2016 – November 30, 2016 | $ | 0.26 | $ | 0.15 | ||||
| December 1, 2016-February 28, 2017 | $ | 0.23 | $ | 0.15 | ||||
| March 1, 2017 – May 31, 2017 | $ | 0.18 | $ | 0.02 | ||||
| June 1, 2017 – August 31, 2017 | $ | 0.38 | $ | 0.15 | ||||
| September 1, 2017 – November 30, 2017 | $ | 0.26 | $ | 0.10 | ||||
As of February 1, 2018,March 16, 2021, there were approximately 77 holders88 shareholders of record of our Common Stock. This amount does not include stockholders whose shares are held in street name or Cede & Co.
Dividends
We have never declared or paid any cash dividends on our Common Stock.common stock. We currently anticipate that we willintend to retain all future earnings, if any, for the expansion and operation of our businessworking capital purposes and do not anticipate paying any cash dividends in the foreseeable future.
The following table provides information regarding our equity compensation plans as of November 10, 2017 the Company's Board of Directors approved the 2017 Purebase Corporation Stock Option30, 2020:
Equity Compensation Plan which is intended to be a qualified stock option plan (the "Option Plan"). The Board allocated up to 10,000,000 shares of Purebase common stock to be issued pursuant to options granted under the Option Plan. Awards will consist if both incentive and non-incentive stock options. The Option Plan has a term of 10 years. The Option Plan is subject to stockholder approval prior to November 10, 2018. The Option Plan is administered by the Compensation Committee of the Board of Directors. As of January 31, 2018, no options had been granted under the Option Plan.
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average Exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans | |||||||||
| Equity compensation plans approved by security holders (1) | 50,000 | $ | 0.12 | 9,950,000 | ||||||||
| Equity compensation plans not approved by security holders (2) | 500,000 | $ | 3.00 | - | ||||||||
| (1) | Represents options to purchase 50,000 shares of the Company’s common stock granted to a consultant for services provided under the 2017 Stock Option Plan. |
| (2) | Represents (i) options to purchase 300,000 shares of the Company’s common stock granted to Al Calvanico, our former Chief Financial Officer, for services as a chief financial officer provided to the Company, (ii) options to purchase 200,000 shares of the Company’s common stock granted to Jim Bennett, a former employee, for services rendered to the Company, and (iii) options to purchase 50,000 shares of the Company’s common stock granted to Gary Gilliand, for consulting services provided to the Company. |
Recent Sales of Unregistered Securities
Except as set forth below, there were no sales of equity securities during the period covered by this Report that were not registered under the Securities Act and were not previously reported salesin a Quarterly Report on Form 10-Q or a Current Report on Form 8-K filed by the Company.
On April 15, 2020, the Company issued four-year options to purchase 200,000 shares of unregistered securities in its Form 10-Q's, 10-K'scommon stock with an exercise price of $0.10 per share to two advisory board members. Shares subject to the option vest and Form 8-K's, during the two fiscal years ending November 30, 2015 and November 30, 2016, and forbecome exercisable on the first three quartersanniversary of fiscal year 2017. Thethe date of grant.
On June 2, 2020, the Company did not issue any additionalgranted a five-year immediately exercisable option to a consultant to purchase 100,000 shares duringof its common stock with an exercise price of $0.10 per share.
On July 7, 2020, the fourth quarterCompany granted a five-year option to purchase 45,000 shares of fiscal year 2017.
On September 9, 2020, the Company did not purchase any of itsissued 100,000 shares of common stock to a consultant pursuant to an investment banking agreement for financial and banking services rendered to the Company.
On September 18, 2020, the Company issued a four-year option to purchase an aggregate of 100,000 shares of its common stock with an exercise price of $0.099 per share to an advisory board member. Shares subject to the option vest and become exercisable on the first anniversary of the date of grant.
On October 12, 2020, the Company issued a four-year option to purchase an aggregate of 100,000 shares of its common stock with an exercise price of $0.099 per share to an advisory board member. Shares subject to the option vest and become exercisable on the first anniversary of the date of grant.
The above issuances did not involve any underwriters, underwriting discounts or other securities duringcommissions, or any public offering and we believe is exempt from the fiscal year ended November 30, 2017.
As a smaller reporting company, we are not required to provide the information required by this information.
ITEM 7. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Management’s Discussion and Analysis contains forward-looking statements that reflectrelating to future events or our plans, estimatesfuture financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “intends”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and beliefs. Ourinvolve known and unknown risks, uncertainties and other factors which may cause our or our industry’s actual results, could differlevels of activity or performance to be materially different from those discussed inany future results, levels of activity or performance expressed or implied by these forward-looking statements. Factors
Although we believe that could cause or contribute to such differences include those discussed below and elsewhere in this annual report.
Management’s discussion and full-scale exploitationanalysis of industrialour financial condition and natural minerals at its properties or acquire mineral from other suppliersresults of operations is based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The Company is also evaluating other possible mineral resource projects and processing facilities including gold, silver, lead, zinc and/or copper opportunities.
Overview
The Company is a diversified, industrial mineral and natural resource company working to provide solutions to the agriculture and construction materials markets. In addition, the Company intends to focus on identifying and developing other advanced stage natural resource projects in support of its subsidiaries.
Results of Operations
Comparison of the most recently completed fiscalYear Ended November 30, 2020 to the Year Ended November 30, 2019
| 2020 | 2019 | Variance | ||||||||||
| Revenue, net | $ | 169,410 | $ | 361,930 | $ | (192,520 | ) | |||||
| Operating Expenses: | ||||||||||||
| Selling, general and administrative | 1,427,288 | 1,498,961 | (71,673 | ) | ||||||||
| Product fulfillment | 77,465 | 212,949 | (135,484 | ) | ||||||||
| Loss on impairment of mineral rights | 200,000 | - | 200,000 | |||||||||
| Operating loss | (1,535,343 | ) | (1,349,980 | ) | 185,363 | |||||||
| Other income (expenses) | 30,186 | (1,783,443 | ) | 1,813,629 | ||||||||
| Loss before income taxes | $ | (1,505,157 | ) | $ | (3,133,423 | ) | $ | 1,626,266 | ||||
Revenues
Revenues decreased by $192,520, or 53%, for the year ended November 30, 2017, the Company generated revenues of $484,706 from the sale of its agricultural products2020, as compared to revenues of $177,705 generated in FY 2016. Total assets decreased from $947,462 as of November 30, 2016 to $286,103 as of November 30, 2017. Total liabilities increased from $3,762,542 at November 30, 2016 to $4,318,665 at November 30, 2017 reflecting the continuing increase in the agricultural products production costs occurring during FY 2017.
Operating Expenses
Total operating results forexpenses decreased remained relatively consistent as compared to the fiscal year ended November 30, 20162019, decreasing by $7,157, or 0%. Selling, general and administrative remained relatively consistent as compared to the Company's operating results for the fiscal year ended November 30, 2017 are summarized as follows:
| Year Ended | Year Ended | |||||||
| 11/30/17 | 11/30/16 | |||||||
| Revenue | $ | 484,706 | $ | 177,705 | ||||
| Operating Expenses | $ | 2,626,873 | $ | 2,732,470 | ||||
| Net Loss | $ | 1,669,271 | $ | 2,701,166 | ||||
Product fulfillment, exploration and mining costsexpenses decreased by $135,484, or 64%, for the fiscal year ended November 30, 2017 were $268,4262020, as compared to $218,961 for the fiscal year ended November 30, 2016, an increase of 22%.2019. The increasedecrease is primarily attributable to a decrease in product fulfillment, exploration and mining costs is the result of higher expensespurchases related to the Company's increasing sales ofCompany not selling any sulfate products from its agricultural products Division.
Loss on impairment of mineral rights increased by $200,000, or 100%, for the fiscal year ended November 30, 2016 the expenses incurred by the Company were $2,501, 468. The decrease in general and administrative expenses is partially attributable2020, as compared to the departure of the Company's President in October 2016 and the Company's inhouse counsel in March 2017. Included in the Company's G&A expenses are professional fees for the fiscal year ended November 30, 2017 which were $509,747 and2019. The increase is attributable to the Company deeming the mineral rights asset to be fully impaired at November 30, 2020.
Other Income (Expenses)
Other income (expense) increased by $1,613,629, or 90%, for the period ended November 30, 2016 the expenses incurred were $311,609. The increase in professional fees is attributed to increased legal expenses related to the Company's termination of the joint venture with Purebase Networks and the preparation for trial of the Durand litigation as well as costs associated with the Company's SEC reporting obligations.
Liquidity and Capital Resources
As of November 30, 2017, the Company's2020, we had cash balance was $6,286on hand of $7,450 and it had a working capital deficitdeficiency of $4,245,656.$1,792,674, as compared to cash on hand of $8,400 and a working capital deficiency of $946,405 as of November 30, 2019. The increase in working capital deficiency is primarily a result of the increase in the due to affiliated entities of $1,091,158. This increase was offset by a decrease in settlement liability of $75,000.
The Company’s operating activities consume the majority of its cash resources. The Company anticipates that it will continue to incur operating losses as it executes its development plans for 2021, as well as other potential strategic and business development initiatives. In addition, the Company has had and expects to have negative cash flows from operations, at least into the near future. The Company has insufficientpreviously funded, and plans to continue funding, these losses with cash advances from an affiliate, the sale of equity, and convertible notes. The accompanying consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
Although no assurances can be given as to the Company’s ability to deliver on handits revenue plans or that unforeseen expenses may arise, management believes that the revenue to pursue itsbe generated from operations together with potential equity and debt financing or other potential financing will provide the necessary funding for the Company to continue as a going concern. Management cannot guarantee any potential debt or equity financing will be available, or if available, on favorable terms. Any additional equity financing may dilute the share ownership of current stockholders and debt financing may contain negative covenants regarding certain corporate actions. The Company currently does not have any agreements or long range business plan andarrangements for additional financing. As such, these matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issue date of this report. If adequate funds are not available on acceptable terms, or at all, the Company will be requiredneed to raise additional capital to fund its operations. Until we are able to establish a sufficient revenue stream fromcurtail operations, our ability to meet our current financial liabilities and commitments will be primarily dependent upon the continued advances from USMC, investments from new or existing investors or loans from existing stockholders and management or outside capital sources. During FY 2017, the Company was primarily reliant for its working capital needs on advances and support from USMC which aggregated $1,248,573 for fiscal year 2017. Management believes that our current cash and cash equivalents will not be sufficient to meet our working capital requirements for the next twelve-month period. We have had negative cash flow from operating activities as we have not yet begun to generate sufficient revenues from mineral production or product sales. The Company plans to raise the capital required to satisfy its immediate short-term needs and additional capital required to meet its estimated funding requirements for the next twelve months primarily through additional advances from USMC, the private placement of Company equity securities, by way of loans, and through such other financing transactions as the Company may determine.
Going Concern
The consolidated financial statements presentedcontained in this annual reportAnnual Report on Form 10-K have been prepared under the assumptionassuming that the Company will continue as a going concern. The Company had a nethas accumulated losses from inception through November 30, 2020, of approximately $12,729,000, as well as negative cash flows from operating loss of $1,669,271activities and $2,701,166 during the fiscal years 2017 and 2016 respectively. The Company had a working capital deficiency of $4,245,656 and $3,109,815 during 2017 and 2016, respectively. Thedeficiency. Presently, the Company diddoes not have sufficient cash at November 30, 2017resources to fund normal operationsmeet its debt obligations for the next 12 months. The Company has realized modest revenues and itsThese factors raise substantial doubt about the Company’s ability to continue as a going concernconcern. Management is dependent onin the Company's abilityprocess of evaluating various financing alternatives in order to raisefinance the capital to fund its future product development and salesrequirements of the Company, as well as working capital requirements. The Company's plans for the long-term attainment and continuation as a going concern include financing the Company's future operations through outside capital advances from USMC, salesneeds of its common stock, entering into debt or line of credit facilities, generating increasing revenue from the sale of agricultural productionexisting subsidiaries and sales activitiesgeneral and the eventual profitable exploitation of its mineral resource properties.administrative expenses. There iscan be no assurance that the Company will be successful with its fund-raising initiatives. If the Company raises additional funds through the issuance of equity, the percentage ownership of current shareholders could be reduced, and such securities might have rights, preferences or privileges senior to the rights, preferences and privileges of the Company’s common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to take advantage of prospective business endeavors or opportunities, which could significantly and materially restrict its future plans for developing its business and achieving commercial revenues. If the Company is unable to obtain funds fromthe necessary capital, the Company may have to cease operations.
The consolidated financial statements do not include any of these potential sources of capital. These factors raise substantial doubt aboutadjustments that may be necessary should the Company's abilityCompany be unable to continue as a going concern.
Working Capital Deficiency
| November 30, | November 30, | |||||||
| 2020 | 2019 | |||||||
| Current assets | $ | 15,340 | $ | 30,416 | ||||
| Current liabilities | 1,808,014 | 976,821 | ||||||
| Working capital deficiency | $ | (1,792,674 | ) | $ | (946,405 | ) | ||
The Companydecrease in current assets is currently investigatingprimarily due to the decrease in accounts receivable of $14,563. The increase in current liabilities is primarily due to the increase in the due to affiliated entities of $1,091,158 and the recording of new settlement liability of $400,000. This increase was offset by a numberdecrease in old settlement liability of alternatives$475,000.
Cash Flows
Year Ended November 30, | ||||||||
| 2020 | 2019 | |||||||
| Net cash used in operating activities | $ | (1,265,328 | ) | $ | (550,894 | ) | ||
| Net cash provided by investing activities | - | - | ||||||
| Net cash provided by financing activities | 1,264,378 | 551,013 | ||||||
| Increase (decrease) in cash | $ | (950 | ) | $ | 119 | |||
Operating Activities
Net cash used in operating activities was $1,265,328 for raising additional capitalthe year ended November 30, 2020 and was primarily due to the net loss of $1,505,157 which was partially offset by non-cash expenses of approximately $263,000.
Net cash used in operating activities was $550,894 for the year ended November 30, 2019 and was primarily due to the net loss of $3,133,423, partially offset by accounts payable and accrued expenses of approximately $718,000, non-cash expenses of approximately $162,000 related to the issuance of common and stock based compensation, $1,230,964 in losses on conversion of related party debt and payables, and the payment of a settlement liability of $475,000.
Financing Activities
For the year ended November 30, 2020, net cash provided by financing activities was $1,264,378, of which $1,091,158 was advances from related parties and $178,000 was raised in connection with potential investors, lendersthe sale of convertible debt.
