ITEM
1A. RISK FACTORS
An
investment in our common stock involves a number of very significant risks. You should carefully consider the following risks
and uncertainties in addition to other information in this report in evaluating our company and its business before purchasing
shares of our common stock. Our business, operating results and financial condition could be seriously harmed due to any of the
following risks. You could lose all or part of your investment due to any of these risks.
Risks
Related to Our Business
The
Company is a development stage company which makes the evaluation of its future business prospects difficult.
The Company changed its
business focus to its current business of developing agricultural and natural resources as a result of a reorganization with its
wholly owned subsidiary PureBase Ag which occurred in December 2014, and only commenced selling its agricultural products
during 2017 and has not yet achieved profitable operations. In 2019, the Company began developing a SCM for the construction
materials market. Final testing for two SCM products have been submitted to the California Department of Transportation for inclusion
on its Approved Materials List.
Our
recent operating history makes evaluation of our future business and prospects difficult. The Company’s success is dependent
upon the successful development of suitable mineral projects, establishing its production capability and establishing a customer
base for its agricultural products. Any future success will depend upon many factors, including factors beyond our control which
cannot be predicted at this time. These factors may include changes in or increased levels of competition; the availability and
cost of bringing mineral projects into production; the amount of agricultural and/or natural resources available and the market
price of and the uses for such minerals. These factors may have a material adverse effect upon our business operating results
and financial condition.
Our
independent registered public accounting firm has expressed doubt about our ability to continue as a going concern.
Our
audited consolidated financial statements as of November 30, 2020 have been prepared under the assumption that we will continue
as a going concern. Our independent registered public accounting firm has issued a report that included an explanatory paragraph
referring to our recurring losses from operations and net capital deficiency and expressing substantial doubt in our ability to
continue as a going concern without additional capital becoming available. For the fiscal year ended November 30, 2020, we had
a loss from operations of approximately $1,172,000 and negative cash flows from operations of approximately $1,265,000. We anticipate
that we will continue to incur operating losses as we execute our development plans for 2021, as well as other potential strategic
and business development initiatives. In addition, we expect to have negative cash flows from operations, at least into the near
future. We have previously funded and plan to continue funding these losses primarily through the sale of equity and debt. Our
ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, attain further
operating efficiencies, reduce expenditures, and, ultimately, to generate revenue. There can be no assurance that we will be successful
in raising capital and have adequate capital resources to fund our operations or that any additional funds will be available to
us on favorable terms or in amounts required by us. If we are unable to obtain adequate capital resources to fund operations,
we may be required to delay, scale back or eliminate some or all of our plan of operations, which may have a material adverse
effect on our business, results of operations and ability to operate as a going concern. The consolidated financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
We
will need to raise additional capital for the foreseeable future in order to continue operations and realize our business plans,
the failure of which could adversely impact our operations.
Although
we have started to generate revenue, such revenue is not sufficient to cover our operating expenses and financing costs. As of
November 30, 2020, we had liabilities of $1,937,014 and a working capital deficiency of $1,792,674. To stay in business,
we will need to raise additional capital through public or private sales of our securities, debt financing or short-term bank
loans, or a combination of the foregoing. In the past, we have financed our operations by issuing secured and unsecured convertible
debt and equity securities in private placements, in some cases with equity incentives for the investor in the form of warrants
to purchase our common stock and have borrowed from related parties. We have sought and will continue to seek various sources
of financing but there are no commitments from anyone to provide us with financing. We can provide no assurance as to whether
our capital raising efforts will be successful or as to when, or if, we will be profitable in the future. Even if the Company
achieves profitability, it may not be able to sustain such profitability. If we are unable to obtain financing or achieve and
sustain profitability, we may have to suspend operations, sell assets and will not be able to execute our business plan. Failure
to become and remain profitable may adversely affect the market price of our common stock and our ability to raise capital and
continue operations.
We
will need to grow the size and capabilities of our company, and we may experience difficulties in managing this growth.
If
and when our marketing plans and business strategies develop, we may need to recruit additional managerial, operational, sales
and marketing, financial, IT and other personnel. Future growth will impose significant added responsibilities on management which
may divert a disproportionate amount of management’s attention away from day-to-day activities to devote a substantial amount
of time to managing these growth activities.
We
depend on third parties for services.
We
currently rely, and for the foreseeable future will continue to rely, in substantial part on advisors and consultants to provide
certain services. There can be no assurance that the services of these independent advisors and consultants will continue to be
available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively
manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any
reason, our business operations may be interrupted. There can be no assurance that we will be able to manage our existing consultants
or find other competent outside contractors and consultants on economically reasonable terms, if at all. If we are not able to
effectively expand our company by hiring new employees and expanding our consultants and contractors, we may not be able to successfully
implement the tasks necessary to achieve our marketing, research, development, and expansion goals, and we may face loss and be
liable for deficiencies in service caused by the lack of capable personnel or errors made by third parties.
If
we lose key employees and consultants or are unable to attract or retain qualified personnel, our business could suffer.
Our
future success depends, in part, on our ability to attract, retain and motivate highly qualified technical, marketing, engineering,
and management personnel. Any inability in hiring and retaining qualified personnel could result in delays in development or fulfillment
of any current strategic and operational plans.
Our
officers and directors are able to control the Company.
Our officer and directors
and their affiliates control the vast majority of common stock of our company. As a result, they have significant influence
over the management and affairs of the Company and control over matters requiring stockholder approval, including the election
of directors and significant corporate transactions, such as a merger or other sale of our company or our assets. Their interests
may differ from the interests of other stockholders and thus result in corporate decisions that are disadvantageous to other shareholders.
This concentration of ownership may also have the effect of delaying or preventing a change in control of the Company that may
be favored by other stockholders. This could prevent transactions in which stockholders might otherwise recover a premium for
their shares over current market prices. This concentration of ownership and influence in management and board decision-making
could also harm the price of our capital stock by, among other things, discouraging a potential acquirer from seeking to acquire
shares of our capital stock (whether by making a tender offer or otherwise) or otherwise attempting to obtain control of our company.
Raising
funds through debt or equity financings in the future, would dilute the ownership of our existing stockholders and possibly subordinate
certain of their rights to the rights of new investors or creditors.
We
hope to raise additional funds in debt or equity financings if available to us on terms we believe reasonable to provide for working
capital, mining development and production programs, expansion of our marketing efforts or to make acquisitions. Any sales of
additional equity or convertible debt securities would result in dilution of the equity interests of our existing stockholders,
which could be substantial. Additionally, if we issue shares of preferred stock or convertible debt to raise funds, the holders
of those securities might be entitled to various preferential rights over the holders of our common stock and such debt instruments
may contain negative covenants restricting corporate actions which could have an adverse effect on the rights and the value of
our common stock and our operations.
We
face increased competition.
At
the present time the Company is aware of other companies providing similar agricultural and natural resources to those of the
Company’s. In addition, other entities not currently offering the minerals or product uses similar to the Company’s
may enter the industrial and agricultural markets. The Company’s natural resources and products will also have to compete
with established minerals (such as fly ash for use in making cement) which are already in commercial and agricultural use. Any
such competitors would likely have greater financial, mining production, production facilities, marketing and sales resources
than the Company. Increased competition may result in pricing pressures and the inability to increase market share, which may
have an adverse effect on the Company’s business, operating results and financial condition.
At
present, our sales are concentrated in a few customers.
The
Company’s sales are presently concentrated within a few customers. If any of these customers, in particular, the customers
that provide the most significant percentage of revenue, are no longer customers, for any reason, and these customers are not
replaced, we will sustain additional losses as our fixed cost base will be left uncovered and consume working capital leading
to significant cash flow problems.
An
increase in the price of natural resources will adversely affect our chances of success.
The
Company’s business plan is based on current development costs and current prices of the natural resources being developed
or purchased by the Company. However, the price of minerals can be very volatile and subject to numerous factors beyond our control
including industrial and agricultural demand, inflation, the supply of certain minerals in the market, and the costs of mining,
refining and shipping of the minerals. Since the Company will be obtaining all of its minerals from third party suppliers, any
significant increase in the price of these natural resources will have a materially adverse effect on the results of the Company’s
operations unless it is able to offset such a price increase by implementing other cost cutting measures or passing such increases
on to its customers. While the Company has attempted to secure stable pricing and supply pursuant to its agreement with USMC,
there is no assurance that the Company will not incur future price increases or supply shortages of its raw materials.
We
may lose rights to properties if we fail to meet payment requirements or development and/or production schedules.
We
expect to acquire rights to some of our mineral properties from leaseholds or purchase mining rights that require the payment
of royalties, rent, minimum development expenditures or other installment fees or specified expenditures. If we fail to make these
payments/expenditures when they are due, our mineral rights to the property may be terminated. This would be true for any other
mineral rights which require payments to be made in order to maintain such rights. Some contracts with respect to mineral rights
we may acquire may require development or production schedules. If we are unable to meet any or all of the development or production
schedules, we could lose all or a portion of our interests in such properties. Moreover, we may be required in certain instances
to pay for government permitting or posting reclamation bonds in order to maintain or utilize our mineral rights in such properties.
Because our ability to make some of these payments is likely to depend on our ability to generate internal cash flow or obtain
external financing, we may not have the funds necessary to meet these development/production schedules by the required dates which
would result in our inability to use the properties.
Management
may be unable to implement its business strategy.
The
Company’s business strategy is to develop and extract or obtain certain minerals which they believe can have significant
commercial applications and value. The Company’s business strategy also includes developing new uses and products derived
from these mineral resources, such as the use of pozzolan as an ingredient for cement or sulfate and Humate for agricultural uses.
There is no assurance that we will be able to identify and/or develop commercially viable uses for the minerals we will be mining
or obtaining. In addition, even if we identify and/or develop commercial uses and markets for our minerals, the time and cost
of mining or otherwise obtaining, refining, blending and distributing such minerals may exceed our expectations or, when developed,
the amount of minerals available may fall significantly short of our expectations thus providing a lower return on investment
or a loss to the Company.
We
have not yet established sustained and increasing sales from our customer base or distribution system.
During
fiscal 2020 we established a customer base and distribution system for our agricultural products but have experienced a decrease
in sales. However, we are now engaged in promoting sales and marketing in an effort to increase the sales revenue of our agricultural
products to customers and through the distribution system. To date, we have one long term supply contract for our minerals and
agricultural products with USMC. We have not yet entered into any agreements for the purchase of our minerals or SCM products
nor have we established a distribution system to deliver our minerals and SCM products to customers. Our inability to attract
additional customers for our agricultural products, to deliver products in a time and cost-effective manner or develop our SCM
business would have an adverse effect on the growth of our business.
Mineral
exploration and mining are highly regulated industries.
Mining
is subject to extensive regulation by state and federal regulatory authorities. State and federal statutes regulate environmental
quality, safety, exploration procedures, reclamation, employees’ health and safety, use of explosives, air quality standards,
pollution of stream and fresh water sources, noxious odors, noise, dust, and other environmental protection controls as well as
the rights of adjoining property owners. We strive to verify that projects currently owned or being considered, are currently
operating or can be operated in substantial compliance with all known safety and environmental standards and regulations applicable
to such mining properties and activities. We also seek suppliers and service providers, such as USMC, who we believe are operating
in substantial compliance with all safety and environmental standards and regulations applicable to such mining properties and
activities. However, there can be no assurance that our compliance efforts regarding our own properties would not be challenged
or that future changes in federal or state laws, regulations or interpretations thereof will not have a material adverse effect
on our ability to establish and sustain mining operations of our own properties or adversely affect the mining properties of our
suppliers or service providers.
