UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-Q

———————

þ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, ~~2020~~2021

Oror

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: _____________ to _____________

Commission File Number: 000-53574

———————

Basanite, Inc.

(Exact name of registrant as specified in its charter)

———————

Nevada	20-4959207
~~Nevada~~	~~20-4959207~~
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

2041 NW 15th Avenue, Pompano Beach, Florida33069

~~(Address~~(Address of Principal Executive Office) (Zip Code)

(954)532-4653

(Registrant’s telephone number, including area code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

———————

Securities registered pursuant to Section 12(b) of the Act: None.


Title of each class	Trading Symbol(s)	Name of each exchange on which registered

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ☒Yes¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ☒Yes¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “~~large~~“large accelerated filer,” “~~accelerated~~“accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ¨		Accelerated filer ¨
Non-accelerated filerþ ☒		Smaller reporting company þ ☒
		Emerging growth company ¨

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes þ☒No

Indicate the number of shares outstanding of each of the ~~issuer~~’sissuer’s classes of common stock, as of the latest practicable date.

Class
~~Class~~		Shares Outstanding as of August ~~14, 2020~~ 21, 2021
Common Stock, $0.001 ~~Par Value Per Share~~ par value per share		~~212,766,781~~ 248,520,598

BASANITE, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

			Page No.
		~~Page No.~~
	PART I. – FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements	1
	Condensed Consolidated Balance Sheets as of June 30, ~~2020~~2021 (Unaudited) and December 31, ~~2019~~2020	1
	Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months ended June 30, ~~2020~~2021 and ~~2019~~2020	2
	Condensed Consolidated Statements of Stockholder’s Deficit (Unaudited) for ~~the~~ Six Months ended June 30, ~~2020~~2021 and ~~2019~~2020	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020	5 4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18 19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22 23
Item 4.	Controls and Procedures	22 23

	PART II. – OTHER INFORMATION

Item 1.	Legal Proceedings	23 24
Item 1A.	Risk Factors	24 25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24 25
Item 3.	Defaults Upon Senior Securities	24 26
Item 4.	Mine Safety Disclosures	24 26
Item 5.	Other Information	24 26
Item 6.	Exhibits	25 27
Signatures		26 28

PART I. – FINANCIAL INFORMATION

~~ITEM 1.~~

~~FINANCIAL STATEMENTS~~

ITEM 1.

FINANCIAL STATEMENTS

BASANITE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, ~~2020~~2021 (UNAUDITED) AND DECEMBER 31, ~~2019~~2020


	June 30, 2020			December 31, 2019			June 30, 2021			December 31, 2020,
		(Unaudited)					(Unaudited)
ASSETS

CURRENT ASSETS
Cash	$	116,483		$	129,152		$	77,400		$	259,505
Accounts receivable, net							8,509			1,907
Inventory		143,833			159,472			678,159			446,575
Prepaid expenses		59,892			26,640			129,915			40,283
Deposits and other current assets		77,370			145,671			278,323			75,995
TOTAL CURRENT ASSETS		397,578			460,935			1,172,306			824,265

Lease right-of-use asset		1,117,669			1,222,853			881,666			1,004,167
Fixed assets, net		801,392			771,996			1,226,440			1,020,035
Other assets		—			5,380
		1,919,061			2,000,229
Total Long-Term Assets							2,108,106			2,024,202

TOTAL ASSETS	$	2,316,639		$	2,461,164		$	3,280,412		$	2,848,467

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
Accounts payable	$	217,210		$	218,082		$	358,916		$	249,353
Accrued expenses		506,038			489,179			136,950			197,350
Accrued legal liability		799,815			790,606			503,286			809,127
Notes payable		353,038			219,617			787,412			128,021
Notes payable - convertible		313,276			453,991
Notes payable - convertible - related party		36,058			—
Notes payable – related party							300,000			0
Notes payables - convertible, net							0			10,000
Notes payable - convertible - related party, net							1,689,746			1,025,000
Subscription liability							—			40,000
Lease liability - current portion		242,259			221,997			209,034			267,289
TOTAL CURRENT LIABILITIES		2,467,694			2,393,472			3,985,344			2,726,140

Lease liability - net of current portion		967,221			1,094,970			756,793			826,388

TOTAL LIABILITIES		3,434,915			3,488,442			4,742,137			3,552,528

STOCKHOLDERS’ DEFICIT
Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued and outstanding		—			—
Common stock, $0.001 par value, 1,000,000,000 shares authorized, 208,601,545 and 200,735,730 shares issued and outstanding, respectively as of June 30, 2020 and December 31, 2019		208,602			200,736
Preferred stock, $0.001 par value, 5,000,000 shares authorized, NaN issued and outstanding							—			—
Common stock, $0.001 par value, 1,000,000,000 shares authorized, 228,522,454 and 224,836,785 shares issued and outstanding, respectively							228,523			224,838
Additional paid-in capital		25,459,900			24,216,042			36,943,818			28,714,488
Accumulated deficit		(26,786,778	)		(25,444,056	)		(38,634,066	)		(29,643,387	)
TOTAL STOCKHOLDERS' DEFICIT		(1,118,276	)		(1,027,278	)		(1,461,725	)		(704,061	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	2,316,639		$	2,461,164		$	3,280,412		$	2,848,467

The accompanying notes are an integral part of the condensed consolidated financial statements.

BASANITE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE ~~AND~~& SIX MONTHS ENDED JUNE 30, ~~2020~~2021, AND ~~2019~~2020

(UNAUDITED)


	For the three months ended						For the six months ended						For the three months ended						For the six months ended
	June 30,						June 30,						June 30,						June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Revenue
Products Sales - Rebar	$	593		$	2,898		$	2,218		$	2,898		$	15,549		$	593		$	19,685		$	2,218

Total cost of goods sold		1,603			41,176			2,222			44,469			19,493			1,603			20,809			2,222

Gross loss		(1,010	)		(38,278	)		(4	)		(41,571	)		(3,944	)		(1,010	)		(1,124	)		(4	)

OPERATING EXPENSES
Professional fees		53,016			62,410			162,874			214,274			79,355			53,016			193,087			162,874
Payroll, taxes and benefits		162,455			227,697			399,886			317,309			300,683			162,455			554,798			399,886
Consulting		81,875			58,017			98,938			216,090			117,375			81,875			230,625			98,938
General and administrative		283,034			1,245,688			500,987			1,499,717			950,167			283,034			1,533,937			500,987
Total operating expenses		580,380			1,593,812			1,162,685			2,247,390			1,469,755			580,380			2,534,622			1,162,685

NET LOSS FROM OPERATIONS		(581,390	)		(1,632,090	)		(1,162,689	)		(2,288,961	)		(1,451,524	)		(581,390	)		(2,513,571	)		(1,162,689	)

OTHER INCOME (EXPENSE)
Gain on sale of a fixed asset		—			—			—			700
Gain on settlement of legal contingency													320,037			—			344,522			—
Miscellaneous income		—			1,274			70,817			1,274			3,116			—			3,116			70,817
Gain on settlement of payable		—			137,497			—			137,497
Gain on extinguishment of debt		980			2,886			980			2,886
Impairment of fixed assets		—			(1,478	)		—			(1,478	)
Loss (gain) on extinguishment of debt													(3,056,892	)		980			(6,743,015	)		980
Loan forgiveness													—			—			124,143			—
Interest expense		(201,007	)		(15,632	)		(251,830	)		(47,142	)		(133,211	)		(201,007	)		(205,874	)		(251,830	)
Total other income (expense)		(200,027	)		124,547			(180,033	)		93,737			(2,866,950	)		(200,027	)		(6,477,108	)		(180,033	)

NET LOSS FROM OPERATIONS		(781,417	)		(1,507,543	)		(1,342,722	)		(2,195,224	)

Deemed dividends		—			(292,150	)		—			(292,150	)

NET LOSS	$	(781,417	)	$	(1,799,693	)	$	(1,342,722	)	$	(2,487,374	)		(4,318,474	)		(781,417	)		(8,990,679	)		(1,342,722	)

Net loss per share - basic and diluted	$	(0.003	)	$	(0.008	)	$	(0.007	)	$	(0.013	)
Net loss per share – basic and diluted													(0.019	)		(0.003	)		(0.039	)		(0.007	)

Weighted average number of shares outstanding - basic and diluted		234,917,946			188,411,391			205,202,856			174,155,883			227,837,337			234,917,946			227,115,792			205,202,856

The accompanying notes are an integral part of the condensed consolidated financial statements.

BASANITE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

FOR THE SIX MONTHS ENDED JUNE 30, ~~2020~~2021 AND ~~2019~~2020

(UNAUDITED)

Additional

Non-

Total

Preferred Stock

Common Stock

Paid-in

Accumulated

controlling

Stockholders'

Shares

Par Value

Shares

Par Value

Capital

Deficit

Interest

Deficit



Balance January 1, 2019

—

$
—

154,202,008

$
154,202

$
18,718,283

$
(21,135,252
)

$
225,015

$
(2,037,752
)

Shares issued to convert notes payable

—

—

1,700,985

1,701

507,477

—

—

509,178

Stock-based compensation

—

—

—

—

73,603

—

—

73,603

Stock issued for cash

—

—

15,500,000

15,500

759,500

—

—

775,000

Stock issued to purchase non-controlling interest in Basalt America Territory #1

—

—

2,010,000

2,010

223,005

—

(225,015
)

—

Net loss

—

—

—

—

—

(687,681
)

—

(687,681
)

Balance March 31, 2019

—

—

173,412,993

173,413

20,281,868

(21,822,933
)

—

(1,367,652
)

Stock-based compensation

—

—

—

—

1,045,734

—

—

1,045,734

Stock issued for cash

—

—

5,778,570

5,779

479,221

—

—

485,000

Warrants exercised for cash

—

—

17,710,715

17,711

1,150,889

—

—

1,168,600

Deemed dividend on common stock

292,150

—

—

292,150

Net loss

—

—

—

—

—

(1,799,693
)

—

(1,799,693
)

Balance June 30, 2019

—

$
—

196,902,278

$
196,903

$
23,249,862

$
(23,622,626
)

$
—

$
(175,861)

Additional Total
Preferred Stock Common Stock Paid-in Accumulated Stockholders'
Shares Par Value Shares Par Value Capital Deficit Deficit

Balance January 1, 2020 — $ — 200,735,730 $ 200,736 $ 24,216,042 $ (25,444,056 ) $ (1,027,278 )

Net loss — — — — — (561,305 ) (561,305 )

Balance March 31, 2020 — — 200,735,730 200,736 24,216,042 (26,005,361 ) (1,588,583 )

Stock issued for cash — — 6,040,614 6,041 610,626 — 616,667

Return of shares issued as loan committee fee — — (1,300,000 ) (1,300 ) (128,700 ) — (130,000 )

Convertible debt and debt discount — — 3,125,201 3,125 761,932 — 765,057

Net loss — — — — — (781,417 ) (781,417 )

Balance June 30, 2020 — $ — 208,601,545 $ 208,602 $ 25,459,900 $ (26,786,778 ) $ (1,118,276 )

Additional Total
Preferred Stock Common Stock Paid-in Accumulated Stockholders'
Shares Par Value Shares Par Value Capital Deficit Deficit

Balance January 1, 2021 — $ — 224,836,785 $ 224,838 $ 28,714,488 $ (29,643,387 ) $ (704,061 )

Warrants exercised for cash — — 1,000,000 1,000 122,500 — 123,500

Stock-based compensation — — 600,000 600 173,400 — 174,000

Stocks issued for cash — — 450,00 450 89,550 — 90,000

Warrants issued with Debt — — — — 3,686,123 — 3,686,123

Net loss — — — — — (4,672,205 ) (4,672,205 )

Balance March 31, 2021 — — 226,886,785 226,888 32,786,061 (34,315,592 ) (1,302,643 )

Stock issued for cash — — 735,669 735 241,041 — 241,776

Stock-Based Compensation — — 900,000 900 554,625 — 555,525

Warrant Issued with Debt — — — — 3,362,091 — 3,362,091

Net loss — — — — — (4,318,474 ) (4,318,474 )

Balance June 30, 2021 — $ — 228,522,454 $ 228,523 $ 36,943,818 $ (38,634,066 ) $ (1,461,725 )

The accompanying notes are an integral part of the condensed consolidated financial statements.

3

~~BASANITE, INC. AND SUBSIDIARIES~~
~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)~~
~~FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~

Additional

Total

Preferred Stock

Common Stock

Paid-in

Accumulated

Stockholders'

Shares

Par Value

Shares

Par Value

Capital

Deficit

Deficit



Balance January 1, 2020

—

$
—

200,735,730

$
200,736

$
24,216,042

$
(25,444,056
)

$
(1,027,278
)

Net loss

—

—

—

—

—

(561,305
)

(561,305
)

Balance March 31, 2020

—

—

200,735,730

200,736

24,216,042

(26,005,361
)

(1,588,583
)

Stock issued for cash

—

—

6,040,614

6,041

610,626

—

616,667

Return of shares issued as loan committee fee

—

—

(1,300,000
)

(1,300
)

(128,700
)

—

(130,000
)

Convertible debt and debt discount

—

—

3,125,201

3,125

761,932

—

765,057

Net loss

—

—

—

—

—

(781,417
)

(781,417
)

Balance June 30, 2020

—

$
—

208,601,545

$
208,602

$
25,459,900

$
(26,786,778
)

$
(1,118,276
)

~~The accompanying notes are an integral part of the condensed consolidated financial statements.~~

BASANITE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, ~~2020~~2021, AND ~~2019~~2020
(UNAUDITED)

For the six months ended

For the six months ended

June 30,

June 30,

2020

2019

2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$
(1,342,722
)

$
(2,487,374
)
$ (8,990,679 ) $ (1,342,722 )
Adjustments to reconcile net loss to net cash used in operating activities:

Lease right-of-use asset

105,184

97,630

Lease right-of-use asset amortization 122,501 105,184
Depreciation

55,774

4,409

63,925 55,774
Amortization of debt discount

186,237

—

— 186,237
Gain on extinguishment of debt

(980
)

—

Impairment of fixed assets

—

1,478

Deemed dividend

—

292,150

Gain on settlement of legal contingency (344,522 ) —
Loss (gain) on extinguishment of debt 6,743,015 (980 )
Loan forgiveness (124,143 ) —
Stock-based compensation

—

1,119,336

729,525 —
Changes in operating assets and liabilities:

—

Prepaid expenses

(33,252
)

28,574

(89,632 ) (33,252 )
Inventory

15,639

(111,859
)
(231,584 ) 15,639
Accounts Receivable

—

(2,015
)
Accounts receivable (208,930 ) —
Other current assets

47,888

(167,971
)
— 47,888
Accounts payable and accrued expenses

33,339

(6,734
)
(203,873 ) 33,339
Subscription liability (40,000 ) —
Lease liability

(107,487
)

—

(127,850 ) (107,487 )
Net cash used in operating activities

(1,040,380
)

(1,232,376
)
(2,294,501 ) (1,040,380 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of equipment

(59,377
)

(406,294
)
(270,330 ) (59,377 )
Deposits on machinery and equipment

—

(22,500
)
Net cash used in investing activities

(59,377
)

(428,794
)
(270,330 ) (59,377 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from sale of common stock

616,667

2,262,749

Proceeds from issuance of common stock 331,776 616,667
Proceeds from warrants exercised for cash 123,500 —
Repayment of convertible notes payable and convertible notes payable related party

(348,000
)

(20,000
)
(35,000 ) (348,000 )
Proceeds from notes payable and notes payable related party

266,727

274,070

1,391,194 266,727
Proceeds from convertible notes payable and convertible notes payable related party

585,000

—

579,741 585,000
Repayment of notes payable and notes payable related party

(33,306
)

(50,000
)
(8,485 ) (33,306 )
Net cash provided by financing activities

1,087,088

2,466,819

2,382,726 1,087,088

NET (DECREASE) INCREASE IN CASH

(12,669
)

805,649

NET INCREASE (DECREASE) IN CASH (182,105 ) (12,669 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

129,152

121,831

259,505 129,152

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$
116,483

$
927,480

$ 77,400 $ 116,483

Supplemental cash flow information:

Cash paid for interest expense

$
34,747

$
10,180

Supplemental disclosure of non cash investing and financing activities:

Return of loan commitment shares

$
(130,000
)

$
—

Conversion of notes payable into common stock

$
—

$
509,178

Recording of debt discount on convertible notes

$
685,000

$
—

Conversion of convertible notes payable into common stock

$
80,057

$
—

Common shares issued to acquire interest in joint venture

$
—

$
502,500

Cash paid for interest $ 4,016 $ 34,747
Forgiveness of Paycheck Protection Program loan and accrued interest 124,143 —

The accompanying notes are an integral part of the condensed consolidated financial statements.