For the year ended November 30, 2019, net cash provided by financing activities was $551,013, of which approximately $596,000 was advances from related parties which was offset by $44,500 in payments to officers in connection with outstanding notes payable.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Effects of Inflation
We do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented.
Critical Accounting Policies and joint venture partners.
Our significant accounting policies are more fully described in Note 3 to our consolidated financial statements included in this Annual Report for the fiscal year ended November 30, 20172020. We believe that the accounting policies below are critical for one to fully understand and evaluate our financial condition and results of operations.
Fair Value Measurement
As defined in ASC 820, “Fair Value Measurements and Disclosures,” fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company did not issue any additional stock throughutilizes market data or assumptions that market participants would use in pricing the private placement of its common stockasset or asliability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a result of conversion of any notes payable.
Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the Company's common stock.
Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.; or
Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
Impairment of Long-lived Assets
The Company did not raise additional funds through the issuance of its common stock to raise capital during the fiscal year ended November 30, 2017.
| Payment due by period | ||||||||||||||||||||
| Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||
| Long-Term Debt Obligations | $ | 1,025,000 | $ | 1,025,000 | $ | -0- | $ | -0- | $ | -0- | ||||||||||
| Mineral Lease Obligations | 37,515 | 7,503 | 15,006 | 15,006 | $ | -0- | ||||||||||||||
| Operating Lease Obligations | -0- | -0- | -0- | $ | -0- | $ | -0- | |||||||||||||
| Total | $ | 1,062,515 | $ | 1,032,503 | $ | 15,006 | $ | 15,006 | $ | -0- | ||||||||||
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carry forwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be generated by those assets.recovered or settled. The cash flow projections are basedeffect on historical experience, management's viewdeferred tax assets and liabilities of growtha change in tax rates withinis recognized in income in the industry,period that includes the enactment date.
The Company utilizes ASC 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the unaudited condensed consolidated financial statements or tax returns. The Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the anticipated future economic environment.
For uncertain tax positions that meet a “more likely than not” threshold, the Company recognizes the benefit of uncertain tax positions in the unaudited condensed consolidated financial statements. The Company’s practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the unaudited condensed consolidated statements of operations.
Revenue Recognition
The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which the Company adopted beginning on December 1, 2018, utilizing the modified retrospective method. The approach was applied to contracts that were in process as of December 1, 2018. The reported results for the fiscal year 2019 reflect the application of ASC topic 606.
The Company derives revenues from the sale of its agricultural products. The Company’s contracted transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s contracts have a single performance obligation which are not separately identifiable from other promises in the contracts and is, therefore, not distinct. The Company’s performance obligation is satisfied upon the existencetransfer of onerisk of loss to the customer.
Exploration Stage
In accordance with GAAP, expenditures relating to the acquisition of mineral rights are initially capitalized as incurred while exploration and pre-extraction expenditures are expensed as incurred until such time as the Company exits the Exploration Stage by establishing proven or more of the above indicators of impairment, we measure any impairment based on a projected discounted cash flow method using a discount rate determined by our managementprobable reserves. Expenditures relating to be commensurate with the risk inherent in our current business model.
Mineral Rights
Acquisition costs of mineral rights are capitalized as incurred while exploration and carried at cost with the intention that these will be depleted by charges against earnings from future mining operations. No depreciation will be charged against the property until commercial production commences. After a mining property has been brought into commercial production, any additional work on that property will bepre-extraction expenditures are expensed as incurred exceptuntil such time as the Company exits the exploration stage by establishing proven or probable reserves, as defined by the SEC under Industry Guide 7, through the completion of a “final” or “bankable” feasibility study. Expenditures relating to exploration activities are expensed as incurred and expenditures relating to pre-extraction activities are expensed as incurred until such time proven or probable reserves are established for largethat project, after which subsequent expenditures relating to development programs,activities for that particular project are capitalized as incurred.
Where proven and probable reserves have been established, the project’s capitalized expenditures are depleted over proven and probable reserves upon commencement of production using the units-of-production method. Where proven and probable reserves have not been established, such capitalized expenditures are depleted over the estimated production life upon commencement of extraction using the straight-line method.
The carrying values of the mineral rights are assessed for impairment by management on a quarterly basis or when indicators of impairment exist. Should management determine that these carrying values cannot be recovered, the unrecoverable amounts are written off against earnings.
Stock-Based Compensation
The Company applies the provisions of ASC 718, Compensation—Stock Compensation (“ASC 718”), which will be deferredrequires the measurement and depleted.
For stock options issued to employees and related accrued liabilities, which are based on our interpretationmembers of current environmental and regulatory requirements, are accrued and expensed, upon determination.
Pursuant to FASB ASC 718, "CompensationASU 2018-07 Compensation – Stock Compensation".
Recently Adopted Accounting Pronouncements
Any new and recently adopted accounting pronouncements are more fully described in Note 23 to our consolidated financial statements included in this Annual Report for the Consolidated Financial Statements.
As a smaller reporting company, we are not required to provide the information required by this information.
The information called for by Item 8 is included following the “Index to Financial Statements” on page F-1 contained in this Annual Report on Form 10-K.
TableITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of ContentsDisclosure Controls and Procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation and subject to the foregoing, our principal executive officer and principal financial officer concluded that, our disclosure controls and procedures were not effective as of November 30, 2020 due to the material weaknesses in internal control over financial reporting described below.
Management’s Annual Report on Internal Control Over Financial Reporting
Management and the Company’s consolidated subsidiaries are responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of its principal executive and principal financial officer and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its consolidated financial statements for external reporting purposes in accordance with GAAP.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Material Weaknesses in Internal Control over Financial Reporting
Management assessed the effectiveness of the Company’s internal control over financial reporting as of November 30, 2020 based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined that the Company’s internal control over financial reporting as of November 30, 2020 was not effective.
A material weakness, as defined in the standards established by the Sarbanes-Oxley is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
The ineffectiveness of the Company’s internal control over financial reporting was due to the following material weaknesses:
| ● | Inadequate segregation of duties consistent with control objectives; |
| ● | Lack of formal policies and procedures; |
| ● | Lack of a functioning audit committee and independent directors on the Company’s board of directors to oversee financial reporting responsibilities; and |
| ● | Lack of risk assessment procedures on internal controls to detect financial reporting risks on a timely manner. |
Management’s Plan to Remediate the Material Weakness
Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include:
| ● | Continue to search for and evaluate qualified independent outside directors; |
| ● | Identify gaps in our skills base and the expertise of our staff required to meet the financial reporting requirements of a public company; and |
| ● | Continue to develop policies and procedures on internal control over financial reporting and monitor the effectiveness of operations on existing controls and procedures. |
We have engaged a third-party financial operations consulting firm to assist with the preparation of SEC reporting.
On January 21, 2021, Michael Fay was appointed as the Company’s Chief Financial Officer and as the Company’s Principal Financial and Accounting Officer for SEC reporting purposes.
Management will continue to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that exempt smaller reporting companies from this requirement.
Changes in Internal Control Over Financial Reporting
Other than described above there have been no changes in our internal control over financial reporting that occurred during our fourth quarter that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
None.
ITEM 8. 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Set forth below are the present directors and executive officers of the Company.
| Name | Age | Position | Since | |||
| A. Scott Dockter | 64 | Chief Executive Officer, President and Director | 2014 | |||
| Michael Fay | 62 | Chief Financial Officer | 2021 | |||
| John Bremer | 71 | Director | 2014 | |||
| Jeffrey Guzy | 69 | Director | 2020 |
Our directors are elected for a term of one year and serve until such director’s successor is duly elected and qualified. Each executive officer serves at the pleasure of the Board.
FINANCIAL STATEMENTSA. Scott Dockter – Chief Executive Officer and President and Director
A Scott Dockter has been Chief Executive Officer and a director of the Company since September 24, 2014, Chief Financial Officer from May 24, 2019 to January 21, 2021, and President and a Director of PureBase Ag since January 22, 2014. Mr. Dockter has also served as the Chief Executive Officer and a Director of USMC since 2012. Mr. Dockter was also a Manager-Member of USAM from its inception in June 2013 until its acquisition by PureBase Ag on November 24, 2014, and continues to serve as its Chief Executive Officer. Mr. Dockter is also a Manager-Member of US Mine, LLC, a Nevada limited liability company, which owns a 3,306 - acre mining property located in Ione, California. From July 2010 to June 2012, Mr. Dockter served as Chief Executive Officer, President and Chairman of Steele Resources Corp., a public company and its subsidiary Steele Resources, Inc. which were involved in the property evaluation and exploration for gold. Over the course of his 30-year career, Mr. Dockter has been responsible for the development of several large open pit and underground mines in the United States, having worked extensively in the states of Nevada, California, Idaho, and Montana. Mr. Dockter has had comprehensive involvement in all aspects of the mining business, including exploration, permitting, mine development, construction, financing, operations, asset acquisitions, and marketing and sales. His experience covers a wide range of commodities including industrial minerals, gold, silver, copper and other precious metals.
Mr. Dockter’s significant experience relating to operational management, industry expertise, and as Chief Executive Officer of the Company led to his appointment as a director of our company.
Michael Fay – Chief Financial Officer
Michael Fay has been Chief Financial Officer of the Company since January 21, 2021. Mr. Fay has a background in all aspects of private and public accounting. From March 2017 through December 2020, Mr. Fay served as Chief Financial Officer of Hardesty LLC, a company that provides executive talent solutions for growing companies. Prior to that, from January 2015 through April 2017, Mr. Fay was Chief Financial Officer for Stalwart Power Inc., a company in the business of clean energy integration. Earlier in his career, Mr. Fay was employed as a Chief Financial Officer and Controller for a number of Silicon Valley and San Francisco based companies. Mr. Fay earned a BS in Mathematics and Computer Science in 1987 and an MS in Accounting in 1996, from California State University Hayward.
John Bremer – Director
John Bremer has been a director of the Company since December 24, 2014. Mr. Bremer was also appointed a director of PureBase Ag on February 5, 2015. Since February 20, 2014, Mr. Bremer has served as a director and President of USMC. Mr. Bremer was also a Manager-Member of USAM from its inception in June 2013 until its acquisition by PureBase Ag on November 24, 2014. Mr. Bremer is also a Manager-Member of US Mine, LLC which owns a 3,306 - acre mining property located in Ione, California. For the past 21 years Mr. Bremer has been the Chief Executive Officer of GroWest, Inc. a holding company with subsidiary companies in the heavy equipment rental and property development business in California. Mr. Bremer started his career teaching college level horticulture and soil science classes, opened and managed large mining operations for Riverside Cement and California Portland Cement Company and has worked with cement producers including to help design material input methodologies to reduce nitrogen oxide emissions from calcining cement. Mr. Bremer also developed a large organic composting operation in Riverside County, California which he sold to Synagro Technologies, Inc., currently part of The Carlyle Group. Mr. Bremer has been involved in property development in Riverside County and Napa Valley in California including permitting processes. Mr. Bremer earned his Bachelor’s degree in Agri-Business from California State Polytechnic University, Pomona, California.
Mr. Bremer was appointed to the Board because of his industry experience.
Jeffrey Guzy – Director
Jeffrey Guzy has been a director since April 8, 2020. Mr. Guzy is the chairman of the Audit and Compensation Committees. Mr. Guzy also currently serves as director of the following public companies: Leatt Corporation and Capstone Companies. In the past five years, Mr. Guzy has served as a director of Brownie’s Marine Group Inc. and Life on Earth, Inc. Mr. Guzy held executive positions at several large international companies, including Loral Space, Sprint International, Verizon and IBM. Mr. Guzy founded and has served as Executive Chairman, President and Chief Executive Officer at CoJax Oil & Gas Corporation since 2017. Mr. Guzy served as Chief Executive Officer for Central oil & Gas Corp. of America from 2013 through 2020. Mr. Guzy has also founded Facilicom International, Inc. Mr. Guzy has also served as an Executive Manager of Business Development to several telecom companies including Bell Atlantic Corp. Mr. Guzy received an MBA from the Wharton School of Business at the University of Pennsylvania, an MS in Systems Engineering from the University of Pennsylvania, and a BS in Electrical Engineering from Pennsylvania State University.
Mr. Guzy was appointed to the Board because of his business acumen as well as his business development experience.
Family Relationships
There are no arrangements or understandings between our directors and directors and any other person pursuant to which they were appointed as an officer and director of the Company. In addition, there are no family relationships between any of our directors or executive officers.
Involvement in Certain Legal Proceedings
There are no legal proceedings that have occurred within the past ten years concerning our directors, or control persons which involved a criminal conviction, a criminal proceeding, an administrative or civil proceeding limiting one’s participation in the securities or banking industries, or a finding of securities or commodities law violations.
Committees of the Board of Directors
Our Board of Directors has three directors. We are not currently listed on a national securities exchange or on an inter-dealer quotation system that has requirements that a majority of the Board of Directors be independent.
The Company does not have a nominating committee.
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Compensation Committee
The Company has a Compensation Committee currently consisting of Jeffrey Guzy. The Compensation Committee initially determines matters relating to executive officer compensation, issuances of stock options and other compensatory matters. The Compensation Committee will then make recommendations to the Board of Directors, who will then participate in discussions concerning executive officer compensation, issuances of stock options and other compensatory matters. The Compensation Committee did not meet during the fiscal year ended November 30, 2020. The Compensation Committee’s charter has been included as an Exhibit to this Annual Report.
Audit Committee
The Company has an Audit Committee currently consisting of Jeffrey Guzy. The Audit Committee is responsible for: (i) selection and oversight of our independent accountant; (ii) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls, and auditing matters; (iii) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (iv) engaging outside advisors; and (v) funding for the outside auditor and any outside advisors engagement by the audit committee. The Audit Committee did not meet during the fiscal year ended November 30, 2020. The Audit Committee’s charter is currently in the process of being approved by the Board.
Our board has determined that Mr. Guzy is the “Audit Committee financial expert” as such term is defined in Item 407(d) of Regulation S-K promulgated by the SEC.
Compensation of Directors
During the year ended November 30, 2020, no compensation has been paid to our directors in consideration for their services rendered in their capacities as directors.
Code of Ethics
Our Board of Directors has adopted a Code of Business Conduct and Ethics (the “Code”) for directors and executive officers of the Company. The Code is intended to focus each director and executive officer on areas of ethical risk, provide guidance to directors and executive officer to help them recognize and deal with ethical issues, provide mechanisms to report unethical conduct, and help foster a culture of honesty and accountability.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who beneficially own more than 10% of our equity securities (“Reporting Persons”), to file reports ownership and changes in ownership with the Securities and Exchange Commission.
