Executive Summary / Key Takeaways

• Strategic Pivot to Agriculture Represents Last Viable Path: Purebase's decision to abandon the supplementary cementitious materials (SCM) construction market in favor of agricultural minerals reflects a rational pursuit of higher margins, but comes after years of capital destruction and leaves the company competing against well-capitalized agribusiness giants with negligible market share and severely limited resources.

• Existential Financial Crisis with Imminent Funding Risk: With an accumulated deficit of $65.52 million, working capital deficit of $749,973, and only $97,921 cash on hand as of August 31, 2025, the company faces substantial doubt about its ability to continue as a going concern, now dependent on dilutive bridge loans after cutting off related-party funding from US Mine Corporation (USMC).

• Micro-Scale Operations Create Insurmountable Competitive Disadvantages: Trailing twelve-month revenue of just $286,000 represents a tiny fraction of competitors' scale, resulting in unit costs that are qualitatively 2-3x higher and preventing the company from achieving the production volumes or R&D investment necessary to compete with The Andersons , United States Antimony , or Imerys .

• Concentration Risk Permeates Every Aspect of Operations: Four customers accounted for 100% of revenue, one supplier for 100% of purchases, and one customer for 100% of accounts receivable, creating single points of failure across the entire value chain while the company simultaneously grapples with material weaknesses in internal controls.

• CEO's Share Purchase Signals Confidence but Magnifies Governance Concerns: A. Scott Dockter's agreement to purchase 122.95 million shares from USMC for $14.56 million suggests insider conviction, yet occurs alongside related-party transactions, office leases from the CEO, and a history of rescinded agreements that raise questions about arm-length dealings and board independence.

Setting the Scene: A Decade of False Starts and Capital Destruction

Purebase Corporation, originally incorporated as Port of Call Online, Inc. in Nevada on March 2, 2010, and headquartered in Sutter Creek, California since May 2025, has spent fifteen years and $65.52 million in accumulated losses searching for a viable business model. This history explains why management is now making a desperate pivot after exhausting multiple strategic directions and burning through related-party funding that has now been severed.

The company's place in the value chain is theoretically straightforward: extract and process natural minerals—leonardite , kaolin clay , and laterite —into specialized fertilizers, sun protectants, and soil amendments for organic and sustainable agriculture. In practice, Purebase operates as a micro-scale distributor with no owned mining assets, dependent on third-party suppliers and contract manufacturing agreements that have been repeatedly rescinded or restructured. This structural weakness prevents the company from controlling its cost base or guaranteeing supply, a fatal disadvantage when competing against vertically integrated rivals.

Purebase's strategic differentiation has shifted repeatedly. The company initially pursued construction SCMs, believing its kaolin-based product could replace up to 40% of cement content. After years of development and pilot plant investments, management abruptly abandoned this market in August 2025, citing a two-year construction timeline and lower margins. This decision, while rational on paper, represents a tacit admission that the company lacked the capital and technical capabilities to compete in industrial materials. The pivot to agriculture reflects a search for a faster path to market, but the competitive landscape reveals why this may be too little, too late.

Technology, Products, and Strategic Differentiation: Niche Formulations vs. Scale Economics

Purebase's core technology centers on two branded products: Purebase Shade Advantage WP, a kaolin-clay based sun protectant, and Humic Advantage, a humic acid derivative from leonardite. The technology's theoretical advantage lies in providing natural, chemical-free alternatives to synthetic crop protectants, appealing to the growing regenerative agriculture market projected to expand 20% annually through 2030. This positioning targets a premium segment willing to pay for sustainability credentials, potentially supporting gross margins that reached 74.33% in the trailing twelve months.

However, the absence of quantitative performance data creates a credibility gap. While competitors like The Andersons publish documented yield improvements of 5-10% for their soil health products, Purebase offers no comparable efficacy metrics. Farmers make purchasing decisions based on return on investment, and without proven performance data, Purebase cannot command premium pricing or build customer loyalty. The company's 58% revenue decline in the most recent quarter, attributed to "cooler weather," suggests its products are viewed as discretionary inputs rather than essential crop protection, making sales highly vulnerable to seasonal variations and customer budget constraints.

The decision to exit the SCM construction market eliminates a capital-intensive distraction but also removes a potential differentiator. The construction sector offered opportunities in low-carbon concrete amid stricter environmental regulations, but required approximately $10-50 million in capital expenditure for a production facility—funds Purebase simply does not have. This strategic retrenchment narrows the company's addressable market while doing nothing to solve its fundamental scale disadvantage. Competitors like Imerys , with $3.74 billion in revenue and 16.3% EBITDA margins, can afford to serve both construction and agriculture, cross-subsidizing R&D and maintaining customer relationships across market cycles.