4

BASANITE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE SIX MONTHS ENDED JUNE 30, 2021, AND 2020
(UNAUDITED)
For the six months ended
June 30,
2021 2020
Supplemental disclosure of non cash investing and financing activities:
Return of loan commitment shares $ — $ (130,000 )
Issuance of warrants for services 64,045 —
Recording of debt discount on convertible notes — 685,000
Conversion of convertible notes payable into common stock — 80,057
Conversion of note payable in exchange for warrants 305,199 —
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~FOR THE THREE~~(UNAUDITED)
NOTE 1 – ORGANIZATION, NATURE OF BUSINESS AND ~~SIX MONTHS ENDED JUNE 30, 2020~~GOING CONCERN
(A) Description of Business
Basanite, Inc., a Nevada corporation (the “Company”, “Basanite”, “we”, “us”, “our” or similar terminology), through our wholly owned subsidiary, Basanite Industries, LLC, a Delaware limited liability company (“BI”), manufactures a range of “green” (environmentally friendly), sustainable, non-corrosive, lightweight, composite products used in concrete reinforcement by the construction industry. Our core product is BasaFlex™, a basalt fiber reinforced polymer reinforcing bar (“rebar”) which we believe is a stronger, lighter, sustainable, non-conductive and corrosion-proof alternative to traditional steel.
Our two other main product lines are BasaMix™, which are fine denier basalt fibers available in various chopped sizes, and BasaMesh™, a line of Basalt Geogrid Mesh Rolls, intended to replace welded wire mesh (made of steel) and other fiber reinforced polymer (“FRB”) grids and mesh.
BasaMix™ is designed to help absorb the stresses associated with early-aged plastic shrinkage and settlement cracking in concrete, as well as providing an increased toughness for enhanced reinforcement in Slab on Grade (SOG) and precast elements. BasaMix™ also serves in a “system approach” for optimum performance of a concrete element when used in conjunction with our BasaFlex™ rebar.
BasaMesh™ is designed for secondary and temperature shrinkage reinforcement. BasaMesh™ can also work in conjunction with the BasaFlex™ rebar or BasaMix™ for a total reinforcement program.
Each of our products is specifically designed to extend the lifecycle of concrete products by eliminating “concrete spalling.” Spalling results from the steel reinforcing materials embedded within the concrete member rusting (contrary to popular belief, concrete is porous and water can permeate into concrete). Rusting leads to the steel expanding and eventually causing the surrounding concrete to delaminate, crack, or even break off, resulting in potential structural failure. We believe that each Basanite product addresses this important need along with other key requirements in today’s construction market.
We believe that the following attributes of BasaFlex™ provide it with a competitive advantage in the marketplace:
· BasaFlex™ never corrodes: steel reinforcement products rust, leading to spalling and significant repair costs down the road;
· BasaFlex™ is sustainable: BasaFlex™ is made from Basalt rock, the most abundant rock found on Earth’s surface, and offers a longer product lifecycle than traditional steel (the lack of corrosion allows the life span of concrete products reinforced with BasaFlex to be significantly longer);
· BasaFlex™ is “green”: From mining, through production, to installation at the building site, BasaFlex™ has an exceptionally low carbon footprint when compared with that of steel; and
· BasaFlex™ has a lower in-place cost: the physical nature of our products relative to steel result in a lower net cost to the contractor once installed, such as: BasaFlex™ is one-quarter of the weight of equivalent sized steel, meaning 4 times the quantity of material can be delivered by the same truck (or container); all Basanite products can be loaded/unloaded and moved around the jobsite by hand – no expensive handling equipment is needed; less concrete is required as BasaFlex™ does not require the extra concrete cover needed when using steel; and Basanite products are safer and easier to use. We believe all these factors materially reduce the net in-place cost of concrete reinforcement.
6
BASANITE, INC. AND ~~2019~~SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 – ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN (CONTINUED)

~~(A) Overview and Basis of Presentation~~

On May 30, 2006, Basanite, Inc. was organized as a Nevada corporation. Basanite and its wholly owned subsidiaries are herein referred to as the "Company", “we”, “our”, or “us”. Currently based in Pompano Beach, Florida, the Company intends to manufacture concrete-reinforcing products made from basalt fiber reinforced polymers (“BFRP”) such as its primary product BasaFlex. This UV-stable, chemical, acid and moisture resistant material is sustainable and environmentally friendly and has been engineered to replace steel as it never rusts, therefore, addressing the industry’s current corrosion issues.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information necessary for a comprehensive presentation of financial position and results of operations. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on April 6, 2020. The interim results for the period ended June 30, 2020 are not necessarily indicative of results for the full fiscal year. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.

(B) ~~Principles of Consolidation~~

The accompanying condensed consolidated financial statements include the accounts of Basanite, Inc. and its wholly owned subsidiaries, Basanite Industries, LLC and Basalt America formerly known as Rockstar Acquisitions, LLC.

~~(C)~~ Liquidity and Management ~~Plans~~Plans

Since inception, the Company has incurred net operating losses and used cash in operations. ~~The Company has an accumulated deficit~~As of ~~approximately $26.8 million, a working capital deficit of approximately $2.1 million, and cash used in operations of approximately $1.0 million as of and for the period ended~~ June 30, ~~2020.~~ 2021, and December 31, 2020, respectively, the Company reported:
· an accumulated deficit of $38,634,066 and $29,643,387;
· a working capital deficiency of $2,813,038 and $1,901,875; and
· cash used in operations of $2,294,501 and $2,799,499.
Losses have principally occurred as a result of the substantial resources required for product research and development and for marketing of the Company's ~~products, which include~~products; including the general and administrative expenses associated with ~~its organization~~the organization.
While we have generated relatively little revenue to date, we continue to receive inquiries from a range of customers for our products, indicating what we believe is a significant level of market interest for BasaFlex™. Some of these inquiries would be for very large potential orders for new, multi-year construction projects. Based on our current limited manufacturing capacity (which we plan to begin to expand with the net proceeds of our private placement offering described in note 13 below), these inquiries (if they lead to actual orders) would exceed our capability to deliver within the customer’s requested timeframe, and ~~product development. Basanite Industries submitted its first round~~largely because of BasaFlex™ (Basalt Fiber Reinforced Polymer) rebar products the Structures and Materials Department of the University of Miami, Miami, Florida (UM), an industry accredited independent testing laboratory, to obtain a Certified Test Report whichthis, there is no guarantee that orders will ~~allow Basanite to participate in precast, architectural, flatwork and other non-structural engineered applications. On May 29~~^th~~, 2020, a Certified Test Report was submitted to Basanite for engineering use. Basanite Industries will~~actually be submitting a second round of BasaFlex™ rebars for additional testing that will further certify and qualify BasaFlex™ for Federal and state government applications. The Company will begin scaling its production in Q3, 2020 to meet the expected demand for alternative, non-corrosive reinforcement, however we expect operating losses to continue through 2021.received.

The Company had cash of $116,483 compared to $129,152 at June 30, 2020 and December 31, 2019, respectively. At this time, the Company believes that it has sufficient access to future capital to fund its planned operations through the third quarter of calendar year 2020. We have historically satisfied our working capital requirements through the sale of restricted common stock and the issuance of warrants and promissory notes. Until ~~future revenues~~we are able to internally generate meaningful revenue and ~~corresponding~~positive cash ~~flows materialize,~~flow, we will attempt to fund working capital requirements through third party financing, including athrough potential private ~~placement~~or public offerings of our securities as well as bridge or other loan arrangements. However, a number of factors continue to hinder the Company’s ability to attract new capital investment. We cannot provide any assurances that the required capital will be obtained at all, or that the terms of such required capital may be acceptable to us. If we are unable to obtain adequate financing, we may reduce our operating activities to reduce our cash use until sufficient funding is ~~secured or revenues~~secured. If we are ~~generated~~unable to ~~support operating activities.~~

6

~~BASANITE, INC. AND SUBSIDIARIES~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~

~~NOTE 1 – ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN (continued)~~

~~The coronavirus (“COVID-19”) that was reported to have surfaced in Wuhan, China in December 2019 and that has now spread throughout the world could adversely impact~~secure funding when needed, our results of operations ~~or those of our third-party partners. Additionally, the continued spread of the virus could negatively impact the manufacturing, supply, distribution and sale of our products~~may suffer, and our financial results. The extent to which the coronavirus impacts our operations or those of our third-party partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information thatbusiness may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. Such developments could have a material adverse effect on our financial results and our ability to conduct business as expected. Additionally, the disruption to capital markets caused by the pandemic may adversely affect the Company’s ability to obtain funding to continue operations in the future.fail.

These conditions raise substantial doubt about the Company's ability to continue as a going concern. As a result of these factors, the report of our independent auditors dated April 6, 2020, on our consolidated financial statements for the year ended December 31, 2019 included an emphasis of matter paragraph indicating that there is substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity for the Company to continue as a going concern.

At June 30, 2021, the Company had cash of $77,400 compared to $259,505 at December 31, 2020. Subsequent to June 30, 2021, cash on hand was increased due to the closing of our private placement offering in August 2021 (see note 13).
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) ~~Cash~~

The Company considers all highly liquid temporary cash instruments with an original maturity of three months or less to be cash equivalents. The Company places its cash, cash equivalents and restricted cash on deposit with financial institutions in the United States, which are insured by the Federal Deposit Insurance Company ("FDIC") up to $250,000. The Company's credit risk in the event of failure of these financial institutions is represented by the difference between the FDIC limit and the total amounts on deposit. Management monitors the financial institutions credit worthiness in conjunction with balances on deposit to minimize risk.

~~(B)~~ Use of Estimates in Financial Statements

The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Stock-based compensation and stock awards related to convertible debt instruments are recognized based on the fair value of the awards granted. The fair value of each award or conversion feature is typically estimated on the grant date using the Black-Scholes pricing model. The Black-Scholes pricing model requires the input of highly subjective assumptions, including the fair value of the underlying common stock, the expected term of the option, the expected volatility of the price of our common stock, risk-free interest rates and the expected dividend yield of our common stock. The assumptions used to determine the fair value of the stock awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment.
7
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(B) Principles of Consolidation
The consolidated financial statements include the accounts of Basanite, Inc. and its wholly owned subsidiaries, Basanite Industries, LLC and Basalt America, LLC. All intercompany balances have been eliminated in consolidation. The Company’s operations are conducted primarily through Basanite Industries, LLC. Basalt America, LLC is currently inactive.
(C) ~~Inventories~~Cash

The Company considers all highly liquid temporary cash instruments with an original maturity of three months or less to be cash equivalents. The Company places its cash, cash equivalents and restricted cash on deposit with financial institutions in the United States, which are insured by the Federal Deposit Insurance Company ("FDIC") up to $250,000. The Company's credit risk in the event of failure of these financial institutions is represented by the difference between the FDIC limit and the total amounts on deposit. Management monitors the financial institutions credit worthiness in conjunction with balances on deposit to minimize risk. The Company from time to time may have amounts on deposit in excess of the insured limits.
(D) Inventories
The Company’s inventories consist of raw materials, work in process and finished goods, both purchased and manufactured. Inventories are stated at the lower of cost or net realizable value. Cost is determined on the first-in, first-out basis. Raw materials inventory consists primarily of basalt fiber and other necessary elements to produce the basalt rebar. On a quarterly basis, the Company analyzes its inventory levels and records allowances for inventory that has become obsolete and inventory that has a cost basis in excess of the expected net realizable value.

The Company’s inventory at June 30, 2021 and December 31, 2020 was comprised of:
7
Schedule of Inventory
June 30,
2021
December 31,
2020

(Unaudited)
Finished goods $ 575,360 $ 305,550
Work in process 23,932 35,286
Raw materials 78,867 105,739
Total inventory $ 678,159 $ 446,575

(E) Fixed assets
Fixed assets consist of the following:
Schedule of Fixed Assets
June 30,
2021
December 31,
2020

(Unaudited)
Computer equipment $ 117,141 $ 15,780
Machinery 686,237 667,536
Leasehold improvements 163,882 161,579
Office furniture and equipment 71,292 71,292
Land improvements 7,270 7,270
Website development 2,500 2,500
Construction in process 382,915 234,950
Total fixed assets 1,431,237 1,160,907
Accumulated depreciation (204,797 ) (140,872 )
Total fixed assets, net $ 1,226,440 $ 1,020,035
8
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~
(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ~~(continued)~~

~~The Company’s inventory at June 30, 2020 and December 31, 2019 was comprised of:~~

June 30,
2020

December 31, 2019

(Unaudited)

Finished goods

$
48,432

$
47,462

Work in process

14,176

—

Raw materials

81,225

112,010

Total inventory

$
143,833

$
159,472

(CONTINUED)
~~(E) Fixed assets~~

~~Fixed assets consist of the following:~~

June 30,
2020

December 31, 2019

(Unaudited)

Computer equipment

$
7,268

$
7,268

Machinery

639,155

578,347

Leasehold improvements

161,579

137,217

Office furniture and equipment

62,926

62,926

Land improvements

7,270

7,270

Website development

27,275

27,275

905,473

820,303

Accumulated depreciation

(104,081
)

(48,307
)

$
801,392

$
771,996

Depreciation expense for the three and six months ended June 30, ~~2020~~2021, was ~~$29,947~~$32,216 and ~~$55,774,~~$63,925, respectively, compared to ~~$2,851~~$29,947 and ~~$4,409~~$55,774 to the three and six months ended June 30, ~~2019.~~2020.

(F) Deposits and other current assets
The Company’s deposits and other current assets consist of the deposits made on equipment, security deposits, utility deposits and other receivables. The deposits are reclassified as part of the fixed asset cost when received and placed into service.
(G) Loss Per Share

The basic loss per share is calculated by dividing the ~~Company's~~Company’s net loss available to common shareholders by the weighted average number of common shares during the period. The diluted loss per share is calculated by dividing the ~~Company's~~Company’s net loss by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.

The following are potentially dilutive shares not included in the loss per share computation:

June 30,
2020

December 31, 2019

(Unaudited)

Options

4,542,500

5,042,500

Warrants

39,015,576

29,849,761

Convertible shares

2,760,028

984,014



46,318,104

35,876,275

8

~~BASANITE, INC. AND SUBSIDIARIES~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
Schedule of Dilutive Shares Not Included in Loss Per Share Computation
June 30,
2021
December 31,
2020

(Unaudited)
Options 4,727,778 4,542,500
Warrants 78,620,378 38,920,378
Convertible shares 173,579,371 112,233,406
256,927,527 155,696,284

~~NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)~~

~~(G)~~ (H) Stock-Based Compensation

The Company recognizes compensation costs to employees under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation – Stock Compensation. Under FASB ASC Topic 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the grant.