Certain
of our current and proposed products will require certifications before being suitable for intended purposes.
Some
of our agricultural products and our SCM’s will require certain certifications before being suitable for labeling and usage.
For example, our SCM must be certified by the California Department of Transportation to meet certain strength standards
to be certified for use in large government projects. Similarly, our agricultural products must be certified under US Department
of Agriculture (“USDA”) and California Department Of Food and Agriculture (“CDFA”) specifications
and properly labeled. While the Company has certified one of its agricultural products under USDA and CDFA specifications and
is currently working with various laboratories and agencies to acquire future certifications, there is no assurance that future
certifications will be obtained.
We
incur increased costs as a result of being a public company.
We
are a public “reporting company” with the Securities and Exchange Commission (“SEC”). As a public reporting
company, we incur significant legal, accounting, reporting and other expenses not generally applicable to a private company. We
also incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002
(“Sarbanes-Oxley”) as well as other rules implemented by the SEC. These rules and regulations increase our legal and
financial compliance costs and make some activities more time-consuming and costly.
The
outbreak of the COVID-19 coronavirus could continue to negatively impact our business and the global economy. In addition, the
COVID-19 pandemic could negatively impact our ability to obtain financing when required.
The
COVID-19 coronavirus has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19
or other public health epidemic, poses the risk that we or our employees, consultants, suppliers, customers, and other commercial
partners may be prevented from conducting business activities for an indefinite period of time, including due to the spread of
the disease or shutdowns requested or mandated by governmental authorities. While our operations have not been significantly affected
by the COVID-19 pandemic, there can be no assurance that this trend will continue. COVID-19 has had an adverse impact on global
economic conditions, which could impair our ability to raise capital when needed.
Risks
Related to Our Common Stock and Its Market Value
Our
common stock is subject to the “penny stock” rules of the SEC and the trading market in our securities is limited,
which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
SEC
Rule 15g-9 establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security
that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
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that
a broker or dealer approve a person’s account for transactions in penny stocks;
and
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the
broker or dealer receives from the investor a written agreement to the transaction, setting
forth the identity and quantity of the penny stock to be purchased.
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In
order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
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obtain
financial information and investment experience objectives of the person; and
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make
a reasonable determination that the transactions in penny stocks are suitable for that
person and the person has sufficient knowledge and experience in financial matters to
be capable of evaluating the risks of transactions in penny stocks.
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The
broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating
to the penny stock market, which, in highlight form:
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sets
forth the basis on which the broker or dealer made the suitability determination; and
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that
the broker or dealer received a signed, written agreement from the investor prior to
the transaction.
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Generally,
brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make
it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Our
securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell
to persons other than established customers and “accredited investors.” The term “accredited investor”
refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to
a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form
prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market.
The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of
the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny
stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information,
must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing
before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that
is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade
our securities.
Our
securities are quoted on the OTCQB, which may not provide us as much liquidity for our investors as an exchange, such as the NASDAQ
Stock Market or other national or regional exchanges.
Our
securities are quoted on the OTCQB, which provides significantly less liquidity than the NASDAQ Stock Market or other national
or regional exchanges. Securities quoted on the OTC are usually thinly traded, highly volatile, have fewer market makers and are
not followed by analysts. The SEC’s order handling rules, which apply to NASDAQ-listed securities, do not apply to securities
quoted on the OTCQB. Quotes for stocks included on the OTC markets are not listed in newspapers. Therefore, prices for securities
traded solely on the OTC Market may be difficult to obtain and holders of our securities may be unable to resell their securities
at or near their original acquisition price, or at any price. We cannot assure you a liquid public trading market will develop.
The
market price of our common stock may be adversely affected by several factors.
The
market price of our common stock could fluctuate significantly in response to various factors and events, including:
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our
ability to execute our business plan;
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operating
results below expectations;
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announcements
of technological innovations or new products by us or our competitors;
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loss
of any strategic relationship;
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industry
developments;
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economic
and other external factors; and
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period-to-period
fluctuations in our financial results.
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In
addition, the securities markets have, at times, experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price
of our common stock.
Because
we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our stockholders
have limited protections against interested director transactions, conflicts of interest and similar matters.
Sarbanes-Oxley,
as well as rule changes proposed and enacted by the SEC, the New York Stock Exchange, the Amex Equities Exchanges and NASDAQ,
as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures
are designed to enhance the integrity of corporate management and the securities markets and apply to securities which are listed
on those exchanges or the NASDAQ. Because we will not be seeking to be listed on any of the exchanges in the near term, we are
not presently required to comply with many of the corporate governance provisions. We do not currently have independent audit
or compensation committees. Until then, the directors who are part of management have the ability, among other things, to determine
their own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance
is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested
director transactions, conflicts of interest and similar matters and investors may be reluctant to provide us with funds necessary
to expand our operations.
We
have not paid dividends in the past and do not expect to pay dividends in the foreseeable future. Any return on investment may
be limited to the value of our common stock.
We
have never paid cash dividends on our capital stock and do not anticipate paying cash dividends on our capital stock in the foreseeable
future. The payment of dividends on our capital stock will depend on our earnings, financial condition and other business and
economic factors affecting us at such time as the board of directors may consider relevant. If we do not pay dividends, our common
stock may be less valuable because a return on any investment in our common stock will only occur if our common stock price appreciates.
A
sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
If
our stockholders sell substantial amounts of our common stock in the public market under Rule 144 or upon the exercise of outstanding
options or warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which
the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring,
also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities
in the future at a time and price that we deem reasonable or appropriate.
We
may, in the future, issue additional shares of common stock, which would reduce the percent of ownership held by current stockholders.
Our
Articles of Incorporation authorizes the issuance of 520,000,000 shares of common stock of which as of March 16, 2021,
214,950,751 shares are issued and outstanding. The future issuance of common stock may result in substantial dilution in
the percentage of our common stock held by our then existing stockholders. We may value any common stock issued in the future
on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the
effect of diluting the value of the shares held by our investors and may have an adverse effect on any trading market of our common
stock.
Compliance
with changing regulations concerning corporate governance and public disclosure may result in additional expenses.
In
recent years, there have been several changes in laws, rules, regulations, and standards relating to corporate governance and
public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”),
Sarbanes-Oxley and various other new regulations promulgated by the SEC and rules promulgated by the national securities exchanges.
The Dodd-Frank Act, enacted in July 2010, expands federal regulation of corporate governance matters and imposes requirements
on publicly-held companies, including us, to, among other things, provide stockholders with a periodic advisory vote on executive
compensation and also adds compensation committee reforms and enhanced pay-for-performance disclosures. Sarbanes-Oxley specifically
requires, among other things, that we maintain effective internal control over financial reporting and disclosure of controls
and procedures. Compliance may result in higher costs necessitated by ongoing revisions to disclosure and governance practices.
Our efforts to comply with evolving laws, regulations and standards are likely to continue to result in increased general and
administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.
Compliance
with new rules may make it more difficult to attract and retain directors.
Compliance
with new and existing laws, rules, regulations and standards may make it more difficult and expensive for us to maintain director
and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain
coverage. Members of our board of directors and our principal executive officer and principal financial officer could face an
increased risk of personal liability in connection with the performance of their duties. As a result, we may have difficulty attracting
and retaining qualified directors and executive officers, which could harm our business. We continually evaluate and monitor regulatory
developments and cannot estimate the timing or magnitude of additional costs we may incur as a result.
We
have reported material weaknesses in internal controls in the past.
We
have reported material weaknesses in internal controls over financial reporting as of November 30, 2020, and we cannot provide
any assurances that additional material weaknesses will not be identified in the future or that we can effectively remediate our
reported weaknesses. If our internal controls over financial reporting or disclosure controls and procedures are not effective,
there may be errors in our financial statements that could require a restatement, or our filings may not be timely, and investors
may lose confidence in our reported financial information.
Section
404 of Sarbanes-Oxley requires us to evaluate the effectiveness of our internal control over financial reporting every quarter
and as of the end of each year, and to include a management report assessing the effectiveness of our internal controls over financial
reporting in each Annual Report on Form 10-K. Our management, including our Chief Executive Officer, and Chief Financial Officer,
do not expect that our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter
how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives
will be met. Furthermore, the design of a control system must reflect the fact that there are resource constraints, and the benefits
of controls must be considered relative to their costs. Controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because
changes in the conditions or deterioration in the degree of compliance with policies or procedures may occur. Because the inherent
limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
As
a result, we cannot assure you that additional significant deficiencies or material weaknesses in our internal control over financial
reporting will not be identified in the future or that we can effectively remediate our reported weaknesses. Any failure to maintain
or implement required new or improved controls, or any difficulties we may encounter in their implementation, could result in
significant deficiencies or material weaknesses, cause us to fail to timely meet our periodic reporting obligations, or result
in material misstatements in our consolidated financial statements. Any such failure could also adversely affect the results of
periodic management evaluations regarding disclosure controls and the effectiveness of our internal control over financial reporting
required under Section 404 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. The existence of material weaknesses
could result in errors in our consolidated financial statements and subsequent restatements of our consolidated financial statements,
cause us to fail to timely meet our reporting obligations and cause investors to lose confidence in our reported financial information.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Set
forth below are the present directors and executive officers of the Company.
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Name
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Age
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Position
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Since
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A.
Scott Dockter
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64
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Chief
Executive Officer, President and Director
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2014
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Michael
Fay
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62
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Chief
Financial Officer
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2021
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John
Bremer
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71
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Director
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2014
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Jeffrey
Guzy
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69
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Director
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2020
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Our
directors are elected for a term of one year and serve until such director’s successor is duly elected and qualified. Each
executive officer serves at the pleasure of the Board.
A.
Scott Dockter – Chief Executive Officer and President and Director
A
Scott Dockter has been Chief Executive Officer and a director of the Company since September 24, 2014, Chief Financial Officer
from May 24, 2019 to January 21, 2021, and President and a Director of PureBase Ag since January 22, 2014.
Mr. Dockter has also served as the Chief Executive Officer and a Director of USMC since 2012. Mr.
Dockter was also a Manager-Member of USAM from its inception in June 2013 until its acquisition by PureBase Ag on November 24,
2014, and continues to serve as its Chief Executive Officer. Mr. Dockter is also a Manager-Member of US Mine, LLC,
a Nevada limited liability company, which owns a 3,306 - acre mining property located in Ione, California. From July 2010
to June 2012, Mr. Dockter served as Chief Executive Officer, President and Chairman of Steele Resources Corp., a public company
and its subsidiary Steele Resources, Inc. which were involved in the property evaluation and exploration for gold. Over the course
of his 30-year career, Mr. Dockter has been responsible for the development of several large open pit and underground mines in
the United States, having worked extensively in the states of Nevada, California, Idaho, and Montana. Mr. Dockter has had comprehensive
involvement in all aspects of the mining business, including exploration, permitting, mine development, construction, financing,
operations, asset acquisitions, and marketing and sales. His experience covers a wide range of commodities including industrial
minerals, gold, silver, copper and other precious metals.
Mr.