Purebase's export strategy to Asia represents its only meaningful differentiation. The company's April 2025 shipments to Pakistan and India demonstrate an ability to access high-growth markets where demand for natural soil amendments is expanding at 5%+ annually. This diversifies revenue away from the saturated U.S. market and exploits competitors' geographic blind spots. However, the scale remains minuscule—likely under $50,000 per shipment based on total revenue—and exposes the company to currency fluctuations and international regulatory risks it lacks the resources to manage effectively.

Financial Performance & Segment Dynamics: Evidence of a Broken Model

Purebase's financial results provide damning evidence that its strategy is not working. Consolidated revenue of $86,814 for the three months ended August 31, 2025, represents a 58% year-over-year decline, while nine-month revenue of $285,435 fell 8%. Management's attribution of this collapse to "cooler weather" reveals a business with no pricing power or customer stickiness—sales evaporate when environmental conditions shift, indicating the products are perceived as optional rather than essential. This cyclical vulnerability stands in stark contrast to The Andersons , which grew revenue 2.19% year-over-year to $11.6 billion despite weather variations, demonstrating the stability that comes from scale and diversified distribution.

The cost structure reveals deeper problems. While cost of goods sold decreased 57% in the quarter, mirroring the revenue decline, total operating expenses increased 8% to $432,000. This divergence shows Purebase cannot achieve operating leverage—every dollar of revenue lost does not bring a corresponding reduction in overhead, accelerating cash burn. General and administrative wages rose $59,230 despite the revenue collapse, suggesting management has not right-sized the organization for its micro-scale reality. Meanwhile, repairs for the calciner pilot plant decreased $45,444, but this merely reflects the abandonment of the SCM strategy rather than operational efficiency.

Cash flow dynamics paint a picture of imminent insolvency. Net cash used in operating activities reached $947,074 for the nine months ended August 31, 2025, while free cash flow was negative $2.17 million on a trailing twelve-month basis. With only $97,921 cash on hand, the company has approximately half a month of runway at current burn rates. This explains the desperate turn to dilutive bridge financing: a $650,000 loan from J.J. Astor Co. in July 2025 required issuing 750,000 shares upfront, with another 750,000 shares likely due because the stock trades below $0.10, well short of the $0.50 threshold. The subsequent $123,050 loan from Vanquish Funding in September 2025 carries a 12% interest rate and conversion rights at a 35% discount, setting up a death spiral of dilution.

The balance sheet deterioration is equally alarming. The working capital deficit improved from $1.09 million to $749,973 only because $1.42 million of related-party debt was converted to equity in June 2025, not from operational improvement. This represents a one-time accounting benefit that masks continued operational cash burn. The company now carries $422,834 in third-party notes payable, $515,449 in new advances from USMC despite management's claim that funding from this source has ceased, and a contingent stock issuance liability of $31,500. The debt-to-equity ratio is meaningless given negative book value, but the absolute debt burden consumes 3.4x trailing revenue, a level that would be unsustainable even for a profitable company.

Outlook, Management Guidance, and Execution Risk: Fragile Assumptions and Governance Red Flags

Management's guidance rests on a precarious assumption that "revenue to be generated from operations together with bridge loans and equity and debt financing, will provide the necessary funding for the Company to continue as a going concern for the next twelve months." This statement contradicts the explicit going concern warning in the same filing and assumes successful execution of multiple uncertain financing events. The company has already tapped two bridge lenders in three months, suggesting traditional equity markets are closed due to the sub-$0.10 stock price and $8 million market capitalization.

The CEO's agreement to purchase 122.95 million shares from USMC for $14.56 million, concurrent with the Master Agreement that severed mining rights and cancelled US Mine's 116 million share option, creates a complex web of related-party transactions. This creates potential conflicts of interest as Dockter and his spouse resigned from US Mine Entities while simultaneously becoming the largest individual shareholder in Purebase, particularly in future negotiations between the companies. The office lease from the CEO at $1,500 per month, while small in absolute terms, further blurs the line between management and company resources, particularly concerning given the material weaknesses in internal controls over segregation of duties.

Management's strategic initiatives announced in September 2025—expanding distribution networks, pursuing uplisting to a premier exchange, and strengthening internal processes—appear disconnected from operational reality. The company cannot afford the audit fees, Sarbanes-Oxley compliance costs, or minimum bid price requirements for NYSE or NASDAQ listing while burning nearly $1 million in cash per quarter. This suggests management is focused on optics rather than survival, potentially diverting scarce resources from essential operations to costly consulting engagements.

The timeline for agricultural market penetration remains undefined. While competitors like United States Antimony (UAMY) have scaled to $40-43 million in annual revenue through mining contracts, Purebase has no clear path to reach even $1 million in sales. The company's products require extensive field trials and regulatory approvals in target markets, processes that take 1-3 years and cost hundreds of thousands of dollars—expenditures Purebase cannot fund without additional dilutive financing.

