UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the Quarterly Period Ended: Ended August 31, 20222023

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Transition Periodtransition period from ___________________________________ to ___________________________________

Commission file number: number 000-55517

 

PUREBASE CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada 27-2060863

(State or other Jurisdiction

(I.R.S. Employer
of Incorporation or Organization)Identification No.)

8631 State Highway 124

Ione, California

 

(I.R.S. Employer

Identification No.)

8631 State Highway 124

Ione, California

95640

(Address of Principal Executive Offices)(Zip Code)

 

(209) 274-9143

(Registrant’s telephone number, including area code)

N/A

(Former address)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading symbol(s) 

Name of each exchange on

on which registered

None N/A N/A

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.001

(Title of class)

 

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. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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)submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smallersmall reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” andor an “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filerAccelerated filer
    
Non-accelerated filerSmaller reporting company
    
  Emerging Growth Companygrowth company

 

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 13(a)7(a)(2)(B) of the ExchangeSecurities Act: ☐

  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

As of October 13, 2022,11, 2023, there were 230,753,005230,863,005 shares of the registrant’s common stock outstanding.

 

 

 
 

PUREBASE CORPORATION AND SUBSIDIARIES

FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 20222023

 

 Page
PART I.FINANCIAL INFORMATION 
  
ITEM 1.Financial Statements (unaudited)2
FINANCIAL STATEMENTS 
Condensed Consolidated Balance Sheets as of August 31, 2022 and November 30, 20213
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended August 31, 2022 and August 31, 20214
   
 Condensed Consolidated Statement of Changes in Stockholders’ Deficit for the Three and Nine Months Ended AugustCONDENSED CONSOLIDATED BALANCE SHEETS AS OF AUGUST 31, 2023 AND NOVEMBER 30, 2022 and August3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED AUGUST 31, 20212023 AND AUGUST 31, 202254
   
 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended AugustCONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT FOR THE THREE AND NINE MONTHS ENDED AUGUST 31, 2022 and August2023 AND AUGUST 31, 202120225
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED AUGUST 31, 2023 AND AUGUST 31, 20226
   
 Notes to Condensed Consolidated Financial StatementsNOTES TO CONDENSED CONSOLIDTED FINANCIAL STATEMENTS7
   
ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of OperationsMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS2427
   
ITEM 3.Quantitative and Qualitative Disclosures about Market RiskQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK2833
   
ITEM 4.Controls and ProceduresCONTROLS AND PROCEDURES28
PART II.OTHER INFORMATION3033
   
PART II. OTHER INFORMATION34
ITEM 1.Legal ProceedingsLEGAL PROCEEDINGS3034
   
ITEM 1A.Risk FactorsRISK FACTORS3034
   
ITEM 2.Unregistered Sales of Equity Securities and Use of ProceedsUNREGISTERED SALES OF EQUITY SECURITES AND USE OF PROCEEDS3034
   
ITEM 3.Defaults Upon Senior SecuritiesDEFAULTS UPON SENIOR SECURITIES3134
   
ITEM 4.Mine Safety DisclosuresMINE SAFETY DISCLOSURES3134
   
ITEM 5.Other InformationOTHER INFORMAION3134
   
ITEM 6.ExhibitsEXHIBITS3135
   
SIGNATURES3236

 

2

PUREBASE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

  1   2  August 31, November 30, 
 August 31, 2022 November 30, 2021  2023  2022 
 (Unaudited)    (Unaudited)   
ASSETS                
                
Current Assets:                
Cash and cash equivalents $11,782  $132,309  $101,966  $19,055 
Accounts receivable, net of allowances for uncollectables of $- and $18,277, respectively  209,809   2,000 
Accounts receivable  100,270   - 
Prepaid expenses and other assets  5,909   4,594   14,535   4,731 
Total Current Assets  227,500   138,903   216,771   23,786 
                
Property and equipment, net  620,000   620,000   746,536   620,000 
Right of use asset  2,843   15,639   49,749   79,599 
                
Total Assets $850,343  $774,542  $1,013,056  $723,385 
                
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
                
Current Liabilities:                
Accounts payable and accrued expenses $115,067  $156,616  $393,930  $115,478 
Settlement liability  400,000   400,000   -   400,000 
Lease liability  2,981   16,095 
Line of credit  231,048   - 
Lease liability, current  40,371   38,882 
Note payable to officer  38,716   58,716   8,716   28,716 
Due to affiliated entities  -   729,059 
Convertible notes payable - related party, net of discount of $- and $5,329, respectively  30,000   994,671 
Convertible notes payable, related party  13,000   36,000 
Notes payable, related party  25,000   25,000   -   25,000 
Notes payable  -   25,000 
Total Current Liabilities  611,764   2,380,157   687,065   644,076 
                
Convertible notes payable - related party, net of current portion, and net of discount of $-  470,862   579,769 
Lease liability, net of current portion  10,413   40,880 
Convertible notes payable; related party, net of current portion  1,525,677   610,889 
                
Total Liabilities  1,082,626   2,959,926   2,223,155   1,295,845 
                
Commitments and Contingencies (Note 8)  -     
Commitments and Contingencies (Note 9)  -    -  
                
Stockholders’ Deficit:                
Preferred stock, $.001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding, at August 31, 2022 and November 30, 2021, respectively  -   - 
Common stock, $.001 par value; 520,000,000 shares authorized; 230,753,005 and 215,380,751 shares issued and outstanding, at August 31, 2022 and November 30, 2021, respectively  160,350   144,977 
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding, at August 31, 2023 and November 30, 2022  -   - 
Common stock, $0.001 par value; 520,000,000 shares authorized; 230,863,005 and 230,753,005 shares issued and outstanding, at August 31, 2023 and November 30, 2022, respectively  160,360   160,350 
Additional paid in capital  47,425,827   18,730,863   60,275,231   52,910,839 
Accumulated deficit  (47,818,460)  (21,061,224)  (61,645,690)  (53,643,649)
Total Stockholders’ Deficit  (232,283)  (2,185,384)  (1,210,099)  (572,460)
                
Total Liabilities and Stockholders’ Deficit $850,343  $774,542  $1,013,056  $723,385 

 

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

 

3

PUREBASE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

                 August 31, 2023  August 31, 2022  August 31, 2023  August 31, 2022 
 For the Three Months Ended For the Nine Months Ended  For the Three Months Ended For the Nine Months Ended 
 August 31, 2022  August 31, 2021  August 31, 2022  August 31, 2021  August 31, 2023  August 31, 2022  August 31, 2023  August 31, 2022 
                  
Revenue, net $226,060  $338,700  $454,536  $368,700  $207,243  $226,060  $325,875  $454,536 
                                
Cost of goods sold  44,080   34,329   93,149   125,611 
                
Operating Income  163,163   191,731   232,726   328,925 
                
Operating Expenses:                                
Selling, general and administrative  8,232,007   293,293   27,055,218   927,080   288,487   348,925   1,170,542   918,053 
Product fulfillment  34,329   85,343   125,611   103,051 
Loss on impairment of mineral rights  -   -   -   - 
Stock based compensation  2,000   

7,883,082

   7,328,400   26,137,165 
Total Operating Expenses  8,266,336   378,636   27,180,829   1,030,131   290,487   8,232,007   8,498,942   27,055,218 
                                
Loss From Operations  (8,040,276)  (39,936)  (26,726,293)  (661,431)  (127,324)  (8,040,276)  (8,266,216)  (26,726,293)
                                
Other Income (Expense):                                
Other income  -   -   2,007   23,200   -   -   310,401   2,007 
Interest expense  (1,038)  (42,129)  (32,949)  (88,177)  (24,702)  (1,038)  (46,226)  (32,949)
Total Other Income (Expense)  (1,038)  (42,129)  (30,942)  (64,977)
Total Other Income (Expense), net  (24,702)  (1,038)  264,175   (30,942)
                                
Net Loss $(8,041,314) $(82,065) $(26,757,235) $(726,408) $(152,026) $(8,041,314) $(8,002,041) $(26,757,235)
                                
Loss per Common Share - Basic and Diluted $(0.03) $(0.00) $(0.12) $(0.00) $(0.00) $(0.03) $(0.03) $(0.12)
                                
Weighted Average Shares Outstanding - Basic and Diluted  237,482,318   215,380,741   227,480,727   215,105,759   231,171,483   237,482,318   230,687,604   227,480,727 

 

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

4

PUREBASE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE THREE AND NINE MONTHS ENDED AUGUST 31, 20222023 AND 20212022

(Unaudited)

 

                             Shares  Amount  Shares  Amount  Capital  Deficit  Deficit 
          Additional                Additional       
 Preferred Stock Common Stock Paid-in Accumulated Stockholders’  Preferred Stock  Common Stock  Paid-in  Accumulated  Stockholders’ 
 Shares Amount Shares Amount Capital Deficit Deficit  Shares  Amount  Shares  Amount  Capital  Deficit  Deficit 
Balance at November 30, 2020  -  $-   214,950,741  $144,547  $11,307,806  $(12,754,027) $      (1,301,674)
                            
Stock based compensation - shares  -   -   -   -   10,688   -   10,688 
                            
Stock based compensation - shares, shares                            
Net loss  -   -   -   -   -   (238,000)  (238,000)
                            
Balance at February 28, 2021  -  $-   214,950,741  $144,547  $11,318,494  $(12,992,027) $(1,528,986)
                            
Stock based compensation - shares  -   -   430,000   430   68,393   -   68,823 
                            
Net loss  -   -   -   -   -   (406,343)  (406,343)
                            
Balance at May 31, 2021  -  $-   215,380,741   144,977   11,386,887   (13,398,370)  (1,866,506)
                            
Stock based compensation - shares  -   -   -   -   23,993   -   23,993 
                            
Net loss  -   -   -   -   -   (82,065)  (82,065)
                            
Balance at August 31, 2021  -  $-   215,380,741   144,977   11,410,880   (13,480,435)  (1,924,578)
                            
Balance at November 30, 2021  -   -   215,380,751   144,977   18,730,863   (21,061,224)  (2,185,384)       -  $      -   215,380,751  $144,977  $18,730,863  $(21,061,224) $(2,185,384)
Balance       -  $      -   215,380,751  $144,977  $18,730,863  $(21,061,224) $(2,185,384)
                                                        
Stock based compensation - shares  -   -   -   -   10,949,738   -   10,949,738   -   -   -   -   10,949,738   -   10,949,738 
                                                        
Net loss  -   -   -   -   -   (11,222,544)  (11,222,544)  -   -   -   -   -   (11,222,544)  (11,222,544)
                                                        
Balance as of February 28, 2022  -  $-   215,380,751   144,977   29,680,601   (32,283,769)  (2,458,191)  -  $-   215,380,751  $144,977  $29,680,601  $(32,283,768) $(2,458,190)
Balance  -  $-   215,380,751  $144,977  $29,680,601  $(32,283,768) $(2,458,190)
                                                        
Stock based compensation - shares  -   -   -   -   7,304,345   -   7,304,345   -   -   -   -   7,304,345   -   7,304,345 
                                                        
Convertible debt converted into common stock  -   -   23,741,655   23,742   2,549,429   -   2,573,171   -   -   23,741,655   23,742   2,549,429   -   2,573,171 
                                                        
Net loss  -   -   -   -   -   (7,493,377)  (7,493,377)  -   -   -   -   -   (7,493,377)  (7,493,377)
                                                        
Balance at May 31, 2022       -  $     -   239,122,406  $168,719  $39,534,375  $(39,777,146) $(74,052)  -  $-   239,122,406  $168,719  $39,534,375  $(39,777,146) $(74,052)
Balance  -  $-   239,122,406  $168,719  $39,534,375  $(39,777,146) $(74,052)
                                                        
Stock based compensation - shares  -   -   300,000   300   7,882,782   -   7,883,082   -   -   300,000   300   7,882,782   -   7,883,082 
                                                        
Settlement share surrender  -   -   (8,669,400)  (8,669)  8,669   -   -   -   -   (8,669,400)  (8,669)  8,669   -   - 
                                                        
Net loss  -   -   -   -   -   (8,041,314)  (8,041,314)  -   -   -   -   -   (8,041,314)  (8,041,314)
                                                        
Balance at August 31, 2021  -  $-   230,753,005   160,350   47,425,827   (47,818,460)  (232,283)
Balance at August 31, 2022  -  $-   230,753,005  $160,350  $47,425,827  $(47,818,460) $(232,283)
Balance  -  $-   230,753,005  $160,350  $47,425,827  $(47,818,460) $(232,283)
                            
Balance at November 30, 2022  -  $-   230,753,005  $160,350  $52,910,839  $(53,643,649) $(572,460)
Balance  -  $-   230,753,005  $160,350  $52,910,839  $(53,643,649) $(572,460)
                            
Stock based compensation - shares  -   -   -   -   5,485,013   -   5,485,013 
                            
Settlement share surrender  -   -   (300,000)  (300)  300   -   - 
                            
Net loss  -   -   -   -   -   (5,830,799)  (5,830,799)
                            
Balance as of February 28, 2023  -  $-   230,453,005  $160,050  $58,396,152  $(59,474,448) $(918,246)
Balance  -  $-   230,453,005  $160,050  $58,396,152  $(59,474,448) $(918,246)
                            