The Company entered into a consulting agreement with Bridgeview Capital on July 9, 2020 for strategic planning and financial markets services in exchange for shares of restricted common stock as compensation. The term of the agreement is for six months with the option for renewal quarterly. Upon execution of the agreement, 600,000 shares were due within 5 days of execution. The execution date fair value of the shares was $0.29 per share or $174,000. If the Company agrees to renew each quarter, an additional 350,000 shares are to be issued per quarter. On July 9, 2021, the Company agreed to renew another quarter and issued 350,000 restricted common shares per the agreement. The execution date fair value of the shares was $0.23 per share or $80,500.
The Company entered into a consulting agreement with Seth Shaw on October 13, 2020 for strategic planning and financial markets services in exchange for shares of restricted common stock as compensation. The term of the agreement is for six months with the option for renewal quarterly. Upon execution of the agreement, no shares were due to be issued. If the Company agrees to renew each quarter, 250,000 shares are to be issued per quarter. On July 9, 2021, the Company agreed to renew another quarter and issued 250,000 restricted common shares per the agreement. The execution date fair value of the shares was $0.23 per share or $57,500.
9
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company entered into a consulting agreement with Frederick Berndt on May 12, 2021 for capital markets advisory services in exchange for restricted warrants to purchase shares of common stock as compensation. The term of the agreement is for twelve months with the option for renewal for an additional six months as needed. If the Company agrees to renew every twelve months, 250,000 warrants are to be issued at that time. On May 12, 2021, the Company issued 250,000 restricted common share warrants per the agreement. The execution date fair value of the warrants was $0.256 per warrant or $64,045.
The Company entered into a consulting agreement with Integrous Communications on May 17, 2021 for investor communications services in exchange for shares of restricted common stock as compensation. The term of the agreement is for six months with the option for renewal for an additional six months as needed. If the Company agrees to renew every six months, 300,000 shares are to be issued at that time. On June 10, 2021, the Company issued 300,000 restricted common shares per the agreement. The execution date fair value of the shares was $0.299 per share or $89,700.
On May 20, 2021, the Company issued 777,778 options with a strike price of $0.27 to the Chairman of the Board as partial compensation for the services rendered in such role. The execution date fair value of the options was $160,857. The options vested fully on May 20, 2021, and expire in 5 years which resulted in stock compensation expense of $160,857 being recorded as of June 30, 2021.
On May 20, 2021, the Company issued 500,000 options with a strike price of $0.28 to a director of the Company as partial compensation for services rendered in such role. The execution date fair value of the options was $102,923. The options vested fully on May 20, 2021, and expire in 5 years which resulted in stock compensation expense of $102,923 being recorded as of June 30, 2021.
The Company recognized $729,525 in stock-based compensation as of June 30, 2021. As of June 30, 2021, $81,563 of stock was issued for the consulting agreements but not earned as compensation and is included in prepaid expenses on the condensed consolidated balance sheet.
NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS

~~There are several~~Described below is a new accounting pronouncements issued or proposed by the ~~FASB. Each of these pronouncements, as applicable,~~FASB that has been ~~or will be~~ adopted by the Company. Management does not believe ~~any of these~~this accounting ~~pronouncements~~pronouncement has had or will have a material impact on the Company’s ~~condensed~~ consolidated financial position or operating ~~results.~~results, except as disclosed below or in future filings of the Company.

In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and other Options (Subtopic 70-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s instruments by removing major separation models required under current accounting principles generally accepted in the United States of America (“U.S. GAAP”). ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exceptions and also simplifies the diluted earnings per share calculation in certain areas. The standard is effective for public business entities, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years and interim periods within those fiscal years beginning after December 15, 2021. The Company early adopted this standard on January 1, 2021. By no longer recording embedded conversion features separately from the convertible debt instrument, and instead as a single liability, the Company’s financial statements reflect a more simplified view of convertible debt instruments and cash interest expense that is believed to be more relevant than an imputed interest expense that results from the separation of conversion features previously required by U.S. GAAP. The adoption of this standard had no material effect on the Company's condensed consolidated financial statements as of June 30, 2021.
10
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 – OPERATING LEASE

On January ~~31,~~18, 2019, the Company entered into an agreement to lease approximately 25,470 square feet of office and manufacturing space in Pompano Beach, ~~Florida. The original term of the lease was approximately five years and two months.~~Florida through March 2024. On March 25, 2019, the Company entered into an amendment to the agreement to increase the square footage of leased premises to 36,900 square feet, increasing the Company’s base rent obligation to be approximately ~~$33,825~~$33,825 per month for one year and nine months, and increasing annually at a rate of three percent for the remainder of the lease term.
The ~~aggregate base rent~~right-of-use asset is composed of the sum of all remaining lease payments ~~for~~plus any initial direct costs and is amortized over the life of the expected lease term. For the expected term of the lease, ~~is $2,073,344. Additionally,~~the Company used the initial term of the five-year lease. If the Company does elect to exercise its option to extend the lease for another five years, that election will be treated as a ~~result of~~lease modification and the lease ~~amendment, the lease deposit required was increased to $74,000.~~will be reviewed for remeasurement.

The future minimum lease payments to be made under the operating lease as of June 30, ~~2020 are as follows:~~2021, are:

2020

202,950

Schedule of Maturity of Operating Lease Liability
2021

415,033

$ 209,034
2022

427,484

427,484
2023

440,308

440,308
2024

110,884

110,888
Total minimum lease payments

1,596,659

1,187,714
Discount

(387,178
)
(221,887 )
Operating lease liability

$
1,209,481

$ 965,827

Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used the incremental borrowing rate based on the information available at the lease commencement date. As of June 30, ~~2020,~~2021, the weighted-average remaining lease term is ~~4.0~~3 years and the weighted-average discount rate used to determine the operating lease liability was ~~15.0%~~15.0%. For the three months ended June 30, ~~2020~~2021, and ~~2019,~~2020, the Company expensed ~~$107,595~~$107,117 and ~~$92,478, respectively for rent.~~$107,595. For the six months ended June 30, ~~2020~~2021, and ~~2019,~~2020, the Company expensed ~~$215,183~~$214,036 and ~~$211,696,~~$215,183, respectively, for rent.

9

~~BASANITE, INC. AND SUBSIDIARIES~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~

NOTE 5 – NOTES PAYABLE – CONVERTIBLE

~~Convertible notes~~Notes payable ~~net of the related debt discounts,~~– convertible totaled ~~$313,276~~$0 and ~~$453,991~~$10,000 at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

On ~~March 5,~~August 3, 2020, the Company issued aan unsecured convertible promissory note ~~with~~to an ~~accredited~~ investor in exchange for ~~$50,000~~$10,000 bearing an interest rate of ~~10%~~18% per annum and payable in ~~nine~~6 months. ~~After June 5, 2020,~~The note included provisions which allowed the holder may convert the unpaid principal and interest balance of the note into shares of common stock, par value $0.001 per share, at the conversion rate equal to 80% of the closing price on June 5, 2020 per share. At the time of conversion, the Company shall immediately also issue a five-year warrant to the holder to purchase an amount of warrants equal to the $50,000 divided by the conversion price of shares of common stock of the Company. The exercise price for such warrants shall be 3 times the conversion price. In addition, the warrants shall have an option whereby the Company can require the exercise of the warrants if the trading price is at or above the warrant price times 190% for 20 consecutive trading days. The conversion price was determined to be $0.132. A debt discount of $50,000 was recorded on the note payable at resolution of the contingent beneficial conversion feature. The noteholder converted the promissory note of $50,000 and accrued interest of $1,908 on July 21, 2020 in exchange for 393,246 restricted common shares and 126,263 five-year warrants with an exercise price of $0.396 per share. As of June 30, 2020, the net debt balance as it relates to the convertible note payable is $7,979.

On April 13, 2020, the Company repaid its remaining obligation under the Securities Purchase Agreement and related 15% Convertible Promissory Note with Labrys Fund, LP (the “Investor”). The Company paid $262,389 in full satisfaction of the note. This amount included $24,389 accrued interest. On April 16, 2020, the Investor returned the originally issued 1,300,000 shares of common stock that was issued as a commitment fee. Additionally, the transfer agent released the reserve of 21,666,666 shares of common stock in the name of the Investor for issuance upon conversion.

On April 13, 2020, the Company entered into several convertible promissory notes in order to provide the financing required to repay the obligation with the Investor. The Company issued convertible notes payable in exchange for $100,000 bearing an interest rate of 12% per annum and payable in six months. At the option of holders, the principal and accrued interest may be converted to shares of common stock at a conversion rate of $0.092 per share. At the time of conversion, the Company shall immediately also issue an equal amount of five-year warrants to purchase common stock of the Company, at an exercise price of $0.312 per share. The warrants shall have an option whereby the Company can require the exercise of the warrants if the trading price is at or above $0.69 per share for 20 consecutive trading days. Upon issuance of the notes, the Company recorded debt discounts of $100,000 for the beneficial conversion features embedded in the notes. On July 21, 2020, one of the noteholders converted the promissory note of $50,000 and accrued interest of $1,908 in exchange for 393,246 restricted common shares and 126,263 five-year warrants with an exercise price of $0.396 per share.

One of the noteholders converted their promissory note of $50,000 and accrued interest of $1,181 on June 26, 2020 in exchange for 556,313 restricted common shares and 556,313 five-year warrants with an exercise price of $0.312 per share. The remaining noteholder converted their promissory note of $50,000 and accrued interest of $1,618 on July 21, 2020 in exchange for 561,064 restricted common shares and 561,064 five-year warrants with an exercise price of $0.312 per share. As of June 30, 2020, the net debt balance on the outstanding convertible notes payable is $21,311.

On April 13, 2020, the Company issued a convertible promissory note with an accredited investor in exchange for $50,000 bearing an interest rate of 12% per annum and payable in six months. After June 5, 2020, the holder may convert the unpaid principal and interest balance of the note into shares of common stock, par value $0.001 per share, at the conversion rate equal to 80% of the closing price on June 5, 2020 per share. At the time of conversion, the Company shall immediately also issue a five-year warrant to the holder to purchase the same number of shares of common stock of the Company as the holder receives in such conversion. The exercise price for such warrants shall be 3 times the conversion price. In addition, the warrants shall have an option whereby the Company can require the exercise of the warrants if the trading price is at or above the warrant price plus 150% for 20 consecutive trading days. The conversion price was determined to be $0.132. A debt discount of $50,000 was recorded on the note payable at resolution of the contingent beneficial conversion feature. The noteholder converted the promissory note of $50,000 and accrued interest of $1,615 on July 21, 2020 in exchange for 391,023 restricted common shares and 391,023 five-year warrants with an exercise price of $0.396 per share. As of June 30, 2020, the net debt balance as it relates to the convertible note payable is $9,615.

10

~~BASANITE, INC. AND SUBSIDIARIES~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~

~~NOTE 5 – NOTES PAYABLE – CONVERTIBLE (continued)~~

On May 27, 2020, the Company issued a convertible promissory note with an accredited investor in exchange for $60,000 bearing an interest rate of 12% per annum and payable in six months. At the option of holder, the principal may be converted to shares of common stock at a conversion rate of $0.11 per share. At the time of conversion, the Company shall immediately also issue an equal amount of five-year warrants to purchase common stock of the Company, at an exercise price of $0.33 per share. The warrants shall have an option whereby the Company can require the exercise of the warrants if the trading price is at or above $0.825 per share for 20 consecutive trading days. Upon issuance of the note, the Company recorded a debt discount of $60,000 for the beneficial conversion features embedded in the note. The noteholder converted the promissory note on June 26, 2020 in exchange for 545,455 restricted common shares and 545,455 five-year warrants with an exercise price of $0.33 per share. Accrued interest of $552 was forgiven and reported as a gain on extinguishment of debt.

On May 29, 2020, the Company issued a convertible promissory note with an accredited investor in exchange for $50,000 bearing an interest rate of 12% per annum and payable in six months. At the option of holder, the principal may be converted to shares of common stock at a conversion rate of $0.108 per share. At the time of conversion, the Company shall immediately also issue an equal amount of five-year warrants to purchase common stock of the Company, at an exercise price of $0.324 per share. The warrants shall have an option whereby the Company can require the exercise of the warrants if the trading price is at or above $0.81 per share for 20 consecutive trading days. Upon issuance of the note, the Company recorded a debt discount of $50,000 for the beneficial conversion features embedded in the note. The noteholder converted the promissory note of $50,000 on June 26, 2020 in exchange for 462,963 restricted common shares and 462,963 five-year warrants with an exercise price of $0.324 per share. Accrued interest of $427 was forgiven and reported as a gain on extinguishment of debt.

On June 1, 2020, the Company issued two convertible promissory notes with accredited investors in exchange for $100,000 bearing an interest rate of 12% per annum and payable in six months. At the option of holder, the principal may be converted to shares of common stock at a conversion rate of $0.096 per share. At the time of conversion, the Company shall immediately also issue an equal amount of five-year warrants to purchase common stock of the Company, at an exercise price of $0.288 per share. The warrants shall have an option whereby the Company can require the exercise of the warrants if the trading price is at or above $0.72 per share for 20 consecutive trading days. Upon maturity, the Company shall have the option to convert the unpaid principal balance of the note ~~under the same terms as above. Upon issuance~~into restricted common stock, of the ~~notes,~~Company at the conversion rate equal to the per share cash price paid for the shares by any third-party investor(s) with total proceeds to the Company ~~recorded debt discounts~~ of ~~$100,000 for~~not less than $500,000 provided, however, in no event shall the ~~beneficial~~ conversion ~~features embedded~~price ever be less than $0.01 per share. On February 16, 2021, the $10,000 note was paid along with accrued interest in the ~~notes. At June 30, 2020, the net debt balance on the outstanding convertible notes payable is $15,857.~~amount of $1,007.

Interest expense for the Company’s convertible notes payable for the three and six months ended June 30, ~~2020~~2021 was ~~$118,443~~$0 and ~~$158,250,~~$161, respectively, compared to ~~$9,503~~$118,443 and ~~$25,119 to~~$158,250 for the three and six months ended June 30, ~~2019.~~ 2020, respectively.
Accrued interest for the Company’s convertible notes payable aton June 30, ~~2020~~2021 and December 31, ~~2019~~2020 was ~~$89,291~~$0 and ~~$86,520.~~

~~NOTE 6 – NOTES PAYABLE – CONVERTIBLE – RELATED PARTY~~

~~Convertible notes payable – related party, net of the related debt discounts, totaled $36,058~~$760, respectively, and ~~$0 at June 30, 2020 and December 31, 2019, respectively.~~

~~On April 13, 2020, the Company issued a convertible promissory note with an entity managed by Ronald J. LoRicco, Sr., a member of our Board of Directors,~~is included in exchange for $150,000 bearing an interest rate of 12% per annum and payable in six months. After June 5, 2020, the holder may convert the unpaid principal and interest balance of the note into shares of common stock, par value $0.001 per share, at the conversion rate equal to 80% of the closing price on June 5, 2020 per share. At the time of conversion, the Company shall immediately also issue a five-year warrant to the holder to purchase the same number of shares of common stock of the Company as the holder receives in such conversion. The exercise price for such warrants shall be 3 times the conversion price. In addition, the warrants shall have an option whereby the Company can require the exercise of the warrants if the trading price is at or above the warrant price plus 150% for 20 consecutive trading days. The conversion price was determined to be $0.132. A debt discount of $150,000 was recordedaccrued expenses on the note payable at resolution of the contingent beneficial conversion feature. The noteholder converted the promissory note of $150,000 and accrued interest of $3,542 on June 26, 2020 in exchange for 1,163,201 restricted common shares and 1,163,201 five-year warrants with an exercise price of $0.396 per share.condensed consolidated balance sheets.

11

11
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~
(UNAUDITED)

NOTE 6 – NOTES PAYABLE – CONVERTIBLE – RELATED PARTY ~~(continued)~~

Notes payable – convertible – related party totaled $1,689,746 and $1,025,000 on June 30, 2021, and December 31, 2020, respectively.
On ~~April 13,~~August 3, 2020, the Company issued a secured convertible promissory note ~~with Michael V. Barbera, our Board Chairman,~~to certain investors in exchange for ~~$25,000~~$1,000,000 in the aggregate bearing an interest rate of ~~12%~~20% per annum and payable in ~~six~~6 months. ~~After June 5, 2020, the~~The holder may convert the unpaid principal ~~and interest~~ balance of the note into shares of restricted common stock, ~~par value $0.001 per share,~~of the Company at the conversion rate equal to ~~80%~~the per share cash price paid for the shares by any third-party investor(s) with total proceeds to the Company of not less than $500,000 provided, however, in no event shall the conversion price ever be less than $0.01 per share. This note contains a negative covenant that requires the Company to obtain consent prior to incurring any additional equity or debt investments and is secured by all of the ~~closing price on June 5, 2020 per share. At~~assets of the ~~time of conversion, the Company shall immediately also issue a five-year warrant to~~Company. The Richard A. LoRicco Sr. and Lucille M. LoRicco Irrevocable Insurance Trust DTD 4/28/95, Louis Demaio as Trustee (the “Trust”) is the holder ~~to purchase the same number~~ of ~~shares of common stock~~$750,000 of the ~~Company as~~principal amount of this note. The Trust was created by Richard A. LoRicco Sr. and Lucille M. LoRicco, who were the holder receives in such conversion. The exercise price for such warrants shall be 3 times the conversion price. In addition, the warrants shall have an option whereby the Company can require the exerciseparents of the warrants if the trading price is at or above the warrant price plus 150% for 20 consecutive trading days. The conversion price was determined to be $0.132. A debt discount of $25,000 was recorded on the note payable at resolution of the contingent beneficial conversion feature. The noteholder converted the promissory note of $25,000 and accrued interest of $809 on July 21, 2020 in exchange for 195,522 restricted common shares and 195,522 five-year warrants with an exercise price of $0.396 per share. As of June 30, 2020, the net debt balance as it relates to the related party convertible note payable is $4,808.