Dockter’s significant experience relating to operational management, industry expertise, and as Chief Executive Officer
of the Company led to his appointment as a director of our company.
Michael
Fay – Chief Financial Officer
Michael
Fay has been Chief Financial Officer of the Company since January 21, 2021. Mr. Fay has a background in all aspects of private
and public accounting. From March 2017 through December 2020, Mr. Fay served as Chief Financial Officer of Hardesty LLC, a company
that provides executive talent solutions for growing companies. Prior to that, from January 2015 through April 2017, Mr. Fay was
Chief Financial Officer for Stalwart Power Inc., a company in the business of clean energy integration. Earlier in his career,
Mr. Fay was employed as a Chief Financial Officer and Controller for a number of Silicon Valley and San Francisco based companies.
Mr. Fay earned a BS in Mathematics and Computer Science in 1987 and an MS in Accounting in 1996, from California State University
Hayward.
John
Bremer – Director
John
Bremer has been a director of the Company since December 24, 2014. Mr. Bremer was also appointed a director of PureBase Ag on
February 5, 2015. Since February 20, 2014, Mr. Bremer has served as a director and President of USMC. Mr. Bremer was also a Manager-Member
of USAM from its inception in June 2013 until its acquisition by PureBase Ag on November 24, 2014. Mr. Bremer is also a
Manager-Member of US Mine, LLC which owns a 3,306 - acre mining property located in Ione, California. For the past 21 years Mr.
Bremer has been the Chief Executive Officer of GroWest, Inc. a holding company with subsidiary companies in the heavy equipment
rental and property development business in California. Mr. Bremer started his career teaching college level horticulture and
soil science classes, opened and managed large mining operations for Riverside Cement and California Portland Cement Company and
has worked with cement producers including to help design material input methodologies to reduce nitrogen oxide emissions from
calcining cement. Mr. Bremer also developed a large organic composting operation in Riverside County, California which he sold
to Synagro Technologies, Inc., currently part of The Carlyle Group. Mr. Bremer has been involved in property development in Riverside
County and Napa Valley in California including permitting processes. Mr. Bremer earned his Bachelor’s degree in Agri-Business
from California State Polytechnic University, Pomona, California.
Mr.
Bremer was appointed to the Board because of his industry experience.
Jeffrey
Guzy – Director
Jeffrey
Guzy has been a director since April 8, 2020. Mr. Guzy is the chairman of the Audit and Compensation Committees. Mr. Guzy
also currently serves as director of the following public companies: Leatt Corporation and Capstone Companies. In
the past five years, Mr. Guzy has served as a director of Brownie’s Marine Group Inc. and Life on Earth, Inc. Mr.
Guzy held executive positions at several large international companies, including Loral Space, Sprint International,
Verizon and IBM. Mr. Guzy founded and has served as Executive Chairman, President and Chief Executive Officer at CoJax Oil
& Gas Corporation since 2017. Mr. Guzy served as Chief Executive Officer for Central oil & Gas Corp. of America from
2013 through 2020. Mr. Guzy has also founded Facilicom International, Inc. Mr. Guzy has also served as an Executive Manager
of Business Development to several telecom companies including Bell Atlantic Corp. Mr. Guzy received an MBA from the
Wharton School of Business at the University of Pennsylvania, an MS in Systems Engineering from the University of
Pennsylvania, and a BS in Electrical Engineering from Pennsylvania State University.
Mr.
Guzy was appointed to the Board because of his business acumen as well as his business development experience.
Family
Relationships
There
are no arrangements or understandings between our directors and directors and any other person pursuant to which they were appointed
as an officer and director of the Company. In addition, there are no family relationships between any of our directors or executive
officers.
Involvement
in Certain Legal Proceedings
There
are no legal proceedings that have occurred within the past ten years concerning our directors, or control persons which involved
a criminal conviction, a criminal proceeding, an administrative or civil proceeding limiting one’s participation in the
securities or banking industries, or a finding of securities or commodities law violations.
Committees
of the Board of Directors
Our
Board of Directors has three directors. We are not currently listed on a national securities exchange or on an inter-dealer quotation
system that has requirements that a majority of the Board of Directors be independent.
The
Company does not have a nominating committee.
Compensation
Committee
The
Company has a Compensation Committee currently consisting of Jeffrey Guzy. The Compensation Committee initially determines matters
relating to executive officer compensation, issuances of stock options and other compensatory matters. The Compensation Committee
will then make recommendations to the Board of Directors, who will then participate in discussions concerning executive officer
compensation, issuances of stock options and other compensatory matters. The Compensation Committee did not meet during the fiscal
year ended November 30, 2020. The Compensation Committee’s charter has been included as an Exhibit to this Annual Report.
Audit
Committee
The
Company has an Audit Committee currently consisting of Jeffrey Guzy. The Audit Committee is responsible for: (i) selection and
oversight of our independent accountant; (ii) establishing procedures for the receipt, retention and treatment of complaints regarding
accounting, internal controls, and auditing matters; (iii) establishing procedures for the confidential, anonymous submission
by our employees of concerns regarding accounting and auditing matters; (iv) engaging outside advisors; and (v) funding for the
outside auditor and any outside advisors engagement by the audit committee. The Audit Committee did not meet during the fiscal
year ended November 30, 2020. The Audit Committee’s charter is currently in the process of being approved by the Board.
Our
board has determined that Mr. Guzy is the “Audit Committee financial expert” as such term is defined in Item 407(d)
of Regulation S-K promulgated by the SEC.
Compensation
of Directors
During
the year ended November 30, 2020, no compensation has been paid to our directors in consideration for their services rendered
in their capacities as directors.
Code
of Ethics
Our
Board of Directors has adopted a Code of Business Conduct and Ethics (the “Code”) for directors and executive officers
of the Company. The Code is intended to focus each director and executive officer on areas of ethical risk, provide guidance to
directors and executive officer to help them recognize and deal with ethical issues, provide mechanisms to report unethical conduct,
and help foster a culture of honesty and accountability.
Delinquent
Section 16(a) Reports
Section
16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who beneficially own more
than 10% of our equity securities (“Reporting Persons”), to file reports ownership and changes in ownership with
the Securities and Exchange Commission.
Based
solely on our review of copies of such reports and representations from Reporting Persons, we believe that during the fiscal year
ended November 30, 2020, the Reporting Persons timely filed all such reports except that (i) Jeffrey Guzy did not file a Form
3 disclosing his appointment as a director on April 8, 2020, his ownership of 160,000 shares of the Company’s common
stock, and the grant for an option to purchase 250,000 shares of the Company’s
common stock, and (ii) each of A. Scott Dockter and John Bremer did not file a Form 4 disclosing their indirect beneficial ownership
of 1,112,500 shares of common stock issuable under convertible notes issued to USMC.
Changes
in Nominating Process
There
are no material changes to the procedures by which security holders may recommend nominees to our Board.
ITEM
11. EXECUTIVE COMPENSATION
Summary
Compensation Table
The
following table shows the compensation awarded to, earned by or paid to our Chief Executive Officer (the “Named Executive
Officer”). No other executive officer received compensation in excess of $100,000 during the year ended November 30, 2020.
|
Name and
Principal
Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive
Plan
Compensa-
tion
($)
|
|
|
Non-qualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensa-
tion
($)
|
|
|
Total ($)
|
|
A. Scott Dockter,
|
|
|
2020
|
|
|
|
120,000
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
120,000
|
|
|
Chief Executive Officer, President and Director
|
|
|
2019
|
|
|
|
106,400
|
(2)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
106,400
|
|
|
(1)
|
Does
not include $4,698 of accrued but unpaid salary which was paid in December 2020. Includes $4,615 of salary which was accrued
but unpaid in the year ended November 30, 2019.
|
|
|
|
|
(2)
|
Does
not include $4,615 of accrued but unpaid salary which was paid in December 2019.
|
Employment
Agreements
The
Company does not have any employment agreements with its executive officers.
Change-in-Control
Agreements
The
Company does not have any change-in-control agreements with its executive officers.
Outstanding
Equity Awards
The
Company has no outstanding equity awards made to our Named Executive Officer that were outstanding as of November 30, 2020.
2017
Stock Option Plan
The
Board of Directors approved the Company’s 2017 Stock Option Plan (the “2017 Plan”) on November 10, 2017, and
the Company’s stockholders approved the 2017 Plan on November 10, 2017. The 2017 Plan provides for stock-based and other
awards to the Company’s employees, consultants and directors.
The
maximum number of shares of our common stock that may be issued under the 2017 Plan is 10,000,000 shares, which may be replenished
and will automatically increase on January 1st of each year for a period of nine years commencing on January 1, 2018,
and ending on (and including) January 1, 2026, in an amount equal to the greater of (i) 10% of the total number of shares of common
stock issued and outstanding on the last day of the immediately preceding fiscal year, or (ii) 10,000,000 shares. As of the date
of this Report, 9,950,000 shares of the Company’s common stock are available for issuance under the 2017 Plan.
Shares
subject to stock awards granted under the 2017 Plan that expire or terminate without being exercised in full, or that are paid
out in cash rather than in shares, do not reduce the number of shares available for issuance under the 2017 Plan.
The
maximum number of shares of common stock that may be subject to awards granted under the 2017 Plan to any one individual during
any calendar year may not exceed 1% of the total number of shares of common stock issued and outstanding as of the award grant
date (as adjusted from time to time in accordance with the provisions of the 2017 Plan).
Plan
Administration. Our Board of Directors, or a duly authorized committee of our Board of Directors, will administer the 2017
Plan. Our Board of Directors may also delegate to one or more of our officers the authority to designate employees (other than
officers) to receive specified stock awards and determine the number of shares subject to such stock awards. Under the 2017 Plan,
the Board has the authority to determine and amend the terms of awards and underlying agreements, including:
|
●
|
whether
each option granted will be an incentive stock option or a non-statutory stock option;
|
|
●
|
the
fair market value of the common stock;
|
|
●
|
recipients;
|
|
●
|
whether
and to what extent 2017 Plan awards are granted;
|
|
●
|
the
exercise and purchase price of stock awards, if any;
|
|
●
|
the
number of shares subject to each stock award;
|
|
●
|
the
form of agreement(s) used under the 2017 Plan;
|
|
●
|
the
vesting schedule applicable to the awards, together with any vesting acceleration, pro
rata adjustments to vesting;
|
|
●
|
any
waiver of forfeiture restrictions; and
|
|
●
|
the
form of consideration, if any, payable on exercise or settlement of the award.
|
Under
the 2017 Plan, the Board also generally has the authority to effect, with the consent of any adversely affected participant:
|
●
|
the
reduction of the exercise, purchase, or strike price of any outstanding award;
|
|
●
|
the
cancellation of any outstanding award and the grant in substitution therefore of other
awards, cash, or other consideration; or
|
|
●
|
any
other action that is treated as a repricing under generally accepted accounting principles.
|
Stock
Options. Incentive stock options may only be granted to employees and non-statutory stock options may be granted to employees
and consultants under stock option agreements subject to the terms of the 2017 Plan, provided that the exercise price of a stock
option generally cannot be less than 100% of the fair market value (110% of the fair market value to an employee who is also a
10% stockholder) of our common stock on the date of grant. Options granted under the 2017 Plan vest at the rate specified in the
stock option agreement. The term of an option shall be no more than ten years from the date of grant and, in the case of an incentive
stock option granted to a person who at the time of such grant is a 10% stockholder, the term shall be no more than five years
from the date of grant.