Based solely on our review of copies of such reports and representations from Reporting Persons, we believe that during the fiscal year ended November 30, 2020, the Reporting Persons timely filed all such reports except that (i) Jeffrey Guzy did not file a Form 3 disclosing his appointment as a director on April 8, 2020, his ownership of 160,000 shares of the Company’s common stock, and the grant for an option to purchase 250,000 shares of the Company’s common stock, and (ii) each of A. Scott Dockter and John Bremer did not file a Form 4 disclosing their indirect beneficial ownership of 1,112,500 shares of common stock issuable under convertible notes issued to USMC.
Changes in Nominating Process
There are no material changes to the procedures by which security holders may recommend nominees to our Board.
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ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows the compensation awarded to, earned by or paid to our Chief Executive Officer (the “Named Executive Officer”). No other executive officer received compensation in excess of $100,000 during the year ended November 30, 2020.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensa- tion ($) | Non-qualified Deferred Compensation Earnings ($) | All Other Compensa- tion ($) | Total ($) | |||||||||||||||||||||||||||
| A. Scott Dockter, | 2020 | 120,000 | (1) | - | - | - | - | - | - | 120,000 | ||||||||||||||||||||||||||
| Chief Executive Officer, President and Director | 2019 | 106,400 | (2) | - | - | - | - | - | - | 106,400 | ||||||||||||||||||||||||||
| (1) | Does not include $4,698 of | accrued but unpaid salary which was paid in December 2020. Includes $4,615 of salary which was accrued but unpaid in the year ended November 30, 2019. |
| (2) | Does not include $4,615 of accrued but unpaid salary which was paid in December 2019. |
Employment Agreements
The Company does not have any employment agreements with its executive officers.
Change-in-Control Agreements
The Company does not have any change-in-control agreements with its executive officers.
Outstanding Equity Awards
The Company has no outstanding equity awards made to our Named Executive Officer that were outstanding as of November 30, 2020.
2017 Stock Option Plan
The Board of Directors approved the Company’s 2017 Stock Option Plan (the “2017 Plan”) on November 10, 2017, and the Company’s stockholders approved the 2017 Plan on November 10, 2017. The 2017 Plan provides for stock-based and other awards to the Company’s employees, consultants and directors.
The maximum number of shares of our common stock that may be issued under the 2017 Plan is 10,000,000 shares, which may be replenished and will automatically increase on January 1st of each year for a period of nine years commencing on January 1, 2018, and ending on (and including) January 1, 2026, in an amount equal to the greater of (i) 10% of the total number of shares of common stock issued and outstanding on the last day of the immediately preceding fiscal year, or (ii) 10,000,000 shares. As of the date of this Report, 9,950,000 shares of the Company’s common stock are available for issuance under the 2017 Plan.
Shares subject to stock awards granted under the 2017 Plan that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, do not reduce the number of shares available for issuance under the 2017 Plan.
The maximum number of shares of common stock that may be subject to awards granted under the 2017 Plan to any one individual during any calendar year may not exceed 1% of the total number of shares of common stock issued and outstanding as of the award grant date (as adjusted from time to time in accordance with the provisions of the 2017 Plan).
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Plan Administration. Our Board of Directors, or a duly authorized committee of our Board of Directors, will administer the 2017 Plan. Our Board of Directors may also delegate to one or more of our officers the authority to designate employees (other than officers) to receive specified stock awards and determine the number of shares subject to such stock awards. Under the 2017 Plan, the Board has the authority to determine and amend the terms of awards and underlying agreements, including:
| ● | whether each option granted will be an incentive stock option or a non-statutory stock option; |
| ● | the fair market value of the common stock; |
| ● | recipients; |
| ● | whether and to what extent 2017 Plan awards are granted; |
| ● | the exercise and purchase price of stock awards, if any; |
| ● | the number of shares subject to each stock award; |
| ● | the form of agreement(s) used under the 2017 Plan; |
| ● | the vesting schedule applicable to the awards, together with any vesting acceleration, pro rata adjustments to vesting; |
| ● | any waiver of forfeiture restrictions; and |
| ● | the form of consideration, if any, payable on exercise or settlement of the award. |
Under the 2017 Plan, the Board also generally has the authority to effect, with the consent of any adversely affected participant:
| ● | the reduction of the exercise, purchase, or strike price of any outstanding award; |
| ● | the cancellation of any outstanding award and the grant in substitution therefore of other awards, cash, or other consideration; or |
| ● | any other action that is treated as a repricing under generally accepted accounting principles. |
Stock Options. Incentive stock options may only be granted to employees and non-statutory stock options may be granted to employees and consultants under stock option agreements subject to the terms of the 2017 Plan, provided that the exercise price of a stock option generally cannot be less than 100% of the fair market value (110% of the fair market value to an employee who is also a 10% stockholder) of our common stock on the date of grant. Options granted under the 2017 Plan vest at the rate specified in the stock option agreement. The term of an option shall be no more than ten years from the date of grant and, in the case of an incentive stock option granted to a person who at the time of such grant is a 10% stockholder, the term shall be no more than five years from the date of grant.
Termination. An optionee shall have 30 days to exercise an option, to the extent vested upon termination for service, unless such termination is for cause in which case such option shall terminate immediately. An option to the extent vested shall terminate 6 months after termination for disability and 12 months after death of the optionee that occurs within 30 days of termination of service.
Stock Purchase Right. Restricted stock awards may also be granted under the 2017 Plan and are granted under restricted stock purchase agreements. If a participant’s service relationship with us ends for any reason, we may receive any or all of the shares of common stock held by the participant that have not vested as of the date the participant terminates service with us through a forfeiture condition or a repurchase right.
Changes to Capital Structure. Subject to any action required under applicable laws by the stockholders of the Company, the number of shares of common stock covered by each outstanding award, and the number of shares of common stock that have been authorized for issuance under the 2017 Plan but as to which no awards have yet been granted or that have been returned to the 2017 Plan upon cancellation or expiration of an award, as well as the price per share of common stock covered by each such outstanding award, shall be proportionately adjusted for any increase or decrease in the number of issued shares of common stock resulting from a stock split, reverse stock split, stock dividend, combination, recapitalization or reclassification of the common stock, or any other increase or decrease in the number of issued shares of common stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of common stock subject to an award.
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Corporate Transactions. Our 2017 Plan provides that in the event of certain specified significant corporate transactions, including: (1) a sale of all or substantially all of our assets, (2) the consummation of a merger, consolidation or other capital reorganization, or business combination transaction where we do not survive the transaction each outstanding option or stock purchase right shall be assumed or an equivalent option or right shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation (the “Successor Corporation”), unless the Successor Corporation does not agree to assume the award or to substitute an equivalent option or right, in which case the vesting of each option or stock purchase right shall fully and immediately accelerate or the repurchase rights of the Company shall fully and immediately terminate, as the case may be, immediately prior to the consummation of the transaction.
For purposes of a corporate transaction, an option or a stock purchase right shall be considered assumed, without limitation, if, at the time of issuance of the stock or other consideration upon a corporate transaction or a change of control, as the case may be, each holder of an option or stock purchase right would be entitled to receive upon exercise of the award the same number and kind of shares of stock or the same amount of property, cash or securities as such holder would have been entitled to receive upon the occurrence of the transaction if the holder had been, immediately prior to such transaction, the holder of the number of shares of common stock covered by the award at such time (after giving effect to any adjustments in the number of shares covered by the option or stock purchase right as provided for); provided that if such consideration received in the transaction is not solely common stock of the Successor Corporation, the Administrator may, with the consent of the Successor Corporation, provide for the consideration to be received upon exercise of the award to be solely common stock of the Successor Corporation equal to the fair market value of the per share consideration received by holders of common stock in the transaction.
Transferability. A participant may not transfer stock awards under our 2017 Plan other than by will, the laws of descent and distribution, or as otherwise provided under our 2017 Plan.
Term. The term of the 2017 Plan is 10 years.
Plan Amendment or Termination. Our Board of Directors has the authority to amend, alter, suspend, or terminate our 2017 Plan, provided that such action does not materially impair the existing rights of any participant without such participant’s written consent. Certain material amendments also require the approval of our stockholders. No incentive stock options may be granted after the tenth anniversary of the date our Board of Directors adopted our 2017 Plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists, as of March 16, 2021, the number shares of common stock beneficially owned by (i) each person or entity known to the Company to be the beneficial owner of more than 5% of the Company’s outstanding common stock; (ii) the Named Executive Officer; and (iii) all officers and directors as a group. Information relating to beneficial ownership of Common Stock by our principal shareholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the SEC. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the SEC rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power with respect to the shares beneficially owned. Unless otherwise indicated, the business address of each such person is c/o PureBase Corporation, 8625 Highway 124, Ione, California 95640. The percentages below are calculated based on 214,950,751 shares of common stock issued and outstanding as of March 16, 2021.
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5% Shareholders
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent | ||||||
US Mine Corporation (1) 8625 Highway 124 Ione, California 95640 | 67,651,078 | (2) | 31.3 | % | ||||
Baystreet Capital Management Corp (3) 2 Woodgreen Place Toronto, Ontario, Canada M4M2J2 | 21,338,800 | (4) | 9.9 | % | ||||
Bremer Family 1995 Living Family Trust (5) 1660 Chicago Avenue Riverside, California 92506 | 40,163,000 | 18.6 | % | |||||
Directors and Executive Officers
Name and Address of Beneficial Owner | Amount and | Percent | ||||||
| A. Scott Dockter | 44,665,932 | (6) | 20.8 | % | ||||
| John Bremer | 40,163,000 | (7) (8) | 18.6 | % | ||||
| Michael Fay | - | - | ||||||
| Jeffrey Guzy | 410,000 | (9) | - | |||||
| Directors and Officers as a Group (4 persons) | 85,238,932 | 39.6 | % | |||||
| (1) | A. Scott Dockter, Chief Executive Officer and a director, and John Bremer, President and a director, of USMC are both 33% owners and share voting and dispositive power over the shares held by USMC. |
| (2) | Includes 1,112,500 shares convertible under a promissory note. |
| (3) | Todd Gauer, President of Baystreet Capital Management Corp. (“Baystreet”) has sole voting and dispositive power over the shares held by Baystreet. |
| (4) | Includes 168,000 shares owned by Bayshore Capital, LLC, an affiliate through common ownership of Baystreet Capital Management Corp. |
| (5) | John Bremer, as executor of the Bremer Family 1995 Living Family Trust, has voting and dispositive power over the shares held by the Bremer Family 1995 Living Family Trust. |
| (6) | Excludes 22,550,359 shares held by USMC over which Mr. Dockter has 33% voting and dispositive power. |
| (7) | Represents 40,163,000 shares owned by the Bremmer Family 1995 Living Family Trust of which mr. Bremer, as trustee has sole voting and dispositive power. |
| (8) | Excludes 22,550,359 shares held by USMC over which Mr. Bremer has 33% voting and dispositive power. |
(9) | Includes currently exercisable options to purchase 250,000 shares. |
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Changes in Control Agreements.
The Company does not have any change-in-control agreements with any of its executive officers.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with Related Persons
Except as set forth below, since December 1, 2018, there have been no transactions, or currently proposed transactions, in which we were or are to be a participant and the amount involved exceeds $120,000, and in which any of the following persons had or will have a direct or indirect material interest:
| ● | any director or executive officer of our company; |
| ● | any person who beneficially owns, directly or indirectly, more than 5% of our outstanding shares of common stock; |
| ● | any promoters and control persons; and |
| ● | any member of the immediate family (including spouse, parents, children, siblings and in laws) of any of the foregoing persons. |
The Company utilizes the services of its affiliate, USMC, for exploration services and other services. Since December 31, 2018, all Company purchases, including all minerals utilized by the Company, where made from USMC. A. Scott Dockter, the Chief Executive Officer and a director of the Company, and John Bremer, a director of the Company, are also officers, directors and controlling shareholders of USMC.
The following tables outline the related parties associated with the Company and amounts due for each period indicated:
| Name of Related Party | Relationship with the Company | |
| US Mine Corporation | 10% shareholder | |
| Bayshore Capital Advisors, LLC | Affiliate of 10% Shareholder | |
| A. Scott Dockter | Chief Executive Officer | |
| Bremer Family 1995 Living Family Trust | 10% shareholder |
| November 30, 2020 | November 30, 2019 | |||||||
| US Mine Corporation – Convertible Notes and Interest, Expenses Paid, and Cash Advances | $ | 1,272,612 | $ | - | ||||
| A. Scott Dockter – Promissory Note, Principal and Interest | $ | 160,617 | $ | 168,207 | ||||
| Bayshore Capital Advisors, LLC – Promissory Note, Principal and Interest | $ | 32,146 | $ | 27,630 | ||||
US Mine Corporation
On December 1, 2013, the Company entered into a contract mining agreement with USMC, a 5% shareholder and a company owned by A. Scott Dockter, our President and Chief Executive Officer, and a director, and John Bremer, a director, pursuant to which USMC will provide various technical evaluations and mine development services to the Company. Services totaling $0 and $142,210 were rendered by USMC for the fiscal years ended November 30, 2020 and 2019, respectively. The Company has paid USMC an aggregate of $153,710 since December 1, 2018, under the mining agreement.
During the fiscal years ended November 30, 2020 and 2019, USMC paid $1,900 and $23,403, respectively, of expenses to the Company’s vendors and creditors on behalf of the Company and also made cash advances to the Company of $1,084,789 and $595,513, respectively. USMC has paid an aggregate of $324,823 of expenses to the Company’s vendors and made cash advances to the Company in the aggregate amount of $945,000 since December 1, 2018.
In connection with the acquisition of USAM by the Company, on November 24, 2014, the Company assumed a $1,000,000 promissory note with Craig Barto, a 33% owner of USMC. The note bears interest at an annual rate of 5% and the principal and accrued interest were payable on May 1, 2016. During year ended November 30, 2019, the note was in default and the Company continued to have discussions with holder of the note to extend the note under the same terms and conditions to cure the default. Pursuant to the February 7, 2020 Amendment to the September 5, 2019, Debt Exchange Agreement, Mr. Barto assigned the note to USMC effective July 31, 2019. On September 5, 2019, the Company entered into a Debt Exchange Agreement with USMC pursuant to which an aggregate of $5,988,471 of debt, including $1,000,000 of principal and $234,247 of unpaid interest, was converted to an aggregate of 66,538568 shares of the Company’s common stock at a conversion price of $0.09 per share.