Stock based compensation - shares  -   -   -   -   1,841,389   -   1,841,389 
                            
Conversion of board of director accrued debt  -   -   310,000   310   35,690   -    36,000  
                            
Net loss  -   -   -   -   -   (2,019,216)  (2,019,216)
                            
Balance at May 31, 2023  -  $-   230,763,005  $160,360  $60,273,231  $(61,493,664) $(1,060,073)
Balance  -  $-   230,763,005  $160,360  $60,273,231  $(61,493,664) $(1,060,073)
                            
Stock based compensation - shares     -    100,000    -    2,000   -    2,000 
                            
Net loss  -    -    -    -    -    (152,026)  (152,026)
                            
Balance at August 31, 2023  -  $-   230,863,005  $160,360  $60,275,231  $(61,645,690) $(1,210,099)
Balance  -  $-   230,863,005  $160,360  $60,275,231  $(61,645,690) $(1,210,099)

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

5

PUREBASE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

  1   2  August 31, 2023  August 31, 2022 
 For the Nine Months Ended  For the Nine Months Ended 
 August 31, 2022  August 31, 2021  August 31, 2023  August 31, 2022 
Cash Flows From Operating Activities:                
Net loss $(26,757,235) $(726,408) $(8,002,041) $(26,757,235)
Adjustments to reconcile net loss to net cash used in operating activities:                
Stock based compensation  26,137,165   98,426   7,328,400   26,137,165 
Amortization of debt discount  5,329   32,783   -   5,329 
Non-cash board of director compensation  30,000   - 
Non-cash effect of right of use asset  -   454 
Non-cash director compensation  13,000   30,000 
Gain on debt forgiveness  (35,399)  - 
Gain on settlement  (275,000)  - 

Settlement liability

  (125,000)  - 
Changes in operating assets and liabilities:                
Accounts receivable  (207,809)  (368,700)  (100,270)  (207,809)
Prepaid expenses and other current assets  (1,315)  (924)
Prepaid expenses and other assets  (9,804)  (1,315)
Right of use asset  29,850   - 
Accounts payable and accrued expenses  73,338   29,335   304,706   73,338 
Change in settlement liability  (28,978)  - 
                
Net Cash Used In Operating Activities  (720,527)  (935,034)  (900,536)  (720,527)
                
Cash Flows From Investing Activities:        
        
Purchases of property and equipment  (126,536)  - 
        
Net Cash Used In Investing Activities  (126,536)  - 
        
Cash Flows From Financing Activities:                
Advances from related parties  620,000   979,461 
Payments on notes due to officers  (20,000)  (39,100)
Advances from related party  898,935   620,000 
Proceeds from line of credit  231,048   - 
Payments on notes payable, related party  (20,000)  (20,000)
                
Net Cash Provided By Financing Activities  600,000   940,361   1,109,983   600,000 
                
Net Increase In Cash  (119,527)  5,327 
Net Increase (Decrease) In Cash and Cash Equivalents  82,911   (119,527)
                
Cash - Beginning of Period  132,309   7,450 
Cash and Cash Equivalents - Beginning of Period  19,055   132,309 
                
Cash - End of Period $12,782  $12,777 
Cash and Cash Equivalents - End of Period $101,966  $12,782 
                
Supplemental Cash Flow Information:                
Noncash operating and financing activities:                
Forgiveness of accounts payable due to USMC $(15,853) $- 
Vendors paid for on behalf of the Company by USMC $6,296  $22,150  $8,320  $6,296 
Expenses paid for on behalf of the Company by USMC $7,533  $- 
Due to affiliates exchanged for convertible debt $1,355,355  $1,401,769  $-  $1,355,355 
Convertible debt converted to common stock $2,464,262  $-  $-  $2,464,262 
Accrued interested converted to common stock $108,909  $- 
Board of director compensation - accrued as convertible debt $30,000  $- 
Accrued interest converted to common stock $-  $108,909 
Director compensation - accrued as convertible debt converted to common stock $36,000  $30,000 

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

6

 

PUREBASE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NoteNOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS

 

Corporate Overview

 

PurebasePureBase Corporation (“Purebase”PureBase” or the “Company”) was incorporated in the State of Nevada on March 2, 2010.2010. The Company is an industrial mineral and natural resource company that provides solutions to the agriculture and construction materials markets in the United States through its two subsidiaries, PurebasePureBase Agricultural, Inc., a Nevada corporation (“PurebasePureBase AG”), and U.S. Agricultural Minerals, LLC, a Nevada limited liability company (“Purebase SCM”PureBase AM”), respectively.

 

The CompanyCompany’s headquarters is headquartered in Ione, California.

 

Agricultural Sector

 

The Company develops specialized fertilizers, sun protectants, soil amendments, and bio-stimulants for organic and non-organic sustainable agriculture. 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 improve 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,“PureBase,” consisting of its PurebasePureBase Shade Advantage WP(WP) product, a kaolin-clay based sun protectant for crops.crops and Humic Advantage, a humic acid product derived from leonardite.

 

Construction Sector

 

The Company has been developing and testing a kaolin-based product that it believes will help create a lower CO2-emitting concrete through the use of high-quality supplementary cementitious materials (“SCMs”). The Company is developing aan 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 in the construction-materialsconstruction materials sector.

 

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, exploration drilling, preparation of feasibility studies, mine modeling, on-site construction, 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 used by the Company are obtained from properties owned or controlled by USMC. A. Scott Dockter, the Company’s Principal Executive Officer and a director, and John Bremer, a director, are also officers, directors, and owners of USMC.

 

NOTE 2 – GOING CONCERN AND LIQUIDITY

 

The accompanying unaudited condensed consolidated financial statements have been 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 normal course of business. As of August 31, 2022,2023, the Company had a significant accumulated deficit of $47,818,46061,645,690 and a working capital deficit of $384,264470,294. For the nine months ended August 31, 2022,2023, the Company had a loss from operations of $26,726,2938,266,216 and negative cash flows from operations of $720,527900,536. 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 2022, as well as other potential strategic and business development initiatives.2023. In addition, the Company has had and expects to have negative cash flows from operations, at least into the near future. The Company has previously funded and plans to continue funding these losses primarily with additional infusions of cash from advances from an affiliate,USMC and the sale of equity and convertible notes. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

 

7

 

The Company’s plan, through the continued promotion of its servicesproducts to existing and potential customers, is to generate sufficient revenues to cover its anticipated expenses. The Company is currently exploring several options to meet its short-term cash requirements, including an additional line of credit and issuances of equity securities or equity-linked securities fromto USMC and other third parties.

 

Although no assurances can be given as to the Company’s ability to deliver on its revenue plans or that unforeseen expenses may arise, management currently believes that the revenue to be generated from operations together with equity and debt financing, including funding from USMC in connection with the March 23, 2022 securities purchase agreement, the March 7, 2023 securities purchase agreement, and a July 10, 2023 line of credit agreement will provide the necessary funding for the Company to continue as a going concern for the next twelve months. On April 7,The March 23, 2022 the Company entered into a securities purchase agreement with USMC, a related party, pursuant to whichprovides for the issuance by the Company may issueof up to an aggregate of $1,000,000 of two-year convertible promissory notes to USMC a related party (see(See Note 10)6). The notes bear interest at 5% per annum and any outstanding principal or interest under the notes is convertible into shares of the Company’s common stock, at any time at the option of the noteholder, at a conversion price of $0.39 per share. Currently, the Company has issued $919,209 of convertible notes under the March 23, 2022 securities purchase agreement and may issue an additional $80,791 of convertible notes. The March 7, 2023 securities purchase agreement provides for the issuance by the Company of up to an aggregate of $1,000,000 of two-year convertible promissory notes to USMC (See Note 6). The notes bear interest at 8% per annum and any outstanding principal or interest under the notes are convertible into shares of the Company’s common stock, at any time at the option of the holder,noteholder, at a conversion price of $0.390.10 per share. Currently, the Company has issued $470,862412,533 of convertible notes under suchthe March 7, 2023 securities purchase agreement and may issue an additional $529,138587,467 of convertible notes. However,notes under such agreement. The July 10, 2023 line of credit agreement provides for the issuance of up to an aggregate of $1,000,000 of advances from USMC under an unsecured convertible grid promissory note until July 10, 2024 (See Note 12). The note bears interest at 8% per annum and any outstanding principal or accrued interest under the note is convertible into shares of the Company’s common stock at a conversion price of $0.10 per share on the maturity date. As of the date hereof, there currentlyhave been $231,048 in advances from USMC under the July 10, 2023 line of credit agreement. Currently, there are no other arrangements or agreements for financing and management cannot guarantee any other potential debt or equity financing will be available, or if available, on favorable terms. 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 need to curtail operations, or cease its operations completely.

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The Company has prepared the accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) including Form 10-Q and Regulation S-X. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments, unless otherwise indicated) which are, in the opinion of management, necessary to fairly state the operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted pursuant to such rules and regulations. These financial statements and the information included under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the audited financial statements and explanatory notes thereto for the year ended November 30, 20212022, in our Annual Report on Form 10-K filed on March 15, 2022February 28, 2023, with the SEC. The results of the nine months ended August 31, 20222023, (unaudited) are not necessarily indicative of the results to be expected for the full year ending November 30, 2022.2023.

8

 

Principles of Consolidation

 

These unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-ownedwholly owned subsidiaries PureBase AG and Purebase SCM.PureBase AM. Intercompany accounts and transactions have been eliminated upon consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP 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 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’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations willmay be affected.

8

 

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of the unaudited condensed consolidated financial statements. Significant estimates include the allowance for doubtful accounts, useful lives of property and equipment, deferred tax asset and valuation allowance, and assumptions used in the Black-Scholes-MertonBlack-Scholes valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate.

 

Revenue

 

The Company accounts for revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. The Company derives revenues from the sale of products from its agricultural products.sector and construction sector. 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.

 

Revenue consistsPractical Expedients

As part of ASC Topic 606, the following by product offering for the nine months ended August 31, 2022:Company has adopted practical expedients including:

 SCHEDULE OF REVENUE CONSIST OF PRODUCT OFFERING

CROP WHITE II  SHADE ADVANTAGE (WP)  

SulFe Hume Si ADVANTAGE

  Total 
               
$192,780  $210,296  $51,460  $454,536 
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 and Partially Unsatisfied Performance Obligations – for 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 606 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 provided 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.

9

Disaggregated Revenue

 

Revenue consists of the following by product offering for the nine months ended August 31, 2021:2023:

SCHEDULE OF DISAGGREGATED REVENUE

CROP WHITE II  SHADE
ADVANTAGE (WP)
  

SulFe Hume Si ADVANTAGE

  Total 
               
$66,825  $207,570  $51,480  $325,875 

Revenue consists of the following by product offering for the nine months ended August 31, 2022:

 

CROP WHITE IICROP WHITE II  SHADE ADVANTAGE (WP)  

SulFe Hume Si ADVANTAGE

  Total CROP WHITE II  SHADE
ADVANTAGE (WP)
  

SulFe Hume Si ADVANTAGE

  Total 
                            
$-  $144,750  $223,950  $368,700 192,780  $210,296  $51,460  $454,536 

 

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. There were no cash equivalents as of August 31, 20222023 and November 30, 2021.2022.

 

AccountAccounts 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. TheAs of August 31, 2023 and November 30, 2022, the Company has determined that there was no allowance for doubtful accounts as of August 31, 2022 and an allowance of $18,277 as of November 30, 2021.was necessary.

 

Property and Equipment

 

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, generally three to five years.years. Expenditures that enhance the useful lives of the assets are capitalized and depreciated.

SCHEDULE OF ESTIMATED USEFUL LIFE OF PROPERTY AND EQUIPMENT

Equipment3-5 years
Autos and trucks5 years

9

 

Maintenance and repairs are charged to expense as incurred. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations. The Company currently has $620,000746,536 in property and equipment, that itprimarily two ball mills, acquired on May 1, 2020. As of August 31, 2022,2023, the Company has not placedput the acquired property and equipment to use. As such, the Company has not recorded depreciation.depreciation related to these assets.

 

Impairment of Long-Lived Assets

 

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. RecoverabilityThe recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the 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 flows or appraised values, depending on the nature of the assets. No impairment losses were recorded during the three and nine months ended August 31, 20222023 and 2021.2022.

 

Shipping and Handling

 

The Company incurs shipping and handling costs which are charged back to the customer. There were noThe Company incurred shipping and handling costs incurredof $0 during the three months ended August 31, 2023, and 2022.

10

The Company incurred shipping and handling costs of $2,400 and $0 during the nine months ended August 31, 2023 and 2022, and 2021.respectively.

 

Advertising and Marketing Costs

 

The Company expenses advertising and marketing costs as theyincurred and such costs are incurred.recorded in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. Advertising and marketing expenses were $15,0400 for the three months ended August 31, 2023, and 2022. Advertising and marketing expenses were $0 and $54,03115,040 for the nine months ended August 31, 2023, and 2022, and 2021, respectively, and $0 and $12,031 for the three months ended August 31, 2022 and 2021, respectively, and are recorded in selling, general and administrative expenses on the statement of operations.respectively.

