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RELATED PARTY TRANSACTIONS
6 Months Ended
May 31, 2023
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 12 – RELATED PARTY TRANSACTIONS

 

Bayshore Capital Advisors, LLC

 

On February 26, 2016, the Company issued a promissory note to Bayshore Capital Advisors, LLC (“Bayshore Capital”), an affiliate through common ownership of a 10% major stockholder of the Company, for $25,000 for working capital at an interest rate of 6% per annum. The note was payable August 26, 2016, or when the Company closes a bridge financing, whichever occurs first. On February 4, 2023, Bayshore Capital agreed to cancel the $25,000 debt, plus $10,146 of accrued and unpaid interest. Prior to the cancellation of the note, the Company was in default on the note. Total interest expense on the note was $255 and $750 for the six months ended May 31, 2023 and 2022, respectively. Total interest expense on the note was zero and $380 for the three months ended May 31, 2023 and 2022, respectively.

 

US Mine Corporation

 

The Company entered into a contract mining agreement with USMC, a company which A. Scott Dockter, the Company’s Chief Executive Officer and a director, and John Bremer, a director, each own 33%, pursuant to which USMC provides various technical evaluations and mine development services to the Company. During the six months ended May 31, 2023 and 2022, the Company made $34,364 and no purchases from USMC, respectively. No services were rendered by USMC for the six months ended May 31, 2023 and 2022. In addition, during the six months ended May 31, 2023 and 2022, USMC paid $15,853 and $4,438, respectively, of expenses to the Company’s vendors and creditors on behalf of the Company. During the six months ended May 31, 2023 and 2022, USMC made cash advances to the Company of $705,000 and $410,000, respectively, which are recorded as part of due to affiliates and convertible notes payable, related party on the Company’s condensed consolidated balance sheets. All amounts owed for services rendered, expenses paid on behalf of the Company, and cash advances were converted into the Company’s common stock pursuant to the September 5, 2019 Debt Exchange Agreement, the November 25, 2020 Securities Purchase Agreement (See Note 6) and the April 7, 2022 Securities Purchase Agreement (See Note 6). The Company had a balance due of $406,604 and zero to USMC on May 31, 2023 and November 30, 2022, respectively.

 

USMC Notes

 

The Company has entered into various securities purchase agreements with USMC pursuant to which USMC may purchase the Company’s unsecured convertible promissory notes (See Note 6). The outstanding balance on the convertible notes due to USMC was $1,331,742 and $610,889 on May 31, 2023 and November 30, 2022, respectively. Interest expense on the convertible notes due to USMC totaled $18,864 and $32,518 for the six months ended May 31, 2023 and May 31, 2022, respectively. Interest expense on the convertible notes due to USMC totaled $11,333 and $13,033 for the three months ended May 31, 2023 and May 31, 2022, respectively.

 

 

USMC Line of Credit

 

On July 10, 2023, the Company entered into a line of credit agreement and unsecured convertible grid promissory note with USMC. The July 10, 2023 line of credit agreement provides for the issuance for up to one year of up to an aggregate of $1,000,000 of advances from USMC under an unsecured convertible grid promissory note (See Note 6). The note bears interest at 8% annum and any outstanding principal or accrued interest under the note is convertible into shares of the Company’s common stock at a conversion price of $0.10 per share on the maturity date. As of the date hereof, there have been no advances from USMC under the July 10, 2023 line of credit agreement.

 

USMC Mining Agreements

 

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. Under the terms of the Supply Agreement, all kaolin clay purchased by the Company from USMC under the Supply Agreement must be used exclusively for agricultural products and supplementary cementitious materials. 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 will adjust the cost to the Company to conform to the more favorable terms. The initial term of the Supply 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 Supply Agreement for a material breach which is not cured within 90 days. For the six months ended May 31, 2023 and 2022, the Company purchased $34,365 and $72,236, respectively, under the Supply Agreement. For the three months ended May 31, 2023 and 2022, the Company purchased $12,450 and $72,236, respectively, under the Supply Agreement. Since April 22, 2020, the Company has purchased $292,806 of materials under the Supply Agreement.

 

US Mine LLC

 

On May 27, 2021, the Company entered into the Materials Extraction Agreement with US Mine, LLC, pursuant to which the Company acquired the right to extract up to 100,000,000 of certain raw clay materials. The Materials Extraction Agreement is effective until 100,000,000 tons of material are extracted. As compensation for such right, the Company issued a ten-year convertible promissory note in the principal amount of $50,000,000 to US Mine, LLC (the “US Mine Note”). The US Mine Note bears interest at the rate of 2.5% per annum which is payable upon maturity. Amounts due under the US Mine Note may be converted into shares of the Company’s common stock at the option of the noteholder, at a conversion price of $0.43 per share. The noteholder may convert (i) up to 50% of the outstanding balance on or after such date as the Company’s common stock is listed for trading on any national securities exchange, (ii) up to an additional 25% of the outstanding balance on or after the six-month anniversary of such initial trading date, and (iii) the remaining 25% on or after the twelve-month anniversary of such initial trading date. In addition, the Company will pay US Mine, LLC a royalty fee of $5.00 per ton of materials extracted and any royalty not paid in a timely manner with be subject to 15% interest per annum and compounded monthly.