On September 26, 2019, the Company entered into a Securities Purchase Agreement with USMC pursuant to which USMC may purchase up to $1,000,000 of the Company’s 5% unsecured two-year promissory notes which are convertible into shares of the Company’s common stock, at any time at the option of the holder, at a conversion price of $0.16 per share. USMC purchased notes in the principal amounts of $20,000, $86,000, and $72,000 on December 1, 2019, January 1, 2019, and February 1, 2020, respectively.
In connection with the Snow White Mine property, owned by John Bremer, a director of the Company, the Company is required to make minimum royalty payments of $3,500 per year. The Company has made royalty payments in the aggregate amount of $10,400 to Mr. Bremer since December 31, 2018.
Board of Directors
On April 8, 2020, the Company issued a five-year option to Jeffrey Guzy, a director, to purchase 250,000 shares of its common stock with an exercise price of $0.10 per share.
Executive Officer
In connection with Michael Fay’s appointment as Chief Financial Officer of the Company, on January 21, 2021, the Company granted Mr. Fay a five-year stock option to purchase 200,000 shares of the Company’s common stock at an exercise price of $0.67 per share. The shares subject to the option will vest and became exercisable one year from the date of grant.
On August 31, 2017, the Company issued a promissory note in the principal amount of $197,096 to A. Scott Dockter, President, Chief Executive Officer and a director of the Company to consolidate total amounts of indebtedness due to Mr. Dockter. The note bears interest at 6% and is due upon demand. During the year ended November 30, 2020, the Company repaid $4,780 towards the balance of the note. As of November 30, 2020 and 2019, the principal balance due on this note is $127,816 and $132,596, respectively.
Bayshore Capital Advisors, LLC
On February 26, 2016, the Company issued a 6% promissory note in the principal amount of $25,000 to Bayshore Capital Advisors, LLC a 5% shareholder of the Company. The note was payable upon the earlier of August 26, 2016 or the closing of a bridge financing by the Company. The Company is in default on the note.
Director Independence
We believe that Jeffrey Guzy would be deemed “independent” under the applicable NASDAQ definition.
| 38 |
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit and Accounting Fees
The following table sets forth the aggregate fees billed to the Company for professional services rendered by Turner, Stone & Company, LLC (“TSC”) for the years ended November 30, 2020 and 2019:
| Years Ended November 30, | ||||||||
| Services | 2020 | 2019 | ||||||
| Audit fees | $ | 44,800 | $ | 87,250 | ||||
| Audit related fees | - | - | ||||||
| Tax fees | - | 850 | ||||||
| All other fees | - | - | ||||||
| Total fees | $ | 44,800 | $ | 88,100 | ||||
Audit Fees
Audit fees consist of fees incurred professional services rendered for the audit of our annual consolidated financial statements, the review of our interim consolidated financial statements included in our quarterly reports on Form 10-Q and for services that are normally provided in connection with statutory or regulatory filings or engagements.
Audit-Related Fees
Audit-related fees consist of fees billed for professional services that are reasonably related to the performance of the audit or review of our financial statements but are not reported under “Audit fees.”
Tax Fees
Tax fees consist of fees billed for professional services relating to tax compliance, tax planning, and tax advice. including the preparation of our corporate tax returns.
All Other Fees
All other fees consist of fees billed for services not associated with audit or tax.
Audit Committee’s Pre-Approval Practice
Prior to our engagement of our independent auditor, such engagement was approved by our audit committee. The services provided under this engagement may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to report to our audit committee at least quarterly regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. Our audit committee may also pre-approve particular services on a case-by-case basis. All audit-related fees, tax fees and other fees incurred by us were approved by our audit committee.
Pre-Approval of Audit and Permissible Non-Audit Services
The percentage of hours expended TSC’s engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was 0%.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following exhibits are included as part of this Annual Report:
| * | Filed herewith |
| ** | Furnished herewith |
None
Pursuant to the requirements of Section 13 or 15(d) 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.
PUREBASE CORPORATION
| By: | /s/ A. Scott Dockter | |
| A. Scott Dockter | ||
| Chief Executive Officer and President (Principal Executive Officer) | ||
| Date: | March 16, 2021 |
| By: | /s/ Michael Fay | |
| Michael Fay | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) | ||
| Date: | March 16, 2021 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ A. Scott Dockter | |
| A. Scott Dockter | ||
| Chief Executive Officer and President and Director | ||
| Date: | March 16, 2021 |
| By: | /s/ Jeffrey Guzy | |
| Jeffrey Guzy | ||
| Director | ||
| Date: | March 16, 2021 |
| By: | /s/ John Bremer | |
| John Bremer | ||
| Director | ||
| Date: | March 16, 2021 |
| 41 |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PUREBASE CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS NOVEMBER 30, 2020 AND 2019
TABLE OF CONTENTS
| Page | |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | F-2 |
| CONSOLIDATED FINANCIAL STATEMENTS: | |
| Consolidated Balance Sheets as of November 30, | F-3 |
| F-4 | |
| F-5 | |
| F-6 | |
| F-7 |
To the Board of Directors and Stockholders of Purebase Corporation:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Purebase Corporation and Subsidiariesits subsidiaries (the “Company”) as of November 30, 20172020 and 2016,2019 and the related consolidated statements of operations, stockholders'stockholders’ deficit and cash flows for the years then ended. The Company's management is responsible for theseended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial statements.position of the Company as of November 30, 2019 and 2020, and the results of its consolidated operations and its consolidated cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company expects to continue to incurring operating losses and generating negative cash flows from operations. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedthe Company’s financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the auditaudits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included considerationAs part of our audits, we are required to obtain an understanding of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.
| /s/ Turner, Stone & Company, L.L.P. | |
| Dallas, Texas | |
| March 16, 2021 | |
| We have served as the Company’s auditor since 2019. |
| Purebase Corporation | November 30, | November 30, | ||||||
| 2017 | 2016 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 6,286 | $ | 555,648 | ||||
| Accounts Receivable, net of allowance for doubtful accounts of $0 | 60,888 | 58,897 | ||||||
| Prepaid expenses and other assets | 5,835 | 38,182 | ||||||
| Total current assets | 73,009 | 652,727 | ||||||
| Property and Equipment | ||||||||
| Property and Equipment | 42,103 | 35,151 | ||||||
| Autos and Trucks | 25,061 | 25,061 | ||||||
| Accumulated Depreciation | (54,070 | ) | (40,477 | ) | ||||
| Total Property and Equipment | 13,094 | 19,735 | ||||||
| Mineral Rights Acquisition Costs | 200,000 | 200,000 | ||||||
| Deposit on mineral rights | 0 | 75,000 | ||||||
| Total Assets | $ | 286,103 | $ | 947,462 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable | $ | 81,098 | $ | 160,467 | ||||
| Accrued Payroll and Related | 250,223 | 479,021 | ||||||
| Accrued Interest | 152,442 | 97,993 | ||||||
| Other Accrued Liabilities | 115,098 | 80,040 | ||||||
| Due to Officer | 197,096 | 170,886 | ||||||
| Due to Affiliated Entities | 2,497,708 | 1,249,135 | ||||||
| Notes Payable Current | 1,025,000 | 1,025,000 | ||||||
| Convertible Notes Payable, Net | ||||||||
| Subscription Liability | 0 | 500,000 | ||||||
| Total Current Liabilities | 4,318,665 | 3,762,542 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders' Equity (Deficit) | ||||||||
| Purebase Corp. Stockholders' Equity (Deficit) | ||||||||
| Common stock $0.001 par value, 520,000,000 shares authorized, | 70,943 | 70,943 | ||||||
| 141,347,173 shares issued and outstanding | ||||||||
| Additional paid in capital | 2,847,479 | 2,462,572 | ||||||
| Accumulated deficit | (6,950,984 | ) | (5,321,422 | ) | ||||
| Total Purebase Corp. Stockholders' Equity (Deficit) | (4,032,562 | ) | (2,787,907 | ) | ||||
| Non-Controlling Interest | 0 | (27,173 | ) | |||||
| Total Stockholders' Equity (Deficit) | (4,032,562 | ) | (2,815,080 | ) | ||||
| Total Liabilities and Stockholders' Deficit | $ | 286,103 | $ | 947,462 | ||||
| Purebase Corporation | For the | For the | ||||||
| Year Ended | Year Ended | |||||||
| November 30, | November 30, | |||||||
| 2017 | 2016 | |||||||
| Revenue | $ | 484,706 | $ | 177,705 | ||||
| Operating expenses: | ||||||||
| General and administrative | 2,344,855 | 2,501,468 | ||||||
| Product fulfillment, exploration and mining expenses | 268,426 | 218,961 | ||||||
| Depreciation and amortization | 13,592 | 12,041 | ||||||
| Total Operating Expense | 2,626,873 | 2,732,470 | ||||||
| Other Income (Expenses) | ||||||||
| Change in value of Derivative Liability | 0 | 65,061 | ||||||
| Gain from deconsolidation of Purebase Networks | 562,571 | 0 | ||||||
| Other Income (Expense) | 22 | 14 | ||||||
| Interest Expense | (89,697 | ) | (212,823 | ) | ||||
| Income Tax Expense | 0 | 1,350 | ||||||
| Total Other Income (Expenses) | 472,896 | (146,398 | ) | |||||
| Net Income (Loss) | $ | (1,669,271 | ) | $ | (2,701,166 | ) | ||
| Less: Net Loss attributable to Non-Controlling Interest | (39,709 | ) | (76,139 | ) | ||||
| Net Loss attributable to Purebase Corp. Stockholders | $ | (1,629,562 | ) | $ | (2,625,027 | ) | ||
| Basic and Diluted Loss Per Share | $ | (0.01 | ) | $ | (0.02 | ) | ||
| Weighted average common shares | ||||||||
| outstanding - basic and diluted | 141,347,173 | 141,042,682 | ||||||
| | | November 30, 2020 | | | November 30, 2019 | | ||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 7,450 | $ | 8,400 | ||||
| Accounts receivable, net of allowances for uncollectables of $18,277 and $11,137, respectively | 2,500 | 17,063 | ||||||
| Prepaid expenses and other assets | 5,390 | 4,953 | ||||||
| Total Current Assets | 15,340 | 30,416 | ||||||
| Property and equipment, net | 620,000 | 772 | ||||||
| Mineral rights acquisition costs | - | 200,000 | ||||||
| Total Assets | $ | 635,340 | $ | 231,188 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 164,040 | $ | 344,225 | ||||
| Settlement liability | 400,000 | 475,000 | ||||||
| Note payable to officer | 127,816 | 132,596 | ||||||
| Due to affiliated entities | 1,091,158 | - | ||||||
| Notes payable, related party | 25,000 | 25,000 | ||||||
| Total Current Liabilities | 1,808,014 | 976,821 | ||||||
| Convertible notes paayble - affiliated entity, net of discount of $49,000 | 129,000 | - | ||||||
| Total Liabilities | 1,937,014 | 976,821 | ||||||
| Commitments and Contingencies (Note 9) | ||||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, $.001 par value; 10,000,000 shares authorized; 0 and 0 shares issued and outstanding, respectively | - | - | ||||||
| Common stock, $.001 par value; 520,000,000 shares authorized; 214,950,751 and 208,650,741 shares issued and outstanding, respectively | 144,547 | 138,247 | ||||||
| Additional paid-in capital | 11,307,806 | 10,364,990 | ||||||
| Accumulated deficit | (12,754,027 | ) | (11,248,870 | ) | ||||
| Total Stockholders’ Deficit | (1,301,674 | ) | (745,633 | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | 635,340 | $ | 231,188 | ||||
The accompanying notes are an integral part of these consolidated financial statementsstatements.
| F-3 |
| Purebase Corporation | ||||||||||||||||||||||||
| Non-Controlling | ||||||||||||||||||||||||
| Additional | Interest in | Total | ||||||||||||||||||||||
| Common Stock | Paid-in | Deficit | Purebase | Stockholders' | ||||||||||||||||||||
| Shares | Amount | Capital | Accumulated | Networks | Equity | |||||||||||||||||||
| Balance, November 30, 2015 | 140,913,099 | $ | 70,509 | $ | 1,641,815 | $ | (2,696,395 | ) | $ | 0 | $ | (984,071 | ) | |||||||||||
| Issuance of units for Converted Debt | 434,074 | 434 | 203,763 | $ | 204,197 | |||||||||||||||||||
| Stock based compensation | 411,069 | 4,891 | $ | 415,960 | ||||||||||||||||||||
| Interest in Purebase Networks | 205,925 | 44,075 | $ | 250,000 | ||||||||||||||||||||
| Net loss | (2,625,027 | ) | (76,139 | ) | $ | (2,701,166 | ) | |||||||||||||||||
| Balance, November 30, 2016 | 141,347,173 | $ | 70,943 | $ | 2,462,572 | $ | (5,321,422 | ) | (27,173 | ) | $ | (2,815,080 | ) | |||||||||||
| Stock based compensation | 384,907 | $ | 384,907 | |||||||||||||||||||||
| Net loss | (1,629,562 | ) | (39,709 | ) | $ | (1,669,271 | ) | |||||||||||||||||
| Deconsolidation of Purebase Networks | 66,882 | $ | 66,882 | |||||||||||||||||||||
| Balance, November 30, 2017 | 141,347,173 | $ | 70,943 | $ | 2,847,479 | $ | (6,950,984 | ) | $ | (4,032,562 | ) | |||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Year Ended | ||||||||
| November 30, 2020 | November 30, 2019 | |||||||
| Revenue, net | $ | 169,410 | $ | 361,930 | ||||
| Operating Expenses: | ||||||||
| Selling, general and administrative | 1,427,288 | 1,498,961 | ||||||
| Product fulfillment | 77,465 | 212,949 | ||||||
| Loss on impairment of mineral rights | 200,000 | - | ||||||
| Total Operating Expenses | 1,704,753 | 1,711,910 | ||||||
| Loss From Operations | (1,535,343 | ) | (1,349,980 | ) | ||||
| Other Income (Expense): | ||||||||
| Other income | 46,283 | 261 | ||||||
| Interest expense | (16,097 | ) | (552,740 | ) | ||||
| Loss on conversion of related party debt and payables | - | (1,230,964 | ) | |||||
| Total Other Income (Expense) | 30,186 | (1,783,443 | ) | |||||
| Net Loss | $ | (1,505,157 | ) | $ | (3,133,423 | ) | ||
| Loss per Common Share - Basic and Diluted | $ | (0.01 | ) | $ | (0.02 | ) | ||
| Weighted Average Shares Outstanding - Basic and Diluted | 214,850,741 | 155,011,842 | ||||||
The accompanying notes are an integral part of these consolidated financial statementsstatements.