 

Fair Value Measurements

 

As defined in ASC 820, “FairFair 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 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 inputs to the valuation 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 fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.

 

Level 1:Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
  
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.
  
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.

 

10

Fair Value of Financial 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 amount of the notes approximates the estimated fair value for these financial instruments as management believes that such notes constitute substantially all of the Company’s debt and interest payable on the notes approximatesbased on the Company’s incremental borrowing rate.

 

Net Loss Per Common Share

 

Net loss per share of common stock is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the year.three and nine months ended August 31, 2023 and 2022. All outstanding options are considered potential common stock. The dilutive effect, if any, of stock options are calculated using the treasury stock method. All outstanding convertible notes are considered common stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method. Since the effect of common stock equivalents is anti-dilutive with respect to losses, outstanding options have been excluded from the Company’s computation of net loss per share of common stock for the three and nine months ended August 31, 20222023 and 2021, respectively.2022.

11

 

The following table summarizes the securitiesstocks 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 stock:

SCHEDULE OF OUTSTANDING SHARES EXCLUDED FROM DILUTED LOSS PER SHARE

        
 Nine Months Ended  Three Months Ended, 
 August 31,2022  August 31,2021  

August 31,

2023

 

August 31,

2022

 
          
Convertible Notes  1,398,498   129,117,358   6,656,110   1,398,498 
Stock Options  62,018,787   1,595,000   128,688,187   62,018,787 
Total  63,417,285   130,712,358   135,344,297   63,417,285 

 

        
 Three Months Ended  Nine Months Ended, 
 August 31, 2022  August 31, 2021  

August 31,

2023

 

August 31,

2022

 
          
Convertible Notes  1,398,498   129,117,358   6,656,110   1,398,498 
Stock Options  62,018,787   1,595,000   128,688,187   62,018,787 
Total  63,417,285   130,712,358   135,344,297   63,417,285 

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 accompanying condensed consolidated 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 Stockcommon stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the Common Stock.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 with 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 as noted above.

 

11

Leases

Leases

 

With the adoption of ASC 842,Leases, operating lease agreements are required to be recognized on the balance sheet as Right-of-Use (“ROU”) assets and corresponding lease liabilities. ROU assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option.

 

12

The Company leases its corporate offices. All of the leases areThe lease is classified as an operating leases.lease. The Company is a party to a two-year lease with USMC a related party, for 1,000 square feet of office space located in Ione, California (the “Ione Lease”) with respect to its corporate operations (See Note 10)7). TheEffective November 1, 2022, the Ione Lease expires in November 2022 (subjectwas amended to automatic extensions onextend the lease through October 2024 and to add an additional 700 square feet of office space for a month-to-month basis) and has atotal monthly base rental during the initial termprice of $1,5003,500 .per month, with automatic one-month renewals. The remaining weighted average term is 0.171.2 years. The Company discounted lease payments using its estimated incremental borrowing rate at December 1, 2020. The weighted average incremental borrowing rate applied was 5%.

 

In accordance with ASC 842,Leases, the Company recognized a ROU asset and corresponding lease liability on the condensed consolidated balance sheet for long-term office leases. See Note 7 – Leases for further discussion, including the impact on the accompanying unaudited condensed consolidated financial statements and related disclosures.

 

Income Taxes

 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the condensed 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 recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in incomeoperations in the period that includes the enactment date.

 

The Company utilizes ASC 740, “IncomeIncome 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 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 related financial amounts, using currently enacted tax rates. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

 

For uncertain tax positions that meet a “more likely than not” threshold, the Company recognizes the benefit of uncertain tax positions in the 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 condensed consolidated statements of operations.

 

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. As of August 31, 2023, the Company was not engaged in any mine exploration.

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 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 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’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.

13

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. As of August 31, 2023 and November 31, 2022, the Company did not have any capitalized mineral rights.

Recent Accounting Pronouncements

 

All other newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company.

 

NOTE 4 – MINING RIGHTS

Federal Preference Rights Lease in Esmeralda County NV

This Preference Rights Lease is granted by the Bureau of Land Management (“BLM”) 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 operation which is situated within the 2,500 acres held by the Company. All rights and obligations under the Preference Rights Lease have been assigned to the Company by USMC. These rights were initially recorded at their cost of $200,000. At November 30, 2020, the Company fully impaired the asset. This lease requires a payment of $7,503 per year to the BLM.

12

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 it agreed to sell its fee simple property interest and certain mining claims to USMC. In contemplation of the Plan and Agreement of Reorganization, onOn December 1, 2014, USMC 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 involvesprovides for the sale of approximately 280 acres of mining property containing 5placer 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 BLM.Bureau of Land Management. An initial deposit of $50,000 was paid to the Company and held in escrow and the Purchase 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.the closing of the sale from US Mining and Minerals Corporation to the Company. In light of the foregoing, and the payment of an 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 the Company, paid $575,000 to acquire the property interest and mining claims on or about October 15, 2015. Mr. Bremer willagreed to transfer title to the Company when the Company pays Mr. Bremerupon payment of $575,000 plus expenses to Mr. Bremer, however, the Company is under no obligation to do so. The mining claims require a minimum royalty payment of $3,500 per year to be made by the Company.

During the year ended November 30, 2017, USMC, agreed to offset the $75,000 deposit against money owed toCompany, which is paid by USMC. 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 of the Company,(the “Trust”), pursuant to which the Company will purchase the Snow White Mine for $836,000 (the(the “Purchase Price”). from the Trust. The Purchase Price plus 5%5% interest is payable in full in cash at the closing which must occur at any time before April 1, 2022 (the “Closing Date”).closing. On April 14, 2022, the agreement was amended to extend the Closing Dateclosing date to April 14, 2023. On April 7, 2023, the agreement was amended to extend the closing date to April 1, 2024.

 

NOTE 5PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at:

SCHEDULE OF PROPERTY AND EQUIPMENT

  

August 31,

2023

  

November 30,

2022

 
       
Furniture and equipment $6,952  $6,952 
Machinery and equipment  35,151   35,151 
Automobiles and trucks  25,061   25,061 
Pilot plant  126,536   - 
Construction in process  620,000   620,000 
 Property and equipment, gross  813,700   687,164 
Less: accumulated depreciation  (67,164)  (67,164)
Property and equipment, net $746,536  $620,000 

There was no depreciation expense for the three or nine months ended August 31, 2023 and 2022.

14

NOTE 6NOTES PAYABLE

 

Bayshore Capital Advisors, LLC

 

On February 26, 2016, the Company issued a promissory note to Bayshore Capital Advisors, LLC (“Bayshore Capital”), an affiliate through common ownership of a 10% major shareholderstockholder of the Company, for $25,000 for working capital at an interest rate of 6% per annum. The note was payable August 26, 2016, or when the Company closes a bridge financing, whichever occurs first. TheOn February 4, 2023, Bayshore Capital agreed to cancel the $25,000 debt, plus $10,401 of accrued and unpaid interest, which was recorded in Other income on the Statement of Operations. Prior to the cancellation of the note, the Company iswas in default on this note as of August 31, 2022. During the nine months ended August 31, 2022, the Company did not make repayments towards the outstanding balance of the note. The balance on the note was $25,000 as of August 31, 2022 and November 30, 2021 (see Note 10). Total interest expense on the note was $255 and $1,126for the nine months ended August 31, 20222023, and 2021,2022, respectively. Total interest expense on the note was $0 and $378 for the three months ended August 31, 2023, and 2022, and 2021.respectively.

 

A. Scott Dockter – President and Chief Executive Officer

 

On August 31, 2017, the Company issued a note in the amount of $197,096 to A. Scott Dockter, President, Chief Executive Officer and a director of the Company, to consolidate the total amounts due to Mr. Dockter. The note bears interest at 6% and is due upon demand. During the nine months ended August 31, 2022,2023, the Company paid $20,000 towards the outstanding balance of the note. The balance on the note was $38,716 and $58,716 as of August 31, 2022 and November 30, 2021, respectively (See Note 10). Total interest expense on the note was $2,291768 and $4,7612,291 for the nine months ended August 31, 20222023, and 2021,2022, respectively. Total interest expense on the note was $586156 and $1,346586 for the three months ended August 31, 2023, and 2022, respectively. The balance on the note was $8,716and 2021,$38,716 as of August 31, 2023, and November 30, 2022, respectively. There was $41,934 and $41,167 of accrued interest as of August 31, 2023, and November 30, 2022, respectively.

 

13

Convertible Promissory Notes – USMC

December 1, 2019

 

On December 1, 2019, in connection with the September 26, 2019 securities purchase agreement with USMC a related party, (See Note 10)12), the Company issued a 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 note may be converted into shares of the Company’s common stock at any time at the option of the holder,noteholder, at a conversion price of $0.16 per share. On April 7, 2022, the December 1, 2019 note was amended to extend the maturity date to April 30, 2022. Thereafter, onOn April 7, 2022, USMC gave notice of conversion of the outstanding principal balance of $20,000 of the December 1, 2019 note, plus accrued interest totaling $2,351 through such date, into 139,692 shares of the Company’s common stock.

 

The issuance of Tranche #1 resulted in a discount from the beneficial conversion feature totaling $20,000. Total straight-line amortization of this discount totaledwas $0 for the three and $7,201 during the nine months ended August 31, 20222023 and 2021, respectively. Total straight-line amortization of this discount totaled $0 and $2,418 during the three months ended August 31, 2022 and 2021, respectively. Total interest expense on Tranche #1 was approximately $350 and $750 for the nine months ended August 31, 2022 and 2021, respectively.2022. Total interest expense on Tranche #1 was approximately $0 and $250350 for the nine months ended August 31, 2023 and 2022, respectively. There was no interest expense on Tranche #1 for the three months ended August 31, 20222023 and 2021, respectively.2022.

 

January 1, 2020

 

On January 1, 2020, in connection with the September 26, 2019 securities purchase agreement with USMC a related party, (See Note 10)12), the Company issued a convertible promissory note in the amount of $86,000to USMC, with a maturity date of January 1, 2022 (“Tranche #2”). 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 at any time at the option of the holder,noteholder, at a conversion price of $0.16 per share. On April 7, 2022, the January 1, 2020 note was amended to extend the maturity date to April 30, 2022. Thereafter, onOn April 7, 2022, USMC gave notice of conversion of the outstanding principal balance of $86,000 of the January 1, 2020 note, plus accrued interest totaling $9,743 through such date, into 598,392 shares of the Company’s common stock.

15

 

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 $1,4120 and $12,0881,412 for the three and nine months ended August 31, 20222023 and August 31, 2021, respectively. Total straight-line amortization of this discount totaled $0 and $4,059 during the three months ended August 31, 2022, and August 31, 2021, respectively. Total interest expense on Tranche #2 was approximately $1,500 and $3,278 for the nine months ended August 31, 2022 and 2021, respectively. Total interest expense on Tranche #2 was approximately $0 and $1,1001,500 for the nine months ended August 31, 2023 and 2022, respectively. Total interest expense on Tranche #2 was approximately $0 and $450 for the three months ended August 31, 20222023 and 2021,2022, respectively.

 

February 1, 2020

 

On February 1, 2020, in connection with the September 26, 2019 securities purchase agreement with USMC a related party, (See Note 10)12), the Company issued a 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, at any time at the option of the holder,noteholder, at a conversion price of $0.16 per share. On April 7, 2022, the February 1, 2020 note was amended to extend the maturity date to April 30, 2022. Thereafter, onOn April 7, 2022, USMC gave notice of conversion of the outstanding principal balance of $72,000 of the February 1, 2020 note, plus accrued interest totaling $7,851 through such date, into 499,068 shares of the Company’s common stock.

 

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 $3,1030 and $13,4943,103 for the nine months ended August 31, 20222023, and 2021, respectively. Total straight-line amortization of this discount totaled $0 and $4,531 during the three months ended August 31, 2022, and 2021, respectively. Total interest expense on Tranche #3 was approximately $1,260 and $2,702 for the nine months ended August 31, 2022 and 2021, respectively. Total interest expense on Tranche #3 was approximately $0 and $9001,260 for the nine months ended August 31, 2023 and 2022, respectively. Total interest expense on Tranche #3 was approximately $0 for the three months ended August 31, 20222023 and 2021, respectively.2022.

 

14

December 1, 2020

 

On December 1, 2020, in connection with the September 26, 2019 securities purchase agreement with USMC a related party, (See Note 10)12), the Company issued a convertible promissory note in the amount of $822,000 to USMC, with a maturity date of November 25, 2022 (“Tranche 4”). The note bears interest at5% per annum which is payable on maturity. Amounts due under the note may be converted into shares of the Company’s common stock at any time at the option of the noteholder, at a conversion price of $0.16 per share. On April 7, 2022, USMC gave notice of conversion of the outstanding principal balance of $822,000 of the December 1, 2020 note, plus accrued interest totaling $55,401 through such date, into 5,483,753 shares of the Company’s common stock. Total interest expense on Tranche #4 was approximately $17,7000 and $30,80017,700 for the nine months ended August 31, 20222023 and 2021,2022, respectively. Total interest expense on Tranche #4 was approximately $0and $10,5007,500 for the three months ended August 31, 20222023, and 2021,2022, respectively.