~~On April 13, 2020, the demand notes payable entered on January 16, 2020 for $50,000 each from related parties; Michael V. Barbera, our Board Chairman and an entity managed by~~ Ronald J. LoRicco Sr., one of the members of the Company’s Board of Directors and is maintained by an independent trustee Ronald J. LoRicco Sr. does not have voting or investment control of or power over the Trust but is an anticipated, partial beneficiary of the Trust.
On February 12, 2021, the Company exchanged the original debt for a ~~Board Member were exchanged for~~newly issued amended and restated secured convertible ~~notes. The notes were~~promissory note with a new principal balance of $1,610,005 bearing an interest rate of 20% per annum and fully payable in 3 months. This was accounted for as andebt extinguishment and the ~~convertible debt valued~~new promissory note was recorded at fair value in accordance with ASC 470 ~~debt. Per the addendums, the interest rate~~“Debt”. The original principal of 10% was increased to 12% per annum. The modification also allowed for a conversion option for the holder after June 5, 2020. After June 5, 2020, the holder may convert the unpaid principal and interest balance of the note into shares of common stock, par value $0.001 per share, at the conversion rate equal to 80% of the closing price on June 5, 2020 per share. At the time of conversion, the Company shall immediately also issue a five-year warrant to the holder to purchase the same number of shares of common stock of the Company as the holder receives in such conversion. The exercise price for such warrants shall be 3 times the conversion price. In addition, the warrants shall have an option whereby the Company can require the exercise of the warrants if the trading price is at or above the warrant price plus 150% for 20 consecutive trading days. The conversion price was determined to be $0.132. Debt discounts of $100,000 was recorded on the notes payable at resolution of the contingent beneficial conversion feature. One noteholder converted the promissory note of $50,000 $1,000,000 and accrued interest of ~~$2,440 on June 26, 2020 in exchange for 397,269 restricted~~$110,005 calculated as of the date of amendment and restatement along with an additional advance of $500,000 determined the principal amount of the new note. In consideration of the additional advance and the extension of the maturity date of the original note, the Company issued to the noteholders 15,000,000 5-year common ~~shares and 397,269 five-year~~stock warrants with an exercise price of ~~$0.396 per share.~~$0.20. The ~~other noteholder converted~~issuance of the warrants for the extension generated a loss on extinguishment of $3,686,136 for the fair value of the warrants issued.
On May 12, 2021, the Company extended the debt for a newly issued amended and restated secured convertible promissory note with a new principal balance of ~~$50,000~~ $1,689,746 bearing an interest rate of 20% per annum and fully payable in 9 months. The original principal of $1,610,005 and accrued interest of ~~$2,826 on July 21, 2020 in exchange for 400,195 restricted~~$79,742 calculated as of the date of amendment and restatement determined the principal amount of the new note. In consideration of the additional advance and the extension of the maturity date of the original note, the Company issued to the noteholders 7,500,000 5-year common ~~shares and 400,195 five-year~~stock warrants with an exercise price of ~~$0.396 per share. As~~$0.35. The issuance of ~~June 30, 2020,~~ the ~~net debt balance as it relates to~~warrants for the ~~outstanding related party convertible note payable is $31,250.~~extension generated a loss on extinguishment of $1,874,705 for the fair value of the warrants issued.

Interest expense for the Company’s convertible notes payable – related parties for the three and six months ended June 30, ~~2020~~2021, was ~~$74,029~~$84,605 and $151,521, respectively, compared to ~~$2,122 and $3,372 to~~$74,029 for the three and six months ended June 30, ~~2019.~~ 2020.
Accrued interest for the Company’s convertible notes payable at– related parties on June 30, ~~2020~~2021, and December 31, ~~2019~~2020, was ~~$3,194~~$46,048 and ~~$0.~~$86,574, respectively, and is included in accrued expenses on the condensed consolidated balance sheets.

12
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 – NOTES PAYABLE

Notes payable totaled ~~$353,038~~$787,412 and ~~$219,617 at~~$128,021 on June 30, ~~2020~~2021, and December 31, ~~2019,~~2020, respectively.

~~Due to the ongoing uncertainty about the severity~~On March 30, 2021, and ~~duration associated with the COVID-19 pandemic,~~May 18, 2021, the Company ~~considered furloughing or eliminating employees~~entered financing arrangements to finance the insurance premiums for its liability coverage. The financing has an interest rate of 9.67% and ~~taking other measures to reduce operating costs until there is more certainty about the short-term and long-term effects~~lasts through March 2022. The balance as of ~~the COVID-19 pandemic on the nation’s economy and the Company’s business.~~ June 30, 2021, was $26,665.
On ~~May 1, 2020,~~February 25, 2021, the Company entered a promissory note agreement with its bank ~~in exchange for $123,318~~to memorialize a $165,747 loan bearing an interest rate of ~~1.0%~~1.0% per annum. The loan was made pursuant to the Paycheck Protection Program under the ~~CARES Act~~Second Draw PPP Legislation after receiving confirmation from the U.S. Small Business Administration (“SBA”). The note contains a deferment period of six months from the date of funding. After sixty, but not more than ninety, days from the date of funding, the Company can apply to the bank for loan forgiveness. The bank will then request confirmation from the SBA. If the SBA confirms full and complete loan forgiveness, the Company’s obligation under the note will be deemed fully satisfied and paid in full. If the SBA denies full and complete loan forgiveness or only partly confirms forgiveness, the Company will be obligated to repay the bank for the total outstanding balance of the note, including principal and interest. The bank will establish terms, including monthly payments based on a maturity of two years from the date of funding and not more than 1.0% interest per annum. No principal or interest payments will be due prior to the end of the six-month deferment period. The PayrollPaycheck Protection Program Flexibility Act requires that the funds be used to maintain the current number of employees as well as cover payroll-related costs, monthly mortgage or rent payments and utilities and not more than ~~25%~~40% can be expended on ~~non- payroll-related~~non-payroll-related costs. ~~After providing documented evidence~~The applicable maturity date will be the maturity date as established by the SBA. If the SBA does not establish a maturity date or range of allowable maturity dates, the term will be five years.
On April 2, 2021, the Company issued a promissory note with an investor in exchange for $200,000 bearing an interest rate of 18% per annum and payable in 1 year. The company also issued 2,000,000 common stock warrants at an exercise price of $0.20 per share expiring in 5 years.
On April 9, 2021, the Company issued a promissory note with an investor in exchange for $50,000 bearing an interest rate of 18% per annum and payable in 1 year. The company also issued 500,000 common stock warrants at an exercise price of $0.20 per share expiring in 5 years.
On April 16, 2021, the Company issued a promissory note with an investor, in exchange for $300,000 bearing an interest rate of 18% per annum. The maturity date for the promissory note is April 16, 2022. The company also issued 3,000,000 common stock warrants at exercise price of $0.25 per share expiring in 5 years. As of this filing the note remains unexecuted.
On April 16, 2021, the Company issued a promissory note with an investor in exchange for $25,000 bearing an interest rate of 18% per annum and payable in 1 year. The company also issued 250,000 common stock warrants at an exercise price of $0.25 per share expiring in 5 years.
On April 16, 2021, the Company issued a promissory note with an investor in exchange for $20,000 bearing an interest rate of 18% per annum and payable in 1 year. The company also issued 200,000 common stock warrants at an exercise price of $0.25 per share expiring in 5 years.
On April 16, 2021, the Company issued a promissory note with an investor in exchange for $300,000 bearing an interest rate of 18% per annum and payable in 1 year. The company also issued 3,000,000 common stock warrants at an exercise price of $0.25 per share expiring in 5 years.
On April 16, 2021, the Company issued a promissory note with an investor in exchange for $300,000 bearing an interest rate of 18% per annum and payable in one year. The company also issued 3,000,000 common stock warrants at an exercise price of $0.25 per share expiring in 5 years. On May 21, 2021, the investor converted the promissory note of $300,000 in exchange for 6,000,000 common stock warrants at an exercise price of $0.15 per share expiring in 5 years. The accrued interest of $5,199 was forgiven. The conversion of the ~~number~~debt to warrants generated a loss on extinguishment of ~~employees and the use of funds, the SBA will provide loan forgiveness~~$1,487,386 for the ~~documented costs.~~

12

~~BASANITE, INC. AND SUBSIDIARIES~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~fair value of the warrants issued.


~~NOTE 7 – NOTES PAYABLE (continued)~~

Interest expense for the Company’s notes payable for the three and six months ended June 30, ~~2020~~2021, was ~~$2,025~~$29,802 and ~~$3,986,~~$30,177, respectively, compared to ~~$4,193~~$2,025 and ~~$2,482~~$3,986 to the three and six months ended June 30, ~~2019.~~ 2020.
Accrued interest for the Company’s notes payable aton June 30, ~~2020~~2021, and December 31, ~~2019~~2020, was ~~$15,561~~ $24,540 and ~~$11,244, respectively.~~$0, respectively, and is included in accrued expenses on the condensed consolidated balance sheets.

13
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 – NOTES PAYABLE –- RELATED PARTY

~~Related~~Notes payable - related party ~~notes payable~~ totaled ~~$0 at~~$300,000 and $0 on June 30, ~~2020~~2021, and December 31, ~~2019.~~2020, respectively.

On ~~January 16, 2020,~~April 2, 2021, the Company ~~entered into~~issued a ~~demand~~promissory note ~~agreement~~ with ~~our Board Chairman, Michael V. Barbera, in the amount of $50,000. The note has a term of 6 months bearing an interest rate of 10% per annum.~~

~~On January 16, 2020, the Company entered into a demand note agreement with an entity managed by Ronald J. LoRicco, Sr.,~~Paul Sallarulo, a member of our Board of Directors, in ~~the amount of $50,000. The note has a term of 6 months~~exchange for $150,000 bearing an interest rate of ~~10%~~18% per ~~annum.~~annum and payable in 1 year. The company also issued 1,500,000 common stock warrants at an exercise price of $0.20 per share expiring in 5 years.

On April ~~13, 2020,~~2, 2021, the ~~two demand notes~~Company issued a promissory note with Michael V. Barbera, our Chairman of the Board, in exchange for $150,000 bearing an interest rate of 18% per annum and payable ~~entered on January 16, 2020 for $50,000 each from related parties was exchanged for convertible debt. (See Note 6)~~in 1 year. The company also issued 1,500,000 common stock warrants at an exercise price of $0.20 per share expiring in 5 years.

Interest expense for the Company’s notes payable – related party for the three and six months ended June 30, ~~2020~~2021, was ~~$364 and $2,455,~~$13,335, respectively, compared to ~~$1,926~~$364 and ~~$2,926~~$2,455 for the three and six months ended June 30, ~~2019.~~ 2020.
Accrued interest for the Company’s notes ~~payable-related~~payable - related party aton June 30, ~~2020~~2021, and December 31, ~~2019~~2020, was ~~$0.~~$13,335 and $0, respectively, and is included in accrued expenses on the condensed consolidated balance sheets.

NOTE 9 – COMMITMENTS AND CONTINGENCIES
Supplier Agreement
MEP Consulting Engineers, Inc.
On July 23, 2020, the Company entered into an Exclusive Supplier Agreement with MEP Consulting Engineers, Inc. (“MEP”) of Miami, Florida. MEP engaged the Company as its sole and exclusive supplier and producer of basalt fiber reinforced polymer (“BFRP”) rebar, with the intent of developing a proprietary rebar to be named “Hurricane Bar.” The agreement also provides MEP with exclusive distribution rights to the Company’s BasaFlex™ BFRP rebar and other Company products in Miami-Dade County.
The agreement is targeting substantial volumes of South Florida construction projects in the works, which is expected to generate material revenues over the 5-year period. As compensation, MEP was provided the ability to exercise options to purchase a total of 5,000,000 restricted common shares of the Company, over the 5 years from the supplier agreement effective date, tied to sales performance. This option shall automatically expire after the end of the option period. An extension period is available through specific clauses in the agreement. To date, the compensation portion of the agreement has not been fully executed.
The Company did not produce product under this contract for the period ending June 30, 2021.
CR Business Consultants, Inc.
On October 22, 2020, the Company entered into an Exclusive Supplier Agreement with CR Business Consultants, Inc. (“CRBC”). CRBC agreed to utilize the Company as its exclusive supplier for all Company products, and the Company has granted CRBC exclusive distribution rights of the Company’s products in the Republic of Costa Rica and the Republic of Panama. Furthermore, CRBC has key relationships that could be a source of additional customers for the Company in other territories with no geographic restrictions.
The agreement is targeting multiple large projects in Costa Rica, to include the rebuilding of the Port of Limon, which Basanite has been specified. The recognized construction projects are expected to produce material revenues over the 5-year period. As compensation, CRBC was provided the ability to exercise options to purchase a total of 5,000,000 restricted common shares of the Company, over the 5 years from the supplier agreement effective date, tied to sales performance. This option shall automatically expire after the end of the option period. An extension period is available through specific clauses in the agreement.
14
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

The Company did not produce product under this contract for the period ending June 30, 2021.
Legal Matters

In the ordinary course of operations, the Company may become a party to legal proceedings. Based upon information currently available, management believes that such legal proceedings, individually or in the aggregate, will not have a material adverse effect on the Company's business, financial condition, cash flows, or results of operations except as provided below.

CalSTRS Judgement

On March 31, 2014, the Company received a “Notice of Default” letter from legal counsel representing the California State Teachers Retirement System (“CalSTRS”) (the landlord for the Company’s office space) alerting that the Company was in default of its lease for failure to pay monthly rent for the office space located at 2400 East Commercial Boulevard, Suite 612, Fort Lauderdale, FLFlorida 33304. The letter demanded immediate payment of ~~$41,937~~$41,937 for rent past due as of April 1, 2014. The Company had indicated in writing its intention to cooperate with ~~the landlord~~CalSTRS while trying to resolve the matter. On February 11, 2015, ~~the landlord,~~CalSTRS, through its attorneys, filed a motion for summary judgment. The motion asked for ~~$376,424~~$376,424 in unpaid rent, recovery of abated rents and tenant improvements and ~~$12,442~~$12,442 in attorney’s costs incurred by the landlord. On April 22, 2015, the motion for unpaid rent, recovery of abated rents and tenant improvements and attorney’s costs was granted by the Circuit Court of the 17th Judicial Circuit in and for Broward County and the Company has reserved the entire judgement of ~~$388,866.~~$388,866. The total amount is accruing interest at the statutory rate of ~~4.75%~~4.75%. The accrued interest on the judgement aton June 30, ~~2020~~2021, and December 31, ~~2019~~2020, is ~~$95,949~~$114,419.95 and ~~$86,739,~~$105,260, respectively.

13

~~BASANITE, INC. AND SUBSIDIARIES~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~

~~NOTE 9 – COMMITMENTS AND CONTINGENCIES (continued)~~

RAW Materials Litigation

On or about August 28, 2018, Raw Energy Materials Corp. (“Raw Energy”) filed an action for declaratory relief and breach of contract in Broward County, Florida, in the 17^th Judicial Circuit Court, titled Raw Energy Materials Corp. v. Rockstar Acquisitions, LLC, Paymeon, Inc. (now Basanite, Inc.), and Basalt America, LLC, CASE NO.: CACE 18-020596.