Termination.
An optionee shall have 30 days to exercise an option, to the extent vested upon termination for service, unless such termination
is for cause in which case such option shall terminate immediately. An option to the extent vested shall terminate 6 months after
termination for disability and 12 months after death of the optionee that occurs within 30 days of termination of service.
Stock
Purchase Right. Restricted stock awards may also be granted under the 2017 Plan and are granted under restricted stock purchase
agreements. If a participant’s service relationship with us ends for any reason, we may receive any or all of the shares
of common stock held by the participant that have not vested as of the date the participant terminates service with us through
a forfeiture condition or a repurchase right.
Changes
to Capital Structure. Subject to any action required under applicable laws by the stockholders of the Company, the number
of shares of common stock covered by each outstanding award, and the number of shares of common stock that have been authorized
for issuance under the 2017 Plan but as to which no awards have yet been granted or that have been returned to the 2017 Plan upon
cancellation or expiration of an award, as well as the price per share of common stock covered by each such outstanding award,
shall be proportionately adjusted for any increase or decrease in the number of issued shares of common stock resulting from a
stock split, reverse stock split, stock dividend, combination, recapitalization or reclassification of the common stock, or any
other increase or decrease in the number of issued shares of common stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected
without receipt of consideration.” Such adjustment shall be made by the administrator, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of common stock subject to an award.
Corporate
Transactions. Our 2017 Plan provides that in the event of certain specified significant corporate transactions, including:
(1) a sale of all or substantially all of our assets, (2) the consummation of a merger, consolidation or other capital reorganization,
or business combination transaction where we do not survive the transaction each outstanding option or stock purchase right shall
be assumed or an equivalent option or right shall be substituted by such successor corporation or a parent or subsidiary of such
successor corporation (the “Successor Corporation”), unless the Successor Corporation does not agree to assume
the award or to substitute an equivalent option or right, in which case the vesting of each option or stock purchase right shall
fully and immediately accelerate or the repurchase rights of the Company shall fully and immediately terminate, as the case may
be, immediately prior to the consummation of the transaction.
For
purposes of a corporate transaction, an option or a stock purchase right shall be considered assumed, without limitation, if,
at the time of issuance of the stock or other consideration upon a corporate transaction or a change of control, as the case may
be, each holder of an option or stock purchase right would be entitled to receive upon exercise of the award the same number and
kind of shares of stock or the same amount of property, cash or securities as such holder would have been entitled to receive
upon the occurrence of the transaction if the holder had been, immediately prior to such transaction, the holder of the number
of shares of common stock covered by the award at such time (after giving effect to any adjustments in the number of shares covered
by the option or stock purchase right as provided for); provided that if such consideration received in the transaction is not
solely common stock of the Successor Corporation, the Administrator may, with the consent of the Successor Corporation, provide
for the consideration to be received upon exercise of the award to be solely common stock of the Successor Corporation equal to
the fair market value of the per share consideration received by holders of common stock in the transaction.
Transferability.
A participant may not transfer stock awards under our 2017 Plan other than by will, the laws of descent and distribution, or as
otherwise provided under our 2017 Plan.
Term.
The term of the 2017 Plan is 10 years.
Plan
Amendment or Termination. Our Board of Directors has the authority to amend, alter, suspend, or terminate our 2017 Plan, provided
that such action does not materially impair the existing rights of any participant without such participant’s written consent.
Certain material amendments also require the approval of our stockholders. No incentive stock options may be granted after the
tenth anniversary of the date our Board of Directors adopted our 2017 Plan.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table lists, as of March 16, 2021, the number shares of common stock beneficially owned by (i) each person or
entity known to the Company to be the beneficial owner of more than 5% of the Company’s outstanding common stock; (ii) the
Named Executive Officer; and (iii) all officers and directors as a group. Information relating to beneficial ownership of Common
Stock by our principal shareholders and management is based upon information furnished by each person using “beneficial
ownership” concepts under the rules of the SEC. Under these rules, a person is deemed to be a beneficial owner of a security
if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment
power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner
of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the SEC rules, more than
one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner
of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole
voting and investment power with respect to the shares beneficially owned. Unless otherwise indicated, the business address of
each such person is c/o PureBase Corporation, 8625 Highway 124, Ione, California 95640. The percentages below are calculated based
on 214,950,751 shares of common stock issued and outstanding as of March 16, 2021.
5%
Shareholders
|
Name and Address of
Beneficial Owner
|
|
Amount and Nature of
Beneficial Ownership
|
|
|
Percent
|
|
|
US Mine Corporation (1)
8625 Highway 124
Ione, California 95640
|
|
|
67,651,078
|
(2)
|
|
|
31.3
|
%
|
|
Baystreet
Capital Management Corp (3)
2 Woodgreen Place
Toronto, Ontario, Canada M4M2J2
|
|
|
21,338,800
|
(4)
|
|
|
9.9
|
%
|
|
Bremer Family
1995 Living Family Trust (5)
1660 Chicago Avenue
Riverside, California 92506
|
|
|
40,163,000
|
|
|
|
18.6
|
%
|
Directors
and Executive Officers
|
Name and Address of
Beneficial Owner
|
|
Amount
and
Nature of
Beneficial
Ownership
|
|
|
Percent
|
|
|
A. Scott Dockter
|
|
|
44,665,932
|
(6)
|
|
|
20.8
|
%
|
|
John Bremer
|
|
|
40,163,000
|
(7)
(8)
|
|
|
18.6
|
%
|
|
Michael Fay
|
|
|
-
|
|
|
|
-
|
|
|
Jeffrey Guzy
|
|
|
410,000
|
(9)
|
|
|
-
|
|
|
Directors and Officers as a Group (4 persons)
|
|
|
85,238,932
|
|
|
|
39.6
|
%
|
|
(1)
|
A. Scott Dockter, Chief Executive Officer
and a director, and John Bremer, President and a director, of USMC are both 33% owners and share voting and dispositive power
over the shares held by USMC.
|
|
|
|
|
(2)
|
Includes 1,112,500 shares convertible under a
promissory note.
|
|
|
|
|
(3)
|
Todd
Gauer, President of Baystreet Capital Management Corp. (“Baystreet”) has sole voting and dispositive power over
the shares held by Baystreet.
|
|
|
|
|
(4)
|
Includes
168,000 shares owned by Bayshore Capital, LLC, an affiliate through common ownership of Baystreet Capital Management Corp.
|
|
|
|
|
(5)
|
John
Bremer, as executor of the Bremer Family 1995 Living Family Trust, has voting and dispositive power over the shares held by
the Bremer Family 1995 Living Family Trust.
|
|
|
|
|
(6)
|
Excludes
22,550,359 shares held by USMC over which Mr. Dockter has 33% voting and dispositive power.
|
|
|
|
|
(7)
|
Represents
40,163,000 shares owned by the Bremmer Family 1995 Living Family Trust of which mr. Bremer, as trustee has sole voting and
dispositive power.
|
|
|
|
|
(8)
|
Excludes
22,550,359 shares held by USMC over which Mr. Bremer has 33% voting and dispositive power.
|
|
|
|
|
(9)
|
Includes
currently exercisable options to purchase 250,000 shares.
|
Changes
in Control Agreements.
The
Company does not have any change-in-control agreements with any of its executive officers.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions
with Related Persons
Except
as set forth below, since December 1, 2018, there have been no transactions, or currently proposed transactions, in which we were
or are to be a participant and the amount involved exceeds $120,000, and in which any of the following persons had or will have
a direct or indirect material interest:
|
●
|
any
director or executive officer of our company;
|
|
●
|
any
person who beneficially owns, directly or indirectly, more than 5% of our outstanding
shares of common stock;
|
|
●
|
any
promoters and control persons; and
|
|
●
|
any
member of the immediate family (including spouse, parents, children, siblings and in
laws) of any of the foregoing persons.
|
The
Company utilizes the services of its affiliate, USMC, for exploration services and other services. Since December 31, 2018, all
Company purchases, including all minerals utilized by the Company, where made from USMC. A. Scott Dockter, the Chief Executive
Officer and a director of the Company, and John Bremer, a director of the Company, are also officers, directors and controlling
shareholders of USMC.
The
following tables outline the related parties associated with the Company and amounts due for each period indicated:
|
Name
of Related Party
|
|
Relationship
with the Company
|
|
US
Mine Corporation
|
|
10%
shareholder
|
|
Bayshore
Capital Advisors, LLC
|
|
Affiliate
of 10% Shareholder
|
|
A.
Scott Dockter
|
|
Chief
Executive Officer
|
|
Bremer
Family 1995 Living Family Trust
|
|
10%
shareholder
|
|
|
|
November 30, 2020
|
|
|
November 30, 2019
|
|
|
US Mine Corporation – Convertible Notes and Interest, Expenses Paid, and Cash Advances
|
|
$
|
1,272,612
|
|
|
$
|
-
|
|
|
A. Scott Dockter – Promissory Note, Principal and Interest
|
|
$
|
160,617
|
|
|
$
|
168,207
|
|
|
Bayshore Capital Advisors, LLC – Promissory Note, Principal and Interest
|
|
$
|
32,146
|
|
|
$
|
27,630
|
|
US
Mine Corporation
On
December 1, 2013, the Company entered into a contract mining agreement with USMC, a 5% shareholder and a company owned by A. Scott
Dockter, our President and Chief Executive Officer, and a director, and John Bremer, a director, pursuant to which USMC
will provide various technical evaluations and mine development services to the Company. Services totaling $0 and $142,210 were
rendered by USMC for the fiscal years ended November 30, 2020 and 2019, respectively. The Company has paid USMC an aggregate of
$153,710 since December 1, 2018, under the mining agreement.
During
the fiscal years ended November 30, 2020 and 2019, USMC paid $1,900 and $23,403, respectively, of expenses to the Company’s
vendors and creditors on behalf of the Company and also made cash advances to the Company of $1,084,789 and $595,513, respectively.
USMC has paid an aggregate of $324,823 of expenses to the Company’s vendors and made cash advances to the Company
in the aggregate amount of $945,000 since December 1, 2018.
In
connection with the acquisition of USAM by the Company, on November 24, 2014, the Company assumed a $1,000,000 promissory note
with Craig Barto, a 33% owner of USMC. The note bears interest at an annual rate of 5% and the principal and accrued interest
were payable on May 1, 2016. During year ended November 30, 2019, the note was in default and the Company continued to have discussions
with holder of the note to extend the note under the same terms and conditions to cure the default. Pursuant to the February 7,
2020 Amendment to the September 5, 2019, Debt Exchange Agreement, Mr. Barto assigned the note to USMC effective July 31, 2019.
On September 5, 2019, the Company entered into a Debt Exchange Agreement with USMC pursuant to which an aggregate of $5,988,471
of debt, including $1,000,000 of principal and $234,247 of unpaid interest, was converted to an aggregate of 66,538568 shares
of the Company’s common stock at a conversion price of $0.09 per share.
On
September 26, 2019, the Company entered into a Securities Purchase Agreement with USMC pursuant to which USMC may purchase up
to $1,000,000 of the Company’s 5% unsecured two-year promissory notes which are convertible into shares of the Company’s
common stock, at any time at the option of the holder, at a conversion price of $0.16 per share. USMC purchased notes in the principal
amounts of $20,000, $86,000, and $72,000 on December 1, 2019, January 1, 2019, and February 1, 2020, respectively.