March 17, 2021

 

On March 17, 2021, in connection with the March 11, 2021 securities purchase agreement with USMC a related party (see(See Note 10)12), the Company issued a convertible promissory note in the amount of $579,769 to USMC, with a maturity date of March 17, 2023 (“Tranche #5”). The note bears interest at5% per annum which is payable on maturity. Amounts due under the note may be converted into shares of the Company’s common stock at any time at the option of the noteholder, at a conversion price of $0.088 per share. On April 7, 2022, USMC gave notice of conversion of the outstanding principal balance of $579,769.39 of the March 17, 2021 note, plus accrued interest totaling $30,656 through such date, into 6,936,656 shares of the Company’s common stock. Total interest expense on Tranche #5 was approximately $8,8000 and $13,3008,800 for the nine months ended August 31, 20222023, and 2021,2022, respectively. Total interest expense on Tranche #5 was approximately $0 and $7,400 for the three months ended August 31, 20222023, and 2021, respectively.2022.

16

 

March 14, 2022

 

On March 14, 2022, in connection with the November 25, 2020 securities purchase agreement with USMC a related party (see(See Note 10)12), the Company issued a convertible promissory note in the amount of $884,429.28884,429 to USMC, with a maturity date of March 14, 2024, (“Tranche #6”). 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 at any time at the option of the noteholder, at a conversion price of $0.088 per share. On April 7, 202222022, USMC gave notice of conversion of the outstanding principal balance of $884,492.28884,492 of the March 14, 2022 note, plus accrued interest totaling $2,908 through such date, into 10,084,093 shares of the Company’s common stock. Total interest expense on Tranche #6 was approximately $0 and $2,908 for the nine months ended August 31, 2022.2023, and August 31, 2022, respectively. Total interest expense on Tranche #6 was approximately $0 for the three months ended August 31, 2023, and August 31, 2022.

 

August 30, 2022

 

On August 30, 2022, in connection with the April 7, 2022 securities purchase agreement with USMC a related party (see(See Note 10)12), the Company issued a convertible promissory note in the amount of $470,862 to USMC, with a maturity date of August 30, 2024 (“Tranche #7”). 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 at any time at the option of the noteholder, at a conversion price of $0.39 per share. Total interest expense on Tranche #7 was approximately $017,673 for the nine months ended August 31, 2022.2023. Total interest expense on Tranche #7 was $05,805 for the three months ended August 31, 2022.2023.

November 29, 2022

 

On November 29, 2022, in connection with the April 7, 2022 securities purchase agreement with USMC (See Note 12), the Company issued a convertible promissory note in the amount of $140,027 to USMC, with a maturity date of August 30, 2024 (“Tranche #8”). 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 at any time at the option of the noteholder, at a conversion price of $0.39 per share. Total interest expense on Tranche #8 was $5,256 for the nine months ended August 31, 2023. Total interest expense on Tranche #8 was $1,803 for the three months ended August 31, 2023.

February 28, 2023

On February 28, 2023, in connection with the April 7, 2022 securities purchase agreement with USMC (See Note 12), the Company issued a convertible promissory note in the amount of $308,320 to USMC, with a maturity date of February 28, 2025 (“Tranche #9”). 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 at any time at the option of the noteholder, at a conversion price of $0.39 per share. Total interest expense on Tranche #9 was $7,771 for the nine months ended August 31, 2023. Total interest expense on Tranche #9 was $3,970 for the three months ended August 31, 2023.

May 31, 2023

On May 31, 2023, in connection with the March 20, 2023 securities purchase agreement with USMC (See Note 12), the Company issued a convertible promissory note in the amount of $412,533 to USMC, with a maturity date of May 31, 2025 (“Tranche #10”). The note bears interest at 8% per annum which is payable on maturity. Amounts due under the note may be converted into shares of the Company’s common stock at any time at the option of the noteholder, at a conversion price of $0.10 per share. Total interest expense on Tranche #10 was $8,318 for the nine months ended August 31, 2023. Total interest expense on Tranche #10 was $8,318 for the three months ended August 31, 2023.

June 30, 2023

On June 30, 2023, in connection with the March 20, 2023 securities purchase agreement with USMC (See Note 12), the Company issued a convertible promissory note in the amount of $193,935 to USMC, with a maturity date of June 30, 2025 (“Tranche #11”). The note bears interest at 8% per annum which is payable on maturity. Amounts due under the note may be converted into shares of the Company’s common stock at any time at the option of the noteholder, at a conversion price of $0.10 per share. Total interest expense on Tranche #11 was $2,635 for the nine months ended August 31, 2023. Total interest expense on Tranche #11 was $2,635 for the three months ended August 31, 2023.

1517

Line of Credit –USMC

July 10, 2023

On July 10, 2023, the Company entered into a line of credit agreement and unsecured convertible grid promissory note with USMC. The July 10, 2023 line of credit agreement provides for the issuance of up to an aggregate of $1,000,000 of advances from USMC under an unsecured convertible grid promissory note (See Note 12) until July 2024. The note bears interest at 8% per annum and any outstanding principal or accrued interest under the note is convertible into shares of the Company’s common stock at a conversion price of $0.10 per share on the maturity date. As of August 31, 2023, there have been $231,048 advances from USMC under the July 10, 2023 line of credit agreement. As of August 31, 2023, the accrued interest on the July 10, 2023 line of credit was $873.

 

Convertible Debt – Board of Directors

 

On April 8, 2021, the Company entered into a twelve-month Director Agreementdirector agreement with Jeffrey Guzy, wherebyas amended on August 26, 2022 (the “Guzy Director Agreement”) pursuant to which Mr. Guzy will receiveserve as a $1,000director of the Company, which agreement will automatically renew (the “Renewal Date”) for successive one-year terms unless either party notifies the other of its desire not to renew the Agreement within 30 days of the expiration of the then current term. As compensation therefor, Mr. Guzy is entitled to a cash fee eachof $1,000 per month for services performed. The fee will accruewhich accrues as 0% interest debt to the Company until the Company has its first cash-flow positive month. If a debtEffective March 1, 2023, Mr. Guzy’s compensation was increased to $1,500 and is stillpaid monthly. Any amounts owed to Mr. Guzy at the end of the term, the debt shallRenewal Date or upon Mr. Guzy’ resignation or removal (the “Termination Date”) will be converted into the Company’s common stock at the lowera price ofper share equal to the market value of such common stockprice on the date of terminationexchange or renewal of the Director Agreement, as the case may be,trading market where such stock is then traded or quoted or the 20-day volume-weighted average price (“VWAP”) immediately prior to the end of the termcommon stock for the 20 days immediately preceding the Renewal Date or renewal date. The Director Agreement shall automatically renew for successive one-year periods unless either party terminates the agreementTermination Date, as the case may be. On April 14, 2023, Mr. Guzy converted $24,000 in accrued but unpaid director fees into 80,000 shares of common stock at least 30 days prior to the end$0.15 per share and 150,000 shares of the then current term. As of August 31, 2022, the Company has debt in the amount ofcommon stock at $17,0000.08 owed to Mr. Guzy.per share.

 

On August 10,13, 2021, the Company entered into a twelve-month Director Agreementdirector agreement with Dr. Kimberly Kurtis, wherebyas amended on August 26, 2022 (the “Kurtis Director Agreement”) pursuant to which Dr. Kurtis will receiveprovide board services, which agreement will automatically renew for successive one-year terms unless either party notifies the other of its desire not to renew the Agreement within 30 days of the expiration of the then current term. As compensation therefor, Dr. Kurtis is entitled to a cash fee of $1,000 cash fee eachper month for services performed. The fee will accruewhich accrues as0% interest debt to the Company until the Company has its first cash-flow positive month. If a debt is stillAny amounts owed to Dr. Kurtis at the end ofRenewal Date or the term, the debt shallTermination Date will be converted into common stock at a price per share equal to market price on the lower priceexchange or trading market where such stock is then traded or quoted or the VWAP of the market value of such common stock onfor the date of termination20 days immediately preceding the Renewal Date or renewal of the Director Agreement,Termination Date, as the case may be, or the 20-day VWAP immediately prior to the endbe. On April 14, 2023, Dr. Kurtis converted $12,000 in accrued but unpaid director fees into 80,000 shares of the term or renewal date. The Director Agreement shall automatically renew for successive one-year periods unless either party terminates the agreementcommon stock at least 30 days prior to the end of the then current term.$0.15 per share. As of August 31, 2022,2023, cash fees owed to Dr. Kurtis under the Company hasKurtis Director Agreement were deferred and debt in the amount of $13,00010,000 is owed to Dr. Kurtis.

 

NOTE 7 – LEASES

The following table presents net lease cost and other supplemental lease information:

SCHEDULE OF LEASE COST AND OTHER SUPPLEMENTAL LEASE INFORMATION

  

Nine Months Ended

August 31, 2023

 
Lease cost    
Operating lease cost (cost resulting from lease payments) $31,500 
Short term lease cost  - 
Sublease income  - 
Net lease cost $31,500 
     
Operating lease – operating cash flows (fixed payments) $31,500 
Operating lease – operating cash flows (liability reduction) $28,978 
Non-current leases – right of use assets $49,749 
Current liabilities – operating lease liabilities $40,371 
Non-current liabilities – operating lease liabilities $10,413 

18

  

Nine Months Ended

August 31, 2022

 
Lease cost    
Operating lease cost (cost resulting from lease payments) $13,500 
Short term lease cost  - 
Sublease income  - 
Net lease cost $13,500 
     
Operating lease – operating cash flows (fixed payments) $13,500 
Operating lease – operating cash flows (liability reduction) $13,113 
Non-current leases – right of use assets $2,843 
Current liabilities – operating lease liabilities $2,981 
Non-current liabilities – operating lease liabilities $- 

Future minimum payments under non-cancelable leases for operating leases for the remaining terms of the leases following the three months ended August 31, 2023:

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS

Fiscal Year Operating Leases 
Remainder of 2023 $21,000 
2024  31,500 
Total future minimum lease payments  52,500 
Amount representing interest  (1,716)
Present value of net future minimum lease payments $50,784 

 

NOTE 68ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consistconsisted of the following amounts:amounts as of:

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

         
  

As of
August 31,2022

  As of
November 30, 2021
 
       
Accounts payable $46,084  $2,647 
Accrued interest – related party  50,460   126,806 
Accrued compensation  18,523   27,163 
Accounts payable and accrued expenses $115,067  $156,616 

NOTE 7 – LEASES

The following table presents net lease cost and other supplemental lease information:

SCHEDULE OF LEASE COST AND OTHER SUPPLEMENTAL LEASE INFORMATION

  Nine Months Ended 
  August 31, 2022 
Lease cost    
Operating lease cost (cost resulting from lease payments) $13,500 
Short term lease cost  - 
Sublease income  - 
Net lease cost $9,000 
     
Operating lease – operating cash flows (fixed payments) $13,500 
Operating lease – operating cash flows (liability reduction) $13,113 
Non-current leases – right of use assets $2,843 
Current liabilities – operating lease liabilities $2,981 
Non-current liabilities – operating lease liabilities $- 

  

 

Nine Months Ended

August 31, 2021

 
Lease cost    
Operating lease cost (cost resulting from lease payments) $13,500 
Short term lease cost  - 
Sublease income  - 
Net lease cost $13,500 
     
Operating lease – operating cash flows (fixed payments) $13,500 
Operating lease – operating cash flows (liability reduction) $12,475 
Non-current leases – right of use assets $19,904 
Current liabilities – operating lease liabilities $17,377 
Non-current liabilities – operating lease liabilities $2,981 

16

Future minimum payments under non-cancelable leases for operating leases for the remaining terms of the leases following the nine months ended August 31, 2022:

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS

Fiscal Year Operating Leases 
Remainder of 2022 $3,000 
Total future minimum lease payments  3,000 
Amount representing interest  19 
Present value of net future minimum lease payments $2,981 
  August 31, 2023  November 30, 2022 
       
Accounts payable $273,881  $30,078 
Accrued interest – related party  90,415   57,266 
Accrued compensation  29,634   28,134 
Accounts payable and accrued expenses $393,930  $115,478 

 

NOTE 89COMMITMENTS AND CONTINGENCIES

 

Office and Rental Property Leases

 

The Company is usingleasing office space provided byfrom USMC, a related party thatwhich is owned by the Company’s majority shareholders and directors, A. Scott Dockter and John Bremer (See Note 10)12).

19

 

Mineral Properties

 

The Company’s mineral rights require various annual lease payments (See Note 4).

 

Legal Matters

 

On July 8, 2020, the Company’s former Chief Financial Officer, Al Calvanico (“Calvanico”), filed a demand for arbitration alleging retaliation, wrongful termination, and demand for a minimum 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 accordance with its terms, and was not renewed by the Company and because Calvanico never exercised his stock options. The Company and Calvanico engaged in binding arbitration which concluded on February 3, 2023. On February 14, 2020,June 20, 2023, the arbitrator decided in favor of the Company requestedwith respect to Calvanico’s breach of contract, fraud and negligent representation and wrongful discharge claims and in writing thatfavor of 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 currentlyfor asserted attorney fee claims in the arbitration discovery phase. An arbitration hearing is scheduled for January 10 - 13, 2023, before arbitrator, Scott Silverman in Los Angeles.