| F-4 |
FOR THE YEAR ENDED NOVEMBERNOVEMEBER 30, 2017 AND 2016
Year Ended November 30, 2017 | Year Ended November 30, 2016 | |||||||
| Operating activities: | ||||||||
| Net Loss | $ | (1,669,271 | ) | $ | (2,701,166 | ) | ||
| Add back Net Loss attributable to Non-Controlling Interest | $ | 39,709 | $ | 76,139 | ||||
| Net Loss attributable to Purebase Corp. | $ | (1,629,562 | ) | $ | (2,625,027 | ) | ||
| Adjustments to reconcile net income (loss) to cash used in operating activities: | ||||||||
| Gain on Deconsolidation of Purebase Networks | (562,571 | ) | 0 | |||||
| Depreciation and amortization | 13,592 | 12,041 | ||||||
| Stock Based Compensation | 384,907 | 415,960 | ||||||
| Excess value of derivative over note payable | 0 | 70,125 | ||||||
| Change in value of derivative liability | 0 | (65,061 | ) | |||||
| Amortization of loan discount | 0 | 77,295 | ||||||
| Non-controlling interest | (39,709 | ) | (76,139 | ) | ||||
| Effect of changes in: | ||||||||
| Accounts Receivable | (1,991 | ) | (58,897 | ) | ||||
| Prepaid expenses and other current assets | 4,841 | (37,682 | ) | |||||
| Accounts payable and accrued expenses | 1,054,048 | 1,253,484 | ||||||
| Net cash used in operating activities | (776,445 | ) | (1,033,901 | ) | ||||
| Investing Activities: | ||||||||
| Proceeds from settlement of Purebase Networks | 250,000 | 0 | ||||||
| Purebase Networks cash balance upon deconsolidation | (453,561 | ) | 0 | |||||
| Purchase Equipment | (6,953 | ) | 0 | |||||
| Net cash provided/(used) in investing activities | (210,514 | ) | 0 | |||||
| Financing activities: | ||||||||
| Interest in Purebase Networks | 0 | 250,000 | ||||||
| Proceeds from Subscription Liability | 0 | 500,000 | ||||||
| Proceeds from Convertible notes payable | 0 | 45,000 | ||||||
| Proceeds from notes payable | 0 | 145,000 | ||||||
| Advances from/(to) officer | 5,597 | (18,720 | ) | |||||
| Advances from affiliated entities | 432,000 | 602,000 | ||||||
| Net cash provided by financing activities | 437,597 | 1,523,280 | ||||||
| Net change in cash | (549,362 | ) | 489,379 | |||||
| Cash, beginning of period | 555,648 | 66,269 | ||||||
| Cash, end of period | $ | 6,286 | $ | 555,648 | ||||
| Supplemental cash flow information: | ||||||||
| Income taxes paid in cash | $ | 0 | $ | 1,350 | ||||
| Vendors paid by Affiliated Entities | $ | 736,038 | $ | 615,465 | ||||
| Assumption of debt by CEO | $ | 20,613 | $ | 222,430 | ||||
| Conversion of notes payable | $ | 0 | $ | 204,197 | ||||
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance at November 30, 2018 | - | $ | - | 141,347,173 | $ | 70,943 | $ | 3,050,893 | $ | (8,115,447 | ) | $ | (4,993,611 | ) | ||||||||||||||
| Stock based compensation | - | - | - | - | 60,854 | - | 60,854 | |||||||||||||||||||||
| Shares issued for conversion of related party payables and note | - | - | 66,538,568 | 66,539 | 7,152,896 | - | 7,219,435 | |||||||||||||||||||||
| Shares issued for consulting | - | - | 100,000 | 100 | 9,900 | - | 10,000 | |||||||||||||||||||||
| Shares issued for subscription payable | - | - | 665,000 | 665 | 90,447 | - | 91,112 | |||||||||||||||||||||
| Net Loss | - | - | - | - | - | (3,133,423 | ) | (3,133,423 | ) | |||||||||||||||||||
| Balance at November 30, 2019 | - | - | 208,650,741 | 138,247 | 10,364,990 | (11,248,870 | ) | (745,633 | ) | |||||||||||||||||||
| Stock based compensation | - | - | - | - | 56,609 | - | 56,609 | |||||||||||||||||||||
| Shares issued for services | - | - | 100,000 | 100 | 33,900 | - | 34,000 | |||||||||||||||||||||
| Shares issued for in Quove asset purchase | - | - | 6,200,000 | 6,200 | 613,800 | - | 620,000 | |||||||||||||||||||||
| Forgiveness of related party liabilities | - | - | - | - | 150,257 | - | 150,257 | |||||||||||||||||||||
| Beneficial conversion feature on convertible debt | - | - | - | - | 88,250 | - | 88,250 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (1,505,157 | ) | (1,505,157 | ) | |||||||||||||||||||
| Balance as of November 30, 2020 | - | $ | - | 214,950,741 | $ | 144,547 | $ | 11,307,806 | $ | (12,754,027 | ) | $ | (1,301,674 | ) | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statementsstatements.
| F-5 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Year Ended | ||||||||
| November 30, 2020 | November 30, 2019 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net loss | $ | (1,505,157 | ) | $ | (3,133,423 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Allowance for Doubtful Accounts | 7,140 | - | ||||||
| Depreciation | 772 | 2,316 | ||||||
| Stock based compensation | 90,609 | 60,854 | ||||||
| Issuance of common stock for services | - | 101,112 | ||||||
| Loss on conversion of related party payables and debt | - | 1,230,964 | ||||||
| Loss on impairment of mineral rights | 200,000 | - | ||||||
| Amortization of debt discount | 39,250 | - | ||||||
| Settlement liability | (75,000 | ) | 475,000 | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 7,423 | (8,792 | ) | |||||
| Prepaid expenses and other current assets | (437 | ) | 2,786 | |||||
| Accounts payable and accrued expenses | (29,928 | ) | 718,289 | |||||
| Net Cash Used In Operating Activities | (1,265,328 | ) | (550,894 | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Advances from related parties | 1,091,158 | 595,513 | ||||||
| Proceeds from convertible notes payable - affiliated entities | 178,000 | - | ||||||
| Payments on notes due to officers | (4,780 | ) | (44,500 | ) | ||||
| Net Cash Provided By Financing Activities | 1,264,378 | 551,013 | ||||||
| Net Increase (Decrease) In Cash | (950 | ) | 119 | |||||
| Cash - Beginning of Year | 8,400 | 8,281 | ||||||
| Cash - End of Year | $ | 7,450 | $ | 8,400 | ||||
| Supplemental Cash Flow Information: | ||||||||
| Cash paid for: | ||||||||
| Interest paid | $ | - | $ | - | ||||
| Income taxes paid | $ | - | $ | - | ||||
| Noncash investing and financing activities: | ||||||||
| Vendors paid by Affiliated Entities | $ | - | $ | 23,403 | ||||
| Common shares issued for debt settlement with related party | $ | - | $ | 7,219,435 | ||||
| Common shares issued for asset purchase | $ | 620,000 | $ | - | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
PUREBASE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – organization and business operations
Corporate History
The Company was incorporated in the State of Nevada on March 2, 2010.2010, under the name Port of Call Online, Inc. to create a web-based service that would offer boaters an easy, convenient, fun, easy to use, online resource to help them plan and organize their boating trips. Pursuant to a corporate reorganization consummated on December 23, 2014, the Company changed its business focus to anthe identification, acquisition, exploration, miningdevelopment and product marketing company which will focus on identifying and developing advanced stage natural resource projects which show potential to achieve full production. The business strategyfull-scale exploitation of the Company is to identify, acquire, define, develop and operate world-class industrial and natural resourcemineral properties and to contract for mine development and operations services to its mining properties located initially in the Western United States for the development of products for the construction and currentlyagriculture markets. In line with this business focus, the Company changed its name to PureBase Corporation in California and Nevada. January 2015.
The Company plans to package and market such industrial and natural minerals to retail and wholesale industrial and agricultural market sectors. The Company will initially seek to develop deposits of pozzolan, and potassium sulfate on its own properties or acquire such minerals from other sources. These minerals have a wide range of uses including construction, agriculture additives, animal feedstock, ceramics, synthetics, absorbents and electronics. The Company's activities are subject to significant risks and uncertainties including its ability to secure additional funding to pursue its operations.
Business Overview
The Company, through its two divisions, Purebase Ag and Purebase SCM, is engaged in the agricultural and construction-materials sectors. In the agricultural sector, the Company’s business is divided into wholly-owned subsidiaries which will operate as business divisions, whose sole focus is to develop specialized fertilizers, sun protectants, soil amendments, and bio-stimulants for organic and non-organic sustainable agriculture.
In the construction sector, relatedthe Company’s focus in 2020 has been to develop and test a kaolin-based product that will help create a lower CO2-emitting concrete (through the use of high-quality SCM’s.) The Company is developing a SCM it believes that can potentially replace up to 40% of cement, the most polluting part of concrete. As government agencies continue to enact stricter requirements for less-polluting forms of concrete, the Company believes there are significant opportunities for high-quality SCM poducts in the construction-materials sector.
In the agricultural sector, the Company has developed and will seek to develop additional products derived from mineralized materials of leonardite, kaolin clay, laterite, and other natural minerals. These mineral and soil amendments are used to protect crops, plants and fruits from the sun and winter damage, to provide nutrients to plants, and to provideimprove dormancy and soil ecology to help farmers increase the yields of their harvests.
The Company is building a brand family under the parent trade name “Purebase,” consisting of its Purebase Shade Advantage WP product, a kaolin-clay based sun protectant for distributioncrops. It is also involved in the early testing of thosesoil amendment products into primarilybased on humic and fulvic acids derived from leonardite. Other agricultural products are in the agriculturaldevelopment stage.
The Company utilizes the services of US Mine Corporation (“USMC”), a Nevada corporation, and a significant shareholder of the Company for the development and contract mining of industrial mineral and metal projects throughout North America, exploration drilling, preparation of feasibility studies, mine modeling, on-site construction, industry sectors.production, site reclamation and for product fulfillment. Exploration services include securing necessary permits, environmental compliance, and reclamation plans. In addition, a substantial portion of the minerals to be utilized by the Company is obtained from properties owned or controlled by USMC. A. Scott Dockter and John Bremer are officers, directors, and owners.
| F-7 |
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts of Purebase Corporation and its wholly owned subsidiaries Purebase Agricultural, Inc. (f.k.a. Purebase, Inc.) and US Agricultural Minerals, LLC ("USAM") and its majority-owned subsidiary Purebase Networks, Inc. (until March 2017), collectively referred to as the "Company". All intercompany transactions have been eliminated in consolidation. The consolidated financial statements reflect all adjustments,prepared on the basis that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the opinionnormal course of management, are necessary to present fairly the consolidated financial position atbusiness. At November 30, 2017 and November 30, 2016 and the consolidated results of operations and cash flows of2020, the Company for the fiscal years ended November 30, 2017had a significant accumulated deficit of approximately $12,754,000 and November 30, 2016.
The Company’s plan, through the continued promotion of its services to existing and potential customers, is to generate sufficient revenues to cover its anticipated expenses. The Company uses the specific identification method for recording the provision for doubtful accounts, which was $0 at November 30, 2017 and 2016. Accounts receivable are written off when all collection attempts have failed.
Although no assurances can be given as to the customer.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The outstanding warrants and stock optionsaccompanying audited consolidated financial statements have been excluded fromprepared in accordance with accounting principles generally accepted in the calculationUnited States of America (“GAAP”). The summary of significant accounting policies presented below is designed to assist in understanding the Company’s consolidated financial statements. Such consolidated financial statements and accompanying notes are the representations of Company’s management, who is responsible for their integrity and objectivity.
Principles of Consolidation
These consolidated financial statements include the accounts of the diluted loss per share due to their anti-dilutive effect.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with U.S. generally accepted accounting principlesGAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and equity-based transactions at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company'sCompany’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of the financial statements. Significant estimates include the allowance for doubtful accounts, useful lives of property and equipment, deferred tax asset and valuation allowance, assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate.
Revenue
The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which the Company adopted beginning on December 1, 2018, utilizing the modified retrospective method. The approach was applied to contracts that were in process as of December 1, 2018. The reported results for the fiscal year 2019 reflect the application of ASC topic 606.
The Company derives revenues from the sale of its agricultural products. The Company’s contracted transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s contracts have a single performance obligation which are not separately identifiable from other promises in the contracts and is, therefore, not distinct. The Company’s performance obligation is satisfied upon the transfer of risk of loss to the customer.
Practical Expedients
As part of ASC Topic 606, the Company has adopted several practical expedients including:
| ● | Significant Financing Component – the Company does not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to the customer and when the customer pays for that good or service will be one year or less. |
| ● | Unsatisfied Performance Obligations – all performance obligations related to contracts with a duration for less than one year, the Company has elected to apply the optional exemption provided in ASC Topic 60 and therefore, is not required to disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied or partially satisfied at the end of the reporting period. |
| ● | Shipping and Handling Activities – the Company elected to account for shipping and handling activities as a fulfillment cost rather than as a separate performance obligation. |
| ● | Right to Invoice – the Company has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date the Company may recognize revenue in the amount to which the entity has a right to invoice. |
Disaggregated Revenue
Revenue consists of the following by product offering for the year ended November 30, 2020:
| Humate INU Advantage | SHADE ADVANTAGE (WP) | SulFe Hume Si ADVANTAGE | Total | |||||||||||
| $ | 8,450 | $ | 126,100 | $ | 34,860 | $ | 169,410 | |||||||
Revenue consists of the following by product offering for the year ended November 30, 2019:
| Humate INU Advantage | SHADE ADVANTAGE (WP) | SulFe Hume Si ADVANTAGE | Total | |||||||||||
| $ | 9,450 | $ | 182,238 | $ | 170,242 | $ | 361,930 | |||||||
Cash
The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. There are no cash equivalents as of November 30, 2020 or 2019.
Account Receivable
The Company periodically assesses its accounts and other receivables for collectability on a specific identification basis. If collectability of an account becomes unlikely, an allowance is recorded for that doubtful account. As of and for the years ended November 30, 2020 and 2019, the Company has determined that an allowance of $18,277 and $11,137, respectively, for doubtful accounts was necessary.
Property and Equipment
Property and equipment are carriedrecorded at cost. Depreciation is computed using straight line depreciation methodsstraight-line method over the estimated useful lives as follows:
| Autos and trucks | 5 years |
Maintenance and repairs which do not improveare charged to expense as incurred. At the time of retirement or extend the life of the associated assets are expensed in the period in which they are incurred. When there is aother disposition of property and equipment, the cost and related accumulated depreciation arewill be removed from the accounts and anythe resulting gain or loss, isif any, will be reflected in net income.