 

On October 6, 2021, and prior to consummation of activities under the Materials Extraction Agreement, the Company and US Mine, LLC executed an amendment to the Materials Extraction Agreement (the “Amendment”). Pursuant to the Amendment, the US Mine Note was retroactively rescinded, ab initio and an option to purchase an aggregate of 116,000,000 shares of the Company’s common stock at an exercise price of $0.38 per share until April 6, 2028, was issued to US Mine, LLC as compensation. Shares subject to the option vested as to 58,000,000 shares on April 6, 2022, 29,000,000 shares on October 6, 2022, and 29,000,000 shares on April 6, 2023. This agreement was further amended and restated on June 21, 2022, with the same option purchase, vesting and exercise schedule. For the three and six months ended May 31, 2023 the Company expensed $1,841,389 and $7,326,402 in stock-based compensation expense related to the issuance of the option on October 16, 2021 to US Mine LLC under the Materials Extraction Agreement.

 

 

Transactions with Officers

 

On August 31, 2017, the Company issued a note in the amount of $197,096 to A. Scott Dockter, President, Chief Executive Officer and a director of the Company, to consolidate the total amounts due to Mr. Dockter. The note bears interest at 6% and is due upon demand. During the six months ended May 31, 2023, the Company paid $15,000 towards the outstanding balance of the note. Total interest expense on the note was $612 and $1,706 for the six months ended May 31, 2023 and 2022, respectively. Total interest expense on the note was $233 and $837 for the three months ended May 31, 2023 and 2022, respectively. The balance on the note was $13,716 and $28,716 as of May 31, 2023 and November 30, 2022, respectively. There was $41,779 and $41,167 of accrued interest as of May 31, 2023 and November 30, 2022, respectively.

 

Convertible Debt – Board of Directors

 

On April 8, 2021, the Company entered into the Guzy Director Agreement (See Note 6) pursuant to which Mr. Guzy will serve as a director of the Company, which agreement will automatically renew for successive one-year terms unless either party notifies the other of its desire not to renew the Agreement within 30 days of the expiration of the then current term. As compensation therefor, Mr. Guzy is entitled to a cash fee of $1,000 per month which accrues as 0% debt to the Company until the Company has its first cash-flow positive month. Any amounts owed to Mr. Guzy at the Renewal Date or upon Mr. Guzy’ resignation or removal will be converted into common stock at a price per share equal to market price on the exchange or trading market where such stock is then traded or quoted or the VWAP of the common stock for the 20-days immediately preceding the Renewal Date or the Termination Date, as the case may be. The Agreement also includes a non-competition provision during the term of the Agreement and for twelve months thereafter.

 

On August 13, 2021, the Company entered into the Kurtis Director Agreement (See Note 6) pursuant to which Dr. Kurtis will provide up to five hours per month of board services, which agreement will automatically renew for successive one-year terms unless either party notifies the other of its desire not to renew the Agreement within 30 days of the expiration of the then current term. As compensation therefor, Dr. Kurtis is entitled to a cash fee of $1,000 per month which accrues as debt to the Company until the Company has its first cash-flow positive month. Any amounts owed to Dr. Kurtis at the Renewal Date or upon Dr. Kurtis’ resignation or removal will be converted into common stock at a price per share equal to market price on the exchange or trading market where such stock is then traded or quoted or the VWAP of the common stock for the 20-days immediately preceding the Renewal Date or the Termination Date, as the case may be. The Agreement includes a non-competition provision during the term of the Agreement and for twelve months thereafter.

 

On June 9, 2023, effective April 8, 2023, the Company entered into a one-year advisory agreement with Dr. Karen Scrivener (“Scrivener Agreement”) pursuant to which Dr. Scrivener will provide certain advisory services to the Company. As compensation therefor, Dr. Scrivener was issued 100,000 shares of the Company’s common stock on June 9, 2023 at $0.08 per share.

 

Leases

 

On October 1, 2020, the Company entered into a two-year lease agreement for its office space with USMC with a monthly rent of $1,500 (See Note 7). The lease was amended to extend the term for an additional two years to November 1, 2024 and to add an additional 700 square feet of office space for a total monthly rental price of $3,500 per month,