An Amended Complaint was filed on or about December 19, 2018, adding the Company’s subsidiary Basanite Industries, LLC as a defendant, as well as an alleged claim under Florida Statute Section 501.201 and for injunction.

The Company filed and ~~all~~has pending an amended counterclaim for breach of ~~the defendants in this case are contesting plaintiff's claims vigorously, have filed counterclaims~~contract, fraud, and ~~are considering additional filings~~civil conspiracy against ~~the plaintiff,~~Raw Energy affiliates, including Donald R. Smith, Elina Jenkins, Global Energy Sciences, LLC, Yellow TurtleDesign, LLC (“YellowTurtle”), as well as ~~its affiliated companies and principals, including~~former business affiliates/associates to Don Smith, Richard Laurin and ~~Elina Jenkins.~~

Robert Ludwig. The nature of the dispute is based on representations (or misrepresentations) ~~we allege~~the Company alleges were made to ~~us and~~it, as well as breaches of the terms of a ~~previously existing~~ licensing agreement, related consulting and other agreements, ~~as well as~~and failures and refusals of plaintiff and Don Smith related ~~sales of~~entities to deliver equipment/machinery and ~~goods.~~goods paid for by the Company or its affiliates. As it became apparent that the subject license agreement was effectively worthless and moot to the Company, and the ~~parties promptly agreed~~purported and promised trade secrets and intellectual property were essentially non-existent, the Company and Plaintiff agree to an order terminating that license agreement, which resulted in the ~~Agreed Order~~agreed order dated January 28, 2019.

A mediation was scheduled on March 4, 2021, which resulted in an impasse. Negotiations were continued, and on April 14, 2021, Basanite, Inc. entered into a settlement and release agreement with RAW, LLC (“RAW”), Donald R. Smith, YellowTurtle and Elina B. Jenkins among others. The ~~parties continue to litigate damages arising from~~settlement agreement provides for, among other things, the ~~dispute.~~

~~Depositions~~following: (i) a dismissal of ~~Raw Energy’s principal, Don Smith, and associate, Elina Jenkins, were taken in January of 2020. Discovery is ongoing. We filed a Motion for Summary Judgment pending which had to be withdrawn,~~the legal action as ~~it was based on Raw Energy having previously assigned its license rights and the license agreement~~ to the ~~Global Energy entity. After~~above-referenced parties and their owners, agents, affiliated companies, successors and assigns, having Case Number 18-020596 (21) in the Motion was filed, the defendants purported to find documents allegedly assigning the license back to Raw Energy. These documents were never produced before, and never discussed by Don Smith in his deposition. Nevertheless, the documents created a justiciable issue of fact so that our Motion would not have likely been successful at that time.

We are still evaluating and considering claims against Raw Energy affiliates, including Don Smith and Elina Jenkins. These evaluations are largely subject to review of discovery pending. Some documents have been received, some are expected to be received over the next month and some are subject to a resolution of objections. More specifically, the plaintiff's prior counsel, Michael Flam, has advised that he will start producing documents next week and continue to gather and produce same throughout the month of August 2020.

~~HLM Paymeon Storefront Damage Settlement~~

On December 15, 2016, a third-party driver drove his car through the Company’s retail storefront located at 2599 N. Federal Highway, Fort Lauderdale, FL 33305. The accident caused severe damage to the building causing the city of Fort Lauderdale to declare the building an unsafe structure. The Company was forced to vacate the premises, therefore, terminating the lease. The damaged storefront and terminated lease effectively terminated the business. On August 3, 2017, the Company filed a complaint with theSeventeenth Judicial Circuit Court ~~of the 17~~^th ~~Judicial Circuit~~ in and for Broward County, Florida (the “Litigation”) upon the Company’s timely purchase of the shares as set forth in the next paragraph below and (ii) mutual general releases for ~~loss of income, beneficial lease and debt~~the above-referenced parties relating to the ~~sub-landlord. On February 26, 2020,~~Litigation upon the Company’s timely purchase of the shares as set forth in the next paragraph below.
Simultaneously with the execution of the settlement agreement settling the litigation in full and release of all claims among the parties, the Company ~~was able~~entered into stock purchase agreements with both RAW and YellowTurtle to ~~settle~~repurchase the 10,000,000 shares of the Company’s common stock held by RAW for ~~$125,000 in exchange~~$1,212,121 and the 6,500,000 shares of the Company’s common stock held by YellowTurtle for $787,879, or an aggregate purchase price of $2,000,000. On May 17, 2021, the settlement shares were purchased by a ~~Complete Release for All Claims against all parties named~~group of related and non-related investors which resulted in the ~~case. The case was taken on~~closing of this legal action. As a ~~contingency basis by its attorney, therefore, reducing~~result of the settlement, ~~proceeds by 40% and related expenses. The~~the Company ~~received $70,817 in net proceeds on March 18, 2020 represented by the~~recognized a gain on settlement of ~~lawsuit.~~$320,037 from the derecognition of previously accrued contingent legal liabilities.

14

15
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~
(UNAUDITED)

NOTE 10 – STOCKHOLDERS’ DEFICIT

~~In April 2020,~~
On May 21, 2021, the Company converted a $300,000 note payable into 6,000,000 warrants to purchase shares of the Company’s common stock warrants. The fair value of the warrants was recorded as a loss on extinguishment of debt for $1,487,386 and is included in additional paid-in capital of the statement of stockholders’ deficit.
On June 10, 2021, 600,000 shares were issued ~~4,166,667~~per the two consulting agreements entered on July 9, 2020, and October 16, 2020, for fundraising services. The value of the shares for both agreements is $138,000 and will be expensed over the renewable three-month term of the agreement.
On June 10, 2021, 300,000 shares were issued per the consulting agreement entered on May 17, 2021, for investor relations services. The value of the shares for agreement is $89,700 and will be expensed over the renewable six-month term of the agreement.
The Company issued 735,669 and 1,185,669 restricted common shares ~~par value $.001 per share, in exchange~~to various investors for the ~~$416,667 received in the prior period from investors.~~three and six months ended June 30, 2021, for cash proceeds totaling $241,776 and $331,776, respectively. The ~~investors also received 4,000,000 five-year warrants with an exercise price of $0.30 per share and 16,667 five-year warrants with an exercise price of $0.40 per share.~~

~~Additionally, 1,300,000~~Company issued 6,040,614 restricted common shares ~~were returned~~ to ~~the Company upon fully satisfying the debt with Labrys Fund.~~

~~In June 2020, the Company received $200,000 from~~various investors in exchange for 912,409 restricted common shares, par value $.001 per share, for $0.1096 per share and 961,538 restricted common shares, par value $.001 per share, for $0.104 per share. Both investors received equal amounts of five-year warrants with an exercise price to be determined as the ~~greater of: (a) three times the purchase price~~ for the ~~common shares pursuant to the subscription agreement;~~ or ~~(b) the price equal to 80% of the lowest open market closing price of the common shares during the twenty trading days preceding the 120~~^th ~~calendar day after the purchase date.~~three and six months ended June 30, 2020, for cash proceeds totaling $616,667.

On June 24, 2020, noteholders including entities managed by Ronald J. LoRicco, Sr., a member of the Board of Directors, converted their convertible notes payable with a principal balance of $360,000. The noteholders converted all principal and accrued interest (where applicable) under these notes in the amount of $367,163 (which includes interest accrued through June 24, 2020) in exchange for 3,125,201 restricted common shares of the Company. As part of the convertible note agreements, the noteholders were issued five-year warrants of an equal amount.

NOTE 11 – OPTIONS AND WARRANTS

Stock Options:

The following table summarizes all option grants outstanding to consultants, directors, and employees as of June 30, ~~2020~~2021, and December 31, ~~2019~~2020, and the related changes during these periods are presented below.

Schedule of Summary of Options and Warrants Assumptions to Estimate Fair Value of Options Granted

June 30,
2020

December 31,
2019

June 30,
2021 December 31,
2020
Options outstanding and exercisable

4,542,500

5,042,500

4,727,778 4,542,500
Weighted-average exercise price

$
0.41

$
0.40

$ 0.36 $ 0.41
Aggregate intrinsic value

$
—

—

$ 579,494 118,148
Weighted-average remaining contractual term (years)

4.37

4.66

4.19 3.86

The Company ~~chose~~uses the “straight-line” attribution method for allocating compensation costs of each stock option over the requisite service period using the Black-Scholes Option Pricing Model to calculate the grant date fair value.

During the six months ended June 30, ~~2020, no~~2021, 1,092,500 options were ~~issued or exercised. 500,000~~cancelled. The company granted 1,277,778 options ~~were cancelled on May~~for the period ending June 30, ~~2020 upon expiration.~~2021.

Stock Warrants:

The following table summarizes all warrant grants outstanding to consultants, directors and employees as well as investors as of June 30, ~~2020~~2021, and December 31, ~~2019~~2020, and the related changes during these periods are presented below.

June 30,
2020

December 31,
2019

Warrants outstanding and exercisable

39,015,576

29,849,761

Weighted-average exercise price

$
0.23

$
0.23

Aggregate intrinsic value

$
1,087,583

$
1,956,750

Weighted-average remaining contractual term (years)

3.49

3.64

15

~~BASANITE, INC. AND SUBSIDIARIES~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~
~~(UNAUDITED)~~
Schedule of Summary of Options and Warrants Assumptions to Estimate Fair Value of Options Granted
June 30,
2021 December 31,
2020
Warrants outstanding and exercisable 78,620,378 38,920,378
Weighted-average exercise price $ 0.25 $ 0.27
Aggregate intrinsic value $ 15,067,991 $ 2,973,660
Weighted-average remaining contractual term (years) 3.86 3.37

~~NOTE 11 – OPTIONS AND WARRANTS (continued)~~

During the six months ended June 30, ~~2020, 9,165,815~~2021, 40,700,000 five-year5 warrants were issued. NoDuring the six months ended June 30, 2021, 1,000,000 warrants were ~~exercised or cancelled.~~exercised.

During the three months ended June 30, ~~2020~~2021, and ~~2019,~~2020, total stock-based compensation expense amounted to $0$482,953 and ~~$1,045,734~~$0, respectively.
During the six months ended June 30, ~~2020~~2021, and ~~2019,~~2020, total stock-based compensation expense amounted to $0$647,963 and ~~$1,119,336,~~$0, respectively.

16
~~NOTE 12 – INCOME TAXES~~

The Coronavirus Aid and Relief and Economic Security (“CARES”) Act enacted on March 27, 2020 provided relief for individuals and businesses as a result of COVID-19 and its impact on the economy. The CARES Act provided for additional relief for businesses by amending the net operating loss (“NOL”) rules. The amendment allows for the carryback of NOLs to each of the five taxable years preceding the taxable year in which the loss arises. Since the enactment of the Tax Cuts and Jobs Act of 2017 (“TCJA”), NOLs generally could not be carried back but could be carried forward indefinitely. Further, the TCJA limited NOL absorption to 80% of taxable income. The CARES Act temporarily removes the 80% limitation, reinstating it for tax years beginning after 2020. This amendment does not currently benefit the Company as it has sustained losses in those years.

~~NOTE 13 – SUBSEQUENT EVENTS~~

On July 6, 2020, Isabella Barbera resigned from her position as Chief Financial Officer. She has agreed to assist the Company with the transition and remain in a contractor position until her replacement can be found.

On July 8, 2020, the Company negotiated with an accredited investor who holds several demand notes to agree to convert the remaining principal balance of $191,965 and accrued interest of $15,729 for $150,000 of restricted common shares. The balance of $57,694 has been forgiven. The conversion price of $0.132 per share was agreed upon, derived from the latest similar valued conversion that occurred (See Note 5), for 1,136,364 restricted common shares and an equal amount of five-year warrants with an exercise price of $0.396 per share. The issuance of the restricted common shares and warrants has not taken place by the date of this report.

On July 21, 2020, a $50,000 convertible note held by an accredited investor was converted at the option of the holder. The Company converted the note per the original terms of the agreement (see Note 5). The Company issued 393,246 restricted common shares and 126,263 five-year warrants with an exercise price of $0.396 per share.

On July 21, 2020, $50,000 of convertible notes held by accredited investors were converted at the option of the holders. The Company converted the notes per the original terms of the agreement (see Note 5).~~The Company issued561,064 restricted common shares and 561,064 five-year warrants with an exercise price of $0.312 per share.~~

On July 21, 2020, a $50,000 of convertible note held by an accredited investor was converted at the option of the holder. The Company converted the note per the amended terms of the agreement (see Note 5). The Company issued 391,023 restricted common shares and 391,023 five-year warrants with an exercise price of $0.396 per share.

On July 21, 2020, a $25,000 of convertible note held by a related party was converted at the option of the holder. The Company converted the note per the original terms of the agreement (see Note 6). The Company issued 195,522 restricted common shares and 195,522 five-year warrants with an exercise price of $0.396 per share.

On July 21, 2020, a $50,000 convertible note held by a related party was converted at the option of the holder. The Company converted the note per the original terms of the agreement (see Note 6). The Company issued 400,195 restricted common shares and 400,195 five-year warrants with an exercise price of $0.396 per share.

On July 24, 2020, the Company entered into an exclusive Supply Agreement with MEP Consulting Engineers, a Design / Build firm out of Miami. The Company will be producing 100% of their BFRP rebar requirements.

16

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~

(UNAUDITED)

NOTE 12 – RELATED PARTIES

In addition to those transactions discussed in Notes 5 and 7, the Company had the following related party transactions.

Issuance of notes payable - related parties, totaling $100,000 and detailed in Note 13 – Subsequent Events.

NOTE 13 – SUBSEQUENT EVENTS ~~(continued)~~

On August 3, 2020, the Company negotiated with an accredited investor who holds a convertible note to agree to convert the remaining principal balance of $258,524 and accrued interest of $102,176, at a conversion price of $0.175 per share, for 2,061,143 restricted common shares.

~~On August 3, 2020,~~July 7, 2021, the Company issued a ~~secured convertible~~ promissory note ~~to certain accredited investors~~with an entity managed by Ronald J. LoRicco, Sr., a member of our Board of Directors, in exchange for ~~$1,000,000~~ $50,000 bearing an interest rate of ~~20%~~10% per ~~annum and payable in six months.~~annum. The ~~Company shall pay interest on the unconverted and then outstanding principal amount of the note at a rate of 20% per annum, accrued monthly~~maturity date for the ~~first four months~~promissory note is July 23, 2021. The note payable remains outstanding as of this note and payable thereafter until the maturity date of February 3, 2021, unless the note is converted or prepaid prior to maturity. The holder may convert the unpaid principal and accrued and unpaid interest balance of the note into shares of common stock, par value $0.001 per share, at the conversion rate equal to the per share cash price paid for the shares by any third party investor(s) with total proceeds to the Company of not less than $500,000. This note contains a negative covenant that requires the Company to obtain consent prior to incurring any additional equity or debt investments and is secured by all of the assets of the Company. The Richard A. LoRicco Sr. and Lucille M. LoRicco Irrevocable Insurance Trust DTD 4/28/95, Louis Demaio as Trustee (the “Trust”) is the holder of $750,000 of the principal amount of this note. The Trust is maintained by Richard A. LoRicco Sr. and Lucille M. LoRicco, who are the parents of Ronald J. LoRicco Sr., one of the members of our Board. The disinterested members of the Board approved the terms of the note. Ronald J. LoRicco Sr. does not have voting or investment control of or power over the Trust but is an anticipated, partial beneficiary of the Trust.filing.

On ~~August 3, 2020,~~July 7, 2021, the Company issued ~~an unsecured convertible~~a promissory note to an accredited investor in exchange for $10,000 bearing an interest rate of 18% per annum and payable in six months. The Company shall pay interest on the unconverted and then outstanding principal amount of the note at a rate of 18% per annum, accrued monthly for the first four months of this note and payable thereafter until the maturity date of February 3, 2021, unless the note is converted or prepaid prior to maturity. The holder may convert the unpaid principal and accrued and unpaid interest balance of the note into shares of common stock, par value $0.001 per share, at the conversion rate equal to the per share cash price paid for the shares by any third party investor(s) with ~~total proceeds to the Company of not less than $500,000.~~

~~On August 3, 2020,the Company issued an unsecured convertible promissory note to~~ Michael V. Barbera, ~~the~~our Chairman of the Board, in exchange for ~~$25,000~~ $50,000 bearing an interest rate of ~~18%~~10% per ~~annum and payable in six months.~~annum. The ~~Company shall pay interest on the unconverted and then outstanding principal amount of the note at a rate of 18% per annum, accrued monthly~~maturity date for the ~~first four months~~promissory note is July 23, 2021. The note payable remains outstanding as of this ~~note and payable thereafter until the maturity date of February 3,~~filing.