Impairment of Long-Lived Assets
The Company considersreviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash in banks, deposits in transit, and highly liquid debt instruments purchased with original maturitiesflows of three months or lessthe operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then these assets are written down first, followed by other long-lived assets of the operation to fair value. Fair value is determined based on discounted cash and cash equivalents. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced anyflows or appraised values, depending on the nature of the assets. No impairment losses in such accounts. The Company's accounts are insured bywere recorded during the FDIC but at times may exceed federally insured limits. Atyears ended November 30, 2017 no accounts exceeded FDIC limits.
Exploration Stage
In accordance with U.S. GAAP, expenditures relating to the acquisition of mineral rights are initially capitalized as incurred while exploration and pre-extraction expenditures are expensed as incurred until such time as the Company exits the Exploration Stage by establishing proven or probable reserves. Expenditures relating to exploration activities such as drill programs to establish mineralized materials are expensed as incurred. Expenditures relating to pre-extraction activities are expensed as incurred until such time proven or probable reserves are established for that project, after which expenditures relating to mine development activities for that particular project are capitalized as incurred.
Mineral Rights
Acquisition costs of mineral rights are capitalized as incurred while exploration and pre-extraction expenditures are expensed as incurred until such time as the Company exits the Exploration Stageexploration stage by establishing proven or probable reserves, as defined by the SEC under Industry Guide 7, through the completion of a "final"“final” or "bankable"“bankable” feasibility study. Expenditures relating to exploration activities are expensed as incurred and expenditures relating to pre-extraction activities are expensed as incurred until such time proven or probable reserves are established for that project, after which subsequent expenditures relating to development activities for that particular project are capitalized as incurred.
Where proven and probable reserves have been established, the project'sproject’s capitalized expenditures are depleted over proven and probable reserves upon commencement of production using the units-of-production method. Where proven and probable reserves have not been established, such capitalized expenditures are depleted over the estimated production life upon commencement of extraction using the straight-line method.
The carrying values of the mineral rights are assessed for impairment by management on a quarterly basis or when indicators of impairment exist. Should management determine that these carrying values cannot be recovered, the unrecoverable amounts are written off against earnings.
Shipping and Handling
The Company incurs shipping and handling costs which are charged back to the customer. The net amounts incurred were $180 and $0 included in general administrative expenses for the years ended November 30, 2020 and 2019, respectively.
Advertising and Marketing Costs
The Company expenses advertising and marketing costs as they are incurred. Advertising and marketing expenses were $5,913 and $2,065 for the years ended November 30, 2020 and 2019, respectively, and are recorded in selling, general and administrative expenses on the statement of operations.
Fair Value of Financial Instruments
As defined in ASC 820, “Fair Value Measurements and liabilities recorded atDisclosures,” fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the Company's balance sheet are categorized based uponinputs to the level of judgment associated withvaluation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure their fair value. The categories, as defined byhierarchy gives the standard, are as follows:
| Level | ||
| Level | Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars. | |
| Pricing inputs include significant inputs that |
For certainFair Value of our financial instruments, includingFinancial Instruments
The carrying value of cash, accounts receivable, accounts payable and accrued expenses approximate their fair values based on the short-term maturity of these instruments. The carrying amounts approximateamount of notes approximates the estimated fair value due to their short-term nature. The carrying amountfor these financial instruments as management believes that such notes constitute substantially all of the Company'sCompany’s debt and interest payable on the notes payable approximates fair value based on prevailing interest rates.the Company’s incremental borrowing rate.
| F-11 |
| Level III | ||||
Conversion feature | ||||
| Balance as of November 30, 2015 | $ | 57,366 | ||
| Issuance convertible note payable | $ | 109,324 | ||
| Conversion of Notes Payable | $ | 101,629 | ||
| Reduction in fair value | $ | (65,061 | ) | |
| Balance as of November 30, 2016 | $ | 0 | ||
| Balance as of November 30, 2017 | $ | 0 | ||
The following table summarizes the securities that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive due to the Company’s net loss position even though the exercise price could be less than the average market price of the common shares:
| Year Ended November 30, | ||||||||
| 2020 | 2019 | |||||||
| Convertible Notes | 1,112,500 | - | ||||||
| Stock Options | 1,345,000 | 550,000 | ||||||
| Total | 2,457,500 | 550,000 | ||||||
Stock-Based Compensation
The Company applies the provisions of ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock-based awards made to employees, including employee stock options, in the statements of operations.
For stock options issued to employees and members of the Company’s Board of Directors (the “Board”) for their services, the Company estimates the grant date fair value of each option using the Black-Scholes option pricing model. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the Common Stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the Common Stock. For awards subject to service-based vesting conditions, including those with a graded vesting schedule, the Company recognizes stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally the vesting term. Forfeitures are recorded as they are incurred as opposed to being estimated at the time of grant and revised.
Pursuant to ASU 2018-07 Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, the Company accounts for stock options issued to non-employees for their services in accordance ASC 718. The Company uses valuation methods and assumptions to value the stock options that are in line with the process for valuing employee stock options noted above.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carry forwards, and liabilities are measured using enacted tax rates expected to have net operating loss carryforwards that it can useapply to offset a certain amount of taxable income in the future.years in which those temporary differences are expected to be recovered or settled. The Company is currently analyzing the amount of loss carryforwards that will be available to reduce future taxable income. The resultingeffect on deferred tax assets will be offset byand liabilities of a valuation allowance due tochange in tax rates is recognized in income in the uncertainty of its realization. period that includes the enactment date.
The primary difference between income tax expense attributable to continuing operations and the amount of income tax expense that would result from applying domestic federal statutory rates to income before income taxes relates toCompany utilizes ASC 740, “Income Taxes,” which requires the recognition of a valuation allowancedeferred tax assets and liabilities for deferred incomethe expected future tax assets.
For uncertain tax positions that meet a “more likely than not” threshold, the carrying amountCompany recognizes the benefit of an assetuncertain tax positions in the consolidated financial statements. The Company’s practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the expected future undiscounted net cash flows generated by the asset. If we determine that the asset may not be recoverable, or if the carrying amountconsolidated statements of an asset exceeds its estimated future undiscounted cash flows, we recognize an impairment charge to the extent of the difference between the fair value and the asset's carrying amount. No impairment losses were recorded during the years ended November 30, 2017 and 2016.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes existing guidance on accounting for leases in "Leases (Topic 840)" and generally. The standard requires all leases that have a term of over 12 months to be recognized inon the consolidated balance sheet. ASU 2016-02sheet with the liability for lease payments and the corresponding right-of-use asset initially measured at the present value of amounts expected to be paid over the term. Recognition of the costs of these leases on the income statement will be dependent upon their classification as either an operating or a financing lease. Costs of an operating lease will continue to be recognized as a single operating expense on a straight-line basis over the lease term. Costs for a financing lease will be disaggregated and recognized as both an operating expense (for the amortization of the right-of-use asset) and interest expense (for interest on the lease liability). This standard is effective for annualthe Company’s interim and interim reportingannual periods beginning December 1, 2019 and must be applied on a modified retrospective basis to leases existing at, or entered into after, December 15, 2018; earlythe beginning of the earliest comparative period presented in the financial statements. The adoption is permitted. The provisions of ASU 2016-02 aredid not have a material impact on the Company’s consolidated financial statements and related disclosures.
All other newly issued but not yet effective accounting pronouncements have been deemed to be applied usingnot applicable or immaterial to the Company.
NOTE 4 – ACQUISITIONS
Asset Purchase - Quove Corporation
On May 1, 2020, the Company entered into an asset purchase agreement (the “Purchase Agreement”) with Quove Corporation, a modified retrospective approach.Colorado corporation, (“Quove”), pursuant to which the Company will purchase from Quove all of the assets used in conjunction with the operating of its gold processing plant. The purchase price of $620,000 was satisfied with the issuance of 6,200,000 shares of the Company’s common stock at a fair value of $0.10 per share to Quove and the assumption of up to $10,000 of Quove’s liabilities. The acquisition closed on June 11, 2020. The Company is currently evaluatingplans to use the impactassets and parts from the assets to augment and improve their current infrastructure related to the production and development of its SCMs.
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the adoption of this standard on its consolidated financial statements.
| November 30, 2020 | November 30, 2019 | |||||||
| Furniture and equipment | $ | 6,952 | $ | 6,952 | ||||
| Machinery and equipment | 35,151 | 35,151 | ||||||
| Automobiles and trucks | 25,061 | 25,061 | ||||||
| Construction in process | 620,000 | - | ||||||
| 687,164 | 67,164 | |||||||
| Less: accumulated depreciation | (67,164 | ) | (66,392 | ) | ||||
| Property and equipment, net | $ | 620,000 | $ | 722 | ||||
Total depreciation expense for the Company in the quarter ending February 2018. Early adoption is permitted in any interim or annual period. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
NOTE 3. PROPERTIES
Placer Mining Claims Lassen County, CA
Placer Mining Claim Notices have been filed and recorded with the US Bureau of Land Management (the "BLM"“BLM”) relating to 50 Placer mining claims identified as "USMC 1"“USMC 1” thru "USMC 50"“USMC 50” covering 1,145 acres of mining property located in Lassen County, California and known as the "Long“Long Valley Pozzolan Deposit"Deposit”. The Long Valley Pozzolan Deposit is a placer claims resource in which the Company holds non-patented mining rights to 1,145acres of contiguous placer claims within the boundaries of a known and qualified Pozzolan deposit. These claims were assigned to Purebasethe Company by one of its founders at his original cost basis of $0. These claims require a payment of $30,000 per year to the BLM.
On September 5, 2019, the Board approved to discontinue any and all mining and related activities at the Long Valley project. As a result, the claims have reverted to the BLM.
Federal Preference Rights Lease in Esmeralda County NV
This Preference Rights Lease wasis granted by the BLM to US Mine Corp. covering approximately 2,500 acres of land located in the Mount Diablo Meridian area of Nevada. Contained in the leased property is the Chimney 1 Potassium/Sulfur Deposit which consists of 15.5 acres of land fully permitted for mining
At November 30, 2020, the Company performed an impairment analysis on the mineral rights asset. The Company believes the fair value of the mineral rights are fully impaired due to the following significant factors: (i) the Company discontinued all mining and related activities related to the operation of its business, (ii) the minerals being mined from the location were to be used by the Company in a discontinued product, and (iii) there are multiple third-party sources to buy the minerals at a relatively inexpensive price. Additionally, the Company concluded that the carrying amount of the mineral rights would not be recoverable due to the Company forecasting that the future undiscounted cash flows from the mineral rights asset would not exceed the carrying amount of the mineral rights asset. As a result, the Company recorded a loss on impairment of mineral rights of $200,000 on its statement of operations during the year ended November 30, 2020.
Snow White Mine located in San Bernardino County, CA – Deposit
On November 28, 2014 US Mining and Minerals Corporation entered into a Purchase Agreement in which US Mining and Minerals Corp.it agreed to sell its fee simple property interest and certain mining claims to US Mine Corp.USMC. In contemplation of the Plan and Agreement of Reorganization, on December 1, 2014, US Mine CorpUSMC, a related party, assigned its rights and obligations under the Purchase Agreement to the Company pursuant to an Assignment of Purchase Agreement. As a result of the Assignment, the Company assumed the purchaser position under the Purchase Agreement. The Purchase Agreement involves the sale of approximately 280 acres of mining property containing 5 placer mining claims known as the Snow White Mine located near Barstow, California in San Bernardino County. The property is covered by a Conditional Use Permit allowing the mining of the property and a Plan of Operation and Reclamation Plan has been approved by San Bernardino County and the US Bureau of Land Management ("BLM").BLM. An initial deposit of $50,000 was paid to escrow, and the agreementPurchase Agreement required the payment of an additional $600,000 at the end of the escrow period. There was a delay in the original seller, Joseph Richard Matthewson, receiving a clear title to the property and a fully permitted project, both of which were conditions to closing. In light of the foregoing, and the payment of anotheran additional $25,000, the parties agreed to extend the closing. Due to delays in the Company securing the necessary funding to close the purchase of the Snow White Mine property, John Bremer, a shareholder and a director of Purebase,the Company, paid $575,000 to acquire the property on or about October 15, 2015. Mr. Bremer will transfer title to the Company when the Company pays Mr. Bremer $575,000 plus expenses.expenses, however, the Company is under no obligation to do so. The mining claims require a minimum royalty payment of $3,500 per year. year to be made by the Company.
During the year ended November 30, 2017, US Mine Corp.USMC, agreed to offset the $75,000 deposit against money owed to USUSMC. As a result, the purchase price is $650,000 plus expenses. Mr. Bremer has not restricted the Company from continuing its exploration on or access to the Snow White mine property.
On September 5, 2019, the Board approved the discontinuance of all mining and related activities at the Snow White project. The Company has no further obligation related to this project.
On April 1, 2020, the Company entered into a purchase and sale agreement with the Bremer Family 1995 Living Trust, a related party through 19% beneficial ownership of the Company, pursuant to which the Company will purchase the Snow White Mine Corp.
NOTE 4.7 – NOTES PAYABLE
Craig Barto and USMC
The Company assumed a $1,000,000 promissory note with Craig Barto, an owner of USMC, on November 24, 2014, in connection with the acquisition of USAM by Purebase.the Company. The note bears simple interest at an annual rate of 5% and the principal and accrued interest were payable on May 1, 2016. Upon the occurrence of an event of default, which includes voluntary or involuntary bankruptcy, all unpaid principal, accrued interest and other amounts owing are immediately due, payable and collectible by the lender pursuant to applicable law. During fiscal year 2019, the note was in default and the Company continued to have discussions with holder of the note to extend the note under the same terms and conditions to cure the default. Pursuant to the February 7, 2020 Amendment to the September 5, 2019, Debt Exchange Agreement, Mr. Barto assigned the note to USMC effective July 31, 2019. On September 5, 2019, the Company entered into a Debt Exchange Agreement with USMC pursuant to which an aggregate of $5,988,471 of debt, including accrued and unpaid interest, was converted to an aggregate of 66,538568 shares of the Company’s common stock at a per share conversion price of $0.09. Included in the $5,988,471 of settled debt was $1,000,000 in principal and $234,247 in unpaid and accrued interest related to the note. On September 5, 2019, the fair value of the Company’s common stock was $0.1085 per share. The $0.0185 difference in share price resulted in a loss on conversion of $1,230,964 for the year ended November 30, 2019, which the Company recorded on the consolidated statements of operations as a loss on conversion of related party debt and payables. The balance of the note was $1,000,000 at$0 as of November 30, 20172020 and November 30, 2016. The2019, respectively (See Note is in Default however, the Company continues to have discussions with Note Holder to extend the Note under the same terms and conditions.