On January 11, 2019, the Company filed a complaint in the Second Judicial District Court in the State of Nevada, 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 Vice President of Agricultural Research and Development. Mr. Hurtado was terminated in March 2018 and since that time the Company alleges that he conspiredaccordance 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 hisCalvanico’s employment agreement with the Company. On March 14, 2019, Agregen and Mr. Hurtado filed an answerAt a July 18, 2023, teleconference regarding a determination of attorney fees to be paid, the Company’s Complaint that the allegations were false. On March 13, 2020, the Company filedarbitrator established a First Amended Complaint, adding James Todd Gauer and John Gingerich as additional defendants. A settlement agreement was entered into betweenbriefing schedule for the parties effective June 3, 2022to formally present their legal arguments on the issue. Calvanico’s brief in support of attorney fees was due and a Notice of Settlementtimely filed on August 15, 2023. The Company’s brief in opposition was due and timely filed on September 19, 2023. Calvanico’s reply brief was filed inon October 4, 2023. A decision regarding the District Court pursuant to which,8,669,000 sharesamount of the Company’s common stock beneficially owned by the defendants were surrendered to the Company and the Company granted Mr. Gauer an immediately exercisable option to purchase 8,669,400 shares of common stock, the equivalent number of common shares surrendered to the Company, at an exercise price of $2.50. The lawsuit was fully settled and dismissed on August 9, 2022.

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 productattorney fees 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 mislabeling and denyingpaid, if any, liability for damages therefrom. The matter is set for trialexpected in AprilNovember 2023.

 

17

Contractual Matters

 

On November 1, 2013, wethe Company entered into an agreement with USMC, a related party, in which USMC provides various technical evaluations and mine development services for the Company with regard toregarding the various mining properties/rights owned by the Company. Terms of services and compensation will be determined for each project undertaken by USMC.

 

On October 12, 2018, the Board approvedCompany entered into a material supply agreement with USMC, a related party, pursuant to which USMC will provideprovides designated natural resources to the Company at predetermined prices (see(See Note 10)12).

Note 10 - STOCKHOLDERS’ EQUITY

On May 19, 2022, the Company entered into an agreement with Newbridge Securities Corporation (“Newbridge”) for a twelve-month term, pursuant to which Newbridge provided investment banking and corporate advisory services to the Company. As consideration therefor, the Company issued Newbridge 300,000 shares of common stock on June 17, 2022, which shares were subject to a 12-month lockup from the date of issuance. The shares were issued at a fair value of $0.35 per share.

On June 9, 2023, effective April 8, 2023, the Company entered into a one-year advisory agreement with Dr. Karen Scrivener (“Scrivener Agreement”) pursuant to which Dr. Scrivener will provide certain strategic advisory services to the Company. As compensation therefor, on June 9, 2023, Dr. Scrivener was issued 100,000 shares of the Company’s common stock at a fair value of $0.08 per share.

 

NOTE 9Note 11STOCK-BASED COMPENSATION

The Company accounted for its stock-based compensation in accordance with the fair value recognition provisions of FASB ASC Topic 718.

2017 Equity Incentive Plan

 

On November 10, 2017, the Board approved the 2017 PureBase Corporation Stock Option Plan which is intended to be a qualified stock option plan (the “Option Plan”). The Board reserved 10,000,000ten million shares of the Company’s common stock to be issued pursuant to options granted under the Option Plan. The Option Plan was subsequently approved by shareholders on September 28, 2018. As of August 31, 2022,2023, options to purchase an aggregate of 128,688,187 shares of common stock have been granted under the Option Plan.

20

 

The Company has also granted options to purchase an aggregate of 500,000 shares of common stock pursuant to employment contracts with certain employees prior to the adoption of the Option Plan.

 

On May 19, 2022, the Company entered into an agreement with Newbridge Securities Corporation (“Newbridge”), pursuant to which Newbridge will provide investment banking and corporate advisory services to the Company. As consideration therefor, the Company issued Newbridge 300,000 shares of common stock on June 17, 2022 which shares are subject to a 12-month lockup from the date of issuance.

On June 3, 2022, in conjunctionconnection with thea settlement agreement with Agregen, International Corp, Robert Hurtado, James Todd Gauer and John Gingerich, (see Note 8), the Company granted James Todd Gauer thean immediately exercisable option to purchase 8,669,400 shares of common stock, the equivalent number of shares of common sharesstock that were surrendered to the Company, at an exercise price of $2.50 per share and a fair value of $1,856,151. The options vest immediately. The options wereoption was valued using the Black-Scholes option pricing model under the following assumptions as found in the table below.below table.

 

On August 26, 2022, the Company granted immediately exercisable options to purchase an aggregate of 2,223,7882,223,787 shares of common stock to members of the Board, consultants and employees for services to be performed. The options were issued at an exercise price of $0.24 andper share for a total fair value of $522,411. The options vest immediately. The options were valued using the Black-Scholes option pricing model under the following assumptions as found in the table below.below table.

 

18

SCHEDULE OF BLACK-SCHOLES OPTION PRICING MODEL ASSUMPTIONS

Date Number of Options  Stock Price  Strike Price  Expected Volatility  Risk-free Interest Rate  Dividend Rate  Expected
Term
 Fair Value 
Grant Date Number of Options  Stock Price  Exercise Price  Expected Volatility  Risk-free Interest Rate  Dividend Rate  Expected Term Fair Value 
4/8/2021  250,000  $0.15  $0.10   281.00%  0.85%  0.00% 2.50 years $36,708 
8/13/2021  200,000  $0.46  $0.36   266.00%  0.79%  0.00% 3.50 years $90,944 
10/6/2021  116,000,000  $0.38  $0.38   278.00%  1.26%  0.00% 3.88 years $43,808,780 
6/3/2022  8,699,400  $0.22  $2.50   274.50%  2.95%  0.00% 3.5 years $1,856,151   8,669,400  $0.22  $2.50   274.50%  2.95%  0.00% 3.50 years $1,856,151 
8/26/2022  1,734,615  $0.24  $0.24   269.24%  3.20%  0.00% 3.5 years $411,668   1,734,615  $0.24  $0.24   269.24%  3.20%  0.00% 3.50 years $411,668 
8/26/2022  242,424  $0.24  $0.24   276.76%  3.20%  0.00% 3.0 years $57,264   242,424  $0.24  $0.24   276.76%  3.20%  0.00% 3.00 years $57,264 
8/26/2022  246,748  $0.24  $0.24   207.37%  3.20%  0.00% 2.5 years $53,479   246,748  $0.24  $0.24   207.37%  3.20%  0.00% 2.50 years $53,479 

 

The Company did not grant stock options during the nine months ended August 31, 2023, and granted stock options to purchase an aggregate of 10,893,188 and 450,000 shares of common stock during the nine months ended August 31, 2022 and 2021, respectively.2022.

 

The weighted average grant date fair value of options granted and vested during the nine months ended August 31, 2022, was $2,378,562 and $24,341,865 respectively. The weighted average grant date fair value of options granted and vested during the nine months ended August 31, 2021, was $36,708 and $28,811, respectively. The weighted average non-vested grant date fair value of non-vested options was $21,835,6517,278,550 and $10,917,826 at August 31, 2022.2023, and November 30, 2022, respectively.  

 

Compensation based stock option activity for qualified and unqualified stock options are summarized as follows:

SCHEDULE OF STOCK OPTION ACTIVITY

   Weighted     Weighted 
   Average  Number of Average 
 Shares  Exercise Price  Shares  Exercise Price 
Outstanding at November 30, 2021  117,795,000  $0.39   117,795,000  $0.39 
Granted  10,893,188   2.04   10,893,188   2.04 
Exercised  -   -   -   - 
Expired or cancelled  -   -   -   - 
Outstanding at August 31, 2022  128,688,187   0.53   128,688,187  $0.53 
        
Outstanding at November 30, 2022  128,688,187  $0.53 
Granted  -   - 
Exercised  -   - 
Expired or cancelled  -   - 
Outstanding at August 31, 2023  128,688,187  $0.53 

21

 

The following table summarizes information about options to purchase shares of the Company’s common stock outstanding and exercisable as ofat August 31, 2022:2023:

SCHEDULE OF STOCK OPTION SHARES OUTSTANDING AND EXERCISABLE

      Weighted-  Weighted-    
      Average  Average    
Range of  Outstanding  Remaining Life  Exercise  Number 
exercise prices  Options  In Years  Price  Exercisable 
              
$0.099   400,000   1.89  $0.099   400,000 
 0.10   645,000   3.03   0.10   645,000 
 0.12   50,000   6.07   0.12   50,000 
 0.24   2,223,787   4.66   0.24   2,223,787 
 0.36   200,000   3.95   0.36   200,000 
 0.38   116,000,000   6.09   0.38   58,000,000 
 2.50   8,669,400   4.76   2.50   8,669,400 
 3.00   500,000   3.50   3.00   500,000 
     128,688,187   5.93  $0.39   70,688,187 
      Weighted-  Weighted-    
      Average  Average    
Exercise  Outstanding  Remaining Life  Exercise  Number 
Price  Options  In Years  Price  Exercisable 
              
$0.10   400,000   0.89  $0.10   400,000 
 0.10   645,000   2.03   0.10   645,000 
 0.12   50,000   5.07   0.12   50,000 
 0.24   2,223,787   3.66   0.24   2,223,787 
 0.36   200,000   2.95   0.36   200,000 
 0.38   116,000,000   5.09   0.38   116,000,000 
 2.50   8,669,400   3.76   2.50   8,669,400 
 3.00   500,000   2.50   3.00   500,000 
     128,688,187   4.93  $0.53   128,688,187 

 

The compensation expense attributed to the issuance of the options is recognized as they are vested.vested options.

 

The stock options granted under the Option Plan are exercisable forover various terms from three to ten years from the grant date and vest over various terms from the grant date to threefive years.

19

 

Total compensation expense related to the options was $26,106,7167,328,400 and $46,07926,137,166 for the nine months ended August 31, 20222023, and 2021,August 31, 2022, respectively. Total compensation expense related to the options was $7,852,6322,000 and $21,837,883,082 for the three months ended August 31, 20222023, and 2021,August 31, 2022, respectively. As of August 31, 2022,2023, there was $12,737,463 inno future compensation cost related to non-vested stock options.

 

TheAs of August 31, 2023, the aggregate intrinsic value is $152,700 forof the total outstanding and exercisable options was $31,155, which was based on ouran estimated fair value of the Company’s common stock of $0.240.13 as of August 31, 2022,such date. and which isrepresents the aggregate fair value of the common stock that would have been received by the option holders had all option holders exercised their options as of that date, net of the aggregate exercise price.

 

NOTE 1012RELATED PARTY TRANSACTIONS

Bayshore Capital Advisors, LLC

 

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 (“Bayshore Capital”), an affiliate through common ownership of a 10%10 shareholder% major stockholder of the Company, for $25,000 for working capital purposes.at an interest rate of 6% per annum. The note was payable August 26, 2016, or when the Company closes aclosed bridge financing, whichever occurs first. TheOn February 4, 2023, Bayshore Capital agreed to cancel the $25,000 debt, plus $10,401 of accrued and unpaid interest. Prior to the cancellation of the note, the Company iswas in default on thisthe note. Total interest expense on the note atwas $255 and $1,126 for the nine months ended August 31, 2022.2023, and 2022, respectively. Total interest expense on the note was $0 and $378 for the three months ended August 31, 2023, and 2022, respectively.

US Mine Corporation

 

The Company entered into a contract mining agreement with USMC, a company owned by the majority stockholders of the Company,which A. Scott Dockter, the Company’s Chief Executive Officer and a director, and John Bremer, a director, each own 33%, pursuant to which USMC provides various technical evaluations and mine development services to the Company. During three andthe nine months ended August 31, 20222023 and 2021,2022, the Company made purchases of $33,150 and $101,40081,444 and $85,343 and $97,343, respectively,purchases from USMC.USMC, respectively. No services were rendered by USMC for the three and nine months ended August 31, 20222023 and 2021.2022. In addition, during the three and nine months ended August 31, 20222023 and 2021,2022, USMC paid $6,29620,836 and $22,1506,296 and $2,014 and $0, respectively, of expenses to the Company’s vendors and creditors on behalf of the Company. During the three and nine months ended August 31, 20222023 and 20212022, USMC made cash advances to the Company of $620,0001,125,000 and $976,000 and $210,000 and $410,000620,000, respectively, which are recorded as part of due to affiliates and convertible notes payable, related party on the Company’s unauditedcondensed consolidated balance sheets. All amounts owed for services rendered, expenses paid on behalf of the Company, and cash advances were converted into the Company’s common stock pursuant to the September 5, 2019 Debt Exchange Agreement, (See Note 5), the November 25, 2020 Securities Purchase Agreement (See Note 5)6) and the April 7, 2022 Securities Purchase Agreement (See Note 5)6). The Company had a balance due to USMC wasof $878,767 and $0 and $729,059 atto USMC on August 31, 20222023, and November 30, 2021,2022, respectively.