On July 9, 2021, ~~unless the note is converted or prepaid prior to maturity. The holder may convert the unpaid principal and accrued and unpaid interest balance of the note into~~600,000 shares of common stock ~~par value $0.001~~were issued per the two consulting agreements entered on July 9, 2020, and October 16, 2020, for fundraising services.

On July 15, 2021, the Company issued a promissory note with David Anderson, our Chief Operating Officer, in exchange for $20,000 bearing an interest rate of 10% per annum. The maturity date for the promissory note is July 23, 2021. The note payable was paid in full on August 18, 2021.

On July 26, 2021, the Company issued a promissory note with David Anderson, our Chief Operating Officer, in exchange for $30,500 bearing an interest rate of 10% per annum. The maturity date of the promissory note is August 2, 2021. The note payable was paid in full on August 18, 2021.

On July 27, 2021, the Company issued a promissory note with Simon Kay, our Interim Acting Chief Executive Officer and Principal Financial Officer, in exchange for $10,000 bearing an interest rate of 10% per annum. The maturity date of the promissory note is August 3, 2021. The note payable was paid in full on August 18, 2021.

On August 17, 2021, the Company conducted the closing (the “Closing”) of a private placement offering to accredited investors (the “Offering”) of the Company’s units (the “Units”) at a price of $0.275 per Unit, with each Unit consisting of: (i) one (1) share of the Company’s common stock, (ii) a five-year, immediately exercisable warrant (“Warrant A”) to purchase one (1) share of common stock at an exercise price of $0.33 per share (“Exercise Price”) and (iii) an additional five-year, immediately exercisable warrant to purchase one (1) share of common stock at the ~~conversion rate equal~~Exercise Price (“Warrant B”). The Warrant A and Warrant B are identical, except that the Warrant B has a call feature in favor of the Company.

In connection with the Closing, the Company entered into definitive securities purchase agreements with 17 accredited investors and issued an aggregate of 19,398,144 shares of common stock, Warrant As to ~~the per share cash price paid~~purchase up to an aggregate of 19,398,144 shares of Common Stock, and Warrant Bs to purchase up to an aggregate of 19,398,144 shares of Common Stock (for an aggregate of 38,796,288 Warrant Shares), for ~~the shares by any third party investor(s) with total~~aggregate gross proceeds to the Company of ~~not less than $500,000.~~approximately $5,334,490. No actual Units were issued in the Offering. Aegis Capital Corp. (“Aegis”) acted as the Company’s placement agent in connection with the Offering, for which Aegis received customary cash fees and expense reimbursements.

~~On August 5, 2020,~~The net proceeds of the Offering (approximately $4,770,000) will be used by the Company ~~issued 163,043 restricted common shares, par value $0.001 per share, in exchange~~ for ~~$30,000 to an accredited investor. The investor will also receive an equal amount~~expansion of ~~five-year warrants with an exercise price equal to the greater~~its manufacturing capability, sales and marketing, satisfaction of ~~(a) three times the purchase price of $0.184 for the common shares or (b) the share price determined one hundred~~certain indebtedness and twenty (120) days from funding, using the following formula: the exercise price will be 20% below the lowest market closing price of the common shares in the twenty trading days preceding the 120th calendar day from funding.general working capital purposes.

ITEM 2.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~ITEM 2.~~

~~MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains ~~forward-looking statements.~~“forward-looking statements” (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). These forward-looking statements are based on our management’s beliefs, assumptions, and expectations and on information currently available to our management. Generally, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-looking statements, which generally are not historical in nature. All statements that address operating or financial performance, events, or developments that we expect or anticipate will occur in the future are forward-looking statements, including without limitation our expectations with respect to customer leads, product sales, future financings, or the commercial success of our ~~products.~~business model. We may not actually achieve the plans, projections or expectations disclosed in forward-looking statements, and actual results, developments or events could differ materially from those disclosed in the forward-looking statements. Our management believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on forward-looking statements because they speak only as of the date when made. We do not assume any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by federal securities laws and the rules of the Securities and Exchange Commission (the “SEC”). We may not actually achieve the plans, projections or expectations disclosed in our forward-looking statements, and actual results, developments or events could differ materially and adversely from those disclosed in the forward-looking statements. Forward-looking statements are subject to a number of significant risks and uncertainties, including without limitation those described from time to time in our ~~future~~ reports filed with the SEC.

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.

Basanite and its wholly owned subsidiaries are herein referred to as the "Company", “we”, “our”, or “us”.

Overview

This overview provides a high-level discussion of our operating results and some of the trends that affect our business. We believe that an understanding of these trends is important to understand our financial results for the six months ended June 30, ~~2020~~2021, and ~~2019,~~2020, respectively. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this report, and our audited consolidated financial statements and accompanying notes included in the Annual Report ~~on Form 10-K~~in Form-10-K for the period ended December 31, ~~2019~~2020 and filed with the SEC on ~~April 6, 2020.~~March 31, 2021.

~~The Company’s~~On May 30, 2006, Basanite, Inc. was formed as a Nevada corporation. Through our wholly owned subsidiary, Basanite Industries, LLC, a Delaware limited liability company (“BI”) ~~manufactures~~, we manufacture a range of “green” (environmentally friendly), sustainable, non-corrosive, lightweight, composite products used in concrete reinforcement by the construction industry. Our core product is BasaFlex™, a basalt fiber reinforced polymer reinforcing bar (“~~BFRP”~~rebar”) ~~rebar. BFRP rebar~~which we believe is a stronger, lighter, sustainable, non-conductive and ~~non-corrosive~~corrosion-proof alternative to traditional steel.

Our two other main product lines are BasaMix™, which are fine denier basalt fibers available in various chopped sizes, and BasaMesh™, a line of Basalt Geogrid Mesh Rolls, intended to replace welded wire mesh (made of steel) and other fiber reinforced polymer grids and mesh.

BasaMix™ is designed to help absorb the stresses associated with early-aged plastic shrinkage and settlement cracking in concrete, as well as providing an increased toughness for ~~traditional~~enhanced reinforcement in Slab on Grade (SOG) and precast elements. BasaMix™ also serves in a “system approach” for optimum performance of a concrete element when used in conjunction with our BasaFlex™ rebar.

BasaMesh™ is designed for secondary and temperature shrinkage reinforcement. BasaMesh™ can also work in conjunction with the BasaFlex™ rebar or BasaMix™ for a total reinforcement program.

Each of our products is specifically designed to extend the lifecycle of concrete products by eliminating “concrete spalling.” Spalling results from the steel ~~rebar~~reinforcing materials embedded within the concrete member rusting (contrary to popular belief, concrete is porous, and ~~wire mesh.~~ water can permeate into concrete). Rusting leads to the steel expanding and eventually causing the surrounding concrete to delaminate, crack, or even break off, resulting in potential structural failure. We believe that each of our products addresses this important need along with other key requirements in today’s construction market.

We believe that the following attributes of BasaFlex™ provide it with a competitive advantage in the marketplace:

BasaFlex™ never corrodes: steel reinforcement products rust, leading to spalling and significant repair costs down the road;

BasaFlex™ is sustainable: BasaFlex™ is made from Basalt rock, the most abundant rock found on Earth’s surface, and offers a longer product lifecycle than traditional steel (the lack of corrosion allows the life span of concrete products reinforced with BasaFlex to be significantly longer);

BasaFlex™ is “green”: From mining, through production, to installation at the building site, BasaFlex™ has an exceptionally low carbon footprint when compared with that of steel; and

BasaFlex™ has a lower in-place cost: the physical nature of our products relative to steel result in a lower net cost to the contractor once installed, such as: BasaFlex™ is one-quarter of the weight of equivalent sized steel, meaning 4 times the quantity of material can be delivered by the same truck (or container); all Basanite products can be loaded/unloaded and moved around the jobsite by hand – no expensive handling equipment is needed; less concrete is required as BasaFlex™ does not require the extra concrete cover needed when using steel; and Basanite products are safer and easier to use. We believe all these factors materially reduce the net in-place cost of concrete reinforcement.

BI leases a fully permitted, ~~and Underwriters Laboratories (“UL”) approved~~ 36,900 square foot facility located in Pompano Beach, Florida equipped with five customized, Underwriters Laboratories approved, Pultrusion ~~machines.~~manufacturing machines for BasaFlex™ production, plus other composite manufacturing equipment. Each Pultrusion machine has up to two linear production lines ~~(a total~~(we use one or two lines per machine depending on rebar size – giving a maximum capacity of 10 manufacturing lines). To date, BI’s operations team ~~is currently in~~has successfully optimized and scaled the ~~processes~~capacity of ~~optimizing and scaling the~~our manufacturing plant to produce ~~11,000~~up to ~~17,000~~25,000 linear feet of ~~BFRP~~BasaFlex™ rebar per ~~line,~~shift, per day, depending on the product mix. BI’s own fully equipped Test Lab is utilized to evaluate, validate, and verify each product’s performance attributes.

Basanite Industries submitted its first round of BasaFlex™ (Basalt Fiber Reinforced Polymer) rebar products the Structures and Materials Department of the University of Miami, Miami, Florida (UM), an industry accredited independent testing laboratory, to obtain a Certified Test Report which will allow Basanite to participate in precast, architectural, flatwork and other non-structural engineered applications. On May 29^th, 2020 a Certified Test Report was submitted by UM to Basanite for engineering use. Basanite Industries will be submitting a second round of BasaFlex™ rebars for additional testing that will further certify and qualify BasaFlex™ for Federal and State government applications. The Company will begin scaling its production in Q3, 2020 to meet the expected demand for alternative, non-corrosive reinforcement, however we expect operating losses to continue until at least 2021.

~~The manufacture of concrete reinforcement products made from continuous basalt fiber create substantial benefits for the construction industry, including but not limited to, the following:~~

~~BasaFlex~~™ ~~never rusts~~ – ~~steel reinforcement products rust, causing time and repair costs down the road;~~

~~BasaFlex~~™ ~~is sustainable; with a longer lifecycle~~ – ~~production of our products results in exceptionally low carbon footprint when compared with steel. The lack of corrosion allows the~~ “~~lifespan~~” ~~of concrete products to be significantly longer; and~~

~~BasaFlex~~™ ~~has a lower final, in place cost~~ – ~~the physical nature of our products relative to steel (4X lighter, easily transportable,~~ “~~coil-able”, safer and easier to use) reduces the all-in cost of reinforcement when all factors are considered.~~

We believe that macroeconomic factors are pressuring the construction industry to consider the use of alternative reinforcement materials for the following reasons: the increasing need for global infrastructure repair; recent design trends towards increasing the lifespan of projects and materials; and increasing consideration of the long-term costs and environmental impacts of material selections.

the increasing need for global infrastructure repair;

recent design trends towards increasing the lifespan of projects and materials;

the global interest in promoting the use of sustainable products; and

increasing consideration of both the long-term costs and environmental impacts of material selections.

We believe we are well positioned to benefit from this renewed focus, ~~although it is difficult to determine at this point what the impacts~~particularly in light of the interest of the U.S. government in funding infrastructure improvements and events such as the tragic collapse of a residential building in Surfside, Florida.

Impact of COVID-19

The novel coronavirus (“COVID-19”) that surfaced in December 2019 and spread throughout the world resulted in our company undergoing a 2-month operational shutdown early in the second quarter of 2020, with normal business operations resuming in June 2019. A second coronavirus related event occurred early in the fourth quarter of 2020, when two employees tested positive for COVID-19 ~~pandemic~~and we became concerned they had potentially exposed the others. Out of an abundance of caution, we temporarily shut down operations for one week and entered a 10-day quarantine period (during this time certain key employees remained active, working from home). We strictly followed CDC guidelines for required quarantining periods and testing of all employees before re-opening. Notwithstanding this, since the beginning of the third quarter of 2020, COVID-19 has not materially impacted our operations or those of our third-party partners. However, the continued spread of variants of the virus could negatively impact the manufacturing, supply, distribution and sale of our products and our financial results in the future. The extent to which COVID-19 may impact the construction ~~industry.~~industry, our operations or the operations of our third-party partners will depend on future developments, which are uncertain and cannot be predicted with confidence.

Once we commence scaled production, we expect that a substantial number of larger customers will request terms for payment. We believe that we will need to grant customers anywhere from 30 to 45 days to complete payment in order to be competitive. We recognize that there may be risk associated with granting terms to certain customers in the construction industry. Our target customers are p~~recast concrete producers, large general and marine contractors, home builders, as well as large distributors serving the general construction industry.~~ ~~With this risk in mind, we are exploring all methods of protecting our interests moving forwards.~~

We expect to continue making investments in BI. We require additional capital to: (1) support additional mechanical ASTM testing from independent laboratories or universities for industry verification; (2) engage the engineering and industry experts to develop a key software program; (3) purchase raw materials and other goods and services related to our manufacturing needs; (4) increase our logistics, management, quality assurance and production teams; (5) purchase additional equipment required; (6) continue research and development around new products for the concrete reinforcement industry; and (7) meet other general working capital needs.

Results of Operations

Revenue – The Company had $15,549 of revenues as a result of sales for the three months ended June 30, 2021 compared to $593 for the same period in the prior year and ~~$2,218~~$19,685 of revenues as a result of sales of finished goods sold for the ~~three and~~ six months ended June 30, ~~2020~~2021 compared to ~~$2,898~~$2,218 for ~~both~~ the ~~three and six months~~same period in the prior year. Revenues have been ~~consistent~~minimal as a result of the Company’s ~~retooling~~focus on the scaling of ~~machinery~~production and acquisition of new raw materials in preparation to shift focus to a new production of materials in order to derive outputs that can be tightly controlled in terms of quality and specifications during both periods.inventory.

Cost of ~~Goods Sold~~

goods sold – During the three and six months ended June 30, ~~2020,~~2021, the Company had cost of sales of $19,493 and $20,809 compared to $1,603 and $2,222, ~~compared to $41,176 and $44,469,~~ respectively for the same period in the prior year. ~~Cost of goods sold consisted of the following:~~

For the three months ended
June 30,

For the six months ended
June 30,

2020

2019

2020

2019

Product cost

$
1,575

$
725

$
2,146

$
725

Equipment rental and maintenance

—

12,019

—

12,019

Supplies

—

23,777

—

26,616

Shipping cost

—

4,655

—

5,109

Merchant fees

28

—

76

—

Total cost of goods sold

$
1,603

$
41,176

$
2,222

$
44,469

For the three ~~and~~months ended June 30, 2021, the Company had a gross margin from operations in the amount of $3,944 compared to a gross margin in the amount of $1,010 in the same period of the prior year.

For the six months ended June 30, ~~2020,~~2021, the Company had a ~~negative~~ gross margin from ~~continuing~~ operations in the amount of ~~$1,010 and $4~~$1,124 compared to a ~~negative~~ gross margin ~~from continuing operations~~ in the amount of ~~$38,278 and $41,571, respectively for~~$4 in the same period inof the prior year.

The Company ~~lost money on a gross margin basis due to inefficiencies in~~has small margins as it sold existing inventory while preparing for the ~~start-up process and extremely narrow margins on~~scaling the ~~initial sales~~manufacture of products. The Company’s initial sales were at very low gross margins to try to gain market share and gain exposure to the product. In the future, as the Company's product gains acceptance it is expected for margins to increase.BasaFlex™.

Operating Expenses

Professional fees – During the three months ended June 30, ~~2020 and 2019~~2021, professional fees were ~~$53,016~~$79,355 compared to ~~$62,410~~$53,016 for the same period in the prior year. During the six months ended June 30, 2021, professional fees were $193,087 compared to $162,874 for the same period in the prior year. The ~~decrease was minimal~~Company has increased fees as ~~during both periods,~~it relates to legal fees with the ~~Company had paid similar amounts~~ongoing litigation, and new supplier and consulting agreements as it tries to secure relationships in the industry.