In
connection with the Snow White Mine property, owned by John Bremer, a director of the Company, the Company is required to make
minimum royalty payments of $3,500 per year. The Company has made royalty payments in the aggregate amount of $10,400 to
Mr. Bremer since December 31, 2018.
Board
of Directors
On
April 8, 2020, the Company issued a five-year option to Jeffrey Guzy, a director, to purchase 250,000 shares of its common stock
with an exercise price of $0.10 per share.
Executive
Officer
In
connection with Michael Fay’s appointment as Chief Financial Officer of the Company, on January 21, 2021, the Company granted
Mr. Fay a five-year stock option to purchase 200,000 shares of the Company’s common stock at an exercise price of $0.67
per share. The shares subject to the option will vest and became exercisable one year from the date of grant.
On
August 31, 2017, the Company issued a promissory note in the principal amount of $197,096 to A. Scott Dockter, President,
Chief Executive Officer and a director of the Company to consolidate total amounts of indebtedness due to Mr. Dockter. The
note bears interest at 6% and is due upon demand. During the year ended November 30, 2020, the Company repaid $4,780 towards
the balance of the note. As of November 30, 2020 and 2019, the principal balance due on this note is $127,816 and $132,596, respectively.
Bayshore
Capital Advisors, LLC
On
February 26, 2016, the Company issued a 6% promissory note in the principal amount of $25,000 to Bayshore Capital Advisors, LLC
a 5% shareholder of the Company. The note was payable upon the earlier of August 26, 2016 or the closing of a bridge financing
by the Company. The Company is in default on the note.
Director
Independence
We
believe that Jeffrey Guzy would be deemed “independent” under the applicable NASDAQ definition.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit
and Accounting Fees
The
following table sets forth the aggregate fees billed to the Company for professional services rendered by Turner, Stone &
Company, LLC (“TSC”) for the years ended November 30, 2020 and 2019:
|
|
|
Years
Ended November 30,
|
|
|
Services
|
|
2020
|
|
|
2019
|
|
|
Audit fees
|
|
$
|
44,800
|
|
|
$
|
87,250
|
|
|
Audit related fees
|
|
|
-
|
|
|
|
-
|
|
|
Tax fees
|
|
|
-
|
|
|
|
850
|
|
|
All other fees
|
|
|
-
|
|
|
|
-
|
|
|
Total fees
|
|
$
|
44,800
|
|
|
$
|
88,100
|
|
Audit
Fees
Audit
fees consist of fees incurred professional services rendered for the audit of our annual consolidated financial statements, the
review of our interim consolidated financial statements included in our quarterly reports on Form 10-Q and for services that are
normally provided in connection with statutory or regulatory filings or engagements.
Audit-Related
Fees
Audit-related
fees consist of fees billed for professional services that are reasonably related to the performance of the audit or review of
our financial statements but are not reported under “Audit fees.”
Tax
Fees
Tax
fees consist of fees billed for professional services relating to tax compliance, tax planning, and tax advice. including the
preparation of our corporate tax returns.
All
Other Fees
All
other fees consist of fees billed for services not associated with audit or tax.
Audit
Committee’s Pre-Approval Practice
Prior
to our engagement of our independent auditor, such engagement was approved by our audit committee. The services provided under
this engagement may include audit services, audit-related services, tax services and other services. Pre-approval is generally
provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally
subject to a specific budget. The independent auditors and management are required to report to our audit committee at least quarterly
regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the
services performed to date. Our audit committee may also pre-approve particular services on a case-by-case basis. All audit-related
fees, tax fees and other fees incurred by us were approved by our audit committee.
Pre-Approval
of Audit and Permissible Non-Audit Services
The
percentage of hours expended TSC’s engagement to audit our financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was 0%.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
1 – organization and business operations
Corporate
History
The
Company was incorporated in the State of Nevada on March 2, 2010, under the name Port of Call Online, Inc. to create a web-based
service that would offer boaters an easy, convenient, fun, easy to use, online resource to help them plan and organize their boating
trips. Pursuant to a corporate reorganization consummated on December 23, 2014, the Company changed its business focus to the
identification, acquisition, exploration, development and full-scale exploitation of industrial and natural mineral properties
in the United States for the development of products for the construction and agriculture markets. In line with this business
focus, the Company changed its name to PureBase Corporation in January 2015.
The
Company is headquartered in Ione, California.
Business
Overview
The Company, through
its two divisions, Purebase Ag and Purebase SCM, is engaged in the agricultural and construction-materials sectors. In the agricultural
sector, the Company’s business is to develop specialized fertilizers, sun protectants, soil amendments, and bio-stimulants
for organic and non-organic sustainable agriculture.
In the
construction sector, the Company’s focus in 2020 has been to develop and test a kaolin-based product that will help
create a lower CO2-emitting concrete (through the use of high-quality SCM’s.) The Company is developing a SCM it
believes that can potentially replace up to 40% of cement, the most polluting part of concrete. As government agencies
continue to enact stricter requirements for less-polluting forms of concrete, the Company believes there are significant
opportunities for high-quality SCM poducts in the construction-materials sector.
In the agricultural
sector, the Company has developed and will seek to develop additional products derived from mineralized materials of leonardite,
kaolin clay, laterite, and other natural minerals. These mineral and soil amendments are used to protect crops, plants and fruits
from the sun and winter damage, to provide nutrients to plants, and to 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,” consisting of its Purebase Shade Advantage WP product,
a kaolin-clay based sun protectant for crops. It is also involved in the early testing of soil amendment products based on humic
and fulvic acids derived from leonardite. Other agricultural products are in the development stage.
The Company utilizes
the services of US Mine Corporation (“USMC”), a Nevada corporation, and a significant shareholder of the Company for
the development and contract mining of industrial mineral and metal projects throughout North America, exploration drilling, preparation
of feasibility studies, mine modeling, on-site construction, production, site reclamation and for product fulfillment. Exploration
services include securing necessary permits, environmental compliance, and reclamation plans. In addition, a substantial portion
of the minerals to be utilized by the Company is obtained from properties owned or controlled by USMC. A. Scott Dockter and John
Bremer are officers, directors, and owners.
NOTE
2 – GOING CONCERN AND LIQUIDITY
The
accompanying 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. At November 30,
2020, the Company had a significant accumulated deficit of approximately $12,754,000 and working capital deficit of approximately
$1,793,000. For the fiscal year ended November 30, 2020, we had a loss from operations of approximately $1,535,000
and negative cash flows from operations of approximately $1,265,000. The Company’s operating activities consume the
majority of its cash resources. The Company anticipates that it will continue to incur operating losses as it executes its development
plans for 2021, as well as other potential strategic and business development initiatives. In addition, the Company has had and
expects to have negative cash flows from operations, at least into the near future. The Company has previously funded, and plans
to continue funding, these losses primarily additional infusions of cash from advances from an affiliate, the sale of equity,
and convertible notes. The accompanying consolidated financial statements do not include any adjustments that might be necessary
should the Company be unable to continue as a going concern.
The
Company’s plan, through the continued promotion of its services to existing and potential customers, is to generate sufficient
revenues to cover its anticipated expenses. The Company is currently exploring several options to meet its short-term cash requirements,
including issuances of equity securities or equity-linked securities from 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 will provide
the necessary funding for the Company to continue as a going concern. However, there currently are no arrangements or agreements
for such financing and management cannot guarantee any 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 operations completely.
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying audited consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”). The summary of significant accounting policies presented below is designed
to assist in understanding the Company’s consolidated financial statements. Such consolidated financial statements and accompanying
notes are the representations of Company’s management, who is responsible for their integrity and objectivity.
Principles
of Consolidation
These
consolidated financial statements include the accounts of the Company and wholly-owned subsidiaries PureBase AG and USAM. 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
will be affected.
The
Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation
of the financial statements. Significant estimates include the allowance for doubtful accounts, useful lives of property and equipment,
deferred tax asset and valuation allowance, assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected
volatility, risk-free interest rate, and expected dividend rate.
Revenue
The
Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which the Company adopted
beginning on December 1, 2018, utilizing the modified retrospective method. The approach was applied to contracts that were in
process as of December 1, 2018. The reported results for the fiscal year 2019 reflect the application of ASC topic 606.
The
Company derives revenues from the sale of its agricultural products. The Company’s contracted transaction price is allocated
to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s
contracts have a single performance obligation which are not separately identifiable from other promises in the contracts and
is, therefore, not distinct. The Company’s performance obligation is satisfied upon the transfer of risk of loss to the
customer.
Practical
Expedients
As
part of ASC Topic 606, the Company has adopted several practical expedients including:
|
●
|
Significant
Financing Component – the Company does not adjust the promised amount of consideration for the effects of a significant
financing component since the Company expects, at contract inception, that the period between when the Company transfers a
promised good or service to the customer and when the customer pays for that good or service will be one year or less.
|
|
●
|
Unsatisfied
Performance Obligations – all performance obligations related to contracts with a duration for less than one year, the
Company has elected to apply the optional exemption provided in ASC Topic 60 and therefore, is not required to disclose the
aggregate amount of transaction price allocated to performance obligations that are unsatisfied or partially satisfied at
the end of the reporting period.
|
|
●
|
Shipping
and Handling Activities – the Company elected to account for shipping and handling activities as a fulfillment cost
rather than as a separate performance obligation.
|
|
●
|
Right
to Invoice – the Company has a right to consideration from a customer in an amount that corresponds directly with the
value to the customer of the Company’s performance completed to date the Company may recognize revenue in the amount
to which the entity has a right to invoice.
|
Disaggregated
Revenue
Revenue
consists of the following by product offering for the year ended November 30, 2020:
Humate INU
Advantage
|
|
|
SHADE
ADVANTAGE (WP)
|
|
|
SulFe Hume Si
ADVANTAGE
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,450
|
|
|
$
|
126,100
|
|
|
$
|
34,860
|
|
|
$
|
169,410
|
|
Revenue
consists of the following by product offering for the year ended November 30, 2019:
Humate INU
Advantage
|
|
|
SHADE
ADVANTAGE (WP)
|
|
|
SulFe Hume Si
ADVANTAGE
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,450
|
|
|
$
|
182,238
|
|
|
$
|
170,242
|
|
|
$
|
361,930
|
|
Cash
The
Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
There are no cash equivalents as of November 30, 2020 or 2019.
Account
Receivable
The
Company periodically assesses its accounts and other receivables for collectability on a specific identification basis. If collectability
of an account becomes unlikely, an allowance is recorded for that doubtful account. As of and for the years ended November 30,
2020 and 2019, the Company has determined that an allowance of $18,277 and $11,137, respectively, for doubtful accounts was necessary.
Property
and Equipment
Property
and equipment are recorded at cost. Depreciation is computed using straight-line method over the estimated useful lives of the
related assets, generally three to five years. Expenditures that enhance the useful lives of the assets are capitalized and depreciated.
|
Equipment
|
3-5
years
|
|
Autos
and trucks
|
5
years
|
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.
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. 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 years ended November 30, 2020 and 2019.
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. There were no costs related to exploration activities for
the years ended November 30, 2020 and 2019.
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.
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. Total capitalized costs related to mineral rights was $200,000 as of November
30, 2020 and November 30, 2019. At November 30, 2020, the Company deemed the mineral rights asset to be fully impaired (See
Note 6.)