 

22

On September 26, 2019, the

USMC Notes

The Company has entered into avarious securities purchase agreementagreements with USMC pursuant to which USMC may purchase the Company’s unsecured convertible promissory notes (See Note 6). The outstanding balance on the convertible notes due to USMC was $1,525,676 and $610,889 on August 31, 2023 and November 30, 2022, respectively. Interest expense on the convertible notes due to USMC totaled $41,654 and $5,934 for the nine months ended August 31, 2023, and 2022, respectively. Interest expense on the convertible notes due to USMC totaled $22,790 and $5,934 for the three months ended August 31, 2023, and 2022, respectively.

USMC Line of Credit

On July 10, 2023, the Company entered into a line of credit agreement and unsecured convertible grid promissory note with USMC. The July 10, 2023 line of credit agreement provides for the issuance of up to an aggregate of $1,000,000 of the Company’s 5%advances from USMC under an unsecured convertible two-yeargrid promissory notes in onenote until July 10, 2024 (See Note 6). The note bears interest at 8% per annum and any outstanding principal or more closings. The notes areaccrued interest under the note is convertible into shares of the Company’s common stock at a conversion price of $0.160.10 per share.share on the maturity date. As of April 7, 2022,the date hereof, there have been $231,048 in advances from USMC had purchased notes totaling $1,000,000 with maturity dates ranging from December 1, 2021, through November 25, 2022 (see Note 5). Interest expense on these notes totaled $20,756 and $37,530 for the nine months ended August 31, 2022 and 2021, respectively. Interest expense on these notes totaled $0 and $12,750 for the three months ended August 31, 2022 and 2021, respectively. On April 7, 2022, the December 1, 2019, January 1, 2020 and February 1, 2020 notes were amended to extend the maturity dates to April 30, 2022. Thereafter, on April 7, 2022, USMC converted the aggregate outstanding principal balance of $1,000,000 of the December 1, 2019, January 1, 2020, February 1, 2020 and December 1, 2020 notes, plus accrued interest totaling $75,346 through such date, into 6,720,906 shares of the Company’s common stock.

20

On November 25, 2020, the Company entered a securities purchase agreement with USMC pursuant to which USMC may purchase up to $2,000,000 of the Company’s 5% unsecured two-year promissory notes in one or more closings. The notes are convertible into the Company’s common stock at a conversion price of $0.088 per share. As of April 7, 2022, USMC has purchased notes totaling $1,579,769 with a maturity date of March 17, 2023 (see Note 5). Interest expense on these notes totaled $8,800 and $13,300for the nine months ended August 31, 2022 and 2021, respectively. Interest expense on these notes totaled $0 and $7,400for the three months ended August 31, 2022 and 2021, respectively. On March 14, 2022, in connection with the November 25, 2020, securities purchase agreement with USMC, a related party, the Company issued a convertible promissory note in the amount of $884,492.28 to USMC, with a maturity date of March 14, 2024. The note bears interest at 5% per annum which is payable on maturity. Amounts due under the note may be converted into sharesJuly 10, 2023 line of the Company’s common stock, at any time at the option of the Holder, at a conversion price of $0.088 per share. Interest expense on this note totaled $2,908 for the nine months ended August 31, 2022. There was no interest expense on this note for the three months ended August 31, 2022. On April 7, 2022, USMC converted the aggregate outstanding principal balance of $1,464,337 of the November 25, 2020 note and March 14, 2022 note, plus accrued interest totaling $33,564 through such date, into 17,020,749 shares of the Company’s common stock.credit agreement.

 

On April 7, 2022, the Company entered into a securities purchase agreement with USMC effective March 23, 2022, 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 $0.39 per share. As August 31, 2022, USMC has purchased notes totaling $470,862 with a maturity date of August 30, 2024 (see Note 5). Interest expense on these notes totaled $0 for the nine months ended August 31, 2022. Interest expense on these notes totaled $0 for the three months ended August 31, 2022.

August 30, 2022

On August 30, 2022, in connection with the April 7, 2022, securities purchase agreement with USMC, a related party (see Note 10), the Company issued a convertible promissory note in the amount of $470,862 to USMC, with a maturity date of August 30, 2024 (“Tranche #7”). 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 at any time at the option of the noteholder, at a conversion price of $0.39 per share. Total interest expense on Tranche #7 was approximately $0 for the nine months ended August 31, 2022. Total interest expense on Tranche #7 was $0 for the three months ended August 31, 2022.

The outstanding balance due on the above notes to USMC was $470,862 and $1,579,769 at August 31, 2022 and November 30, 2021, respectively.Mining Agreements

 

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. AllUnder the terms of the Supply Agreement, 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, theThe Company will pay $25 per ton for the kaolin clay for supplementary cementitious materials and $145per 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 Company, USMC will adjust the cost to the Company to conform to the more favorable terms. The initial term of the Supply Agreement iswas three years, which automatically renews for three successive one-year terms, unless either party provides notice of termination at least sixty days prior to the end of the then current term. Either party has the right to terminate the Supply Agreement for a material breach which is not cured within 90 days. For the three and nine months ended August 31, 2023 and 2022, the Company purchased $33,15081,444 and $72,236, respectively, under the Supply Agreement. For the three months ended August 31, 2023, and 2022, the Company purchased $101,40047,080 and $72,236, respectively, under the Supply Agreement. Since April 22, 2020, the Company has purchased $251,156339,886 of materials under the Supply Agreement.

 

US Mine LLC

 

On May 27, 2021, the Company entered into the Materials Extraction Agreement with US Mine, LLC, pursuant to which the Company acquired the right to extract up to 100,000,000one hundred million of certain raw clay materials. The Materials Extraction Agreement is effective until 100,000,000one hundred million tons of material are extracted. extracted. As compensation for suchthe right, the Company issued a ten-year convertible promissory note in the principal amount of $50,000,000 to US Mine, LLC (the “US Mine Note”). The US Mine Note bears interest at the rate of 2.5%2.5% per annum which is payable upon maturity. Amounts due under the US Mine Note may be converted into shares of the Company’s common stock at the option of the noteholder, at a conversion price of $0.43 per share. The noteholder may convert (i) up to 50% of the outstanding balance on or after such date as the Company’s common stock is listed for trading on any national securities exchange, (ii) up to an additional 25% of the outstanding balance on or after the six-month anniversary of such initial trading date, and (iii) the remaining 25% on or after the twelve-month anniversary of such initial trading date. In addition, the Company will pay US Mine, LLC a royalty fee of $5.00 per ton of materials extracted and any royalty not paid in a timely manner with be subject to 15% interest per annum and compounded monthly.monthly.

 

2123

 

On October 6, 2021, and prior to consummation of activities under the Materials Extraction Agreement, the Company and US Mine, LLC executed an amendment to the Materials Extraction Agreement (the “Amendment”). Pursuant to the Amendment, as further amended on June 17, 2022, the US Mine Note was retroactively rescinded, ab initio and an option to purchase an aggregate of 116,000,000 shares of the Company’s common stock at an exercise price of $0.38 per share until April 6, 2028, was issued to US Mine, LLC as compensation. Shares subject to the option vestvested as to 58,000,000 shares on April 6, 2022, 29,000,000 shares on October 6, 2022, and 29,000,000 shares on April 6, 2023. For the three and nine months ended August 31, 2022,2023, the Company expensed $23,655,2891,841,389 and $7,326,402, respectively, in stock-based compensation expense related to the issuance of the option on October 16, 2021, to US Mine LLC under the Extraction Agreement.Amendment.

Transactions with Officers

 

On August 31, 2017, the Company issued a note in the amount of $197,096 to A. Scott Dockter, President, Chief Executive Officer and a director of the Company, to consolidate the total amounts due to Mr. Dockter. The note bears interest at 6%6% and is due upon demand. During the nine months ended August 31, 2022,2023, the Company paid $20,000 towards the outstanding balance of the note. The balanceTotal interest expense on the note was $38,716768 and $58,7162,291 as offor the nine months ended August 31, 20222023, and November 30, 2021,2022, respectively. Total interest expense on the note was $2,291156 and $4,761 for the nine months ended August 31, 2022 and 2021, respectively. Total interest expense on the note was $586 and $1,346 for the three months ended August 31, 2023, and 2022, respectively. The balance on the note was $8,716and 2021,$38,716 as of August 31, 2023, and November 30, 2022, respectively. There was $41,934 and $41,167 of accrued interest as of August 31, 2023, and November 30, 2022, respectively.

 

Convertible Debt – Board of Directors

 

On April 8, 2021, the Company entered into a twelve-monththe Guzy Director Agreement with Jeffrey Guzy whereby(See Note 6) pursuant to which Mr. Guzy will receiveserve as a director of the Company, which agreement will automatically renew for successive one-year terms unless either party notifies the other of its desire not to renew the Agreement within 30 days of the expiration of the then current term. As compensation therefor, Mr. Guzy is entitled to a cash fee of $1,000 cash fee eachper month for services performed. The fee will accruewhich accrues as 0%0 interest% debt to the Company until the Company has its first cash-flow positive month. If a debtEffective March 1, 2023, Mr. Guzy’s compensation was increased to $1,500 and is stillpaid monthly. Any amounts owed to Mr. Guzy at the end of the term, the debt shallRenewal Date or upon Mr. Guzy’ resignation or removal will be converted into common stock at a price per share equal to market price on the lower priceexchange or trading market where such stock is then traded or quoted or the VWAP of the market value of such common stock onfor the date of termination20-days immediately preceding the Renewal Date or renewal of the Director Agreement,Termination Date, as the case may be, orbe. The Agreement also includes a non-competition provision during the 20-day VWAP immediately prior to the endterm of the term or renewal date. TheAgreement and for twelve months thereafter.

On August 13, 2021, the Company entered into the Kurtis Director Agreement shall(See Note 6) pursuant to which Dr. Kurtis will serve as a director and provide board services, which agreement will automatically renew for successive one-year periodsterms unless either party terminatesnotifies the agreement at leastother of its desire not to renew the Agreement within 30 days prior toof the endexpiration of the then current term. As of August 31, 2022, the Company has debt in the amountcompensation therefor, Dr. Kurtis is entitled to a cash fee of $17,000 owed to Mr. Guzy.

On August 10, 2021, the Company entered into a twelve-month Director Agreement with Dr. Kimberly Kurtis whereby Dr. Kurtis will receive a $1,000 cash fee eachper month for services performed. The fee will accruewhich accrues as0% interest debt to the Company until the Company has its first cash-flow positive month. If a debt is stillAny amounts owed to Dr. Kurtis at the end of the term, the debt shallRenewal Date or upon Dr. Kurtis’ resignation or removal will be converted into common stock at a price per share equal to market price on the lower priceexchange or trading market where such stock is then traded or quoted or the market valueVWAP of suchthe common stock onfor the date of termination20-days immediately preceding the Renewal Date or renewal date of the Director Agreement,Termination Date, as the case may be, orbe. The Agreement includes a non-competition provision during the 20-day VWAP immediately priorterm of the Agreement and for twelve months thereafter.

On June 9, 2023, effective April 8, 2023, the Company entered into the Scrivener Agreement pursuant to which Dr. Scrivener will provide certain strategic advisory services to the endCompany. As compensation therefor, Dr. Scrivener was issued 100,000 shares of the term or renewal date. The Director Agreement shall automatically renew for successive one-year periods unless either party terminates the agreementCompany’s common stock on June 9, 2023, at least 30 days prior to the end of the then current term. As of August 31, 2022, the Company has debt in the amounta fair value of $13,0000.08 owed to Dr. Kurtis.per share.

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Leases

 

On October 1, 2020, the Company entered into a two-year lease agreement for its office space with USMC with a monthly rent of $1,500 (See Note 7). The lease was amended to extend the term for an additional two years to November 1, 2024, and to add an additional 700 square feet of office space for a total monthly rental price of $3,500 per month,

 

NOTE 1113CONCENTRATION OF CREDIT RISK

 

Cash Deposits

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of August 31, 20222023, and November 30, 2021,2022, the Company had no deposits in excess ofover the FDIC insured limit.

22

 

Revenues

 

Four customers accounted for 98% of total revenues for the nine months ended August 31, 2023, as set forth below:

SCHEDULE OF CONCENTRATION OF CREDIT RISK

Customer A45%
Customer B20%
Customer C17%
Customer D16%

Four customers accounted for 99%99% of total revenuerevenues for the nine months ended August 31, 2022, as set forth below:

 

Customer A4242%
Customer B2929%
Customer C1616%
Customer D12%

 

Four customers accounted for 98% of total revenue for the nine months ended August 31, 2021, as set forth below:

Customer A4612%
Customer B24%
Customer C17%
Customer D11%

 

Accounts Receivable

 

ThreeTwo customers accounted for 99%100% of the accounts receivable as of August 31, 2022,2023, as set forth below:

 

Customer A5482%
Customer B28%
Customer C1718%

 

One customer accounted forThere were 100%no of the accounts receivable as of November 30, 2021.2022.