Payroll and payroll taxes – During the three months ended June 30, 2021, payroll and payroll taxes were $300,683 compared to $162,455 for ~~legal and accounting services.~~

the same period in the prior year. During the six months ended June 30, ~~2020~~2021, payroll and ~~2019 professional fees~~payroll taxes were ~~$162,874~~$554,798 compared to ~~$214,274~~$399,886 for the same period in the prior year. The ~~decreased cost was due~~company retained a total of 27 employees at the period end June 30, 2021 as compared to ~~higher legal expense in~~9 employees at the ~~prior period resulting from litigation with its supplier and consultants.~~

~~Payroll and payroll taxes –~~ ~~During~~close of the ~~three and six months ended~~ June 30, 2020 payroll and payroll taxes were $162,455 and $399,886 compared to $227,697 and $317,309 in the prior year. The decrease was due to the termination of the prior CEO in the first quarter of 2020 compared to being employed during the same period in the prior year.period.

Consulting -– During the three months ended June 30, ~~2020,~~2021, consulting fees were $117,375 compared to $81,875 in the prior year. During the six months ended June 30, 2021, consulting fees were $230,625 compared to $98,938 in the prior year. The increase is due to additional consulting agreements: our Chief Executive Officer is currently compensated as a consultant. The Company’s previous Chief Executive Officer was compensated as an employee. The Company has also retained a capital markets consultant to assist in financial planning and ~~$58,017~~fundraising.

General and administrative – During the three months ended June 30, 2021, general and administrative expenses were $972,342 compared to $283,034 for the same period in the prior year. During the six months ended June 30, 2021, general and administrative expenses were $1,556,112 compared to $500,987 for the same period in the prior year. The increase is ~~due to a consulting agreement for senior management.~~

During the six months ended June 30, 2020, consulting fees were $98,938 compared to $216,090 for the same period in the prior year. The decrease was due to the Company having amounts paid under several consulting agreements to senior management.

~~General and administrative –~~ ~~During the three months ended June 30, 2020, general and administrative expenses were $283,034 compared to $1,245,688 for the same period in the prior year. The decrease is~~ largely due to ~~the higher~~an increase in stock-based compensation ~~expense in the prior year of $1,045,734.~~expense.

During the six months ended June 30, 2020, general and administrative expenses were $500,987 compared to $1,499,717 for the same period in the prior year. The decrease is largely due to the higher stock-based compensation expense in the prior year of $1,119,337.

Other Income

~~Miscellaneous income~~Gain on settlement of legal contingency - During the three ~~and six~~ months ended June 30, ~~2020, miscellaneous income was $0 and $1,274~~2021, the Company had a gain of $320,037 compared to ~~the gain on settlement of lawsuit of $70,817 and $1,274 or~~$0 for the same period in the prior year. ~~The increase is due to the net settlement of $125,000 less the contingency fee and expenses paid to the attorney for the HLM Storefront litigation.~~

~~Gain on settlement of payable -~~ During the ~~three and~~ six months ended June 30, ~~2020, the Company had no gain on settlement of payable in the current period as compared to $137,497 for the same period in the prior year.~~

~~Gain on extinguishment of debt -~~ ~~During the three and six months ended June 30, 2020,~~2021, the Company had a gain of ~~$980 for both periods~~$344,522 compared to ~~$2,886 for both periods in the prior year.~~

~~Other Expenses~~

~~Interest expense -~~ ~~During the three and six months ended June 30, 2020 and 2019, interest expense was $201,007 and $251,830 compared to $15,632 and $47,142, respectively,~~$0 for the same period in the prior year. The increase in the current year is ~~mainly~~largely due to the ~~amortization~~writing off of ~~the debt discounts recorded for the convertible debt.~~payables that had finalized with regards to legal matters in 2021.

~~Disposition of fixed asset~~Loan forgiveness - During the three ~~and~~months ended June 30, 2021, the Company had forgiveness of $0 compared to $0 for the same period in the prior year. During the six months ended June 30, ~~2020 and 2019,~~2021, the Company had ~~a $0 loss for both periods~~forgiveness of $124,143 compared to ~~a loss of $1,478~~$0 for the same period in the prior year. The balance increased due to the forgiveness from activities related to a note payable loan on May 21, 2021.

Miscellaneous Income -During the three ~~and~~months ended June 30, 2021, the Company had forgiveness of $3,116 compared to $0 for the same period in the prior year. During the six months ended June 30, ~~2020 and 2019,~~2021, the Company had forgiveness of $3,116 compared to $70,187 for the same period in the prior year. The balance increased due to a credit of materials damaged in transit from a primary vendor of the company.

Other Expenses

Loss on Extinguishment of Debt - During the three months ended June 30, 2021, the Company had a $0 gain ~~for both periods~~of $3,056,892 compared to ~~a gain of $0 and $700~~$980 for the same period in the prior year.During the six months ended June 30, 2021, the Company had a loss of $6,743,015 compared to $980 for the same period in the prior year. For more information about the transaction leading to the extinguishment of debt refer to footnote 6 of the financial statements included in this Form 10-Q.

Interest expense - During the three months ended June 30, 2021, interest expense was $133,211 compared to $201,007 for the same period in the prior year. During the six months ended June 30, 2021, interest expense was $205,874 compared to $251,830 for the same period in the prior year. The decrease is due to the volume of lending committed to during the second quarter of 2021.

Liquidity and Capital Resources

Since inception, ~~the Company has~~we have incurred net operating losses and ~~used~~negative cash ~~in operations.~~flow. As of June 30, ~~2020,~~2021, the Company had an accumulated deficit of ~~$26,786,778.~~$38,634,066. The Company has incurred general and administrative expenses associated with ~~its~~our product development and compliance while concurrently ~~preparing the~~setting up our manufacturing facility, beginning operations, and developing ~~the manufacturing business.~~our business plan. The Company also continues to incur legal fees arising from ongoing activities due to fundraising. We expect operating losses to continue in the short term, and we require additional financing for continued support of our ~~BFRP~~BasaFlex™ manufacturing business until ~~the Company~~we can generate sufficient revenues ~~and~~to achieve positive cash flow. These conditions raise substantial doubt about ~~the Company’s~~our ability to continue as a going concern.

We have historically satisfied our working capital requirements through the sale of restricted common stock and the issuance of warrants and promissory notes. We will continue our fundraising efforts until we have ~~can obtain~~obtained positive cash flow to cover our expenses. No assurances can be given that we will be successful in raising capital at all or on terms acceptable to us, or at all, and no assurances can be given that even if we raise capital that we will be able to generate sufficient revenue to be cash flow positive.

~~At June 30, 2020,~~While we have generated relatively little revenue to date, we continue to receive inquiries from a range of customers for our products, indicating what we believe is a significant level of market interest for BasaFlex™. Some of these inquiries would be for very large potential orders for new, multi-year construction projects. Based on our current limited manufacturing capacity (which we plan to begin to expand with the ~~Company had cash~~net proceeds of ~~$116,483 compared~~our private placement offering), these inquiries (if they lead to ~~$129,152 at December 31, 2019.~~actual orders) would exceed our capability to deliver within the customer’s requested timeframe, and largely because of this, there is no guarantee that orders will actually be received.

Notwithstanding ~~the~~ proceeds from the sale of our common stock this year, current working capital ~~is not sufficient~~and projected sales revenue are insufficient to maintain our current operations. In order to scale up operations and ~~there is no assurance that sales efforts will be successful enough in the near term to achieve~~reach the level of sales revenue sufficient to provide positive cash ~~flow. To~~flow, we require funding of both our expansion plan and our operating deficit through the ~~extent such revenues and corresponding cash flows do not materialize,~~period while we are scaling our manufacturing capability. We will ~~continue working towards securing more working~~attempt to raise this capital ~~with a preference towards debt which may be convertible to equity.~~through third party financing, including potential private or public offerings of our securities as well as bridge or other loan arrangements. We cannot provide any assurances that required capital will be obtained at all or that the terms of such required ~~capital~~financing may be acceptable to us. If we are unable to obtain adequate financing, we may reduce our operating activities to reduce our cash use until sufficient funding is ~~secured or revenues~~secured. If we are unable to secure funding when needed, our results of operations may suffer, and our business may fail.

At June 30, 2021, the Company had cash of $77,400 compared to $259,505 at December 31, 2020. Subsequent to the quarter end, we closed a private placement on August 17, 2021 that generated net cash proceeds to ~~support operating activities.~~us of approximately $4,770,000.

Cash Flows

Net cash used in operating activities amounted to ~~$1,040,380~~$2,294,501 and ~~$1,232,376~~$1,040,380 for the six months ended June 30, 2021, and 2020, ~~and 2019,~~ respectively. In the current period a loss was recorded related to the issuance of warrants at fair value issued as compensation for the extension of the maturity date of an amended note.

During the six months ended June 30, ~~2020, we used $59,377~~2021, net cash used for investing activities were $270,330 compared to ~~$428,794 used in~~$59,377 for the same period in the prior ~~fiscal year for~~year. The increase is largely due to costs associated with the ~~modifications~~customization, installation, and ~~UL listing~~verification and validation testing of the ~~production machinery and the final payments for the enhancements made to our production facility as compared to the deposits made on machinery and equipment.~~first BasaMax™ prototype pultrusion machine.

During the six months ended June 30, ~~2020,~~2021, we had ~~$1,087,088~~$2,382,726 net cash provided by financing activities compared to ~~$2,466,819~~$1,087,088 in the prior year. Issuance of common shares for ~~$616,667,~~$331,776, and $123,500 from warrants exercised; borrowing of ~~$851,727~~$579,741 from the issuance of convertible and short-term notes payable, including from related parties; less ~~$348,000~~$35,000 of a ~~partial~~full repayment of convertible notes; and less ~~$33,306~~$8,485 of partial repayment of notes payable provided the net cash during the six months ended June 30, ~~2020. We also issued common shares for $2,262,749, borrowing of $274,070~~2021. Further the Company borrowed $1,091,194 from the issuance of ~~short-term~~ notes payable, including from related ~~parties; less $20,000 of a partial repayment of convertible notes; and less $50,000 of partial repayment of~~parties. Additionally, the Company borrowed $300,000 in notes payable ~~provided the net cash during the six months ended June 30, 2019.~~which was later exchanged for 6,000,0000 five-year warrants on May 21, 2021.

We do not believe that our cash on hand as of June 30, ~~2020~~2021, will be sufficient to fund our current working capital requirements as we try to ~~the point where we are generating positive cash flow.~~develop our fiber reinforced polymer rebar manufacturing business. We ~~have recently~~ entered into ~~several convertible~~ promissory notes and issued restricted common shares in an effort to ~~help fund operations and will require~~raise additional working capital. Additionally, the Company entered into an agreement with Aegis Capital, LLC to secure working capital for equipment and manufacturing improvements. See Note 13 – Subsequent Events in the ~~short term.~~accompanying condensed consolidated financial statements for more details on recent financing activity. We will continue working towards securing more working ~~capital with a preference towards debt which may be convertible to equity.~~capital. However, there is no assurance that we will be successful in ~~our efforts~~securing working capital or, if we are, that the terms will be beneficial to our shareholders.

Risk Factors

Investing in our ~~common stock~~securities is speculative and involves a high degree of ~~risk.~~risk. You should carefully consider the risk factors included in the Company’s annual report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on ~~April 6, 2020,~~March 31, 2021, before deciding whether to invest in the Company. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our business operations or our financial condition.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~ITEM 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Not applicable to smaller reporting companies.

ITEM 4.

CONTROLS AND PROCEDURES

~~ITEM 4.~~

~~CONTROLS AND PROCEDURES~~

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

The Company’s management, under the supervision and with the participation of the Company's Interim Chief Executive Officer and ~~Chief Financial Officer,~~Controller, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) ~~as of~~through June 30, ~~2020.~~2021.

During our assessment of the effectiveness of internal control over financial reporting as of June 30, ~~2020~~2021 management identified material weaknesses related to (i) the U.S. GAAP expertise and experience of our internal accounting personnel and (ii) a lack of segregation of duties within accounting functions. As a result of these material weaknesses, our Chief Executive Officer and ~~Chief Financial Officer~~Controller concluded that our internal control over financial reporting was not effective as of June 30, ~~2020.~~2021.

Because of its inherent limitations, however, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

We are committed to maintaining a strong internal control environment and implementing measures designed to help ensure that the material weaknesses described above are remediated as soon as possible. We believe we will have the opportunity to remediate these weaknesses when adequate funding is secured. We will consider the material weaknesses remediated after the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that the controls are operating effectively.

Changes in Internal Control over Financial Reporting

No change in our system of internal control over financial reporting occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~LEGAL PROCEEDINGS~~Legal Matters

~~Legal Matters~~

In the ordinary course of operations, the Company may become a party to legal proceedings. Based upon information currently available, management believes that such legal proceedings, individually or in the aggregate, will not have a material adverse effect on the Company's business, financial condition, cash flows, or results of operations except as provided below.

CalSTRS Judgement

On March 31, 2014, the Company received a “Notice of Default” letter from legal counsel representing the California State Teachers Retirement System (“CalSTRS”) (the landlord for the Company’s previous office space) alerting that the Company was in default of its lease for failure to pay monthly rent for the office space located at 2400 East Commercial Boulevard, Suite 612, Fort Lauderdale, FL 33304. The letter demanded immediate payment of $41,937 for rent past due as of April 1, 2014. The Company had indicated in writing its intention to cooperate with ~~the landlord~~CalSTRS while trying to resolve the matter. On February 11, 2015, ~~the landlord,~~CalSTRS, through its attorneys, filed a motion for summary judgment. The motion asked for $376,424 in unpaid rent, recovery of abated rents and tenant improvements and $12,442 in attorney’s costs incurred by the landlord. On April 22, 2015, the motion for unpaid rent, recovery of abated rents and tenant improvements and attorney’s costs was granted by the Circuit Court of the 17th Judicial Circuit in and for Broward County and the Company has reserved the entire judgement of $388,866. The total amount is accruing interest at the statutory rate of 4.75%. The accrued interest on the judgement aton June 30, 2021, and December 31, 2020, is ~~$95,949.~~$114,420 and $105,260, respectively.

RAW Materials Litigation

On or about August 28, 2018, Raw Energy Materials Corp. filed an action for declaratory relief and breach of contract in Broward County, Florida, in the 17^th Judicial Circuit Court, titled Raw Energy Materials Corp. v. Rockstar Acquisitions, LLC, Paymeon, Inc. (now Basanite, Inc.), and Basalt America, LLC, CASE NO.: CACE 18-020596.

An Amended Complaint was filed on or about December 19, 2018, adding our subsidiary Basanite Industries, LLC as a defendant, as well as an alleged claim under Florida Statute Section 501.201 and for injunction.

The Company filed and ~~all~~has pending an amended counterclaim for breach of ~~the defendants in this case are contesting plaintiff's claims vigorously, have filed counterclaims~~contract, fraud, and ~~are considering additional filings~~civil conspiracy against ~~the plaintiff,~~Raw Energy affiliates, including Donald R. Smith, Elina Jenkins, Global Energy Sciences, LLC, YellowTurtle Design, LLC (“YellowTurtle”), as well as ~~its affiliated companies and principals, including~~former business affiliates/associates to Don Smith, Richard Laurin and ~~Elina Jenkins.~~

Robert Ludwig. The nature of the dispute is based on representations (or misrepresentations) ~~we allege~~the Company alleges were made to ~~us and~~it, as well as breaches of the terms of a ~~previously existing~~ licensing agreement, related consulting and other agreements, ~~as well as~~and failures and refusals of plaintiff and Don Smith related ~~sales of~~entities to deliver equipment/machinery and ~~goods.~~goods paid for by the Company or its affiliates. As it became apparent that the subject license agreement was effectively worthless and moot to the Company, and the ~~parties promptly agreed~~purported and promised trade secrets and intellectual property were essentially non-existent, the Company and Plaintiff agree to an order terminating that license agreement, which resulted in the ~~Agreed Order~~agreed order dated January 28, 2019.

