PUREBASE CORPORATION Our Management's Discussion and Analysis contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "intends", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these statements, which speak only as of the date of this Annual Report. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. You should read this Annual Report on Form 10-K with the understanding that our actual future results may be materially different from what we expect. All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by applicable law.
Management's discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements which have been
prepared in accordance with accounting principles generally accepted in
Business Overview
We are an industrial mineral and natural resource company that provides
solutions to the agriculture and construction materials markets in
Agricultural Sector
We develop specialized fertilizers, sun protectants, soil amendments and
bio-stimulants for organic and non-organic sustainable agriculture. We have
developed and will seek to develop additional products derived from mineralized
materials of leonardite, kaolin clay, laterite, and other natural minerals.
These mineral and soil amendments are used to protect crops, plants and fruits
from the sun and winter damage, to provide nutrients to plants, and to improve
dormancy and soil ecology to help farmers increase the yields of their harvests.
We are building a brand family under the parent trade name "
Construction Sector
We are developing and testing a kaolin-based product that it believes will help create a lower CO2-emitting concrete through the use of high-quality supplementary cementitious materials ("SCMs"). We are developing SCMs for the construction material markets, particularly the cement markets that we believe can potentially replace up to 40% of cement, the most polluting part of concrete. As government agencies continue to enact stricter requirements for less-polluting forms of concrete, we believe there are significant opportunities for high-quality SCM products in the construction-materials sector.
We utilize the services of USMC, for the development and contract mining of
industrial mineral and metal projects, exploration drilling, preparation of
feasibility studies, mine modeling, on-site construction, production, site
reclamation and for product fulfillment. Exploration services include securing
necessary permits, environmental compliance, and reclamation plans. In addition,
a substantial portion of the minerals used by the Company are obtained from
properties owned or controlled by USMC.
24 Results of Operations Comparison of the Year EndedNovember 30, 2022 to the Year EndedNovember 30, 2021 November 30, November 30, 2022 2021 Variance Revenue, net$ 471,608 $ 369,450 $ 102,158 Operating Expenses: Selling, general and administrative 32,883,673 8,500,338 24,383,335 Product fulfillment 132,247 107,928 24,319 Loss from operations (32,544,312 ) (8,238,816 ) (24,305,496 ) Other income (expense) 2,007 23,200 (21,193 ) Interest expense (40,120 ) (91,581 ) 51,461 Net Loss$ (32,582,425 ) $ (8,307,197 ) $ (24,275,228 ) Revenues
Revenues increased by
Operating Expenses
Total operating expenses increased by
Product fulfillment expenses increased by
Other Income (Expenses)
Other income (expense) decreased
Liquidity and Capital Resources
As of
The Company's operating activities consume the majority of its cash resources. The Company anticipates that it will continue to incur operating losses as it executes its development plans for 2023, as well as other potential strategic and business development initiatives. In addition, the Company has had and expects to have negative cash flows from operations, at least into the near future. The Company has previously funded, and plans to continue funding, these losses with cash advances from USMC and the sale of equity, and convertible notes. The accompanying consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
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Although no assurances can be given as to the Company's ability to deliver on
its revenue plans or that unforeseen expenses may arise, management currently
believes that the revenue to be generated from operations together with equity
and debt financing, including funding from USMC in connection with the
Going Concern
The consolidated financial statements contained in this Annual Report on Form
10-K have been prepared assuming that the Company will continue as a going
concern. The Company has accumulated losses from inception through
The consolidated financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.
Working Capital Deficiency
November 30, November 30,
2022 2021
Current assets $ 23,786 $ 138,903
Current liabilities 644,076 2,380,157
Working capital deficiency $ (620,290 ) $ (2,241,254 ) The decrease in current assets is primarily due to the decrease in cash on hand
of
Cash Flows
Year Ended
November 30,
2022 2021
Net cash used in operating activities
- -
Net cash provided by financing activities 725,000 948,420
Increase (decrease) in cash $ (113,254 ) $ 124,859
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Operating Activities
Net cash used in operating activities was
Net cash used in operating activities was
Financing Activities
For the year ended
For the year ended
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Effects of Inflation
Inflationary factors such as increases in the costs to purchase products, acquire mineral rights and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a continued high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of revenues if the selling prices of our services do not increase with these increased costs.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in Note 3 to our
consolidated financial statements included in this Annual Report for the fiscal
year ended
Fair Value Measurement
As defined in ASC 820, "Fair Value Measurements and Disclosures," fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company 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.
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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.
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 operations 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.
Revenue Recognition
The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. 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.
Exploration Stage
In accordance with GAAP, expenditures relating to the acquisition of mineral rights are initially capitalized as incurred while exploration and pre-extraction expenditures are expensed as incurred until such time as the Company exits the exploration stage by establishing proven or 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.
28 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
Where proven and probable reserves have been established, the project's capitalized expenditures are depleted over proven and probable reserves upon commencement of production using the units-of-production method. Where proven and probable reserves have not been established, such capitalized expenditures are depleted over the estimated production life upon commencement of extraction using the straight-line method.
The carrying values of the mineral rights are assessed for impairment by management on a quarterly basis or when indicators of impairment exist. Should management determine that these carrying values cannot be recovered, the unrecoverable amounts are written off against earnings.
Stock-Based Compensation
The Company applies the provisions of ASC 718, Compensation-Stock Compensation ("ASC 718"), which requires the measurement and recognition of compensation expense for all stock-based awards made to employees, including employee stock options, in its statements of operations.
For stock options issued to employees and members of the Company's board of directors 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.
Recently Adopted Accounting Pronouncements
Any new and recently adopted accounting pronouncements are more fully described
in Note 3 to our consolidated financial statements included in this Annual
Report for the year ended
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