 

Vendors

 

Three suppliers accounted for 61% of purchases during the nine months ended August 31, 2023, as set forth below:

Vendor A36%
Vendor B15%
Vendor C10%

Five suppliers accounted for 87%88% of purchases as ofduring the nine months ended August 31, 2022, as set forth below:

 

Vendor A2929%
Vendor B1818%
Vendor C1717%
Vendor D, a related party13%
Vendor E11%

25
  13%
Vendor E11%

Two suppliers accounted for 88% of purchases as of August 31, 2021, as set forth below:

Vendor A, a related party75%
Vendor B13%

 

NOTE 1214SUBSEQUENT EVENTS

 

TheIn accordance with ASC 855, Subsequent Events, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events and transactions that occurred after August 31, 2023 through the date the condensed consolidated financial statements were filed. During this period the Company did not have any material reportable subsequent events through the filing date and determined that none require disclosure herein.other than those stated below:

 

Effective September 11, 2023, Brady Barto was appointed to serve on the Company’s board of directors and entered into a twelve-month director agreement with the Company, which automatically renews unless Mr. Barto gives 30 days prior written notice of his desire not to renew the agreement. Pursuant to the agreement, Mr. Barto will be paid $1,000 per month for serving as a director, which shall accrue as debt until the Company has its first cash flow positive month. At the completion of the term of the agreement or if Mr. Barto has been removed or resigned, any accrued amount owed will be paid in shares of the Company’s common stock at the lower of $0.15 per share or the 20-day volume weighted average price from the date of termination or resignation. Also on September 11, 2023, Mr. Barto was granted a five-year option to purchase 200,000 shares of the Company’s common stock at an exercise price of $0.15 per share which become exercisable one year from the date of grant. Mr. Barto is the son of Craig Barto who, together with John Bremer, a director and A. Scott Dockter, the Company’s Chief Executive Officer and a director, are owners of US Mine Corp. and US Mine LLC.

23

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q includes forward-looking statements that reflect management’s current views with respect to future events and financial performance. Forward-looking statements are statements 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. These statements include statements regarding the intent, belief or current expectations of our management team, as well as the assumptions on which such statements are based. 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 set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended November 30, 2021,2022, as filed with the Securities and Exchange Commission (the “SEC”) on March 15, 2022,February 28, 2023, 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 in our forward-looking statements. These risks and factors 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.

 

We undertake no obligation to update or revise forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report, except as required by law.

 

As used in this Quarterly Report and unless otherwise indicated, the terms “Company,” “we,” “us,” and “our,” refer to PureBase Corporation and its wholly-owned subsidiaries, PureBase Agricultural, Inc., a Nevada corporation (“PureBase AG”) and U.S. Agricultural Minerals, LLC, a Nevada limited liability company (“Purebase SCM”PureBase AM”).

 

Business Overview

 

We are an industrial mineral and natural resource company that provides solutions to the agriculture and construction materials markets in the United States, through our two subsidiaries, PurebasePureBase AG, and Purebase SCM,PureBase AM, respectively. The Company has not yet commenced mining operations.operations and relies on US Mine LLC for its raw materials.

 

2427

Agricultural Sector

 

We develop specialized fertilizers, sun protectants, soil amendments and bio-stimulants for organic and non-organic sustainable agriculture. We have 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 improve dormancy and soil ecology to help farmers increase the yields of their harvests. We are building a brand family under the parent trade name “Purebase,“PureBase,” consisting of its PurebasePureBase Shade Advantage WP product, a kaolin-clay based sun protectant for crops.crops and Humic Advantage a humic acid product derived from leonardite.

 

Construction Sector

 

We have beenare developing and testing a kaolin-based product that it believes will help create a lower CO2-emitting concrete through the use of high-quality supplementary cementitious materials (“SCMs”). We are developing a SCMSCMs for the construction material markets, particularly the cement markets that we believe 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, we believe there are significant opportunities for high-quality SCM products in the construction-materials sector.

 

We utilize the services of US Mine Corporation (“Corporation(“USMC”), a Nevada corporation and a significant shareholder of the Company, for the development and contract mining of industrial mineral and metal projects, exploration drilling, preparation of feasibility studies, mine modeling, on-site construction, 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 used by the Company are obtained from properties owned or controlled by USMC.

A. Scott Dockter, the Company’s PrincipalChief Executive Officer and a director, and John Bremer, a director, are also officers, directors and owners of USMC.

 

Recent Developments

A settlement agreement wasUSMC Line of Credit

On July 10, 2023, the Company entered into betweena line of credit agreement with USMC which provides for the Companyissuance of up to an aggregate of $1,000,000 of advances from USMC under an unsecured convertible grid promissory note until July 10, 2024 (the “Line of Credit”). The note accrues interest at 8% per annum and Agregen International Corp, Robert Hurtado, James Todd Gauer and John Gingerich, effective June 3, 2022 (the “Settlement Agreement”), and a Notice of Settlement was filed inany outstanding principal or accrued interest under the Second Judicial District Court in the State of Nevada, Washoe County pursuant to which, among other things, 8,669,400note is convertible into shares of the Company’s common stock beneficially owned byat a conversion price of $0.10 per share on the defendants were surrendered to the Company onmaturity date. As of August 11, 2022.31, 2023, there have been advances of $231,048 from USMC and $873 in accrued interest.

 

On June 3, 2022, in conjunction with the Settlement AgreementNew Director, the Company granted Mr. Gauer an immediately exercisable option to purchase 8,669,400 shares of common stock, the equivalent number of common shares surrendered to the Company, at an exercise price of $2.50.

 

On August 26, 2022,Effective September 11, 2023, Brady Barto was appointed to serve on the Company’s board of directors and entered into a twelve-month director agreement with the Company, which automatically renews unless Mr. Barto gives 30 days prior written notice of his desire not to renew the agreement. Pursuant to the agreement, Mr. Barto will be paid $1,000 per month for serving as a director, which shall accrue as debt until the Company has its first cash flow positive month. At the completion of the term of the agreement or if Mr. Barto has been removed or resigned, any accrued amount owed will be paid in shares of the Company’s common stock at the lower of $0.15 per share or the 20-day volume weighted average price from the date of termination or resignation. Also on September 11, 2023, Mr. Barto was granted immediately exercisable optionsa five-year option to purchase an aggregate of 2,223,788200,000 shares of the Company’s common stock at an exercise price of $0.24$0.15 per share to certain directors, consultantswhich become exercisable one year from the date of grant. Mr. Barto is the son of Craig Barto who, together with John Bremer, a director and employees for services providedA. Scott Dockter, the Company’s Chief Executive Officer and a director, are owners of US Mine Corp. and US Mine LLC.

28

Results of Operations

Comparison of the Three Months Ended August 31, 2023 to the Company.Three Months Ended August 31, 2022

  August 31,  August 31,    
  2023  2022  Variance 
Revenue, net $207,243  $226,060  $(18,817)
             
Cost of goods sold  44,080   34,329   9,751 
             
Operating income $163,163  $191,731  $(28,568)
             
Operating Expenses:            
Selling, general and administrative  288,487   348,925   (60,438)
Stock based compensation  2,000   7,883,082   (7,881,082)
Loss from operations  (127,324)  (8,040,276)  7,912,952 
Other income (expense)  -   -   - 
Interest expense  (24,702)  (1,038)  (23,664)
Net Loss $(152,026) $(8,041,314) $7,889,288 

Revenues

Revenue decreased by $18,817, or 8%, for the three months ended August 31, 2023, as compared to the three months ended August 31, 2022. This decrease was primarily due to a decrease in purchases by the Company’s customers during the three months ended August 31, 2023.

Cost of Goods Sold

Cost of goods sold increased by $9,751, or 28%, for the three months ended August 31, 2023, as compared to the three months ended August 31, 2022, directly corresponding with the decrease in revenue during the three months ended August 31, 2023.

Operating Expenses

Total operating expenses decreased by $7,941,520, or 96%, for the three months ended August 31, 2023, as compared to the three months ended August 31, 2022. The decrease in operating expenses was primarily due to a decrease in stock-based compensation of $7,881,082 for the three months ended August 31, 2023, as compared to the three months ended August 31, 2022.

As of April 2023, the Company no longer expensed the option to purchase an aggregate of 116,000,000 shares of common stock issued to US Mine LLC on October 6, 2021, which resulted in a decreased stock-based compensation expense during the three months ended August 31, 2023 compared to the three months ended August 31, 2022.

Other Income

There was no change in other income for the three months ended August 31, 2023, as compared to the three months ended August 31, 2022.

Interest Expense

Interest expense increased by $23,664 for the three months ended August 31, 2023, as compared to the three months ended August 31, 2022, primarily due to increased borrowing from USMC.

29

Comparison of the Nine Months Ended August 31, 2023, to the Nine Months Ended August 31, 2022.

  August 31,  August 31,    
  2023  2022  Variance 
Revenue, net $325,875  $454,536  $(128,661)
             
Cost of goods sold  93,149   125,611   (32,462)
             
Operating income $232,726  $328,925  $(96,199)
             
Operating Expenses:            
Selling, general and administrative  1,170,542   918,053   252,489 
Stock based compensation  7,328,400   26,137,165   (18,808,765)
Loss from operations  (8,266,216)  (26,726,293)  18,460,077 
Other income (expense)  310,401   2,007   308,394 
Interest expense  (46,226)  (32,949)  (13,277)
Net Loss $(8,002,041) $(26,757,235) $18,755,194 

Revenues

Revenue decreased by $128,661, or 28%, for the nine months ended August 31, 2023, as compared to the nine months ended August 31, 2022. This decrease was primarily due to a decrease in purchases by the Company’s customers during the nine months ended August 31, 2023.

Cost of Goods Sold

Cost of goods sold expenses decreased by $32,462, or 26%, for the nine months ended August 31, 2023, as compared to the nine months ended August 31, 2022, directly corresponding with the decrease in revenue during the nine months ended August 31, 2023.

Operating Expenses

Total operating expenses decreased by $18,556,276, or 69%, for the nine months ended August 31, 2023, as compared to the nine months ended August 31, 2022. The decrease in operating expenses was primarily due to a decrease in stock-based compensation of $18,808,763 for the nine months ended August 31, 2023, as compared to the nine months ended August 31, 2022.

As of April 2023, the Company no longer expensed the option to purchase an aggregate of 116,000,000 shares of common stock issued to US Mine LLC on October 6, 2021, which resulted in a decreased stock-based compensation expense during the nine months ended August 31, 2023 compared to the nine months ended August 31, 2022.

Other Income

Other income increased by $308,394 for the nine months ended August 31, 2023, as compared to the nine months ended August 31, 2022, primarily due to a legal settlement of $275,000, and gain on forgiveness of debt and accrued interest in the amount of $35,401.

Interest Expense

Interest expense increased by $13,277, or 40%, for the nine months ended August 31, 2023, as compared to the nine months ended August 31, 2022, primarily due to increased borrowing from USMC.

30

Liquidity and Capital Resources

As of August 31, 2023, we had cash on hand of $101,966 and a working capital deficiency of $470,294, as compared to cash on hand of $19,055 and a working capital deficiency of $620,290 as of November 30, 2022. The decrease in working capital deficiency is primarily a result of an increase in cash of $82,91l, accounts receivable increase of $100,270 and an increase in prepaid expenses and other assets of $9,804.

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 2023, 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 previously funded, and plans to continue funding, these losses with cash advances from USMC and the sale of equity and convertible notes. The accompanying condensed 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 its revenue plans or that unforeseen expenses may arise, management currently believes that the revenue to be generated from operations together with equity and debt financing, including funding from USMC in connection with the March 23, 2022 securities purchase agreement, March 7, 2023 securities purchase agreement, and July 10, 2023 line of credit agreement will provide the necessary funding for the Company to continue as a going concern for the next twelve months.

 

On August 30,February 28, 2023, in connection with the securities purchase agreement with USMC, dated April 7, 2022, the Company issued a two-year5% convertible promissory note in the principal amount of $470,862$308,320 to USMC. The note bears interest at 5% per annum.USMC, which matures on February 28, 2025. Amounts due under the note may be converted into shares of the Company’s common stock at any time at the option of the noteholder at a conversion price of $0.39 per share.

 

25

Results of Operations

Comparison of the Three Months Ended August 31, 2022 and the Three Months Ended August 31, 2021

A comparison of the Company’s operating results for the three months ended August 31, 2022 and August 31, 2021 are summarized as follows:

  August 31,  August 31,    
  2022  2021  Variance 
Revenues $226,060  $338,700  $(112,640)
Operating expenses:            
Selling, general & administrative  8,232,007   293,293   7,938,714 
Product fulfillment, exploration and mining  34,329   85,343   (51,014)
Loss from operations  (8,040,276)  (39,936)  (8,000,340)
Other expense  (1,038)  (42,129)  (41,019)
Net Loss $(8,041,314) $(82,065) $(7,959,249)

Revenues

Revenue decreased by $112,640, or 33%, for the three months ended August 31, 2022, as compared to the three months ended August 31, 2021. This was primarily due to a decrease in purchases by the Company’s customers during the three months endedOn May 31, 2022.

Operating Expenses

Total operating expenses increased by $7,887,700 for2023, in connection with the three months ended August 31, 2022, as compared to the three months ended August 31, 2021, primarily as a result of an increase in stock compensation cost of $7,830,799 resulting from the Company’s issuance of stock options to US Mine, LLC, directors, consultants and employees. This increase was partially offset by a decrease of $51,014 in product fulfillment, exploration and mining expenses for the three months ended August 31, 2022.