A mediation was scheduled on March 4, 2021, which resulted in an impasse. Negotiations were continued, and on April 14, 2021, Basanite, Inc. entered into a settlement and release agreement with RAW, LLC (“RAW”), Donald R. Smith, YellowTurtle and Elina B. Jenkins among others. The ~~parties continue to litigate damages arising from~~settlement agreement provides for, among other things, the ~~dispute.~~

~~Depositions~~following: (i) a dismissal of ~~Raw Energy’s principal, Don Smith, and associate, Elina Jenkins, were taken in January of 2020. Discovery is ongoing. We filed a Motion for Summary Judgment pending which had to be withdrawn,~~the legal action as ~~it was based on Raw Energy having previously assigned its license rights and the license agreement~~ to the ~~Global Energy entity. After~~above-referenced parties and their owners, agents, affiliated companies, successors and assigns, having Case Number 18-020596 (21) in the Motion was filed, the defendants purported to find documents allegedly assigning the license back to Raw Energy. These documents were never produced before, and never discussed by Don Smith in his deposition. Nevertheless, the documents created a justiciable issue of fact so that our Motion would not have likely been successful at that time.

We are still evaluating and considering claims against Raw Energy affiliates, including Don Smith and Elina Jenkins. These evaluations are largely subject to review of discovery pending. Some documents have been received, some are expected to be received over the next month and some are subject to a resolution of objections. More specifically, the plaintiff's prior counsel, Michael Flam, has advised that he will start producing documents next week and continue to gather and produce same throughout the month of August 2020.

~~HLM Paymeon Storefront Damage Settlement~~

On December 15, 2016, a third-party driver drove his car through the Company’s retail storefront located at 2599 N. Federal Highway, Fort Lauderdale, FL 33305. The accident caused severe damage to the building causing the city of Fort Lauderdale to declare the building an unsafe structure. The Company was forced to vacate the premises, therefore, terminating the lease. The damaged storefront and terminated lease effectively terminated the business. On August 3, 2017, the Company filed a complaint with theSeventeenth Judicial Circuit Court ~~of the 17~~^th ~~Judicial Circuit~~ in and for Broward County, Florida (the “Litigation”) upon the Company’s timely purchase of the shares as set forth in the next paragraph below and (ii) mutual general releases for ~~loss of income, beneficial lease and debt~~the above-referenced parties relating to the ~~sub-landlord. On February 26, 2020,~~Litigation upon the Company’s timely purchase of the shares as set forth in the next paragraph below.

Simultaneously with the execution of the settlement agreement settling the litigation in full and release of all claims among the parties, the Company ~~was able~~entered into stock purchase agreements with both RAW and YellowTurtle to ~~settle~~repurchase the 10,000,000 shares of the Company’s common stock held by RAW for ~~$125,000 in exchange~~$1,212,121 and the 6,500,000 shares of the Company’s common stock held by YellowTurtle for $787,879, or an aggregate purchase price of $2,000,000. On May 17, 2021, the settlement shares were purchased by a ~~Complete Release for All Claims against all parties named~~group of related and non-related investors which resulted in the ~~case. The case was taken on~~closing of this legal action. As a ~~contingency basis by its attorney, therefore, reducing~~result of the settlement, ~~proceeds by 40% and related expenses. The~~the Company ~~received $70,817 in net proceeds on March 18, 2020 represented by the~~recognized a gain on settlement of ~~lawsuit.~~$320,037 from the derecognition of previously accrued contingent legal liabilities.

~~ITEM 1A.~~To our knowledge, we are not currently subject to any legal proceedings.

~~RISK FACTORS~~

ITEM 1A.

RISK FACTORS

Not applicable to smaller reporting companies.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~ITEM 2.~~

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

~~None.~~

~~ITEM 3.~~

~~DEFAULTS UPON SENIOR SECURITIES~~

On ~~September 22, 2017,~~February 12, 2021 (the “Issuance Date”), the Company ~~issued a total~~entered into an Amended and Restated 20% Secured Convertible Promissory Note (the “Restated Promissory Note”) with certain accredited investors (the “Holders”) for an aggregate of ~~200,000 shares of common stock valued at $72,000 ($0.38 per share)~~$1,610,004.54 in ~~conjunction with an extension of~~principal amount which cancelled and restated in its entirety the note to April 22, 2018. The interest rate on the note was also increased to 10% per annum. The modifications to the debt was reflected as a material modification in the Company’s quarter ended December 31, 2017. On May 2, 2018,20% Secured Convertible Promissory Note entered into by the Company ~~secured a three-year extension of~~and the convertible note in return for (1) a $5,000 per month payment applicable to current interest and principal beginning on April 22, 2018, and (2) the issuance of 274,575 new, restricted common shares. The shares were issued on June 13, 2018. The Company has begun making payments but is not current with payments required by the extension. The modifications to this debt instrument are reflected as a material modification in the Company’s financial statements as of December 31, 2018 in the amount of $90,061 and reflected as a loss on share issuance for extension of debt on the Company’s statement of operations. The Company was current in maintaining the required payments of $5,000 per month during this quarter. As of June 30, 2020, the Company made payments totaling $60,500, applied pro-ratably to principal and interest, thereby reducing the note payable balance to $258,524. On August 3, 2020, the parties came to an agreement to convert the remaining principal balance of $258,524 and accrued interest of $102,176, at a conversion price of $0.175 per share, for 2,061,143 restricted common shares. As indicated in our Subsequent Events footnote to our financial statements, this convertible promissory note was converted to restricted common sharessame Holders on August 3, 2020 and is more fully described in Amendment No. 1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 10, 2020 (the “Original Promissory Note”). On the Issuance Date, the Holders advanced the Company an additional $500,000 pursuant to the terms and conditions of the Restated Promissory Note (the “Additional Advance”). Additionally, the accrued but unpaid interest through February 11, 2021 under the Original Promissory Note in the amount of $110,004.54 was added to the principal amount of the Restated Promissory Note The Restated Promissory Note has a maturity date of May 12, 2021 (the “Maturity Date”) and will continue to have an interest rate of 20% per annum. Interest will be payable in cash at the Maturity Date. If, prior to the Maturity Date, the Company consummates an equity financing, revenue sharing transaction, joint venture, or other similar type transaction (including any combination and/or multiple transactions thereof) with total cash proceeds to the Company of not less than $3,000,000, the Agent (as defined below), at its sole discretion and by providing written notice to the Company, may elect to extend the Maturity Date of this Note by an additional six months such that the Maturity Date shall then be November 12, 2021. In connection with the issuance of the Restated Promissory Note and in consideration of the Additional Advance and the extension of the Maturity Date under the Original Promissory Note, on February 12, 2021 the Company issued to the Holders, on a pro rata basis, Common Stock Warrants to purchase up to an aggregate of 15,000,000 shares of the Company’s Common Stock at a per share exercise price of $0.20 (the “Warrants”). Pursuant to the terms of the Restated Promissory Note, The Richard A. LoRicco Sr. and Lucille M. LoRicco Irrevocable Insurance Trust DTD 4/28/95, Louis Demaio as Trustee will serve as the agent for the benefit of the Holders (the “Agent”). The Agent is a trust created by Richard A. LoRicco Sr. and Lucille M. LoRicco, who were the parents of Ronald J. LoRicco (“Mr. LoRicco”), one of the members of the Company’s Board of Directors (the “Board”) and is maintained by an independent trustee. The Agent is the Holder of $1,207,503.40 of the principal amount of the Restated Promissory Note and the Holder of 11,250,000 of the Warrants. The disinterested members of the Board approved the terms of the Restated Promissory Note. Mr. LoRicco does not have voting or investment control of or power over the Agent but is an anticipated, partial beneficiary of the Agent.

On April 5, 2021, the Company issued the 127,128 restricted common shares to the investor in exchange for the funds received and recorded as a subscription liability of $23,900 on March 31, 2021.

On April 16, 2021, upon the conversion of a note ~~is no longer outstanding.~~$300,000 into 3,000,000 common stock warrants additional paid-in capital was generated in the amount of $300,000 for the original principal of the note.

~~ITEM 4.~~

~~MINE SAFETY DISCLOSURE~~On May 21, 2021, upon the conversion of a $300,000 note into 6,000,000 common stock warrants additional paid-in capital was generated in the amount of $300,000 for the original principal of the note.

On June 10, 2021, 600,000 shares were issued per the two consulting agreements entered on July 9, 2020, and October 16, 2020, for fundraising services.

On June 10, 2021, 300,000 shares were issued per the consulting agreement entered on May 17, 2021, for investor relations services.

On June 10, 2021, the Company issued 45,455 restricted common shares to an investor in exchange for $10,000.

On June 10, 2021, the Company issued 47,619 restricted common shares to an investor in exchange for $10,000.

On June 10, 2021, the Company issued 36,372 restricted common shares to an investor in exchange for $14,545.

On June 10, 2021, the Company issued 72,744 restricted common shares to an investor in exchange for $29,091.

On June 10, 2021, the Company issued 60,620 restricted common shares to an investor in exchange for $24,242.

On June 10, 2021, the Company issued 96,992 restricted common shares to an investor in exchange for $38,788.

On June 10, 2021, the Company issued 30,310 restricted common shares to an investor in exchange for $12,121.

On June 10, 2021, the Company issued 60,620 restricted common shares to an investor in exchange for $24,242.

On June 10, 2021, the Company issued 15,155 restricted common shares to an investor in exchange for $6,061.

On June 10, 2021, the Company issued 24,248 restricted common shares to an investor in exchange for $9,697.

On June 10, 2021, the Company issued 12,124 restricted common shares to an investor in exchange for $4,848.

On June 10, 2021, the Company issued 30,310 restricted common shares to an investor in exchange for $12,121.

On June 24, 2021, the Company issued 45,662 restricted common shares to an investor in exchange for $10,000.

All of the shares issued and sold described above were not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state, and were offered and sold in reliance on the exemption from registration under the Securities Act, provided by Section 4(a)(2) and Regulation D (Rule 506) under the Securities Act. Each investor represented that it was an accredited investor (as defined by Rule 501 under the Securities Act).

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURE

Not applicable.

~~ITEM 5.~~

~~OTHER INFORMATION~~

~~None.~~

~~ITEM 6.~~

~~EXHIBITS~~

ITEM 5.

OTHER INFORMATION

None.

	ITEM 6.						EXHIBITS
~~Exhibit~~

Exhibit		Incorporated by Reference			Filed or Furnished
No.	Exhibit Description	Form	Date Filed	Number	Herewith
~~31.1~~ 4.1	Form of Warrant A (relating to August 2021 private placement offering)				Filed
4.2	Form of Warrant B (relating to August 2021 private placement offering)				Filed
10.1	Form of Securities Purchase Agreement (relating to August 2021 private placement offering)				Filed
10.2	Placement Agent Agreement, dated August 17, 2021, between the Company and Aegis Capital Corp. (relating to August 2021 private placement offering)				Filed
31.1	Certification of Interim ~~Acting~~ Chief Executive Officer pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the Securities Exchange Act				Filed
31.2	Certification of Chief Financial Officer pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the Securities Exchange Act				Filed
32.1	Certification of Interim ~~Acting~~ Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				Furnished
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				Furnished
~~101~~ 101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)				Filed
101.SCH	Inline XBRL Taxonomy Extension Schema Document				Filed
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document				Filed
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document				Filed
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document				Filed
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document				Filed
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)				Filed

SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August ~~14, 2020~~

23, 2021


		Basanite, Inc.
~~Basanite, Inc.~~
By:
~~By:~~	/s/ Simon R. Kay
	Simon R. Kay
	Company’s Interim ~~Acting~~ Chief Executive Officer and Principal Financial Officer


	/s/ Simon R. Kay
	Simon R. Kay
	Company’s Interim Chief Executive Officer and Principal Financial Officer


									Additional					Non-			Total
	Preferred Stock				Common Stock				Paid-in		Accumulated			controlling			Stockholders'
	Shares		Par Value		Shares		Par Value		Capital		Deficit			Interest			Deficit

Balance January 1, 2019		—	$	—		154,202,008	$	154,202	$	18,718,283	$	(21,135,252	)	$	225,015		$	(2,037,752	)

Shares issued to convert notes payable		—		—		1,700,985		1,701		507,477		—			—			509,178

Stock-based compensation		—		—		—		—		73,603		—			—			73,603

Stock issued for cash		—		—		15,500,000		15,500		759,500		—			—			775,000

Stock issued to purchase non-controlling interest in Basalt America Territory #1		—		—		2,010,000		2,010		223,005		—			(225,015	)		—

Net loss		—		—		—		—		—		(687,681	)		—			(687,681	)

Balance March 31, 2019		—		—		173,412,993		173,413		20,281,868		(21,822,933	)		—			(1,367,652	)

Stock-based compensation		—		—		—		—		1,045,734		—			—			1,045,734

Stock issued for cash		—		—		5,778,570		5,779		479,221		—			—			485,000

Warrants exercised for cash		—		—		17,710,715		17,711		1,150,889		—			—			1,168,600

Deemed dividend on common stock										292,150		—			—			292,150

Net loss		—		—		—		—		—		(1,799,693	)		—			(1,799,693	)

Balance June 30, 2019		—	$	—		196,902,278	$	196,903	$	23,249,862	$	(23,622,626	)	$	—		$	(175,861)

Schedule of Inventory
	June 30, 2021		December 31, 2020
	(Unaudited)
Finished goods	$	575,360	$	305,550
Work in process		23,932		35,286
Raw materials		78,867		105,739
Total inventory	$	678,159	$	446,575

Schedule of Fixed Assets
	June 30, 2021			December 31, 2020
	(Unaudited)
Computer equipment	$	117,141		$	15,780
Machinery		686,237			667,536
Leasehold improvements		163,882			161,579
Office furniture and equipment		71,292			71,292
Land improvements		7,270			7,270
Website development		2,500			2,500
Construction in process		382,915			234,950
Total fixed assets		1,431,237			1,160,907
Accumulated depreciation		(204,797	)		(140,872	)
Total fixed assets, net	$	1,226,440		$	1,020,035


	June 30, 2020		December 31, 2019
	(Unaudited)
Finished goods	$	48,432	$	47,462
Work in process		14,176		—
Raw materials		81,225		112,010
Total inventory	$	143,833	$	159,472

Schedule of Dilutive Shares Not Included in Loss Per Share Computation
	June 30, 2021		December 31, 2020
	(Unaudited)
Options		4,727,778		4,542,500
Warrants		78,620,378		38,920,378
Convertible shares		173,579,371		112,233,406
		256,927,527		155,696,284


2020		202,950
Schedule of Maturity of Operating Lease Liability
2021		415,033		$	209,034
2022		427,484			427,484
2023		440,308			440,308
2024		110,884			110,888
Total minimum lease payments		1,596,659			1,187,714
Discount		(387,178	)		(221,887	)
Operating lease liability	$	1,209,481		$	965,827


Schedule of Summary of Options and Warrants Assumptions to Estimate Fair Value of Options Granted
	June 30, 2020		December 31, 2019		June 30, 2021		December 31, 2020
Options outstanding and exercisable		4,542,500		5,042,500		4,727,778		4,542,500
Weighted-average exercise price	$	0.41	$	0.40	$	0.36	$	0.41
Aggregate intrinsic value	$	—		—	$	579,494		118,148
Weighted-average remaining contractual term (years)		4.37		4.66		4.19		3.86


	June 30, 2020		December 31, 2019
Warrants outstanding and exercisable		39,015,576		29,849,761
Weighted-average exercise price	$	0.23	$	0.23
Aggregate intrinsic value	$	1,087,583	$	1,956,750
Weighted-average remaining contractual term (years)		3.49		3.64


	For the three months ended June 30,				For the six months ended June 30,
	2020		2019		2020		2019
Product cost	$	1,575	$	725	$	2,146	$	725
Equipment rental and maintenance		—		12,019		—		12,019
Supplies		—		23,777		—		26,616
Shipping cost		—		4,655		—		5,109
Merchant fees		28		—		76		—
Total cost of goods sold	$	1,603	$	41,176	$	2,222	$	44,469