Bayshore Capital Advisors, LLC
On July 13, 2015,February 26, 2016, the Company issued a promissory note in the amount of $100,000 for general working capital needs. Effective February 29, 2016, the $100,000 note due to Bayshore Capital a shareholder, was assumed by A. Scott Dockter. Mr. Dockter is responsible for the debt to Bayshore Capital. This debt reassignment allowed advances to this officer be settled in full.
Warrants Outstanding | Weighted Average Exercise Price | |||||||
| Outstanding at November 30, 2015 | 477,494 | $ | 3.42 | |||||
| Granted | 0 | 0 | ||||||
| Exercised | 0 | 0 | ||||||
| Expired | 0 | 0 | ||||||
| Outstanding at November 30, 2016 | 477,494 | $ | 3.42 | |||||
| Granted | 0 | 0 | ||||||
| Exercised | 0 | 0 | ||||||
| Expired | (477,494 | ) | $ | 3.42 | ||||
| Outstanding at November 30, 2017 | 0 | $ | 0 | |||||
Number of Options | Weighted Average Exercise Price | Aggregate Intrinsic Value | Weighted Average Contractual terms | ||||||||||
| Outstanding at December 1, 2015 | 0 | 0 | 0 | ||||||||||
| Granted | 7,500,000 | $ | 2.60 | 0 | |||||||||
| Exercised | 0 | N/A | 0 | ||||||||||
| Expired/Cancelled | (1,000,000 | ) | $ | 3.00 | $ | 0 | |||||||
| Outstanding 11/30/16 | 6,500,000 | $ | 2.54 | 0 | |||||||||
| Granted | 0 | $ | 0 | 0 | |||||||||
| Exercised | 0 | $ | N/A | 0 | |||||||||
| Expired/Cancelled | (6,000,000 | ) | $ | 2.5 | 0 | ||||||||
| Outstanding 11/30/17 | 500,000 | $ | 3.00 | 0 | 8.26 years | ||||||||
| Exercisable 11/30/2017 | 300,000 | $ | 3.00 | 0 | 8.24 years | ||||||||
| Expected to vest 11/30/17 | 200,000 | $ | 3.00 | 0 | |||||||||
A. Scott Dockter – President and John Bremer, pursuant to which USMC will provide Product fulfillment and various technical evaluations and mine development services to the Company. Services totaling $155,534 and $110,164 were rendered by USMC for the year ended November 30, 2017 and 2016, respectively.
On August 31, 2017, the Company issued a Notenote in the amount of $197,096 to ArthurA. Scott Dockter, President, CEO and a Directordirector of the Company, to consolidate the total amounts due to and assumed by Mr. Dockter. The Notenote to Mr. Dockter bears interest at 6% and is due upon demand. During the earlier of closing of bridge financing or January 15, 2018.
Convertible Promissory Notes – USMC
December 1, 2019
On December 1, 2019, in connection with the years ended November 30, 2017 and 2016, purchases from one vendor comprised approximately 85% and 100% of total purchases, respectively. This one vendor was US Mine Corp,September 26, 2019, securities purchase agreement with USMC, a related party, (See Note 12), the Company issued a two-year convertible promissory note in the amount of $20,000 to USMC, with a maturity date of December 31, 2021 (“Tranche #1”). The note bears interest at 5% per annum which is payable on maturity. Amounts due under the Company.
The issuance of 1934. Based on that evaluation, the Certifying Officers concluded that, as of the date of the evaluation, the Company's disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed in the Company's periodic filings under the Securities Exchange Act of 1934 is accumulated and communicated to management to allow timely decisions regarding required disclosure.
January 1, 2020
On January 1, 2020, in connection with the September 26, 2019, securities purchase agreement with USMC, a related party, (See Note 12), the Company issued a two-year convertible promissory note in the amount of $86,000 to USMC, with a maturity date of January 1, 2022 (“Tranche #2”). The note bears interest at 5% per annum which is payable on two occasions. Each director duringmaturity. Amounts due under the note may be converted into shares of the Company’s common stock, $0.001 par value, at any time at the option of the Holder, at a conversion price of $0.16 per share.
The issuance of Tranche #2 resulted in a discount from the beneficial conversion feature totaling $32,250. Total straight-line amortization of this discount totaled $14,735 for the fiscal year 2017ended November 30, 2020. Total interest expense on Tranche #2 was approximately $3,935 for the fiscal year ended November 30, 2020.
February 1, 2020
On February 1, 2020, in connection with the September 26, 2019, securities purchase agreement with USMC, a related party, (See Note 12), the Company issued a two-year convertible promissory note in the amount of $72,000 to USMC, with a maturity date of February 1, 2022 (“Tranche #3”). The note bears interest at 5% per annum which is payable on maturity. Amounts due under the note may be converted into shares of the Company’s common stock, $0.001 par value, at any time at the option of the Holder, at a conversion price of $0.16 per share.
The issuance of Tranche #3 resulted in a discount from the beneficial conversion feature totaling $36,000. Total straight-line amortization of this discount totaled $14,922 for the fiscal year ended November 30, 2020. Total interest expense on Tranche #3 was approximately $8,988 for the fiscal year ended November 30, 2020.
NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following amounts:
| November 30, 2020 | November 30, 2019 | |||||||
| Accounts payable | $ | 84,600 | $ | 265,449 | ||||
| Accrued interest | 39,948 | 44,846 | ||||||
| Accrued compensation | 39,492 | 33,930 | ||||||
| Accounts payable and accrued expenses | $ | 164,040 | $ | 344,225 | ||||
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Office and Rental Property Leases
The Company is using office space provided by USMC, a related party that is owned by the Company’s majority shareholders and directors A. Scott Dockter and John Bremer. See Note 12.
Mineral Properties
The Company’s mineral rights require various annual lease payments (See Note 6).
Legal Matters
On September 21, 2016, the Company terminated its employment agreement with its then President, David Vickers (“Vickers”). Subsequently, Vickers alleged claims of age discrimination, fraud in the inducement, violation of California Labor Code §970 and breach of contract against the Company (collectively, the “Vicker Claims”). On April 14,2017, Vickers served the Company with a demand for arbitration of the Vicker Claims before the Judicial Arbitration and Mediation Services, Inc. On June 5, 2018, the parties participated in at least 75% ofa voluntary mediation but were unable to reach a resolution. An arbitration hearing was held on August 6, 2019 to August 8, 2019. An interim-preliminary decision was rendered in connection with the aggregate number ofarbitration however, a final award was not determined and judicial proceedings were not initiated. On June 25, 2020, the meetings or actions taken in lieu ofparties entered into a meeting of the Board held during fiscal year 2017.
On July 8, 2020, former Chief Financial Officer, Al Calvanico (“Calvanico”), filed a demand for arbitration alleging retaliation, wrongful termination, and demand for a minimum amount of $600,000 in alleged stock value, plus interest, recovery of past and future wages, attorneys’ fees, and punitive damages (collectively, the “Calvanico Claims”). The Company denied all Calvanico Claims. The Company believes Calvanico is owed nothing because it takes the position that Calvanico was not terminated, but rather, his employment contract expired on September 21, 2019 in the normal course, and was not renewed by Company and because Calvanico never exercised his stock options. On February 14, 2020, the Company requested in writing that Calvanico exercise his stock options within 30 days. Calvanico failed to do so. To date, Calvanico has not exercised his stock options. This dispute is currently in the early stages of arbitration. An arbitration hearing date has not yet been assigned.
On August 30, 2018 the Company was named as a director ordefendant in a complaint filed by Tessenderlo Kerley, Inc. (“Tessenderlo”) in the United States District Court for committee participation or special assignments.the District of Arizona (Case # CV-18-2756-PHX-DJH) alleging trademark infringement relating to the plaintiff’s trademark PURSHADE and the Company’s product PureBase Shade Advantage. The Company's DirectorsCompany filed its answer on September 21, 2018, denying the allegations set forth in the complaint. A settlement conference was held on June 11, 2019. The Company entered into a settlement agreement and release (the “Settlement Agreement”) with Tessenderlo effective July 8, 2019. Pursuant to the Settlement Agreement the Company agreed, among other requirements for dissemination of information with its product, to make various changes to the packaging of its Purebase Shade Advantage products relating to the visual representation of the product’s names. Under the Settlement Agreement, each party fully released the other party from all existing claims and liabilities. There were no monetary damages as part of the Settlement Agreement. As a result of the Settlement Agreement, the case was dismissed on July 9, 2019.
On January 11, 2019, the Company filed a complaint in the Nevada District Court for Washoe County (Case # CV19-00097) against Agregen International Corp (“Agregen”) and Robert Hurtado alleging the misuse of proprietary and confidential information acquired by Mr. Hurtado while employed by the Company as VP of Agricultural Research and Development. Mr. Hurtado was terminated in March 2018 and since that time the Company alleges that he conspired with Agregen to improperly use proprietary and confidential information to compete with the Company which constitute breaches of the non-compete and confidentiality provisions of his employment agreement with the Company. The Company is seeking $100,000,000 in monetary damages. On March 14, 2019 Agregen and Mr. Hurtado filed an answer to the Company’s Complaint that the allegations were false. An Early Case Conference was held on April 26, 2019 and a pre-trial conference was held on July 10, 2019. On March 13, 2020, the Company filed a First Amended Complaint, adding Todd Gauer and John Gingerich as additional defendants. A default has been taken against Mr. Gingerich. Litigation is actively proceeding against Mr. Hurtado, Mr. Gauer, and Agregen. Trial is scheduled for seven days beginning June 21, 2021.
On March 29, 2019, the Company was served with a complaint filed by Superior Soils Supplements LLC (“Superior Soils”) in the Superior Court of the State of California in and for the County of Kings (Case #19C-0124) relating to 64 truckloads of soil amendments delivered to a customer by the Company on behalf of Superior Soils. Superior Soils alleged that the soil amendments were not paidlabeled correctly requiring the entire shipment of product to be returned to the Company. The complaint alleges breach of contract, misrepresentations, fraudulent concealment and unfair competition. The complaint seeks damages of approximately $300,000. The Company filed its answer on May 6, 2019, denying responsibility for the mis-labelling and denying any liability for damages therefrom. The parties are currently in settlement negotiations. The Company believes its potential exposure to be approximately $400,000 and, as such, has accrued this amount on the consolidated balance sheet at November 30, 2020.
Contractual Matters
On November 1, 2013, we entered into an agreement with USMC, a related party, in which USMC performs services relating to various technical evaluations and mine development services for the Company with regard to the various mining properties/rights owned by the Company. Terms of services and compensation during fiscal years 2017 or 2016will be determined for serviceseach project undertaken by USMC.
On October 12, 2018 the Board approved a material supply agreement with USMC, a related party, pursuant to which USMC will provide designated natural resources to the Company at predetermined prices (See Note 12).
Resignation of Directors
Effective April 8, 2020, Calvin Lim resigned as a Director.
Appointment of Directors
The Company entered into a twelve-month director agreement with Jeffrey Guzy (“Guzy”), effective as of April 8, 2020, (the “Director Agreement”). Pursuant to the Director Agreement, Guzy will be entitled to $1,000 per month for serving on the Board, which will accrue as debt until the Company has its first cash flow positive month. Upon the termination of the initial term of the Director Agreement or Guzy’s earlier removal or resignation, such accrued amount will be paid in common stock of the Company at a conversion rate of the lower of $0.15 per share or the 20-day volume weighted average price from the last date Guzy was on the Board. Guzy was also granted an immediately exercisable five-year option to purchase 250,000 shares of common stock at an exercise price of $0.10 per share. Guzy was appointed as the chairman of the Audit Committee and the Compensation Committee.
Note 10 - Stockholders’ Equity
Equity Transactions During the Period
During the fiscal yearsyear ended November 30, 2017 and 2016 and each employee who received annual2020, the Company issued 6,200,000 shares of the Company’s common stock with a fair value of $0.10 per share to Quove Corporation for the purchase of assets used in conjunction with the operating of its gold processing plant (See Note 4).
During the fiscal year ended November 30, 2020, the Company issued 100,000 shares of the Company’s common stock with a fair value of $0.094 per share to an investor pursuant to an investment banking agreement for services rendered.
Note 11 – StocK-BASED COMPENSATION
The Company accounted for its stock-based compensation in excessaccordance with the fair value recognition provisions of $100,000 during the last completed fiscal year.
On November 10, 2017 the Company's Board of Directors approved the 2017 PurebasePureBase Corporation Stock Option Plan which is intended to be a qualified stock option plan (the "Option Plan"“Option Plan”). The Board allocated up toreserved 10,000,000 shares of Purebasethe Company’s common stock to be issued pursuant to options granted under the Option Plan. Awards will consist if both incentive and non-incentive stock options. The Option Plan has a term of 10 years. Option Plan is administeredwas subsequently approved by the Compensation Committee of the Board of Directors.shareholders on September 28, 2018. As of November 30, 2017 no2020, options hadto purchase an aggregate of 50,000 shares of common stock have been granted under the Option Plan.
| OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | ||||||||||||||||||
| Name & Position | Number of securities underlying unexercised options/ exercisable | Number of securities underlying unexercised options/ un- exercisable | Equity incentive plan awards: Number of securities underlying unexercised/unerned options | Option exercise price ($) | Option Expiration date | Number of shares of stock that have not vested | Market value of shares of stock that have not vested ($) | Equity incentive plan awards: Number of unearned shares or other rights that have not vested | Equity incentive plan awards: Market or payout value of unearned shares or other rights that have not vested ($) | |||||||||
| Al Calvanico (CFO) | 200,000 | 100,000 | -0- | 3.00 | 3/14/26 | 100,000 | 10,000 | -0- | -0- | |||||||||
The Company has also granted options to purchase an aggregate of 500,000 shares of common stock pursuant to employment contracts entered into bywith certain employees prior to the Company and the respective employee.
The Company and/or Purebase Ag. At the present time, the Company does not offer such benefits.
There arewere no known pending or anticipated arrangements that may cause a change in control.