Other Expense

Other expense decreased by $41,091, or 98%, for the three months ended August 31, 2022, as compared to the three months ended August 31, 2021, primarily due to a decrease in interest expense as a result of the Company’s conversion of convertible debt into common stock in April 2022.

Comparison of the Nine Months Ended August 31, 2022 and the Nine Months Ended August 31, 2021

A comparison of the Company’s operating results for the nine months ended August 31, 2022 and August 31, 2021 are summarized as follows:

  August 31,  August 31,    
  2022  2021  Variance 
Revenues $454,536  $368,700  $85,836 
Operating expenses:            
Selling, general & administrative  27,055,218   927,080   26,128,138 
Product fulfillment, exploration and mining  125,611   103,051   22,560 
Loss from operations  (26,726,293)  (661,431)  (26,064,862)
Other expense  (30,942)  (64,977)  34,035 
Net Loss $(26,757,235) $(726,408) $(26,030,827)

Revenues

Revenue increased by $85,836, or 23%, for the nine months ended August 31, 2022, as compared to the nine months ended August 31, 2021, primarily due to an increase in purchases from the Company’s customers during our second fiscal quarter ended May 31, 2022.

Operating Expenses

Total operating expenses increased by $26,150,698 for the nine months ended August 31, 2022, as compared to the nine months ended August 31, 2021, primarily as a result of an increase in stock compensation cost of $26,129,138 resulting from the Company’s issuance of stock options to US Mine, LLC. Product fulfillment, exploration and mining expenses for the nine months ended August 31, 2022, increased $22,569, or 22%, as compared to the nine months ended August 31, 2021 due to an increase in exploration costs.

26

Other Expense

Other expense decreased by $34,035, or 52%, for the nine months ended August 31, 2022, as compared to the nine months ended August 31, 2021, primarily due to a decrease in interest expense as a result of the Company’s conversion of convertible debt into common stock in April 2022.

Liquidity and Capital Resources

As of August 31, 2022, we had $11,782 in cash on hand and a working capital deficiency of $384,264, as compared to cash on hand of $132,209 and a working capital deficiency of $2,241,254 as of November 30, 2021. The decrease in working capital deficiency is mainly due to the conversion of notes due to USMC into an aggregate of 22,889,337 shares of common stock.

We will require additional funds to implement our growth strategy. We do not believe that our current cash and cash equivalents will be sufficient to meet our working capital requirements for the next twelve months. We have had negative cash flow from operating activities as we have not yet begun to generate sufficient and consistent revenues to cover our operating expenses. Until we are able to establish a sufficient revenue stream from operations, our ability to meet our current financial liabilities and commitments will be primarily dependent upon proceeds from outside capital sources including USMC, an affiliated entity. On April 7, 2022, the Company entered into a securities purchase agreement with USMC, a related party, pursuant to whichdated March 20, 2023, the Company may issue up toissued an aggregate of $1,000,000 of two-year8% convertible promissory notesnote in the principal amount of $412,533 to USMC, a related party. The notes bear interest at 5% per annum and any outstanding principal or interestwhich matures on May 31, 2025. Amounts due under the notes are convertiblenote may be converted into shares of the Company’s common stock at any time at the option of the holder,noteholder at a conversion price of $0.39$0.10 per share. Currently,

The Company has a Line of Credit with USMC for up to $1,000.000.

Going Concern

The unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q have been prepared assuming that the Company will continue as a going concern. The Company has issued $470,862accumulated losses from inception through August 31, 2023 of convertible notes under such securities purchase agreement$61,645,690, negative cash flows from operating activities of $900,536 and may issue ana working capital deficiency of $470,294. During the nine months ended August 31, 2023, the Company received net cash proceeds of $1,125,000 from USMC and USMC paid $20,836 to vendors on behalf of the Company. If the Company does not generate additional $529,138revenue and obtain equity and debt financing from USMC or other third parties, it will not have sufficient cash to meet its obligations for the next twelve months, following the date of convertible notes. However, therethis Quarterly Report. There currently are no other arrangements or agreements for financing, and management cannot guaranteethere can be no assurances that any other potential debt or equity financing will be available, or if available, on favorable terms. Furthermore, additional equity financing may dilute the stock ownership of current shareholders while debt financing may subject the Company to restrictions on its operations and corporate actions. 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 need to curtail operations, or cease operations completely.

Going Concern

The unaudited condensed consolidated financial statements presented in this Quarterly Report have been prepared under the assumption that the Company will continue as a going concern. The Company has accumulated losses from inception through August 31, 2022 of $47,818,460, as well as negative cash flows from operating activities. During the nine months ended August 31, 2022, the Company received net cash proceeds of $620,000 from USMC, an affiliated entity. Additionally, USMC paid $6,296 to vendors on behalf of the Company during the nine months ended August 31, 2022. Presently the Company does not have sufficient cash to meet its obligations in the twelve months following the date of this Quarterly Report. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is in the process of evaluating various financing alternatives in order to finance the capital requirements of the Company. There can be no assurance that the Company will be successful with its fund-raising initiatives.

The unaudited condensed consolidated financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.

27

 

Working Capital Deficiency

  August 31,  November 30, 
  2023  2022 
Current assets $216,771  $23,786 
Current liabilities  687,065   644,076 
Working capital deficiency $(470,294) $(620,290)

Our working capital deficiencyThe increase in current assets as of August 31, 2022, in comparison to our working capital deficiency as of November 30, 2021, is summarized as follows:

  August 31,  November 30, 
  2022  2021 
Current assets $227,500  $138,903 
Current liabilities  611,764   2,380,157 
Working capital deficiency $(384,264) $(2,241,254)

The $88,597, or 64%, increase in current assets2023, is primarily due to the increase of cash of $82,911 and an increase in accounts receivable of $207,809,$100,270. The increase in current liabilities is primarily a result of a reduction in settlement liability from $400,000 to $125,000, partially offset by a decreasean increase in cashaccounts payable and accrued expenses of $120,527. Current liabilities decreased $1,768,393, or 74%, during the nine months ended August 31, 2022, as compared to the nine months ended August 31, 2021, primarily due to a decrease in convertible notes payable of $963,671 and a decrease of amounts due to affiliated entities of $729,059 during the nine months ended August 31, 2022.$278,453.

 

31

Cash Flows

 

 Nine Months Ended  

Nine Months Ended

August 31,

 
 August 31,
2022
  August 31,
2021
  2023  2022 
Net cash used in operating activities $(720,527) $(935,034) $(900,536) $(720,527)
Net cash used in investing activities  (126,536)  - 
Net cash provided by financing activities  600,000   940,361   1,109,983   600,000 
Increase or (decrease) in cash $(120,527) $5,327 
Increase (decrease) in cash $82,911  $(119,527)

 

Operating Activities

 

Net cash used in operating activities was $720,527$900,536 for the nine months ended August 31, 2022,2023, primarily due to a net loss of $8,002,041, which primarily consisted of a non-cash expense of $7,328,402 related to stock-based compensation cost, professional fees of $670,528 and wages of $383,911, partially offset by an increase of $275,000 in a settlement liability.

Investing Activities

Net cash used in investing activities was $126,536 for the nine months ended August 31, 2023, as compared to $935,034 forno investing activities during the same periodnine months ended August 31, 2021.2022. The increase was primarily due to a decreasethe increase investment in accounts receivable of $160,891new material testing and an increase in accounts payablemanufacturing plant, this recorded under property and accrued expenses of $44,003.equipment, net.

 

Financing Activities

 

NetFor the nine months ended August 31, 2023, net cash provided by financing activities was $600,000 for the nine months ended August 31, 2022, as compared to $940,361 for the same period ended August 31, 2021. The increase$1,109,983, consisting of $898,935 which was primarily due to a decrease in advances of $359,461advanced to the Company by USMC whichand recorded as part of convertible notes payable, related party on the Company’s balance sheet and $231,048 from a line of credit from USMC. The increase from the advance and the line of credit was partially offset by a decrease$20,000 of $19,100 ofprincipal payments on notesthe note due to officers.A. Scott Dockter.

 

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

 

Critical Accounting Policies and Procedures

 

Our significant accounting policies are more fully described in Note 1 to our condensed consolidated financial statements included in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended November 30, 2021,2022, as filed with the SEC on March 15, 2022.February 28, 2023.

 

Recently Adopted Accounting Pronouncements

 

Our recently adopted accounting pronouncements are more fully described in Note 23 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

32

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

28

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e)13a-15I 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 Quarterly 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 August 31, 20222023 due to the material weaknesses in internal control over financial reporting described below.

 

Material Weaknesses in Internal Control over Financial Reporting

 

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 risk assessment procedures on internal controls to detect financial reporting risks on a timely manner; and
Lack of personnel with U.S. GAAP experience including a chief financial officer.

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;
Continue to search forHiring a qualified chief financial officer;officer before December 31, 2023;
Identify gaps in ourthe Company’s 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.

 

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.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal controlcontrols over financial reporting that occurred during the quarter ended August 31, 20222023, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

2933

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

Except as described below, there are no material pending legal proceedings in which we or any of our 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 party adverse to us or has a material interest adverse to us.

On July 8, 2020, the Company’s former Chief Financial Officer, Al Calvanico (“Calvanico”), filed a demand for arbitration alleging retaliation, wrongful termination, and demand for a minimum 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 accordance with its terms, and was not renewed by the Company and because Calvanico never exercised his stock options. The Company and Calvanico engaged in binding arbitration which concluded on February 3, 2023. On February 14, 2020,June 20, 2023, the arbitrator decided in favor of the Company requestedwith respect to Calvanico’s breach of contract, fraud and negligent representation and wrongful discharge claims and in writing thatfavor of 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 currentlyfor asserted attorney fee claims in the arbitration discovery phase. An arbitration hearing is scheduled for January 10 - 13, 2023,before arbitrator, Scott Silverman in Los Angeles.

On January 11, 2019, the Company filed a complaint in the Second Judicial District Court in the State of Nevada, 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 Vice President of Agricultural Research and Development. Mr. Hurtado was terminated in March 2018 and since that time the Company alleges that he conspiredaccordance 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 hisCalvanico’s employment agreement with the Company. On March 14, 2019, Agregen and Mr. Hurtado filed an answerAt a July 18, 2023, teleconference regarding a determination of attorney fees to be paid, the Company’s Complaint that the allegations were false. On March 13, 2020, the Company filedarbitrator established a First Amended Complaint, adding James Todd Gauer and John Gingerich as additional defendants. A settlement agreement was entered into betweenbriefing schedule for the parties effective June 3, 2022 (the “Settlement Agreement”)to formally present their legal arguments on the issue. Calvanico’s brief in support of attorney fees was due and a Notice of Settlementtimely filed on August 15, 2023. The Company’s brief in opposition was due and timely filed on September 19, 2023. Calvanico’s reply brief was filed inon October 4, 2023. A decision regarding the District Court pursuant to which, among other things, certain sharesamount of the Company’s common stock beneficially owned by the defendants will be surrendered to the Company. The lawsuit was fully settled and dismissed on August 9, 2022.

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 productattorney fees 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 mislabeling and denyingpaid, if any, liability for damages therefrom. The matter is set for trialexpected in AprilNovember 2023.

ITEM 1A. RISK FACTORS

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

 

Except as set forth below, thereThere 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 in a Current Report on Form 8-K filed by the Company.Company other than noted below.

 

On June 3, 2022, pursuant to the Settlement Agreement,9, 2023, the Company granted Mr. Gauerissued 100,000 shares of common stock to Karen Scrivener for serving on the Company’s advisory board.

On June 20, 2023, the Company issued an immediately exercisable option to purchase 8,669,400350,000 shares of common stock at an exercise price of $2.50.

30

On July 7, 2022, the Company issued an aggregate of 23,741,655 shares of its common stock to USMC pursuant to USMC’s conversion of $2,464,262 of principal amount and $108,909 of accrued interest under convertible promissory notes.

On August 26, 2022, the Company granted immediately exercisable options to purchase an aggregate of 2,223,788 shares of the Company’s common stock at an exercise price of $0.24$0.10 per share to certain directors, consultants and employeesJeffrey Guzy for services provided toserving on the Company.Company’s board of directors.

 

The above issuanceissuances did not involve any underwriters, underwriting discounts or commissions, or any public offering and we believe are exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(2) thereof.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

There are no defaults upon senior securities that were not previously reported in a Current Report on Form 8-K.None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

 

ITEM 5. OTHER INFORMATION

 

None.

34

 

ITEM 6. EXHIBITS

Exhibit

Number

Description
31* Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Chief Executive Officer and Chief Financial Officer
32* Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Chief Executive Officer and the Chief Financial Officer
101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (embedded within the Inline XBRL document)

3135

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

PUREBASE CORPORATION

PUREBASE CORPORATION
By:/s/ A. Scott Dockter 
A. Scott Dockter 
Chief Executive Officer and Chief Financial Officer 
(Principal Executive Officer and Principal Financial and Accounting Officer) 
Date:October 13, 2022

Date: October 13, 2023

 

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