Forward-Looking Statements

This Quarterly Report on Form 10-Q includes a number of forward-looking statements that reflect management's current views with respect to future events and financial performance. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. These statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set forth in the section entitled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended November 30, 2019, as filed with the Securities and Exchange Commission (the "SEC") on February 28, 2020, any of which may cause our company's or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in our forward-looking statements. These risks and factors include, by way of example and without limitation:





? absence of contracts with customers or suppliers;
? our ability to maintain and develop relationships with customers and suppliers;
? the impact of competitive products and pricing;
? supply constraints or difficulties;
? the retention and availability of key personnel;
? general economic and business conditions;
? business interruptions resulting from geo-political actions, including war, and

terrorism or disease outbreaks (such as the recent outbreak of COVID-19, or the

novel coronavirus); ? substantial doubt about our ability to continue as a going concern; ? our ability to successfully implement our business plan; ? our need to raise additional funds in the future; ? our ability to successfully recruit and retain qualified personnel in order to


  continue our operations;
? our ability to successfully acquire, develop or commercialize new products;
? the commercial success of our products;
? the impact of any industry regulation;




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? our ability to develop existing mining projects or establish proven or probable

reserves;

? our dependence on once vendor for our minerals for our products; ? the impact of potentially losing the rights to properties; and ? the impact of the increase in the price of natural resources.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law.

As used in this Quarterly Report on Form 10-K and unless otherwise indicated, the terms "Company," "we," "us," and "our," refer to PureBase Corporation and its wholly-owned subsidiaries, PureBase Agricultural, Inc., a Nevada corporation ("PureBase AG") and U.S. Agricultural Minerals, LLC, a Nevada limited liability company ("USAM").





Business Overview

The Company, through its wholly-owned operating subsidiaries PureBase AG and USAM is a diversified, industrial mineral and natural resource company working to provide solutions to the agriculture and construction materials markets. It is engaged in the identification, acquisition, exploration, development, mining and full-scale exploitation of industrial and natural mineral properties in the United States for the agriculture and construction materials markets. On the agricultural side, our business is to develop agricultural specialized fertilizers, minerals and bio-stimulants for organic and sustainable agriculture. In addition, we intend to focus on identifying and developing other advanced stage natural resource projects in support of our agricultural business. On the construction side, we are focused on developing construction sector-related products such as supplemental cementious material ("SCM").

We are developing pozzolan-based products that have applications in the construction materials sector. Pozzolans, also known as SCM's, may have beneficial qualities when added to concrete. We continue our research into SCM markets and believe there are substantial opportunities with pozzolan-based products currently being tested.

Our initial focus has been on the organic agricultural market sector. We hope to develop innovative solutions for our agricultural customers while building a brand under the name, "PureBase", consisting of three primary product lines: PureBase Shade Advantage WP, PureBase SulFi Hume Si Advantage, and PureBase Humate INU Advantage. and will seek to develop additional products derived from mineralized materials of leonardite, kaolin clay, laterite, potassium silicate sulfate, and other natural minerals. These agricultural minerals and soil amendments are used in the agricultural industry to protect crops, plants and fruits from the sun and winter damage, provide nutrients to plants, and improve dormancy and soil ecology to help farmers increase the yields of their harvests. We also seek to acquire and develop mineralized materials of pozzolan and potassium silicate sulfate for agricultural applications.

We utilize the services of US Mine Corporation ("USMC"), a Nevada corporation, for the development and contract mining of industrial mineral and metal projects. USMC performs exploration drilling, mine modeling, on-site construction, mine production, and mine site reclamation, and prepares feasibility studies for the Company. Exploration services also include securing necessary permits, environmental compliance, and reclamation plans. In addition, a substantial portion of the minerals utilized by the Company is obtained through USMC. Scott Dockter, our President, Chief Executive Officer, and Chief Financial Officer, and John Bremer, a director, are the Treasurer and President, respectively, as well as directors, of USMC.





Recent Developments



Snow White Mine

On April 1, 2020, we entered into a purchase and sale agreement with Bremer Family 1995 Living Family Trust (the "Trust") pursuant to which we will purchase 80 acres of land known as the Snow White Mine, located in San Bernardino County, California, and all mineral rights. The purchase price for the property is $836,000, with 5% interest, with the closing to occur within two years. John Bremer, a director of the Company, is the executor of the Trust which owns approximately 19% of the issued and outstanding shares of the Company. The Company previously had certain rights to the Snow White property but in September 2019 discontinued all mining activities at this property. As of the date of this Quarterly Report, the Company has not closed on the purchase.





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Asset Purchase Agreement

On June 11, 2020, the Company executed 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. In consideration therefor, the Company will issue 6,200,000 shares of its common stock at a fair value of $0.10 per share and agreed to assume up to $10,000 of Quove's liabilities. We plan to use the assets and parts from the assets to augment and improve our current infrastructure.