Shipping
and Handling
The
Company incurs shipping and handling costs which are charged back to the customer. The net amounts incurred were $180 and $0 included
in general administrative expenses for the years ended November 30, 2020 and 2019, respectively.
Advertising
and Marketing Costs
The
Company expenses advertising and marketing costs as they are incurred. Advertising and marketing expenses were $5,913 and $2,065
for the years ended November 30, 2020 and 2019, respectively, and are recorded in selling, general and administrative expenses
on the statement of operations.
Fair
Value Measurements
As
defined in ASC 820, “Fair Value Measurements and Disclosures,” fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).
The Company 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.
|
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 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 approximates the Company’s incremental borrowing rate.
Net
Loss Per Common Share
Net
loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during
the year. 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, the options have been excluded from the Company’s computation of net loss per common share for the
years ended November 30, 2020 and 2019.
The
following table summarizes the securities that were excluded from the diluted per share calculation because the effect of including
these potential shares was antidilutive due to the Company’s net loss position even though the exercise price could be less
than the average market price of the common shares:
|
|
|
Year Ended November 30,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Convertible Notes
|
|
|
1,112,500
|
|
|
|
-
|
|
|
Stock Options
|
|
|
1,345,000
|
|
|
|
550,000
|
|
|
Total
|
|
|
2,457,500
|
|
|
|
550,000
|
|
Stock-Based
Compensation
The
Company applies the provisions of ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement
and recognition of compensation expense for all stock-based awards made to employees, including employee stock options, in the
statements of operations.
For
stock options issued to employees and members of the Company’s Board of Directors (the “Board”) for their services,
the Company estimates the grant date fair value of each option using the Black-Scholes option pricing model. The use of the Black-Scholes
option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility
of the Common Stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of
the Common Stock. For awards subject to service-based vesting conditions, including those with a graded vesting schedule, the
Company recognizes stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis
over the requisite service period, which is generally the vesting term. Forfeitures are recorded as they are incurred as opposed
to being estimated at the time of grant and revised.
Pursuant
to ASU 2018-07 Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,
the Company accounts for stock options issued to non-employees for their services in accordance ASC 718. The Company uses valuation
methods and assumptions to value the stock options that are in line with the process for valuing employee stock options noted
above.
Income
Taxes
Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated
financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including
tax loss and credit carry forwards, and liabilities are measured using enacted tax rates expected to 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 income in the period that includes the enactment date.
The
Company utilizes ASC 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been included in the 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 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 consolidated statements of operations.
Recent
Accounting Pronouncements
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires all leases that have a term of
over 12 months to be recognized on the balance sheet with the liability for lease payments and the corresponding right-of-use
asset initially measured at the present value of amounts expected to be paid over the term. Recognition of the costs of these
leases on the income statement will be dependent upon their classification as either an operating or a financing lease. Costs
of an operating lease will continue to be recognized as a single operating expense on a straight-line basis over the lease term.
Costs for a financing lease will be disaggregated and recognized as both an operating expense (for the amortization of the right-of-use
asset) and interest expense (for interest on the lease liability). This standard is effective for the Company’s interim
and annual periods beginning December 1, 2019 and must be applied on a modified retrospective basis to leases existing at, or
entered into after, the beginning of the earliest comparative period presented in the financial statements. The adoption of ASU
2016-02 did not have a material impact on the Company’s consolidated financial statements and related disclosures.
All
other newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the
Company.
NOTE
4 – ACQUISITIONS
Asset
Purchase - Quove Corporation
On
May 1, 2020, the Company entered into an asset purchase agreement (the “Purchase Agreement”) with Quove Corporation,
a Colorado corporation, (“Quove”), pursuant to which the Company will purchase from Quove all of the assets used in
conjunction with the operating of its gold processing plant. The purchase price of $620,000 was satisfied with the issuance of
6,200,000 shares of the Company’s common stock at a fair value of $0.10 per share to Quove and the assumption of up to $10,000
of Quove’s liabilities. The acquisition closed on June 11, 2020. The Company plans to use the assets and parts from the
assets to augment and improve their current infrastructure related to the production and development of its SCMs.
NOTE
5 – PROPERTY AND EQUIPMENT
Property
and equipment consisted of the following at:
|
|
|
November 30,
2020
|
|
|
November 30,
2019
|
|
|
|
|
|
|
|
|
|
|
Furniture and equipment
|
|
$
|
6,952
|
|
|
$
|
6,952
|
|
|
Machinery and equipment
|
|
|
35,151
|
|
|
|
35,151
|
|
|
Automobiles and trucks
|
|
|
25,061
|
|
|
|
25,061
|
|
|
Construction in process
|
|
|
620,000
|
|
|
|
-
|
|
|
|
|
|
687,164
|
|
|
|
67,164
|
|
|
Less: accumulated depreciation
|
|
|
(67,164
|
)
|
|
|
(66,392
|
)
|
|
Property and equipment, net
|
|
$
|
620,000
|
|
|
$
|
722
|
|
Total
depreciation expense for the years ended November 30, 2020 and 2019 was $722 and $2,316, respectively.
NOTE
6 – MINING RIGHTS
Placer
Mining Claims Lassen County, CA
Placer
Mining Claim Notices have been filed and recorded with the US Bureau of Land Management (the “BLM”) relating to 50
Placer mining claims identified as “USMC 1” thru “USMC 50” covering 1,145 acres of mining property located
in Lassen County, California and known as the “Long Valley Pozzolan Deposit”. The Long Valley Pozzolan Deposit is
a placer claims resource in which the Company holds non-patented mining rights to 1,145acres of contiguous placer claims within
the boundaries of a known and qualified Pozzolan deposit. These claims were assigned to the Company by one of its founders at
his original cost basis of $0. These claims require a payment of $30,000 per year to the BLM.
On
September 5, 2019, the Board approved to discontinue any and all mining and related activities at the Long Valley project. As
a result, the claims have reverted to the BLM.
Federal
Preference Rights Lease in Esmeralda County NV
This
Preference Rights Lease is granted by the 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 are presented at their cost of $200,000.
This lease requires a payment of $7,503 per year to the BLM.
At November 30, 2020,
the Company performed an impairment analysis on the mineral rights asset. The Company believes the fair value of the mineral
rights are fully impaired due to the following significant factors: (i) the Company discontinued all mining and related activities
related to the operation of its business, (ii) the minerals being mined from the location were to be used by the Company in a
discontinued product, and (iii) there are multiple third-party sources to buy the minerals at a relatively inexpensive price.
Additionally, the Company concluded that the carrying amount of the mineral rights would not be recoverable due to the Company
forecasting that the future undiscounted cash flows from the mineral rights asset would not exceed the carrying
amount of the mineral rights asset. As a result, the Company recorded a loss on impairment of mineral rights of $200,000 on its
statement of operations during the year ended November 30, 2020.
Snow
White Mine located in San Bernardino County, CA – Deposit
On
November 28, 2014 US Mining and Minerals Corporation entered into a Purchase Agreement in which it agreed to sell its fee
simple property interest and certain mining claims to USMC. In contemplation of the Plan and Agreement of Reorganization, on 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 involves the sale of approximately 280 acres of mining property containing 5 placer mining claims known as the Snow
White Mine located near Barstow, California in San Bernardino County. The property is covered by a Conditional Use Permit allowing
the mining of the property and a Plan of Operation and Reclamation Plan has been approved by San Bernardino County and the BLM.
An initial deposit of $50,000 was paid to 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.
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 on or about October 15, 2015. Mr. Bremer will transfer title
to the Company when the Company pays Mr. Bremer $575,000 plus expenses, 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 to 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
through 19% beneficial ownership of the Company, pursuant to which the Company will purchase the Snow White Mine for $836,000
(the “Purchase Price”). The Purchase Price plus 5% interest shall be payable in full in cash at the closing which
can occur at any time before April 1, 2022. As of November 30, 2020, the Company has yet to close on the purchase.
NOTE
7 – NOTES PAYABLE
Craig
Barto and USMC
The
Company assumed a $1,000,000 promissory note with Craig Barto, an owner of USMC, on November 24, 2014, in connection with the
acquisition of USAM by the Company. The note bears simple interest at an annual rate of 5% and the principal and accrued interest
were payable on May 1, 2016. Upon the occurrence of an event of default, which includes voluntary or involuntary bankruptcy, all
unpaid principal, accrued interest and other amounts owing are immediately due, payable and collectible by the lender pursuant
to applicable law. During fiscal year 2019, the note was in default and the Company continued to have discussions with holder
of the note to extend the note under the same terms and conditions to cure the default. Pursuant to the February 7, 2020 Amendment
to the September 5, 2019, Debt Exchange Agreement, Mr. Barto assigned the note to USMC effective July 31, 2019. On September 5,
2019, the Company entered into a Debt Exchange Agreement with USMC pursuant to which an aggregate of $5,988,471 of debt, including
accrued and unpaid interest, was converted to an aggregate of 66,538568 shares of the Company’s common stock at a per share
conversion price of $0.09. Included in the $5,988,471 of settled debt was $1,000,000 in principal and $234,247 in unpaid and accrued
interest related to the note. On September 5, 2019, the fair value of the Company’s common stock was $0.1085 per share.
The $0.0185 difference in share price resulted in a loss on conversion of $1,230,964 for the year ended November 30, 2019, which
the Company recorded on the consolidated statements of operations as a loss on conversion of related party debt and payables.
The balance of the note was $0 as of November 30, 2020 and 2019, respectively (See Note 12).
Bayshore
Capital Advisors, LLC
On
February 26, 2016, the Company issued a promissory note to Bayshore Capital Advisors, LLC, an affiliate through common ownership
of a 10% major shareholder 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. The Company is in default on this note
at November 30, 2020. The balance on the note was $25,000 as of November 30, 2020 and 2019. See (Note 12). Total interest expense
on the note was $1,496 for the fiscal years ended November 30, 2020 and 2019.
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, CEO and a director of the
Company, to consolidate the total amounts due to Mr. Dockter. The note to Mr. Dockter bears interest at 6% and is due upon demand.
During the year ended November 30, 2019, the Company repaid $44,500 towards the outstanding balance of the note. The balance on
the note was $127,816 and $132,596 as of November 30, 2020 and 2019, respectively (See Note 12). Total interest expense on the
note was $8,679 and $11,859 for the fiscal years ended November 30, 2020 and 2019, respectively.
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
12), the Company issued a two-year convertible promissory note in the amount of $20,000 to USMC, with a maturity date of December
31, 2021 (“Tranche #1”). The note bears interest at 5% per annum which is payable on maturity. Amounts due under the
note may be converted into shares of the Company’s common stock, $0.001 par value, at any time at the option of the holder,
at a conversion price of $0.16 per share.
The
issuance of Tranche #1 resulted in a discount from the beneficial conversion feature totaling $20,000. Total straight-line amortization
of this discount totaled $9,593 during the fiscal year ended November 30, 2020. Total interest expense on Tranche #1 was approximately
$1,000 for the fiscal year ended November 30, 2020.
January
1, 2020
On
January 1, 2020, in connection with the September 26, 2019, securities purchase agreement with USMC, a related party, (See Note
12), the Company issued a two-year convertible promissory note in the amount of $86,000 to USMC, with a maturity date of January
1, 2022 (“Tranche #2”). The note bears interest at 5% per annum which is payable on maturity. Amounts due under the
note may be converted into shares of the Company’s common stock, $0.001 par value, at any time at the option of the Holder,
at a conversion price of $0.16 per share.