Risks and Asymmetries: Multiple Paths to Zero

Customer concentration risk represents a binary outcome for the company. With four customers accounting for 100% of revenue and one customer representing 100% of accounts receivable, the loss of any single customer would cut revenue by 25-100%. This creates a single point of failure that could trigger immediate insolvency. Competitors like The Andersons serve thousands of customers across multiple end markets, making their revenue base resilient to individual customer failures. Purebase's customer base is so small that a single delayed payment—likely given the $9,828 accounts receivable balance—could create a working capital crisis.

Supplier concentration compounds this vulnerability. One supplier providing 100% of purchases gives that supplier complete pricing power and the ability to shut down Purebase's operations unilaterally. This exposes the company to input cost inflation it cannot pass through to customers, further compressing already negative operating margins. Vertically integrated competitors like UAMY control their own mining and processing, insulating them from supply shocks and enabling cost control that Purebase cannot replicate.

The internal control material weaknesses—inadequate segregation of duties and lack of risk assessment procedures—create fraud risk and financial reporting errors that could trigger SEC enforcement or delisting from OTC markets. This prevents investors from trusting the already-poor financial results and makes it impossible for institutional investors to consider the stock, eliminating a potential source of capital. While management claims remediation plans are underway, the company's history of related-party transactions and rescinded agreements suggests governance reform is unlikely without board turnover.

Funding risk has become existential. The J.J. Astor loan requires consent for additional debt, creating a potential blockage if the company needs emergency financing. The Vanquish loan's 35% conversion discount with 4.99% ownership limitation sets up a continuous dilution mechanism that will drive the share count higher while depressing the stock price. This creates a negative feedback loop: lower stock price triggers more dilutive conversions, which further lowers the price, making future capital raises increasingly expensive until the market closes entirely.

Valuation Context: Pricing for a Turnaround That May Never Come

At $0.03 per share, Purebase trades at an enterprise value-to-revenue multiple of 31.0x, a level that would be demanding for a high-growth software company but is absurd for a shrinking commodity minerals distributor. This multiple implies the market is pricing in a successful turnaround and resumption of growth, yet the company's revenue has declined 58% quarter-over-quarter and it faces going concern risk. By comparison, Imerys (IMYSF) trades at 0.98x EV/revenue despite generating $3.74 billion in sales and 16.3% EBITDA margins, demonstrating that profitable industrial mineral companies command lower multiples due to cyclicality and capital intensity.

The company's gross margin of 74.33% appears attractive at first glance, but this metric is misleading. With only $285,000 in annual revenue, fixed costs are spread across such a small base that the operating margin is negative 432.81%. This shows the company cannot achieve profitability at current scale, and scaling up would require millions in capital expenditure that is unavailable. Competitors like The Andersons (ANDE) operate on gross margins of just 6.00% but generate positive operating margins through volume and operational efficiency—an economic model Purebase cannot replicate without $10-50 million in mining and processing assets.

Balance sheet metrics reveal a company with negative book value and no tangible equity cushion. The current ratio of 0.18 and quick ratio of 0.12 indicate the company cannot meet short-term obligations from current assets, explaining the reliance on emergency bridge loans. This means equity holders are effectively holding an out-of-the-money option on a turnaround, with debt holders and convertible note investors holding senior claims on any remaining value. The return on assets of negative 102.74% shows the company destroys more than its entire asset base each year, a pace of value destruction that is mathematically unsustainable.

Cash runway analysis provides the starkest valuation reality. With $97,921 cash and annual burn of $2.17 million, Purebase has approximately 0.5 months of liquidity before requiring another dilutive financing. The recent bridge loans of $773,050 provide at most four months of additional runway. This frames the investment as a timing bet on emergency financing rather than a fundamental valuation opportunity. Even if the agricultural pivot succeeds, the company must survive long enough to demonstrate results, and the current capital structure makes that unlikely.

Conclusion: A Binary Outcome with Skewed Risk-Reward

Purebase Corporation represents a micro-cap turnaround story where the odds of success are vanishingly small but the potential upside from a successful agricultural market penetration could be substantial—if the company survives. The central thesis hinges on whether management can rapidly scale agricultural revenue from under $300,000 to over $2 million annually before cash runs out, a feat that would require 600% growth in the next 12 months while competitors with established distribution and manufacturing capabilities grow at 2-20%.

The investment decision boils down to two critical variables: the company's ability to secure non-dilutive financing or achieve cash flow breakeven, and its capacity to convert international pilot shipments into recurring revenue streams. On the first variable, recent bridge loans suggest traditional equity markets are closed, making further dilution inevitable. On the second, the 58% revenue decline and customer concentration risk suggest traction is slipping rather than building.

For investors, the asymmetry is stark: upside potential is capped by the company's micro-scale and competitive disadvantages, while downside risk is effectively 100% if funding dries up or key customers depart. The CEO's share purchase provides a modest signal of alignment but cannot overcome the structural realities of a business that has destroyed $65 million in capital over fifteen years. Until Purebase demonstrates it can generate positive cash flow from operations and diversify its customer base, the stock remains a speculation on emergency financing rather than a legitimate investment in agricultural mineral markets.