Material Supply Agreement

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.





Results of Operations

Comparison of the Three Months Ended May 31, 2020 and the Three Months Ended May 31, 2019

A comparison of the Company's operating results for the three months ended May 31, 2020 and May 31, 2019 are summarized as follows:





                                               May 31,        May 31,
                                                 2020           2019         Variance
Revenues                                      $    1,619     $  139,208     $ (137,589 )
Operating expenses:
Selling, general & administrative                193,456        319,729       (126,273 )
Product fulfillment, exploration and mining        3,435         31,637        (28,202 )
Loss from operations                            (195,272 )     (212,158 )       16,886
Other income (expenses)                            3,226        (15,856 )       19,082
Net Loss                                      $ (192,046 )   $ (228,014 )   $   35,968




Revenues

Revenue decreased by $137,589, or 99%, for the three months ended May 31, 2020, as compared to the three months ended May 31, 2019, primarily as a result of a decrease in sales of the Shade Advantage (WP) and SulFe Hume Si Advantage products due to customers buying more than they anticipated needing in the three months ended May 31, 2019.





Operating Costs and Expenses

Selling, general and administrative expenses decreased by $126,273, or 39%, for the three months ended May 31, 2020, as compared to the three months ended May 31, 2019, primarily due to the following: (i) a decrease in payroll and related benefits of $50,486 due to a reduction of employees, (ii) a decrease in consulting expense of $30,000, and (iii) a write-off of payables of $42,428 resulting from unapproved expense reports from a terminated employee and a former director.





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Product fulfillment and exploration and mining expenses decreased by $28,202, or 89%, for the three months ended May 31, 2020, as compared to the three months ended May 31, 2019 primarily as a result of the three months ended May 31, 2019 including $31,378 in costs related to the products ordered as mentioned above in the revenue section. In addition, there were no mining claim royalty fees during the three months ended May 31, 2020.





Other Income (Expense)

Other income (expense) increased by $19,082, or 220%, for the three months ended May 31, 2020, as compared to the three months ended May 31, 2019, primarily due to a decrease in interest expense as a result of the Company converting payables and a note payable owed to USMC to common stock during the fourth quarter of the fiscal year 2019.

Comparison of the Six Months Ended May 31, 2020 and the Six Months Ended May 31, 2019

A comparison of the Company's operating results for the six months ended May 31, 2020 and May 31, 2019 are summarized as follows:





                                               May 31,        May 31,
                                                 2020           2019         Variance
Revenues                                      $    6,129     $  186,458     $ (180,329 )
Operating expenses:
Selling, general & administrative                355,434        634,269       (278,835 )
Product fulfillment, exploration and mining        5,194         86,452        (81,258 )
Loss from operations                            (354,499 )     (534,263 )      179,764
Other income (expenses)                            6,041        (31,642 )       37,683
Net Loss                                      $ (348,458 )   $ (565,905 )   $  217,447




Revenues

Revenue decreased by $180,329, or 97%, for the six months ended May 31, 2020, as compared to the six months ended May 31, 2019, primarily as a result of a decrease in sales of the Shade Advantage (WP) and SulFe Hume Si Advantage products due to customers buying more than they anticipated needing in the six months ended May 31, 2019.





Operating Costs and Expenses

Selling, general and administrative expenses decreased by $278,835, or 44%, for the six months ended May 31, 2020, as compared to the six months ended May 31, 2019, primarily due to the following: (i) a decrease in stock-based compensation of $30,116, (ii) a decrease in legal and accounting fees of $68,461 primarily due to a change in auditors, (iii) a decrease in payroll and related benefits of $95,988 due to a reduction of employees, (iv) a write-off of payables of $42,428 resulting from unapproved expense reports from a terminated employee and a former board member, and (v) a decrease in consulting expense of $46,332.

Product fulfillment and exploration and mining expenses decreased by $81,258, or 94%, for the six months ended May 31, 2020, as compared to the six months ended May 31, 2019 primarily as a result of the six months ended May 31, 2019 including $69,178 in costs related to the products ordered as mentioned above in the revenue section. In addition, there were no mining claim royalty fees during the six months ended May 31, 2020.





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Other Income (Expense)

Other income (expense) increased by $37,683, or 220%, for the six months ended May 31, 2020, as compared to the six months ended May 31, 2019, primarily due to a decrease in interest expense as a result of the Company converting payables and a note payable owed to USMC to common stock during the fourth quarter of the fiscal year 2019.

Liquidity and Capital Resources

As of May 31, 2020, we had no cash on hand and a working capital deficiency of approximately $918,000, as compared to cash on hand of $8,400 and a working capital deficiency of $946,405 as of November 30, 2019. The decrease in working capital deficiency is mainly due to an approximate $13,000 decrease in accounts receivable, an approximate decrease in accounts payable and accrued expenses of $122,000, and a $50,000 decrease in the settlement liability due to a partial payment of an outstanding litigation claim. These decreases were offset by an approximate $161,000 increase in due to affiliated entities as a result of a cash infusion from USMC.





