Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements that reflect management's current views with respect to future events and financial performance. Forward-looking statements are statements in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. These statements include statements regarding the intent, belief or current expectations of our management team, as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set forth in the section entitled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended November 30, 2021, as filed with the Securities and Exchange Commission (the "SEC") on March 15, 2022, any of which may cause our company's or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in our forward-looking statements. These risks and factors include, by way of example and without limitation:





?      absence of contracts with customers or suppliers;
?      our ability to maintain and develop relationships with customers and
       suppliers;
?      the impact of competitive products and pricing;
?      supply constraints or difficulties;
?      the retention and availability of key personnel;
?      general economic and business conditions;
?      substantial doubt about our ability to continue as a going concern;
?      our ability to successfully implement our business plan;
?      our need to raise additional funds in the future;
?      our ability to successfully recruit and retain qualified personnel in
       order to continue our operations;
?      our ability to successfully acquire, develop or commercialize new
       products;
?      the commercial success of our products;
?      the impact of any industry regulation;
?      our ability to develop existing mining projects or establish proven or
       probable reserves;
?      our dependence on one vendor for our minerals for our products;
?      the impact of potentially losing the rights to properties;
?      the impact of the increase in the price of natural resources; and
?      the continued impact of the COVID-19 pandemic.

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

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





Business Overview

We are an industrial mineral and natural resource company that provides solutions to the agriculture and construction materials markets in the United States, through our two subsidiaries, Purebase AG, and Purebase SCM, respectively. The Company has not yet commenced mining operations.





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Agricultural Sector

We develop specialized fertilizers, sun protectants, soil amendments and bio-stimulants for organic and non-organic sustainable agriculture. We have developed and will seek to develop additional products derived from mineralized materials of leonardite, kaolin clay, laterite, and other natural minerals. These mineral and soil amendments are used to protect crops, plants and fruits from the sun and winter damage, to provide nutrients to plants, and to improve dormancy and soil ecology to help farmers increase the yields of their harvests. We are building a brand family under the parent trade name "Purebase," consisting of its Purebase Shade Advantage WP product, a kaolin-clay based sun protectant for crops.





Construction Sector

We have been developing and testing a kaolin-based product that it believes will help create a lower CO2-emitting concrete through the use of high-quality supplementary cementitious materials ("SCMs"). We are developing a SCM that we believe can potentially replace up to 40% of cement, the most polluting part of concrete. As government agencies continue to enact stricter requirements for less-polluting forms of concrete, we believe there are significant opportunities for high-quality SCM products in the construction-materials sector.

We utilize the services of US Mine Corporation ("USMC"), a Nevada corporation and a significant shareholder of the Company, for the development and contract mining of industrial mineral and metal projects, exploration drilling, preparation of feasibility studies, mine modeling, on-site construction, production, site reclamation and for product fulfillment. Exploration services include securing necessary permits, environmental compliance, and reclamation plans. In addition, a substantial portion of the minerals used by the Company are obtained from properties owned or controlled by USMC. A. Scott Dockter, the Company's Principal Executive Officer and a director, and John Bremer, a director, are also officers, directors and owners of USMC.





Recent Developments

A settlement agreement was entered into between the Company and Agregen International Corp, Robert Hurtado, James Todd Gauer and John Gingerich, effective June 3, 2022 (the "Settlement Agreement"), and a Notice of Settlement was filed in the Second Judicial District Court in the State of Nevada, Washoe County pursuant to which, among other things, 8,669,400 shares of the Company's common stock beneficially owned by the defendants were surrendered to the Company on August 11, 2022.

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

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

On August 30, 2022, the Company issued a two-year convertible promissory note in the principal amount of $470,862 to USMC. The note bears interest at 5% per annum. Amounts due under the note may be converted into shares of the Company's common stock at any time at the option of the noteholder at a conversion price of $0.39 per share.





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Results of Operations

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

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





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




Revenues

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





Operating Expenses

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





Other Expense

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

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

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





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




Revenues

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





Operating Expenses

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





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Other Expense

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

Liquidity and Capital Resources

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

We will require additional funds to implement our growth strategy. We do not believe that our current cash and cash equivalents will be sufficient to meet our working capital requirements for the next twelve months. We have had negative cash flow from operating activities as we have not yet begun to generate sufficient and consistent revenues to cover our operating expenses. Until we are able to establish a sufficient revenue stream from operations, our ability to meet our current financial liabilities and commitments will be primarily dependent upon proceeds from outside capital sources including USMC, an affiliated entity. On April 7, 2022, the Company entered into a securities purchase agreement with USMC, a related party, pursuant to which the Company may issue up to an aggregate of $1,000,000 of two-year convertible promissory notes to USMC, a related party. The notes bear interest at 5% per annum and any outstanding principal or interest under the notes are convertible into shares of the Company's common stock, at any time at the option of the holder, at a conversion price of $0.39 per share. Currently, the Company has issued $470,862 of convertible notes under such securities purchase agreement and may issue an additional $529,138 of convertible notes. However, there currently are no other arrangements or agreements for financing, and management cannot guarantee any other potential debt or equity financing will be available, or if available, on favorable terms. Furthermore, additional equity financing may dilute the stock ownership of current shareholders while debt financing may subject the Company to restrictions on its operations and corporate actions. As such, these matters raise substantial doubt about the Company's ability to continue as a going concern for a period of twelve months from the issue date of this report. If adequate funds are not available on acceptable terms, or at all, the Company will need to curtail operations, or cease operations completely.





Going Concern

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

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





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Working Capital Deficiency

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




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

The $88,597, or 64%, increase in current assets is primarily due to an increase in accounts receivable of $207,809, partially offset by a decrease in cash of $120,527. Current liabilities decreased $1,768,393, or 74%, during the nine months ended August 31, 2022, as compared to the nine months ended August 31, 2021, primarily due to a decrease in convertible notes payable of $963,671 and a decrease of amounts due to affiliated entities of $729,059 during the nine months ended August 31, 2022.





Cash Flows



                                                 Nine Months Ended
                                            August 31,      August 31,
                                               2022            2021

Net cash used in operating activities $ (720,527 ) $ (935,034 ) Net cash provided by financing activities 600,000 940,361 Increase or (decrease) in cash

$  (120,527 )   $     5,327




Operating Activities

Net cash used in operating activities was $720,527 for the nine months ended August 31, 2022, as compared to $935,034 for the same period ended August 31, 2021. The increase was primarily due to a decrease in accounts receivable of $160,891 and an increase in accounts payable and accrued expenses of $44,003.





Financing Activities

Net cash provided by financing activities was $600,000 for the nine months ended August 31, 2022, as compared to $940,361 for the same period ended August 31, 2021. The increase was primarily due to a decrease in advances of $359,461 to the Company by USMC, which was partially offset by a decrease of $19,100 of payments on notes due to officers.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies and Procedures

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

Recently Adopted Accounting Pronouncements

Our recently adopted accounting pronouncements are more fully described in Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

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