The
issuance of Tranche #2 resulted in a discount from the beneficial conversion feature totaling $32,250. Total straight-line amortization
of this discount totaled $14,735 for the fiscal year ended November 30, 2020. Total interest expense on Tranche #2 was approximately
$3,935 for the fiscal year ended November 30, 2020.
February
1, 2020
On
February 1, 2020, in connection with the September 26, 2019, securities purchase agreement with USMC, a related party, (See Note
12), the Company issued a two-year convertible promissory note in the amount of $72,000 to USMC, with a maturity date of February
1, 2022 (“Tranche #3”). The note bears interest at 5% per annum which is payable on maturity. Amounts due under the
note may be converted into shares of the Company’s common stock, $0.001 par value, at any time at the option of the Holder,
at a conversion price of $0.16 per share.
The
issuance of Tranche #3 resulted in a discount from the beneficial conversion feature totaling $36,000. Total straight-line amortization
of this discount totaled $14,922 for the fiscal year ended November 30, 2020. Total interest expense on Tranche #3 was approximately
$8,988 for the fiscal year ended November 30, 2020.
NOTE
8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts
payable and accrued expenses consist of the following amounts:
|
|
|
November 30,
2020
|
|
|
November 30,
2019
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
84,600
|
|
|
$
|
265,449
|
|
|
Accrued interest
|
|
|
39,948
|
|
|
|
44,846
|
|
|
Accrued compensation
|
|
|
39,492
|
|
|
|
33,930
|
|
|
Accounts payable and accrued expenses
|
|
$
|
164,040
|
|
|
$
|
344,225
|
|
NOTE
9 – COMMITMENTS AND CONTINGENCIES
Office
and Rental Property Leases
The
Company is using office space provided by USMC, a related party that is owned by the Company’s majority shareholders and
directors A. Scott Dockter and John Bremer. See Note 12.
Mineral
Properties
The
Company’s mineral rights require various annual lease payments (See Note 6).
Legal
Matters
On
September 21, 2016, the Company terminated its employment agreement with its then President, David Vickers (“Vickers”).
Subsequently, Vickers alleged claims of age discrimination, fraud in the inducement, violation of California Labor Code §970
and breach of contract against the Company (collectively, the “Vicker Claims”). On April 14,2017, Vickers served the
Company with a demand for arbitration of the Vicker Claims before the Judicial Arbitration and Mediation Services, Inc. On June
5, 2018, the parties participated in a voluntary mediation but were unable to reach a resolution. An arbitration hearing was held
on August 6, 2019 to August 8, 2019. An interim-preliminary decision was rendered in connection with the arbitration however,
a final award was not determined and judicial proceedings were not initiated. On June 25, 2020, the parties entered into a written
settlement agreement pursuant to which the Company agreed to pay Vickers the aggregate sum of $580,976, including interest
of $13,079, (the “Settlement Sum”) in exchange for a general release of all Vicker Claims and a covenant to forebear
all litigation against Company. The Company timely paid the Settlement Sum and the case was terminated effective November 25,
2020.
On
July 8, 2020, former Chief Financial Officer, Al Calvanico (“Calvanico”), filed a demand for arbitration alleging
retaliation, wrongful termination, and demand for a minimum amount of $600,000 in alleged stock value, plus interest, recovery
of past and future wages, attorneys’ fees, and punitive damages (collectively,
the “Calvanico Claims”). The Company denied all Calvanico Claims. The Company believes Calvanico is owed nothing because
it takes the position that Calvanico was not terminated, but rather, his employment contract expired on September 21, 2019 in
the normal course, and was not renewed by Company and because Calvanico never exercised his stock options. On February 14, 2020,
the Company requested in writing that Calvanico exercise his stock options within 30 days. Calvanico failed to do so. To date,
Calvanico has not exercised his stock options. This dispute is currently in the early stages of arbitration. An arbitration hearing
date has not yet been assigned.
On
August 30, 2018 the Company was named as a defendant in a complaint filed by Tessenderlo Kerley, Inc. (“Tessenderlo”)
in the United States District Court for the District of Arizona (Case # CV-18-2756-PHX-DJH) alleging trademark infringement
relating to the plaintiff’s trademark PURSHADE and the Company’s product PureBase Shade Advantage.
The Company filed its answer on September 21, 2018, denying the allegations set forth in the complaint.
A settlement conference was held on June 11, 2019. The Company entered into a settlement agreement and release (the “Settlement
Agreement”) with Tessenderlo effective July 8, 2019. Pursuant to the Settlement Agreement the Company agreed, among other
requirements for dissemination of information with its product, to make various changes to the packaging of its Purebase Shade
Advantage products relating to the visual representation of the product’s names. Under the Settlement Agreement, each party
fully released the other party from all existing claims and liabilities. There were no monetary damages as part of the Settlement
Agreement. As a result of the Settlement Agreement, the case was dismissed on July 9, 2019.
On
January 11, 2019, the Company filed a complaint in the Nevada District Court for Washoe County (Case # CV19-00097) against Agregen
International Corp (“Agregen”) and Robert Hurtado alleging the misuse of proprietary and confidential information
acquired by Mr. Hurtado while employed by the Company as VP of Agricultural Research and Development. Mr. Hurtado was terminated
in March 2018 and since that time the Company alleges that he conspired with Agregen to improperly use proprietary and confidential
information to compete with the Company which constitute breaches of the non-compete and confidentiality provisions of his employment
agreement with the Company. The Company is seeking $100,000,000 in monetary damages. On March 14, 2019 Agregen and Mr. Hurtado
filed an answer to the Company’s Complaint that the allegations were false. An Early Case Conference was held on April 26,
2019 and a pre-trial conference was held on July 10, 2019. On March 13, 2020, the Company filed a First Amended Complaint, adding
Todd Gauer and John Gingerich as additional defendants. A default has been taken against Mr. Gingerich. Litigation is actively
proceeding against Mr. Hurtado, Mr. Gauer, and Agregen. Trial is scheduled for seven days beginning June 21, 2021.
On
March 29, 2019, the Company was served with a complaint filed by Superior Soils Supplements LLC (“Superior
Soils”) in the Superior Court of the State of California in and for
the County of Kings (Case #19C-0124) relating
to 64 truckloads of soil amendments delivered to a customer by the Company on behalf of Superior Soils. Superior Soils
alleged that the soil amendments were not labeled correctly requiring the entire shipment of product to be returned to the
Company. The complaint alleges breach of contract, misrepresentations, fraudulent concealment and unfair competition. The
complaint seeks damages of approximately $300,000. The Company filed its answer on May 6, 2019, denying responsibility for
the mis-labelling and denying any liability for damages therefrom. The parties are currently in settlement
negotiations. The Company believes its potential exposure to be approximately
$400,000 and, as such, has accrued this amount on the consolidated balance sheet at November 30, 2020.
Contractual
Matters
On
November 1, 2013, we entered into an agreement with USMC, a related party, in which USMC performs services relating to various
technical evaluations and mine development services for the Company with regard to the various mining properties/rights owned
by the Company. Terms of services and compensation will be determined for each project undertaken by USMC.
On
October 12, 2018 the Board approved a material supply agreement with USMC, a related party, pursuant to which USMC will provide
designated natural resources to the Company at predetermined prices (See Note 12).
Resignation
of Directors
Effective
April 8, 2020, Calvin Lim resigned as a member of the Board. His resignation was not a result of any dispute or disagreement with
the Company or the Board on any matter relating to the operations, policies, or practices of the Company.
Appointment
of Directors
The
Company entered into a twelve-month director agreement with Jeffrey Guzy (“Guzy”), effective as of April 8, 2020,
(the “Director Agreement”). Pursuant to the Director Agreement, Guzy will be entitled to $1,000 per month for serving
on the Board, which will accrue as debt until the Company has its first cash flow positive month. Upon the termination of the
initial term of the Director Agreement or Guzy’s earlier removal or resignation, such accrued amount will be paid in common
stock of the Company at a conversion rate of the lower of $0.15 per share or the 20-day volume weighted average price from the
last date Guzy was on the Board. Guzy was also granted an immediately exercisable five-year option to purchase 250,000 shares
of common stock at an exercise price of $0.10 per share. Guzy was appointed as the chairman of the Audit Committee and the Compensation
Committee.
Note
10 - Stockholders’ Equity
Equity
Transactions During the Period
During
the fiscal year ended November 30, 2020, the Company issued 6,200,000 shares of the Company’s common stock with a fair value
of $0.10 per share to Quove Corporation for the purchase of assets used in conjunction with the operating of its gold processing
plant (See Note 4).
During
the fiscal year ended November 30, 2020, the Company issued 100,000 shares of the Company’s common stock with a fair value
of $0.094 per share to an investor pursuant to an investment banking agreement for services rendered.
Note
11 – StocK-BASED COMPENSATION
The
Company accounted for its stock-based compensation in accordance with the fair value recognition provisions of FASB ASC Topic
718, “Compensation – Stock Compensation.”
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 10,000,000 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 November 30, 2020, options to purchase an aggregate of 50,000 shares of common stock have been granted under the Option
Plan.
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.
The
Company granted options to purchase an aggregate of 795,000 shares of common stock during the fiscal year ended November 30, 2020.
There
were no stock options granted during the year ended November 30, 2019.
The
weighted average grant date fair value of options granted and vested during the year ended November 30, 2020 was $17,695. The
weighted average non-vested grant date fair value of non-vested options was $6,663 at November 30, 2020.
Compensation
based stock option activity for qualified and unqualified stock options are summarized as follows:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Outstanding at November 30, 2018
|
|
|
550,000
|
|
|
$
|
2.74
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Expired or cancelled
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding at November 30, 2019
|
|
|
550,000
|
|
|
|
2.74
|
|
|
Granted
|
|
|
795,000
|
|
|
|
0.10
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Expired or cancelled
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding at November 30, 2020
|
|
|
1,345,000
|
|
|
$
|
1.18
|
|
The
following table summarizes information about options to purchase shares of the Company’s common stock outstanding and exercisable
at November 30, 2020:
|
|
|
|
|
|
|
Weighted-
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Range of
|
|
|
Outstanding
|
|
|
Remaining Life
|
|
|
Exercise
|
|
|
Number
|
|
|
exercise prices
|
|
|
Options
|
|
|
In Years
|
|
|
Price
|
|
|
Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.099
|
|
|
|
400,000
|
|
|
|
3.64
|
|
|
$
|
0.099
|
|
|
|
-
|
|
|
|
0.10
|
|
|
|
395,000
|
|
|
|
4.42
|
|
|
|
0.10
|
|
|
|
350,000
|
|
|
|
0.12
|
|
|
|
50,000
|
|
|
|
7.82
|
|
|
|
0.12
|
|
|
|
50,000
|
|
|
|
3.00
|
|
|
|
500,000
|
|
|
|
5.25
|
|
|
|
3.00
|
|
|
|
500,000
|
|
|
|
|
|
|
|
1,345,000
|
|
|
|
4.62
|
|
|
$
|
1.18
|
|
|
|
900,000
|
|
The
compensation expense attributed to the issuance of the options is recognized as they are vested.
The
stock options granted under the Option Plan are exercisable for ten years from the grant date and vest over various terms from
the grant date to three years.