Future Financing

We will require additional funds to implement our growth strategy. We currently expect further exploration and development of our current or future projects and the sale of our agricultural products to continue generating sales revenues, but we do not believe that our current cash and cash equivalents will be sufficient to meet our working capital requirements for the next twelve-months. We have had negative cash flow from operating activities as we have not yet begun to generate sufficient and consistent revenues to cover our operating expenses. Until we are able to establish a sufficient revenue stream from operations our ability to meet our current financial liabilities and commitments will be primarily dependent upon proceeds from outside capital sources including USMC, an affiliated entity. There is no assurance that we will be able to obtain necessary amounts of capital or that our estimates of our capital requirements will prove to be accurate. Even if we are able to secure outside financing, it may not be available in the amounts or times when we require or on favorable terms. We currently do not have any agreements or understandings for additional financing. If we are unable to raise sufficient capital we will be required to delay or forego some portion of our business plan, which would have a material adverse effect on our anticipated results from operations and financial condition or cease operations.

Furthermore, such outside financing would likely take the form of bank loans, private offerings of debt or equity securities, advances from affiliates or some combination of these. The issuance of additional equity securities would dilute the stock ownership of current investors while incurring loans, lines of credit or long-term debt by the Company would increase its cash flow requirements and possible loss of valuable assets if such obligations were not repaid in accordance with their terms and may subject the Company to restrictions on its operations and corporate actions.





Going Concern

The unaudited condensed consolidated financial statements presented in this Quarterly Report have been prepared under the assumption that the Company will continue as a going concern. The Company has accumulated losses from inception through May 31, 2020, of approximately $11.6 million, as well as negative cash flows from operating activities. During the six months ended May 31, 2020, the Company received net cash proceeds of approximately $161,000 from USMC, an affiliated entity. Presently the Company does not have sufficient cash resources to meet its debt obligations in the twelve months following the date of this Quarterly Report. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management is in the process of evaluating various financing alternatives in order to finance the capital requirements of the Company. There can be no assurance that the Company will be successful with its fund-raising initiatives.

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





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Working Capital Deficiency

Our working capital deficiency as of May 31, 2020, in comparison to our working capital deficiency as of November 30, 2019, can be summarized as follows:





                                            May 31,       November 30,
                                             2020             2019
              Current assets               $  43,313     $       30,416
              Current liabilities            961,458            976,821
              Working capital deficiency   $ 918,145     $      946,405

The increase in current assets is primarily due to an increase in prepaid expenses and other assets of $33,332 which is offset by a decrease in cash and accounts receivable of $8,400 and $12,700, respectively. A majority of current liabilities remained consistent during the six month period ending May 31, 2020, however, due to affiliates increased approximately $161,000, settlement liability decreased $50,000 due to a partial payment on an outstanding litigation claim, and accounts payable and accrued expenses decreased approximately $122,000 at May 31, 2020.





Cash Flows



                                                    Six Months Ended
                                             May 31, 2020       May 31, 2019

Net cash used in operating activities $ (396,211 ) $ (419,930 ) Net cash provided by financing activities 387,811

            413,125
Increase (decrease) in cash                 $       (8,400 )   $       (6,805 )




Operating Activities

Net cash used in operating activities was $396,211 for the six months ended May 31, 2020. This was primarily due to the net loss of $348,458 and a decrease of $50,000 in the settlement liability due to a partial payment on an outstanding litigation claim which was partially offset by non-cash expenses of approximately $30,000 and $17,000 related to stock-based compensation and amortization of debt discount, respectively.

Net cash used in operating activities was $419,930 for the six months ended May 31, 2019. This was primarily due to the net loss of $565,905 and an increase in accounts receivable of $136,500, which was partially offset by an increase in due to affiliates and accounts payable and accrued expenses of $81,611 and $45,134, respectively.





Investing Activities

There were no investing activities during the six months ended May 31, 2020 and 2019.





Financing Activities

For the six months ended May 31, 2020, net cash provided by financing activities was $387,811, which was primarily due to $178,000 from convertible notes payable received from USMC and cash advanced to the Company by USMC of $161,000.

For the six months ended May 31, 2019, net cash provided by financing activities was $413,125, which represented cash advanced to the Company by USMC.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.





Effects of Inflation

We do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented.





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Critical Accounting Policies and Procedures

Our significant accounting policies are more fully described in the notes to our financial statements included herein for the quarter ended May 31, 2020, and in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2019, as filed with the SEC on February 28, 2020.

Recently Adopted Accounting Pronouncements

Our recently adopted accounting pronouncements are more fully described in Note 2 to our financial statements herein for the quarter ended May 31, 2020.

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