Name of Beneficial Owner | Number of Shares Owned Beneficially | Percent Of Class | Title Of Class |
A. Scott Dockter, CEO and Director 3090 Boeing Road Cameron Park, CA 95682 | 44,064,932 | 31.2% | Common |
John Bremer, Director 10490 Dawson Canyon Road Corona, CA 92883 | 40,163,000(1) | 28.4% | Common |
Calvin Lim, Director 6580 Haven Side Drive Sacramento, CA 95831 | -0- | 0% | Common |
John Gingerich, Director 27Wedgewood Drive Woodstock, Ontario Canada | -0- | 0% | Common |
Al Calvanico CFO 8625 State Highway 124 P.O. Box 757 Ione, CA 95640 | 203,000(2) | 1.4% | Common |
| All Executive Officers and Directors as a group (5 people) | 84, 430,932 | 60% | Common |
Baystreet Capital Corp. Bayshore Capital 136 Turtle Cove Road Turks & Caicos Islands British West Indies | 21,338,800(3) | 15.1% | Common |
Kevin Wright 1 Yonge Street, Suite 1801 Toronto, ON M5E 1W7 | 12,582,800 | 8.9% | Common |
Compensation based stock option activity for qualified and unqualified stock options are summarized as follows:
| Weighted | ||||||||
| Average | ||||||||
| Shares | Exercise Price | |||||||
| Outstanding at November 30, 2018 | 550,000 | $ | 2.74 | |||||
| Granted | - | - | ||||||
| Exercised | - | - | ||||||
| Expired or cancelled | - | - | ||||||
| Outstanding at November 30, 2019 | 550,000 | 2.74 | ||||||
| Granted | 795,000 | 0.10 | ||||||
| Exercised | - | - | ||||||
| Expired or cancelled | - | - | ||||||
| Outstanding at November 30, 2020 | 1,345,000 | $ | 1.18 | |||||
The following table summarizes information about options to purchase shares of the Company’s common stock outstanding and exercisable at November 30, 2016, respectively.
| Weighted- | Weighted- | |||||||||||||||||
| Average | Average | |||||||||||||||||
| Range of | Outstanding | Remaining Life | Exercise | Number | ||||||||||||||
| exercise prices | Options | In Years | Price | Exercisable | ||||||||||||||
| $ | 0.099 | 400,000 | 3.64 | $ | 0.099 | - | ||||||||||||
| 0.10 | 395,000 | 4.42 | 0.10 | 350,000 | ||||||||||||||
| 0.12 | 50,000 | 7.82 | 0.12 | 50,000 | ||||||||||||||
| 3.00 | 500,000 | 5.25 | 3.00 | 500,000 | ||||||||||||||
| 1,345,000 | 4.62 | $ | 1.18 | 900,000 | ||||||||||||||
The compensation expense attributed to the issuance of the options is recognized as they are vested.
The stock options granted under the Option Plan are exercisable for ten years from OPTEC Solutions, LLC, a company partly ownedthe grant date and vest over various terms from the grant date to three years.
The aggregate intrinsic value totaled $0 and was based on the Company’s closing stock price of $0.08 as of November 30, 2020, which would have been received by the Company's former CFO, Amy Clemens, onoption holders had all option holders exercised their options as of that date.
On April 8, 2020, the Company granted a month-to-month basis.director an option to purchase 250,000 shares of the Company’s common stock at an exercise price of $0.10 per share and a fair value of $27,088. The options vest immediately at the grant date. The options were valued using the Black-Scholes option pricing model under the following assumptions: stock price - $0.11; strike price - $0.10; expected volatility – 305%; risk-free interest rate – 0.47%; dividend rate – 0%; and expected term – 2.50 years.
On April 15, 2020, the Company paid rent totaling $0granted two advisory board members options to purchase an aggregate of 200,000 shares of the Company’s common stock at an exercise price of $0.10 per share and $7,500a fair value of $19,481. The options vest one year from the date of grant. The options were valued using the Black-Scholes option pricing model under the following assumptions: stock price - $0.099; strike price - $0.10; expected volatility – 304%; risk-free interest rate – 0.34%; dividend rate – 0%; and expected term – 2.50 years.
On June 2, 2020, the Company granted a consultant an option to purchase 100,000 shares of the Company’s common stock at an exercise price of $0.10 per share and a fair value of $10,739. The options vest immediately at the grant date. The options were valued using the Black-Scholes option pricing model under the following assumptions: stock price - $0.11; strike price - $0.10; expected volatility – 283%; risk-free interest rate – 0.20%; dividend rate – 0%; and expected term – 2.50 years.
On July 7, 2020, the Company granted a consultant an option to purchase 45,000 shares of the Company’s common stock at an exercise price of $0.10 per share and a fair value of $4,435. The options vest one year from the grant date. The options were valued using the Black-Scholes option pricing model under the following assumptions: stock price - $0.10; strike price - $0.10; expected volatility – 282%; risk-free interest rate – 0.28%; dividend rate – 0%; and expected term – 3.00 years.
On September 18, 2020, the Company granted a member of the advisory board an option to purchase 100,000 shares of the Company’s common stock at an exercise price of $0.099 per share and a fair value of $9,712. The options vest from the grant date. The options were valued using the Black-Scholes option pricing model under the following assumptions: stock price - $0.099; strike price - $0.099; expected volatility – 297%; risk-free interest rate – 0.16%; dividend rate – 0%; and expected term – 2.50 years.
On October 12, 2020, the Company granted a member of the advisory board an option to purchase 100,000 shares of the Company’s common stock at an exercise price of $0.099 per share and a fair value of $9,121. The options vest from the grant date. The options were valued using the Black-Scholes option pricing model under the following assumptions: stock price - $0.099; strike price - $0.099; expected volatility – 297%; risk-free interest rate – 0.20%; dividend rate – 0%; and expected term – 2.50 years.
Total compensation expense related to the options was $56,609 and $60,854 for the years ended November 30, 20172020 and 2016,2019, respectively. That arrangement has now come to an end since the Company has relocated its corporate headquarters to Ione, California. As of November 30, 2016, the Company had an outstanding balance owed2019, there was $23,966 in future compensation cost related to Amy Clemens, the former CFO, of $21,123, for consulting fees, benefits and miscellaneous expenses, and an outstanding balance of $14,478, owed to OPTEC Solutions,non-vested stock options.
NOTE 12 – RELATED PARTY TRANSACTIONS
Bayshore Capital Advisors, LLC which is included in accounts payable on the condensed consolidated balance sheets. As of August 31, 2017, the balance owed to Amy Clemens was $16,188. The previous balances due to OPTEC Solutions and Amy Clemens have been assumed by A. Scott Dockter and consolidated into the new Note issued on August 31, 2017. (See Note 4 to the Financial Statements).
On February 26, 2016, the Company issued a promissory note in the principal amount of $25,000 with an interest rate of 6% per annum to Bayshore Capital Advisors, LLC, an affiliate through common ownership of a major10% shareholder of the Company, advanced $25,000 to the Company for working capital at 6% per annum.purposes. The note was payable August 26, 2016, or when the Company closes a bridge financing, whichever occurs first. The Company is in default on this note at November 31, 2017.
US Mine Corporation
The Company entered into a $100,000 note due to Bayshore Capital was assumedcontract mining agreement with USMC, a company owned by A. Scott Dockter. Mr. Dockter is now responsible for the debt due Bayshore and notmajority stockholders of the Company. The balance remaining due toCompany, A. Scott Dockter and John Bremer, pursuant to which USMC will provide various technical evaluations and mine development services to the Company. During the years ended November 30, 2020 and 2019, the Company made purchases from USMC totaling $0 and $153,180, respectively, and are recorded as part of accounts payable on August 31, 2017 was $48,456the Company’s consolidated balance sheets. Services totaling $0 and has been$142,210 were rendered by USMC for the years ended November 30, 2020 and 2019, respectively, and are recorded as part of due to affiliates on the Company’s consolidated balance sheets. In addition, during the fiscal years ended November 30, 2020 and 2019, USMC paid $1,900 and $23,403, respectively, of expenses to the Company’s vendors and creditors on behalf of the Company and also made cash advances to the Company of $1,084,789 and $595,513, respectively, and are recorded as part of due to affiliates on the Company’s consolidated balance sheets. The amounts owed for services rendered, expenses paid on behalf of the Company, and cash advances were converted into the Company’s common stock as part of the September 5, 2019 Debt Exchange Agreement (See Note 7). The balance due to USMC is $1,091,158 and $0 at November 30, 2020 and 2019, respectively.
On September 26, 2019, the Company entered into a new Note dated August 31, 2017securities purchase agreement with other amounts due and assumed by Mr. Dockter.USMC pursuant to which USMC may purchase up to $1,000,000 of the Company’s 5% unsecured convertible two-year promissory notes in one or more closings. The notes are convertible into the Company’s common stock at a conversion price of $0.16 per share. As of November 30, 2020, USMC has purchased notes totaling $178,000 with maturity dates ranging from December 1, 2021 through February 1, 2022 (See Note 47). Interest expense on these notes totaled $7,923 for the fiscal year ended November 30, 2020 and is recorded as part of due to affiliates on the consolidated balance sheets. The outstanding balance due on the notes to USMC is $178,000 and $0 at November 30, 2020 and November 30, 2019, respectively.
On April 9, 2020, USMC agreed to forgive $150,257 in outstanding accounts payable from PureBase AG effective February 29, 2020. The Company treated this as a capital contribution and recorded the forgiveness as an increase in additional paid in capital on the consolidated balance sheet at November 30, 2020.
On April 22, 2020, the Company entered into a Material Supply Agreement (the “Supply Agreement”) with USMC which amended the prior Materials Supply Agreement entered into on October 12, 2018. All kaolin clay purchased by the Company from USMC under the Supply Agreement must be used exclusively for agricultural products and supplementary cementitious materials. Under the terms of the Supply Agreement, the Company will pay $25 per ton for the kaolin clay for supplementary cementitious materials and $145 per ton for bagged products for clay for agriculture (in each case plus an additional $5 royalty fee per ton). The Supply Agreement also provides that if USMC provides pricing to any other customer which is more favorable than that provided to the Financial Statements).
Leases
On October 1, 2020 theCompany issued Mr. Dockter a Note in the amount of $122,430 which amount included accumulated interest on the assumed notes. The Note to Mr. Dockter bears interest at 6% and was due September 7, 2016. The Note has been consolidatedentered into a new Note dated August 31, 2017two-year lease agreement for its office space with other amounts due and assumed by Mr. Dockter.
Transactions with Officers
On August 31, 2017, the Company issued a Notenote in the amount of $197,096 to Arthur Scott Dockter, President, CEO and a Directordirector of the Company to consolidate the total amounts due to and assumed by Mr. Dockter. The Note to Mr. Dockternote bears interest at 6% and is due the earlier of closing of bridge financing or January 15, 2018. As of January 15, 2018 this note had not been repaid and is currently in default.
NOTE 13 – CONCENTRATION OF CREDIT RISK
Cash Deposits
Financial instruments that potentially subject the Company's independent auditors ("RSJ"),Company to concentrations of credit risk consist principally of cash deposits. Accounts at each institution are insured by the matters requiredFederal Deposit Insurance Corporation (“FDIC”) up to be discussed by PCAOB on Auditing Standards No. 16, Communication with Audit Committees.
Revenues
Three customers accounted for 79% of this annual report and irrespective of any general incorporation language in such filing.
| Customer A | 39 | % | ||
| Customer B | 21 | % | ||
| Customer C | 19 | % |
Four customers accounted for 87% of total revenue for the year ended November 30, 2019, as set forth below:
| Customer A | 35 | % | ||
| Customer B | 23 | % | ||
| Customer C | 18 | % | ||
| Customer D | 11 | % |
Accounts Receivable
Two customers accounted for 100% of the accounts receivable as of November 30, 2020, as set forth below:
| Customer A | 80 | % | ||
| Customer B | 20 | % |
Two customers accounted for 100% of the accounts receivable as of November 30, 2019, as set forth below:
| Customer A | 66 | % | ||
| Customer B | 34 | % |
Vendors
One supplier accounted for 85% of purchases as of November 30, 2020.
Two suppliers accounted for 100% of purchases as of November 30, 2019, as set forth below:
| Vendor A, a related party | 88 | % | ||
| Vendor B | 12 | % |
NOTE 14 – INCOME TAXES
The Company identified their federal and California state tax returns as their “major” tax jurisdictions. The periods our income tax returns are subject to examination for these jurisdictions are 2015 through 2020. The Company believe their income tax filing positions and deductions will be sustained on audit, and they do not anticipate any adjustments that would result in a material change to their financial position. Therefore, no liabilities for uncertain tax positions have been recorded.
At November 30, 2020, we had available net operating loss carry-forwards for federal income tax reporting purposes of approximately $2,474,949 which are available to offset future taxable income. As a result of the Tax Cuts Job Act 2017, certain of these carry-forwards do not expire. We have not performed a formal analysis, but we believe our ability to use such net operating losses and 2016, respectively.
Our net deferred tax assets, liabilities and valuation allowance as of November 30, 2020 and 2019 are summarized as follows:
| Year Ended November 30, | ||||||||
| 2020 | 2019 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforwards | $ | 897,800 | $ | 2,140,900 | ||||
| Changes in prior year estimates | - | - | ||||||
| Total deferred tax assets | 897,800 | 2,140,900 | ||||||
| Valuation allowance | (897,800 | ) | (2,140,900 | ) | ||||
| Net deferred tax assets | $ | - | $ | - | ||||
We record a valuation allowance in the full amount of our net deferred tax assets since realization of such tax benefits has been determined by our independent auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under Audit Fees. This category includes accounting consultations on transaction and proposed transaction related matters. During fiscal years 2017 and 2016, RSJ did not bill for Audit-related Fees.
A reconciliation of the statutory federal income tax benefit to actual tax benefit for Purebase, Inc. are includedthe years ended November 30, 2020 and 2019 is as follows:
| 2020 | 2019 | |||||||
| Federal statutory blended income tax rates | (21 | )% | (21 | )% | ||||
| State statutory income tax rate, net of federal benefit | (7 | ) | (7 | ) | ||||
| Incentive stock options | 5 | 2 | ||||||
| Change in valuation allowance | 23 | 27 | ||||||
| Other | (- | ) | (1 | ) | ||||
| Effective tax rate | - | % | - | % | ||||
As of the date of this filing, the Company has not filed its 2020 federal and state corporate income tax returns. The Company expects to file these documents as soon as practicable.
NOTE 15 – SUBSEQUENT EVENTS
On January 21, 2021, Michael Fay was appointed Chief Financial Officer of the Company. Mr. Fay will be entitled to an annual base salary of $144,000 to be reviewed on an annual basis. In connection with this annual report.
