v3.25.2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
 6 Months Ended
May 31, 2025
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

 

The Company has prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) including Form 10-Q and Regulation S-X. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments, unless otherwise indicated) which are, in the opinion of management, necessary to fairly state the operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted pursuant to such rules and regulations. These financial statements and the information included under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the audited financial statements and notes thereto for the year ended November 30, 2024, in our Annual Report on Form 10-K filed with the SEC on February 28, 2025. The results of the six months ended May 31, 2025 (unaudited), are not necessarily indicative of the results to be expected for the full year ending November 30, 2025.

 
Principles of Consolidation

Principles of Consolidation

 

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

 
Use of Estimates

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 may be affected.

 

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

 
Revenue

Revenue

 

The Company accounts for revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. The Company derives revenues from the sale of products from its agricultural sector and construction sector. The Company’s contracted transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s contracts have a single performance obligation which are not separately identifiable from other promises in the contracts and is, therefore, not distinct. The Company’s performance obligation is satisfied upon the transfer of control to the customer.

 

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Practical Expedients

 

As part of ASC Topic 606, the Company has adopted 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 and Partially Unsatisfied Performance Obligations – for all performance obligations related to contracts with a duration for less than one year, the Company has elected to apply the optional exemption provided in ASC Topic 606 and therefore is not required to disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied or partially satisfied at the end of the reporting period.
  ● Shipping and Handling Activities – the Company elected to account for shipping and handling activities as a fulfillment cost rather than as a separate performance obligation.
  ● Right to Invoice – the Company has a right to consideration from a customer in an amount that corresponds directly with the value provided to the customer of the Company’s performance completed to date. The Company may recognize revenue in the amount to which the entity has a right to invoice.

  
Cash and Cash Equivalents

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. There were no cash equivalents as of May 31, 2025 and November 30, 2024.

 
Accounts Receivable

Accounts Receivable

 

The Company periodically assesses its accounts and other receivables for collectability on a specific identification basis. If collectability of an account becomes unlikely, a credit loss is recorded for that doubtful account. As of May 31, 2025, the Company has determined that no allowance for credit losses was necessary. As of November 30, 2024, the Company had no accounts receivable.

 
Property and Equipment

Property and Equipment

 

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

 

SCHEDULE OF ESTIMATED USEFUL LIFE OF PROPERTY AND EQUIPMENT

Equipment 3-5 years
Autos and trucks 5 years
SCM plants 30 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. The Company currently has $547,907 in property and equipment that it acquired on May 1, 2020. As of May 31, 2025, the Company has not put the acquired property and equipment to use. As such, the Company has not recorded depreciation related to these assets. The Company has $202,809 in costs for its pilot plant which has begun manufacturing sample quantities of the Company’s SCM product for testing by third-parties. The Company has begun recording depreciation related to the pilot plant. The Company also has $60,213 in other fixed assets which are fully depreciated.

 

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 
Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

 

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then these assets are written down first, followed by other long-lived assets of the operation to fair value. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets. No impairment losses were recorded during the three and six months ended May 31, 2025 and 2024.

 
Shipping and Handling

Shipping and Handling

 

The Company occasionally incurred shipping and handling costs which are charged back to the customer. There were no net amounts incurred or included in general and administrative expenses for the three and six months ended May 31, 2025 and 2024.

 
Advertising and Marketing Costs

Advertising and Marketing Costs

 

The Company expenses advertising and marketing costs as incurred and such costs are recorded in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. Advertising and marketing expenses were $10,807 and $7,950 for the three months ended May 31, 2025 and 2024, respectively. Advertising and marketing expenses were $20,276 and $14,450 for the six months ended May 31, 2025 and 2024, respectively.

 
Fair Value Measurements

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.

 

 

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 
Fair Value of Financial Instruments

Fair Value of Financial Instruments

 

The carrying value of cash, accounts payable, and accrued expenses approximate their fair values based on the short-term maturity of these instruments. The carrying amount of the notes approximates the estimated fair value for these financial instruments as management believes that such notes constitute all of the Company’s debt and interest payable on the notes based on the Company’s incremental borrowing rate.

 
Loss Per Common Share

Loss Per Common Share

 

Net loss per share of common stock is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the three and six months ended May 31, 2025 and 2024. All outstanding options are considered potential common stock. The dilutive effect, if any, of stock options are calculated using the treasury stock method. All outstanding convertible notes are considered common stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method. Since the effect of common stock equivalents is anti-dilutive with respect to losses, outstanding options have been excluded from the Company’s computation of net loss per share of common stock for the three and six months ended May 31, 2025 and 2024.

 

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 even though the exercise price could be less than the average market price of the common stock:

 

   Three Months Ended, 
   May 31, 2025   May 31, 2024 
Convertible Notes   27,483,685    11,020,992 
Stock Options   130,234,907    129,438,187 
Total   157,718,592    140,459,179 

 

   Six Months Ended, 
   May 31, 2025   May 31, 2024 
Convertible Notes   27,483,685    11,020,992 
Stock Options   130,234,907    129,438,187 
Total   157,718,592    140,459,179 

 
Stock-Based Compensation

Stock-Based Compensation

 

The Company applies the provisions of ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock-based awards made to employees, including employee stock options, in the accompanying condensed consolidated statements of operations.

 

For stock options issued to employees and members of the Company’s Board of Directors (the “Board”) for their services, the Company estimates the grant date fair value of each option using the Black-Scholes option pricing model. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common 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 the vesting term. Forfeitures are recorded as they are incurred as opposed to being estimated at the time of grant and revised.