The
aggregate intrinsic value totaled $0 and was based on the Company’s closing stock price of $0.08 as of November 30, 2020,
which would have been received by the option holders had all option holders exercised their options as of that date.
On
April 8, 2020, the Company granted a director an option to purchase 250,000 shares of the Company’s common stock at an exercise
price of $0.10 per share and a fair value of $27,088. The options vest immediately at the grant date. The options were valued
using the Black-Scholes option pricing model under the following assumptions: stock price - $0.11; strike price - $0.10; expected
volatility – 305%; risk-free interest rate – 0.47%; dividend rate – 0%; and expected term – 2.50 years.
On
April 15, 2020, the Company granted two advisory board members options to purchase an aggregate of 200,000 shares of the Company’s
common stock at an exercise price of $0.10 per share and a fair value of $19,481. The options vest one year from the date of grant.
The options were valued using the Black-Scholes option pricing model under the following assumptions: stock price - $0.099; strike
price - $0.10; expected volatility – 304%; risk-free interest rate – 0.34%; dividend rate – 0%; and expected
term – 2.50 years.
On
June 2, 2020, the Company granted a consultant an option to purchase 100,000 shares of the Company’s common stock at an
exercise price of $0.10 per share and a fair value of $10,739. The options vest immediately at the grant date. The options were
valued using the Black-Scholes option pricing model under the following assumptions: stock price - $0.11; strike price - $0.10;
expected volatility – 283%; risk-free interest rate – 0.20%; dividend rate – 0%; and expected term – 2.50
years.
On
July 7, 2020, the Company granted a consultant an option to purchase 45,000 shares of the Company’s common stock at an exercise
price of $0.10 per share and a fair value of $4,435. The options vest one year from the grant date. The options were valued using
the Black-Scholes option pricing model under the following assumptions: stock price - $0.10; strike price - $0.10; expected volatility
– 282%; risk-free interest rate – 0.28%; dividend rate – 0%; and expected term – 3.00 years.
On
September 18, 2020, the Company granted a member of the advisory board an option to purchase 100,000 shares of the Company’s
common stock at an exercise price of $0.099 per share and a fair value of $9,712. The options vest from the grant date. The options
were valued using the Black-Scholes option pricing model under the following assumptions: stock price - $0.099; strike price -
$0.099; expected volatility – 297%; risk-free interest rate – 0.16%; dividend rate – 0%; and expected term –
2.50 years.
On
October 12, 2020, the Company granted a member of the advisory board an option to purchase 100,000 shares of the Company’s
common stock at an exercise price of $0.099 per share and a fair value of $9,121. The options vest from the grant date. The options
were valued using the Black-Scholes option pricing model under the following assumptions: stock price - $0.099; strike price -
$0.099; expected volatility – 297%; risk-free interest rate – 0.20%; dividend rate – 0%; and expected term –
2.50 years.
Total
compensation expense related to the options was $56,609 and $60,854 for the years ended November 30, 2020 and 2019, respectively.
As of November 30, 2019, there was $23,966 in future compensation cost related to non-vested stock options.
NOTE
12 – RELATED 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, an affiliate through common ownership of a 10% shareholder of the Company for working capital
purposes. The note was payable August 26, 2016, or when the Company closes a bridge financing, whichever occurs first. The Company
is in default on this note at November 30, 2020.
US
Mine Corporation
The
Company entered into a contract mining agreement with USMC, a company owned by the majority stockholders of the Company, A. Scott
Dockter and John Bremer, pursuant to which USMC will provide various technical evaluations and mine development services to the
Company. During the years ended November 30, 2020 and 2019, the Company made purchases from USMC totaling $0 and $153,180, respectively,
and are recorded as part of accounts payable on the Company’s consolidated balance sheets. Services totaling $0 and $142,210
were rendered by USMC for the years ended November 30, 2020 and 2019, respectively, and are recorded as part of due to affiliates
on the Company’s consolidated balance sheets. In addition, during the fiscal years ended November 30, 2020 and 2019, USMC
paid $1,900 and $23,403, respectively, of expenses to the Company’s vendors and creditors on behalf of the Company and also
made cash advances to the Company of $1,084,789 and $595,513, respectively, and are recorded as part of due to affiliates on the
Company’s consolidated balance sheets. The amounts owed for services rendered, expenses paid on behalf of the Company, and
cash advances were converted into the Company’s common stock as part of the September 5, 2019 Debt Exchange Agreement (See
Note 7). The balance due to USMC is $1,091,158 and $0 at November 30, 2020 and 2019, respectively.
On
September 26, 2019, the Company entered into a securities purchase agreement with USMC pursuant to which USMC may purchase up
to $1,000,000 of the Company’s 5% unsecured convertible two-year promissory notes in one or more closings. The notes are
convertible into the Company’s common stock at a conversion price of $0.16 per share. As of November 30, 2020, USMC has
purchased notes totaling $178,000 with maturity dates ranging from December 1, 2021 through February 1, 2022 (See Note 7). Interest
expense on these notes totaled $7,923 for the fiscal year ended November 30, 2020 and is recorded as part of due to affiliates
on the consolidated balance sheets. The outstanding balance due on the notes to USMC is $178,000 and $0 at November 30, 2020 and
November 30, 2019, respectively.
On
April 9, 2020, USMC agreed to forgive $150,257 in outstanding accounts payable from PureBase AG effective February 29, 2020. The
Company treated this as a capital contribution and recorded the forgiveness as an increase in additional paid in capital on the
consolidated balance sheet at November 30, 2020.
On
April 22, 2020, the Company entered into a Material Supply Agreement (the “Supply Agreement”) with USMC which amended
the prior Materials Supply Agreement entered into on October 12, 2018. All kaolin clay purchased by the Company from USMC under
the Supply Agreement must be used exclusively for agricultural products and supplementary cementitious materials. Under the terms
of the Supply Agreement, the Company will pay $25 per ton for the kaolin clay for supplementary cementitious materials and $145
per ton for bagged products for clay for agriculture (in each case plus an additional $5 royalty fee per ton). The Supply Agreement
also provides that if USMC provides pricing to any other customer which is more favorable than that provided to the Company, USMC
shall adjust the cost to the Company to conform to the more favorable terms. The initial term of the Agreement is 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 Agreement for a material breach which
is not cured within 90 days.
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.
Transactions
with Officers
On
August 31, 2017, the Company issued a note in the amount of $197,096 to Arthur Scott Dockter, President, CEO and a director of
the Company to consolidate the total amounts due to and assumed by Mr. Dockter. The note bears interest at 6% and is due upon
demand. During the fiscal years ended November 30, 2020 and 2019, the Company repaid $4,780 and $44,500, respectively, towards
the balance of the note. As of November 30, 2020 and 2019, the principal balance due on this note is $127,816 and $132,596, respectively,
and is recorded as Note Payable to Officer on the consolidated balance sheet. Interest expense for this note was $8,679 and $11,859
for the fiscal years ended November 30, 2020 and 2019, respectively.
NOTE
13 – CONCENTRATION 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 November
30, 2020 and 2019, the Company had no deposits in excess of the FDIC insured limit.
Revenues
Three
customers accounted for 79% of total revenue for the fiscal year ended November 30, 2020, as set forth below:
|
Customer A
|
|
|
39
|
%
|
|
Customer B
|
|
|
21
|
%
|
|
Customer C
|
|
|
19
|
%
|
Four
customers accounted for 87% of total revenue for the year ended November 30, 2019, as set forth below:
|
Customer A
|
|
|
35
|
%
|
|
Customer B
|
|
|
23
|
%
|
|
Customer C
|
|
|
18
|
%
|
|
Customer D
|
|
|
11
|
%
|
Accounts
Receivable
Two
customers accounted for 100% of the accounts receivable as of November 30, 2020, as set forth below:
|
Customer A
|
|
|
80
|
%
|
|
Customer B
|
|
|
20
|
%
|
Two
customers accounted for 100% of the accounts receivable as of November 30, 2019, as set forth below:
|
Customer A
|
|
|
66
|
%
|
|
Customer B
|
|
|
34
|
%
|
Vendors
One
supplier accounted for 85% of purchases as of November 30, 2020.
Two
suppliers accounted for 100% of purchases as of November 30, 2019, as set forth below:
|
Vendor A, a related party
|
|
|
88
|
%
|
|
Vendor B
|
|
|
12
|
%
|
NOTE
14 – INCOME TAXES
The
Company identified their federal and California state tax returns as their “major” tax jurisdictions. The periods
our income tax returns are subject to examination for these jurisdictions are 2015 through 2020. The Company believe their income
tax filing positions and deductions will be sustained on audit, and they do not anticipate any adjustments that would result in
a material change to their financial position. Therefore, no liabilities for uncertain tax positions have been recorded.
At
November 30, 2020, we had available net operating loss carry-forwards for federal income tax reporting purposes of approximately
$2,474,949 which are available to offset future taxable income. As a result of the Tax Cuts Job Act 2017, certain of these carry-forwards
do not expire. We have not performed a formal analysis, but we believe our ability to use such net operating losses and tax credit
carry-forwards is subject to annual limitations due to change of control provisions under Sections 382 and 383 of the Internal
Revenue Code, which significantly impacts our ability to realize these deferred tax assets.
Our
net deferred tax assets, liabilities and valuation allowance as of November 30, 2020 and 2019 are summarized as follows:
|
|
|
Year Ended November 30,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
897,800
|
|
|
$
|
2,140,900
|
|
|
Changes in prior year estimates
|
|
|
-
|
|
|
|
-
|
|
|
Total deferred tax assets
|
|
|
897,800
|
|
|
|
2,140,900
|
|
|
Valuation allowance
|
|
|
(897,800
|
)
|
|
|
(2,140,900
|
)
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
We
record a valuation allowance in the full amount of our net deferred tax assets since realization of such tax benefits has been
determined by our management to be less likely than not. The valuation allowance decreased $1,243,100 during the fiscal year ended
November 30, 2020. The valuation allowance increased $831,300 during the fiscal year ended November 30, 2019.
A
reconciliation of the statutory federal income tax benefit to actual tax benefit for the years ended November 30, 2020 and 2019
is as follows:
|
|
|
2020
|
|
|
2019
|
|
|
Federal statutory blended income tax rates
|
|
|
(21
|
)%
|
|
|
(21
|
)%
|
|
State statutory income tax rate, net of federal benefit
|
|
|
(7
|
)
|
|
|
(7
|
)
|
|
Incentive stock options
|
|
|
5
|
|
|
|
2
|
|
|
Change in valuation allowance
|
|
|
23
|
|
|
|
27
|
|
|
Other
|
|
|
(-
|
)
|
|
|
(1
|
)
|
|
Effective tax rate
|
|
|
-
|
%
|
|
|
-
|
%
|
As
of the date of this filing, the Company has not filed its 2020 federal and state corporate income tax returns. The Company expects
to file these documents as soon as practicable.
NOTE
15 – SUBSEQUENT EVENTS
On
January 21, 2021, Michael Fay was appointed Chief Financial Officer of the Company. Mr. Fay will be entitled to an annual base
salary of $144,000 to be reviewed on an annual basis. In connection with such appointment, Mr. Fay was granted a five-year option
to purchase 200,000 shares of the Company’s common stock at an exercise price of $0.067 per share under the Option plan.
The options vest on the one-year anniversary of the date of grant.