 

Pursuant to ASU 2018-07 Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, the Company accounts for stock options issued to non-employees for their services in accordance with ASC 718. The Company uses valuation methods and assumptions to value the stock options that are in line with the process for valuing employee stock options as noted above.

 

 

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 
Leases

Leases

 

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

 

The Company leases its corporate offices. All of the leases are classified as operating leases. The Company is a party to a two-year lease, with USMC, a related party, for 1,000 square feet of office space located in Ione, California (the “Ione Lease”) with respect to its corporate operations (See Note 12). Effective November 1, 2022, the Ione Lease was amended to extend the lease through October 2024 and to add an additional 700 square feet of office space for a total monthly rental price of $3,500 per month. Effective November 1, 2024, the lease was amended to change the term to month-to-month at $1,500 per month. The Company no longer leases the additional 700 square feet. In May 2025, we moved our corporate offices to Sutter Creek, California. We lease from our Chief Executive Officer for $1,500 per month. The lease expires in April 2026. The Company plans to extend the lease upon expiration of the initial term and therefore did not elect to apply the exemption clause for short-term leases.

 

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

 
Income Taxes

Income Taxes

 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the condensed consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carry forwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in 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 condensed consolidated financial statements or tax returns. The Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

 

For uncertain tax positions that meet a “more likely than not” threshold, the Company recognizes the benefit of uncertain tax positions in the condensed consolidated financial statements. The Company’s practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the condensed consolidated statements of operations.

 
Exploration Stage

Exploration Stage

 

In accordance with U.S. GAAP, expenditures relating to the acquisition of mineral rights are initially capitalized as incurred while exploration and pre-extraction expenditures are expensed as incurred until such time as the Company exits the exploration stage by establishing proven or probable reserves. Expenditures relating to exploration activities such as drill programs to establish mineralized materials are expensed as incurred. Expenditures relating to pre-extraction activities are expensed as incurred until such time proven or probable reserves are established for that project, after which expenditures relating to mine development activities for that particular project are capitalized as incurred. As of May 31, 2025, the Company was not engaged in any mine exploration.

 

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 
Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

In November 2024, FASB issued Accounting Standards Update (ASU) 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures and Disaggregation of Income Statement Expenses

 

The amendments in the Update require disclosure, in the notes to the financial statements, of specific information about certain costs and expenses. The amendments require that at each interim and annual reporting period an entity:

 

1Disclose the amounts of (a) purchases of inventory, (b) employee compensation (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities ((DD&A) (or other amounts of depletion expense) included in each relevant expense caption. A relevant expense caption is an expense caption presented on the face of the income statement within continuing operations that contains an of the expense categories listed in (a)-(e).
2Include certain amounts that are already required to be disclosed under current generally accepted accounting principles (GAAP) in the same disclosure as the other disaggregation requirements.
3Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively.
4Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses.

 

The amendments in this Update are effective for annual reporting periods after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company has determined that such disclosures will result in expanded notes to the financial statements. The Company will adopt ASU 2024-03 on or before November 30, 2027.

 

In December 2023, FASB issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740). The amendment’s main provisions are rate reconciliation, income taxes paid, and other disclosures.

 

For rate reconciliation, the amendments require that public business entities on an annual basis disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

 

Public business entities are required to disclose a tabular reconciliation, using both percentages and reporting currency amounts, according to the following requirements:

 

1The following specific categories are required to be disclosed:

 

aState and local income tax, net of federal income tax effect,
bForeign tax effects,
cEffect of changes in tax laws or rates enacted in the current period,
dEffect of cross-border tax laws,
eTax credits,
fChanges in valuation allowances,
gNontaxable or nondeductible items,
hChanges in unrecognized tax benefits.

 

2Separate disclosure is required for any reconciling item listed below in which the effect of the reconciling item is equal to or greater than 5 percent of the amount computed by multiplying income (or loss) from continuing operations before income taxes by the applicable statutory income tax rate:

 

aIf the reconciling item is within the effect of cross-border tax laws, tax credits, or nontaxable or nondeductible items categories, it is required to be disaggregated by nature,
bIf the reconciling item is within the foreign tax effects category, it is required to be disaggregated by jurisdiction (country) and by nature, except for reconciling items related to changes in unrecognized tax benefits discussed in (4),
cIf the reconciling item does not fall within any of the categories listed in (1), it is required to be disaggregated by nature.

 

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

3For the purpose of categorizing reconciling items, except for reconciling items related to changes in unrecognized tax benefits discussed in (4), the state and local income tax category should reflect income taxes imposed at the state or local level within the jurisdiction (country) of domicile, the foreign tax effects category should reflect income taxes imposed by foreign jurisdictions, and the remaining categories listed in (1) should reflect federal (national) income taxes imposed by the jurisdiction (country) of domicile.

 

4For the purpose of presenting reconciling items:

 

aReconciling items are required to be presented on a gross basis with two exceptions under which unrecognized tax benefits and the related tax positions and tax effects of certain cross-border tax laws and the related tax credits may be presented on a net basis,
bReconciling items presented in the changes in unrecognized tax benefits category may be disclosed on an aggregate basis for all jurisdictions.

 

For income taxes paid, the amendments require that all entities disclose on an annual basis the following information about income taxes paid:

 

1The amount of income taxes paid (net of funds received) disaggregated by federal (national), state, and foreign taxes,
2The amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refund received).

 

For other disclosures, the amendments require that all entities disclose the following information:

 

1Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign,
2Income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign.

 

The amendments in this ASU are effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures.