UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-Q

———————

 

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

 

For the quarterly period ended: June 30, 20212022

 

or

 

¨  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)

———————

Nevada20-4959207
(State or other jurisdiction(I.R.S. Employer
of incorporation or organization)Identification No.)

 

2041 NW 15th Avenue, Pompano Beach, Florida 33069

(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 classTrading 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. ☒ 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).  ☒ 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 accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨ Accelerated filer   ¨
Non-accelerated filer     ☒ Smaller reporting company  ☒
  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  ☒ No

 

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

 

Class Shares Outstanding as of August 21, 202115, 2022
Common Stock, $0.001 par value per share 248,520,598253,217,402
 
 

 

 
 

BASANITE, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

 

  Page No.
 PART I. – FINANCIAL INFORMATION 
   
Item 1.Condensed Consolidated Financial Statements 
 Condensed Consolidated Balance Sheets as of June 30, 20212022 (Unaudited) and December 31, 202020211
 Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months ended June 30, 20212022 and 202020212
 Condensed Consolidated Statements of Stockholder’s Deficit(Deficit) Equity (Unaudited) for Six Months ended June 30, 20212022 and 202020213
 Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 20212022 and 2020202145
 Notes to Condensed Consolidated Financial Statements (Unaudited)6
   
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations1914
Item 3.Quantitative and Qualitative Disclosures About Market Risk2320
Item 4.Controls and Procedures2320
   
 PART II. – OTHER INFORMATION 
   
Item 1.Legal Proceedings2421
Item 1A.Risk Factors2521
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds2521
Item 3.Defaults Upon Senior Securities2621
Item 4.Mine Safety Disclosures2621
Item 5.Other Information2621
Item 6.Exhibits 2721
Signatures2822

 

 

 

 

 

 

 

 

 
 

PART I. – FINANCIAL INFORMATION

 

ITEM 1.FINANCIAL STATEMENTS

 

BASANITE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

 

         
  June 30,
2021		  December 31,
2020,		 
  (Unaudited)    
ASSETS        
         
CURRENT ASSETS        
Cash $77,400  $259,505 
Accounts receivable, net  8,509   1,907 
Inventory  678,159   446,575 
Prepaid expenses  129,915   40,283 
Deposits and other current assets  278,323   75,995 
TOTAL CURRENT ASSETS  1,172,306   824,265 
         
Lease right-of-use asset  881,666   1,004,167 
Fixed assets, net  1,226,440   1,020,035 
Total Long-Term Assets  2,108,106   2,024,202 
         
TOTAL ASSETS $3,280,412  $2,848,467 
LIABILITIES AND STOCKHOLDERS' DEFICIT        
         
CURRENT LIABILITIES        
Accounts payable $358,916  $249,353 
Accrued expenses  136,950   197,350 
Accrued legal liability  503,286   809,127 
Notes payable  787,412   128,021 
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  209,034   267,289 
TOTAL CURRENT LIABILITIES  3,985,344   2,726,140 
         
Lease liability - net of current portion  756,793   826,388 
TOTAL LIABILITIES  4,742,137   3,552,528 
         
STOCKHOLDERS’ DEFICIT        
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  36,943,818   28,714,488 
Accumulated deficit  (38,634,066)  (29,643,387)
TOTAL STOCKHOLDERS' DEFICIT  (1,461,725)  (704,061)
         
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $3,280,412  $2,848,467 

         
  June 30, 2022  December 31, 2021 
  (Unaudited)    
ASSETS        
         
CURRENT ASSETS        
Cash $58,893  $109,514 
Accounts receivable, net  24,256   7,817 
Inventory  317,972   714,655 
Prepaid expenses  104,805   127,806 
Deposits and other current assets  253,436   265,553 
TOTAL CURRENT ASSETS  759,362   1,225,345 
         
Lease right-of-use asset, operating  605,621   749,116 
Lease right-of-use asset, financing, related-party  451,050   — 
Fixed assets, net  3,462,492   3,236,825 
TOTAL NON CURRENT ASSETS  4,519,163   3,985,941 
         
TOTAL ASSETS $5,278,525  $5,211,286 
         
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY        
         
CURRENT LIABILITIES        
Accounts payable $1,469,978  $1,175,682 
Accrued expenses  890,932   407,454 
Accrued legal liability  165,000   165,000 
Subscription liability  1,300,000   — 
Notes payable  500,515   466,762 
Notes payable - related party  300,000   300,000 
Notes payable - convertible - related party, net  1,689,745   1,689,745 
Lease liability – operating, current portion  357,080   325,339 
Lease liability – financing, related party, current portion  3,892   — 
TOTAL CURRENT LIABILITIES  6,677,142   4,529,982 
         
Lease liability – operating, net of current portion  312,781   499,546 
Lease liability – financing, related party, net of current portion  445,257   — 
         
TOTAL LIABILITIES  7,435,180   5,029,528 
         
STOCKHOLDERS’ (DEFICIT) EQUITY        
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, 251,884,069 and 248,840,144 shares issued and outstanding, respectively  251,885   248,842 
Additional paid-in capital  47,177,393   46,054,126 
Accumulated deficit  (49,585,933)  (46,121,210)
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY  (2,156,655)  181,758 
         
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY $5,278,525  $5,211,286 

 

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

 

 

1 
 

BASANITE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(UNAUDITED)

 

                 
  For the three months ended  For the six months ended 
  June 30,  June 30, 
  2021  2020  2021  2020 
Revenue            
Products Sales - Rebar $15,549  $593  $19,685   $2,218 
                 
Total cost of goods sold  19,493   1,603   20,809   2,222 
                 
Gross loss  (3,944)  (1,010)  (1,124)  (4)
                 
OPERATING EXPENSES                
Professional fees  79,355   53,016   193,087   162,874 
Payroll, taxes and benefits  300,683   162,455   554,798   399,886 
Consulting  117,375   81,875   230,625   98,938 
General and administrative  950,167   283,034   1,533,937   500,987 
Total operating expenses  1,469,755   580,380   2,534,622   1,162,685 
                 
NET LOSS FROM OPERATIONS  (1,451,524)  (581,390)  (2,513,571)  (1,162,689)
                 
OTHER INCOME (EXPENSE)                
Gain on settlement of legal contingency  320,037   —   344,522   — 
Miscellaneous income  3,116   —   3,116   70,817 
Loss (gain) on extinguishment of debt  (3,056,892)  980   (6,743,015)  980 
Loan forgiveness  —   —   124,143   — 
Interest expense  (133,211)  (201,007)  (205,874)  (251,830)
Total other income (expense)  (2,866,950)  (200,027)  (6,477,108)  (180,033)
                 
NET LOSS  (4,318,474)  (781,417)  (8,990,679)  (1,342,722)
                 
Net loss per share – basic and diluted  (0.019)  (0.003)  (0.039)  (0.007)
                 
Weighted average number of shares outstanding - basic and diluted  227,837,337   234,917,946   227,115,792   205,202,856 

                 
  For the three months ended  For the six months ended 
  June 30,  June 30, 
  2022  2021  2022  2021 
Revenue                
Products sales - rebar $288,050  $15,549  $546,339  $19,685 
                 
Total cost of goods sold  611,163   19,493   1,196,974   20,809 
                 
Gross (loss)  (323,113)  (3,944)  (650,635)  (1,124)
                 
OPERATING EXPENSES                
Sales, general, and administrative  1,035,717   1,447,580   2,083,095   2,512,447 
Total operating expenses  1,035,717   1,447,580   2,083,095   2,512,447 
                 
NET LOSS FROM OPERATIONS  (1,358,830)  (1,451,524)  (2,733,730)  (2,513,571)
                 
OTHER INCOME (EXPENSE)                
Gain on settlement of legal contingency  —   320,037   —   344,522 
Liquidated damages – loan commitment  (403,643)  —   (426,759)  — 
Miscellaneous income  —   3,116   —   3,116 
Loss on extinguishment of debt  —   (3,056,892)  —   (6,743,015)
Gain on loan forgiveness  —   —   —   124,143 
Interest expense  (181,589)  (133,211)  (304,234)  (205,874)
Total other income (expense)  (585,232)  (2,866,950)  (730,993)  (6,477,108)
                 
NET LOSS $(1,944,062) $(4,318,474) $(3,464,723) $(8,990,679)
                 
Net loss per share – basic $(0.01) $(0.02) $(0.01) $(0.04)
Net loss per share – diluted $(0.01) $(0.02) $(0.01) $(0.04)
                 
Weighted average number of shares outstanding – basic  251,800,462   227,837,337   250,996,454   227,115,792 
Weighted average number of shares outstanding – diluted  251,800,462   227,837,337   250,996,454   227,115,792 

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

 

2 
 

BASANITE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICITEQUITY (DEFICIT)

FOR THE SIX MONTHS ENDED JUNE 30, 20212022 AND 20202021

(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)

                
        Additional     Total 
  Common Stock  Paid-in  Accumulated  Stockholders’ 
  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 
Stock issued for cash  450,000   450   89,550   —   90,000 
Warrants Issued  —   —   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 
Warrants issued  —   —   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)

 

              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' EQUITY (DEFICIT) (CONTINUED)

FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(UNAUDITED)

              Total 
              Stockholders’ 
  Common Stock  Paid-in  Accumulated  Equity 
  Shares  Par Value  Capital  Deficit  (Deficit) 
Balance January 1, 2022  248,840,144  $248,842  $46,054,126  $(46,121,210) $181,758 
                     
Stock issued for cash, net of costs of $50,409  2,121,212   2,121   647,470   —   649,591 
Stock issued for exercise of warrants  500,000   500   124,500   —   125,000 
Stock issued to service provider  300,000   300   57,600   —   57,900 
Warrants issued to management  —   —   169,565   —   169,565 
Net loss  —   —   —   (1,520,661)  (1,520,661)
                     
Balance March 31, 2022  251,761,356  $251,763  $47,053,261  $(47,641,871) $(336,847)
                     
Shares issued to related party for services  122,713   122   18,162   —   18,284 
Vesting of warrants issued to management  —   —   41,706   —   41,706 
Warrants issued to Related Party for services provided      —   64,264   —   64,264 
Net loss  —   —   —   (1,944,062)  (1,944,062)
                     
Balance June 30, 2022  251,884,069  $251,885  $47,177,393  $(49,585,933) $(2,156,655)

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

4 

BASANITE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

         
  For the six months ended 
  June 30, 
  2022  2021 
  (Unaudited)    
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss $(3,464,723) $(8,990,679)
Adjustments to reconcile net loss to net cash used in operating activities:        
Lease right-of-use asset amortization  143,495   122,501 
Lease right-of-use asset amortization, financing lease, related party  (1,050)  — 
Depreciation and amortization  67,165   63,925 
Gain on settlement of legal contingency  —   (344,522)
Loss on extinguishment of debt  —   6,743,015 
Loan forgiveness  —   (124,143)
Stock-based compensation  426,856   729,525 
Changes in operating assets and liabilities:        
Prepaid expenses  (18,383)  (89,632)
Inventory  396,683   (231,584)
Accounts receivable  (16,439)  (208,930)
Deposits and other current assets  12,117   — 
Accounts payable and accrued expenses  1,227,774   203,873 
Subscription liability  1,300,000   (40,000)
Lease liability, operating leases  (155,024)  (127,850)
Net cash used in operating activities  (81,529)  (2,294,501)
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchase of equipment  (742,832)  (270,330)
Net cash used in investing activities  (742,832)  (270,330)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Lease liability, financing lease – related party  (851)  — 
Proceeds from sale of common stock, net of costs  649,591   331,776 
Proceeds from exercise of warrants  —   123,500 
Proceeds from exercise of stock options  125,000   — 
Proceeds of convertible notes payable and convertible notes payable related party  —   579,741 
Repayments of convertible notes payable and convertible notes payable related party  —   (35,000)
Proceeds from notes payable and notes payable related party  —   1,391,194 
Repayments of notes payable and notes payable related party  —   (8,485)
Net cash provided by financing activities  773,740   2,382,726 
         
NET INCREASE (DECREASE) IN CASH  (50,621)  (182,105)
         
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD  109,514   259,505 
         
CASH AND CASH EQUIVALENTS AT END OF PERIOD $58,893  $77,400 
         
Supplemental cash flow information:        
Cash paid for income taxes $—  $— 
Cash paid for interest $—  $4,016 
Forgiveness of Paycheck Protection Program loan and accrued interest $—  $124,143 
         
Supplemental disclosure of non cash investing and financing activities:        
Common stock issued for services $57,900  $— 
Issuance of warrants for services $64,264  $64,045 
Conversion of note payable in exchange for warrants $—  $305,199 
Accounts payable paid by financing lease, related party $450,000  $— 

 

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

 

 

35 
 

BASANITE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

(UNAUDITED)

         
  For the six months ended 
  June 30, 
  2021  2020 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss $(8,990,679) $(1,342,722)
Adjustments to reconcile net loss to net cash used in operating activities:        
Lease right-of-use asset amortization  122,501   105,184 
Depreciation  63,925   55,774 
Amortization of debt discount  —   186,237 
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  729,525   — 
Changes in operating assets and liabilities:        
Prepaid expenses  (89,632)  (33,252)
Inventory  (231,584)  15,639 
Accounts receivable  (208,930)  — 
Other current assets  —   47,888 
Accounts payable and accrued expenses  (203,873)  33,339 
Subscription liability  (40,000)  — 
Lease liability  (127,850)  (107,487)
Net cash used in operating activities  (2,294,501)  (1,040,380)
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchase of equipment  (270,330)  (59,377)
Net cash used in investing activities  (270,330)  (59,377)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
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  (35,000)  (348,000)
Proceeds from notes payable and notes payable related party  1,391,194   266,727 
Proceeds from convertible notes payable and convertible notes payable related party  579,741   585,000 
Repayment of notes payable and notes payable related party  (8,485)  (33,306)
Net cash provided by financing activities  2,382,726   1,087,088 
         
NET INCREASE (DECREASE) IN CASH  (182,105)  (12,669)
         
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD  259,505   129,152 
         
CASH AND CASH EQUIVALENTS AT END OF PERIOD $77,400  $116,483 
         
Supplemental cash flow information:        
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

(UNAUDITED)

 

NOTE 1 – ORGANIZATION, NATURE OF BUSINESS AND 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)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 SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

(B) Liquidity and Management PlanPlanss

 

Since inception, the Company has incurred net operating losses and used cash in operations. As of June 30, 2021,2022, and December 31, 2020,2021, respectively, the Company reported:

 

·an accumulated deficit of $38,634,06649,585,933 and $29,643,38746,121,210;

 

·a working capital deficiency of $2,813,0385,917,780 and $1,901,8753,304,637; and

 

·cash used in operations of $2,294,501 81,529and $$4,507,418. 2,799,4992,294,501.

 

Losses have principally occurred as a result of the substantial resources required for product research and development, establishment and upgrading of our manufacturing facility and equipment, and for certification, government approval and marketing of the Company'sCompany’s products; including the general and administrative expenses associated with the organization.

 

While we have generated relatively little revenue to date, revenue from sales of product began to increase during the first half of 2022 (including the quarter ended June 30, 2022), and we continue to receive inquiries and solicit orders from a range of customers for our products, indicating what we believe is a significant level of market interest for BasaFlex™. Some and BasaMix ™ products. We also spent time and resources during the first half of these inquiries would be for very large potential orders for new, multi-year2022 in introducing our products to, and receiving approvals and certifications from, various county and local government agencies to have our products used in such agencies’ construction projects. Basedprojects, While the Company plans to expand its manufacturing capacity during 2022, 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 largely because of this, there is no guarantee that orders secured from marketing and governmental approval activities will actually be received.received or that orders, if received, can be properly fulfilled.

 

6 

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

We have historically satisfied our working capital requirements through the sale of restricted common stockCommon Stock of the Company, $0.001 par value per share (the “Common Stock”), and the issuance of warrants to purchase Common Stock and promissory notes. Until we are able to internally generate meaningful revenue and positive cash flow, we will attempt to fund working capital requirements through third party financing, including through potential private 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. If we are unable to secure funding when needed, our results of operations may suffer, and our business may fail.

 

These conditions raise substantial doubt about the Company'sCompany’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, 2021,2022, the Company had cash of $77,40058,893 compared to $259,505109,514 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).2021.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(A) 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,Common Stock, the expected term of the option, the expected volatility of the price of our common stock,Common Stock, risk-free interest rates and the expected dividend yield of our common stock.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)The Company used the Black Scholes valuation model to determine the fair value of the warrants and options issued, using the following key assumptions for the six months ended June 30, 2022. There were no such valuations during the six months ended June 30, 2021:

 

Schedule of Fair Value Assumptions        
  Six months  Six months 
  ended  ended 
  June 30,  June 30, 
  2022  2021 
  (Unaudited)    
Expected price volatility  144.76-145.73%  N/A 
Risk-free interest rate  2.55-2.88   N/A 
Expected life in years  5   N/A 
Dividend yield  —   N/A 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(B) Principles of Consolidation

 

The condensed 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.

7 

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(C) 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"“(“FDIC”) up to $250,000. The Company'sCompany’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 worthinessinstitutions' creditworthiness 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 thea first-in, first-out basis. Raw materials inventory consists primarily of basalt fiber and other necessary elements to produce the basalt rebar.BasaFlex™ rebar and our other products. 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, 20212022 and December 31, 20202021 was comprised of:

 

Schedule of Inventory        
Schedule of Inventories        
 June 30, December 31, 
 June 30,
2021		  

December 31,

2020

  2022  2021 
 (Unaudited)     (Unaudited)    
Finished goods $575,360  $305,550  $61,339  $328,229 
Work in process  23,932   35,286   73,019   35,213 
Raw materials  78,867   105,739   183,614   351,213 
Total inventory $678,159  $446,575  $317,972  $714,655 

 

(E) Fixed assets

 

Fixed assets consist of the following:

 

Schedule of Fixed Assets                
 June 30, December 31, 
 June 30,
2021		  

December 31,

2020

  2022  2021 
 (Unaudited)     (Unaudited)    
Computer equipment $117,141  $15,780  $166,679  $133,654 
Machinery  686,237   667,536   728,245   717,437 
Leasehold improvements  163,882   161,579   170,452   166,252 
Office furniture and equipment  71,292   71,292   71,292   71,292 
Land improvements  7,270   7,270   7,270   7,270 
Website development  2,500   2,500   2,500   2,500 
Construction in process  382,915   234,950   2,653,784   2,408,986 
Total fixed assets  1,431,237   1,160,907 
  3,800,222   3,507,391 
Accumulated depreciation  (204,797)  (140,872)  (337,730)  (270,566)
Total fixed assets, net $1,226,440  $1,020,035 
 $3,462,492  $3,236,825 

 

Depreciation expense for the three and six months ended June 30, 2022, was $33,493 and $66,751, respectively; depreciation expense for the three months and six months ended June 30, 2021, was $32,216, and $63,925, respectively.

8 

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Depreciation expense for the three and six months ended June 30, 2021, was $32,216 and $63,925, respectively, compared to $29,947 and $55,774 to the three and six months ended June 30, 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 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 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:

 

Schedule of Dilutive Shares Not Included in Loss Per Share Computation             
 June 30, December 31, 
 June 30,
2021		 

December 31,

2020

  2022  2021 
 (Unaudited)    (Unaudited)    
Options 4,727,778 4,542,500   1,727,778   4,227,778 
Warrants 78,620,378 38,920,378   141,889,090   138,191,666 
Convertible shares  173,579,371  112,233,406 
  256,927,527  155,696,284 
Convertible securities  7,696,765   6,970,063 
Total  151,313,633   149,389,507 

 

(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(I) Revenue Recognition

We recognize revenue when control of the promised goods or services is transferred to the Company’s customers in an amount that reflects the consideration we expected to be entitled to in exchange for sharesthose goods or services. The timing of restricted common stock as compensation. The termrevenue recognition largely is dependent on shipping terms. Revenue is recorded at the time of shipment for terms designated free on board (“FOB”) shipping point. For sales transactions designated FOB destination, revenue is recorded when the agreementproduct is for six months withdelivered to 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.customer’s delivery site.

 

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 BerndtAll revenues recognized are net of trade allowances, cash discounts, and sales returns. Trade allowances are based on May 12, 2021the estimated obligations. Adjustments to earnings resulting from revisions to estimates on discounts and returns have been immaterial for capital markets advisory services in exchange for restricted warrants to purchase shares of common stock as compensation. The termeach of the agreement is for twelve months withreported periods. Shipping and handling amounts billed to a customer as part of a sales transaction are included in revenues, and the option for renewal for an additionalrelated costs are included in cost of goods sold. Shipping and handling are treated as fulfillment activities, rather than promised services, and therefore are not considered separate performance obligations. During the six three and 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,ended June 30, 2022, and 2021, the Company issued 250,000 restricted common share warrants perincurred shipping and handling costs in 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 priceamount of $0.2716,537 to the Chairman of the Board as partial compensation for the services rendered in such role. The execution date fair value of the options wasand $160,8570. 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

Described below is a new accounting pronouncements issued or proposed by the FASB that has been adopted by the Company. Management does not believe this accounting pronouncement has had or will have a material impact on the Company’s consolidated financial position or operating 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), respectively.

 

NOTE 43 – OPERATING LEASE

 

On January 18, 2019, the Company entered into an agreement to lease approximately 25,470 square feet of office and manufacturing space in Pompano Beach, 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 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 right-of-use asset is composed of the sum of all remaining lease payments plus any initial direct costs and is amortized over the life of the expected lease term. For the expected term of the lease, 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, thatfor which the election will be treated as a lease modification, and the lease will be reviewed for remeasurement.

 

The future minimum lease payments to be made under the operating lease as of June 30, 2021, are:2022, are as follows: 

 

Schedule of Maturity of Operating Lease Liability   
2021 $ 209,034 
Schedule of Operating Lease Liability     
2022 427,484   $215,310 
2023 440,308    440,308 
2024  110,888    110,884 
Total minimum lease payments 1,187,714    766,502 
Discount  (221,887)   (96,641)
Operating lease liability $965,827   $669,861 

 

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, 2021,2022, the weighted-average remaining lease term is 32.0 years and the weighted-average discount rate used to determine the operating lease liability was 15.0%. For the three months ended June 30, 2021, and 2020, the Company expensed $107,117 and $107,595. For the six months ended June 30, 2021,2022, and 2020,2021, the Company expensed $214,036220,863 and $215,183214,036, respectively for rent.

NOTE 5 – NOTES PAYABLE – CONVERTIBLE

Notes payable – convertible totaled $0 and $10,000 at June 30, 2021 and December 31, 2020, respectively.

On August 3, 2020, the Company issued an unsecured convertible promissory note to an investor in exchange for $10,000 bearing an interest rate of 18% per annum and payable in 6 months. The note included provisions which allowed the holder to convert the unpaid principal balance of the note into restricted common stock, of the 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 of not less than $500,000 provided, however, in no event shall the conversion 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 amount of $1,007.

Interest expense for the Company’s convertible notes payable for the three and six months ended June 30, 2021 was $0 and $161, respectively, compared to $118,443 and $158,250 for the three and six months ended June 30, 2020, respectively.

Accrued interest for the Company’s convertible notes payable on June 30, 2021 and December 31, 2020 was $0 and $760, respectively, and is included in accrued expenses on the condensed consolidated balance sheets.

11 

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 6 4 – NOTES PAYABLE – CONVERTIBLEFINANCING LEASE – RELATED PARTY

 

Notes payable – convertible – related party totaled $1,689,746 and $1,025,000 on June 30, 2021, and December 31, 2020, respectively.

On August 3, 2020,April 27, 2022, the Company issuedentered into an Equipment Rental Agreement (the “Agreement”) with First New Haven Mortgage Company, LLC, a secured convertible promissory note to certain investors in exchange for $1,000,000 in the aggregate bearingConnecticut limited liability company and an interest rate of 20% per annum and payable in6 months. The holder may convert the unpaid principal balance of the note into shares of restricted common stock,affiliate of the 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 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 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”“Lessor”) is the holder of $750,000 of the principal amount of this note. The Trust was created by Richard A. LoRicco Sr. and Lucille M. LoRicco, who were the parents of. Ronald J. LoRicco, Sr., one of the membersa member 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 beneficiaryco-managing member of the Trust.Lessor and has an indirect pecuniary interest in the Lessor. In accordance with Nevada corporate law, the Agreement was independently reviewed and approved by the unanimous vote of the disinterested directors of the Company, with Mr. LoRicco recusing himself from voting.

 

On February 12, 2021,Pursuant to the Agreement, the Lessor paid approximately $450,000 to Upstate Custom Products LLC, a South Carolina limited liability company (the “Manufacturer”) on April 22, 2022, to purchase a single, specialized BasaMax™ Tetrad Basalt Rebar Pultrusion Machine to be used to manufacture the Company’s products (the “Machine”). The Company exchangedhad previously ordered the original debt forMachine from the Manufacturer, and pursuant to the Agreement, the Lessor secured rights to the ownership of the Machine and rights under all the sales orders and agreements to purchase the Machine from Manufacturer to the Lessor. The loan amount was paid directly to the Manufacturer. The Company has elected to use a newly issued amended and restated secured convertible promissory note with a new principal balance of $1,610,005 bearing anmarket interest rate of 20% per annum and fully payable21%, this rate in 3 months. This was accounted for as debt extinguishment andline with the new promissory note was recorded at fair valueavailable options the Company would be subject to. Pursuant to this lease, the Company will make payments in accordance with ASC 470 “Debt”. The original principalthe amount of $1,000,000 8,250and accrued interest per month for 24 months, followed by a final payment in the amount of $110,005 calculated$450,000.

The future minimum lease payments to be made under the financing lease 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 stock warrants with an exercise price of $0.20. The issuance of the warrants for the extension generated a loss on extinguishment of $3,686,136 for the fair value of the warrants issued.June 30, 2022, are as follows: 

 

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 $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 $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 stock warrants with an exercise price of $0.35. The issuance of the warrants for the extension generated a loss on extinguishment of $1,874,705 for the fair value of the warrants issued.

Schedule of Financing Lease Liability     
2022  $41,250 
2023   99,000 
2024   474,750 
    Total minimum lease payments   615,000 
Discount   (165,851)
    Financing lease liability  $449,149 

  

Interest expense for the Company’s convertible notes payable – related parties for the three and six months ended June 30, 2021, was $84,605 and $151,521, respectively, compared to $74,029 for the three and six months ended June 30, 2020.

Accrued interest for the Company’s convertible notes payable – related parties on June 30, 2021, and December 31, 2020, was $46,048 and $86,574, respectively, and is included in accrued expenses on the condensed consolidated balance sheets.

1210 

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 75 – NOTES PAYABLE

 

Notes payable totaled $787,412500,515 and $128,021466,762 on June 30, 2021,2022, and December 31, 2020,2021, respectively.

 

On March 30, 2021, and May 18, 2021, the Company entered financing arrangements to finance the insurance premiums for its liability coverage. The financing has an interest rate of 9.67% and lasts through March 2022. The balance as of June 30, 2021, was $26,665.

On February 25, 2021, the Company entered a promissory note agreement with its bank to memorialize afor $165,747 loan bearing an interest rate of 1.0% per annum. The loan was made pursuant to the Paycheck Protection Program under the Second Draw PPP Legislation after receiving confirmation from the U.S. Small Business Administration (“SBA”). The Paycheck 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 40% can be expended on non-payroll-related costs. 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.The Company applied for forgiveness of this loan on January 17, 2022; the Company received notice of forgiveness on August 1, 2022.

The Company enters into financing arrangements for its liability insurance premiums. The financings have a term of one year and an interest rate of 9.40%. The balance due on these financings as of June 30, 2022 and December 31, 2021 $39,768 and $6,015, respectively.

 

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.on April 2, 2022. The companyCompany also issued a warrant to purchase 2,000,000 common stock warrantsshares of Common Stock at an exercise price of $0.20 per share expiring in 5 years. On April 2, 2022, the due date of this note was extended to October 2, 2022.

 

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.on April 9, 2022. The companyCompany also issued a warrant to purchase 500,000 common stock warrantsshares of Common Stock at an exercise price of $0.20 per share expiring in 5 years.

On April 16, 2021,2, 2022, the Company issued a promissory note with an investor, in exchange for $300,000 bearing an interest rate of 18% per annum. The maturitydue 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.was extended to October 9, 2022.

 

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.on April 16, 2022. The companyCompany also issued a warrant to purchase 250,000 common stock warrantsshares of Common Stock at an exercise price of $0.25 per share expiring in 5 years. On April 2, 2022, the due date of this note was extended to October 16, 2022.

 

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.on April 16, 2022. The company also issued a warrant to purchase 200,000 common stock warrants at an exercise priceshares 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 warrantsCommon Stock at an exercise price of $0.25 per share expiring in 5 years. On May 21, 2021,April 2, 2022, the investor converted the promissorydue date of this 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 $5,199was forgiven. The conversion of the debtextended to warrants generated a loss on extinguishment of $1,487,386October 16, 2022 for the fair value of the warrants issued..

 

Interest expense for the Company’s notes payable for the three and six months ended June 30, 2021,2022 was $16,493 and $32,300, respectively, compared to $29,802 and $30,177, respectively, compared to $2,025 and $3,986 to for the three and six months ended June 30, 2020.2021, respectively.

 

Accrued interest for the Company’s notes payable on June 30, 2021,2022 and December 31, 2020,2021 was $24,540 69,655and $042,773, respectively, and is included in accrued expenses on the accompanying condensed consolidated balance sheets.

 

13 

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 86 – NOTES PAYABLE -– RELATED PARTY

 

Notes payable - related party– Related Party, totaled $300,000 and $0 on June 30, 2021,2022, and December 31, 2020,2021, respectively.

 

On April 2, 2021, the Company issued a promissory note withto Paul Sallarulo, a member of our Board of Directors, in exchange for $150,000 bearing an interest rate of 18% per annum and payable inon 1April 2, 2022 year.. The companyCompany also issued a warrant to purchase 1,500,000 common stock warrantsshares of Common Stock at an exercise price of $0.20 per share expiring in 5 years. On April 2, 2022, the due date of this note was extended to October 2, 2022.

 

On April 2, 2021, the Company issued a promissory note withto Michael V. Barbera, our Chairman of the Board, in exchange for $150,000 bearing an interest rate of 18% per annum and payable inon 1April 2, 2022 year.. The companyCompany also issued a warrant to purchase 1,500,000 common stock warrantsshares of Common Stock at an exercise price of $0.20 per share expiring in 5 years. On April 2, 2022, the due date of this note was extended to October 2, 2022.

 

Interest expense for the Company’s notes payable – related party for the three and six months ended June 30, 2022 was $16,365 and $32,015, respectively. Interest expense for the Company’s notes payable – related party for the three and six months ended June 30, 2021, was $13,335, respectively, compared to $3640 and $2,45513,335 for the three and six months ended June 30, 2020., respectively.

 

Accrued interest for the Company’s notes payable - related party on June 30, 2021,2022, and December 31, 2020,2021, was $13,33574,629 and $042,614, respectively, and is included in accrued expenses on the accompanying condensed consolidated balance sheets.

11 

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 7 – NOTES PAYABLE – CONVERTIBLE – RELATED PARTY

Convertible Notes payable – related party totaled $1,689,746 on June 30, 2022, and December 31, 2021.

On August 3, 2020, the Company issued a secured convertible promissory note to certain investors in exchange for $1,000,000 in the aggregate bearing an interest rate of 20% per annum and payable in 6 months. The holder may convert the unpaid principal balance of the note into shares of restricted Common Stock at the conversion price equal to $0.275 per share, which conversion price was set with the consummation of the Company’s private placement of Units which closed on August 17, 2021. 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 was created by Richard A. LoRicco Sr. and Lucille M. LoRicco, who were the parents of 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 newly issued amended and restated secured convertible 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 a debt extinguishment and the new promissory note was recorded at fair value in accordance with ASC 470 “Debt”. The original principal of $1,000,000 and accrued interest of $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 5-year warrants to purchase an aggregate of 15,000,000 shares of Common Stock with an exercise price of $0.20 per share. The issuance of the warrants for the extension generated a loss on extinguishment of $3,686,123 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 $1,689,746 bearing an interest rate of 20% per annum and fully payable February 12, 2022. The original principal of $1,610,005 and accrued interest of $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 5-year warrants to purchase an aggregate of 7,500,000 shares of Common Stock with an exercise price of $0.35per share. The issuance of the warrants for the extension generated a loss on extinguishment of $1,874,705 for the fair value of the warrants issued. The note was not paid by its due date of February 12, 2022. As of the date of this filing, the noteholder has not issued a formal demand for payment and the Company is in negotiations with the noteholder to remedy the past-due status.

Interest expense for the Company’s convertible notes payable – related parties for the three and six months ended June 30, 2022, was $102,398 and 199,843, respectively, compared to $84,605 and $151,521, respectively, for the three and six months ended June 30, 2021.

Accrued interest for the Company’s convertible notes payable – related parties on June 30, 2022, and December 31, 2021, was $426,865 and $227,022, respectively, and is included in accrued expenses on the condensed consolidated balance sheets.

 

NOTE 98 – COMMITMENTS AND CONTINGENCIES

 

Supplier Agreement

MEP Consulting Engineers, Inc.

On July 23, 2020,The Company is the Company entered into an Exclusive Supplier Agreement with MEP Consulting Engineers, Inc. (“MEP”)obligor under certain promissory notes that are currently past due (although formal events 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 hasdefault have not been fully executed.

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

CR Business Consultants, Incdeclared).

   

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 wasis presently 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, Florida 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 CalSTRS while trying to resolve the matter. On February 11, 2015, 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 on June 30, 2021, and December 31, 2020, is $114,419.95 and $105,260, respectively.

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 17th 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 claimobligations under Florida Statute Section 501.201 and for injunction. The Company filed and has pending an amended counterclaim for breach of contract, fraud, and civil conspiracy against Raw Energy affiliates, including Donald R. Smith, Elina Jenkins, Global Energy Sciences, LLC, Yellow TurtleDesign, LLC (“YellowTurtle”), as well as former business affiliates/associates to Don Smith, Richard Laurin and Robert Ludwig. The nature of the dispute is based on representations (or misrepresentations) the Company alleges were made to it, as well as breaches of the terms of a licensing agreement, related consulting and other agreements, and failures and refusals of plaintiff and Don Smith related entities to deliver equipment/machinery and 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 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 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 settlement agreement provides for, among other things, the following: (i) a dismissal of the legal action as to the above-referenced parties and their owners, agents, affiliated companies, successors and assigns, having Case Number 18-020596 (21) in the Seventeenth Judicial Circuit Court in and for Broward County, Florida (the “Litigation”) upon the Company’s timely purchase of the shares as set forthprivate placement which closed in the next paragraph belowAugust 2021 to file a registration statement for an underwritten public offering and (ii) mutual general releasesconcurrently an application for the above-referenced parties relating to the 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 entered intolisting on a national stock purchase agreements with both RAW and YellowTurtle to repurchase the 10,000,000 shares of the Company’s common stock held by RAW for $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 group of related and non-related investors which resulted in the closing of this legal action.exchange. As a result, of the settlement, the Company recognized a gainis required to pay liquidated damages in the amount of $53,345 per month starting in March 2022, and $106,690 per month, beginning on settlementJune 1, 2022. The maximum amount of such liquidated damages could be $480,104 if such filings are not made. The Company has accrued the full amount of this liability, resulting in charges of $320,037403,643 fromand $426,759 to operations during the derecognitionthree and six months ended June 30, 2022, respectively. During the three months ended June 30, 2022, a payment in the amount of previously$53,345 was made in connection with these obligations; at June 30, 2022, the amount of $426,759 was recorded on the Company’s balance sheet as an accrued contingent legal liabilities.liability.

15 

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 109 – STOCKHOLDERS’ DEFICIT

 

On May 21, 2021,23, 2022, the Company converted a $issued 300,000 note payable into 6,000,0002,000,000 warrants to purchase shares of the Company’s common stock warrants. Thewith a fair value of $257,059 to a Key Honey, LLC. During the three months ended June 30, 2022, 500,000 of these warrants was recorded aswere vested and with 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 per the two consulting agreements entered on July 9, 2020, and October 16, 2020, for fundraising services. The value of $64,264. Key Honey, LLC is owned and operated by Richard Gibbs III, a non-affiliated shareholder. Key Honey, LLC provides the shares for both agreements is $138,000Company with sales, operations 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 $89,700marketing work product and will be expensed over the renewable six-month term of the agreement.consultancy.

 

The Company raised $1,300,000 pursuant to a private placement of Common Stock and warrants – this amount is carried on the Company’s balance sheet as a current liability as of June 30, 2022 because the shares have not yet been issued to the investors.

Effective May 27, 2022, the Company issued 735,669122,713 and shares of Common Stock at a price of $1,185,6690.149 restricted common sharesper share to various investorsa board member for commission on a sale. The amount of $18,284 was charged to non-cash compensation.

During the three and six months ended June 30, 2021, for cash proceeds totaling2022, the company charged the amount of $241,77641,706 and $331,776, respectively. The Companyto non-cash compensation representing the vesting of warrants issued 6,040,614 restricted common shares to various investors for the three and six months ended June 30, 2020, for cash proceeds totaling $616,667.Company’s Chief Executive Officer.

12 

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1110 – OPTIONS AND WARRANTS

 

Stock Options:

 

The following table summarizes all option grants outstanding to consultants, directors, and employees as of June 30, 2021, and December 31, 2020, andprovides 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,
 2021		  December 31,
2020		 
Options outstanding and exercisable  4,727,778   4,542,500 
Weighted-average exercise price $0.36  $0.41 
Aggregate intrinsic value $579,494   118,148 
Weighted-average remaining contractual term (years)  4.19   3.86 

The Company 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, 2021, 1,092,500 options were cancelled. The company granted 1,277,778activity in options for the period endingrespective periods:

Schedule of Option Activity            
  Total Options  Weighted Average  Aggregate Intrinsic 
  Outstanding  Exercise Price  Value 
             
Balance at January 1, 2021  4,542,500  $0.41  $— 
Issued  1,277,778   0.27   — 
Cancelled / Expired  (1,592,500)  0.53   — 
Balance at December 31, 2021  4,227,778  $0.33  $19,500 
Exercised  (500,000)  0.25   — 
Cancelled / Expired  (1,000,000)  0.55   — 
Balance at March 31, 2022  2,727,778  $0.26  $— 
Cancelled / Expired  (1,000,000)  0.25   — 
Balance at June 30, 2022  1,727,778  $0.27  $— 

Options exercisable and outstanding at June 30, 2021.2022 are as follows:

Schedule of Options Exercisable and Outstanding        
    Weighted Average    
    Remaining    
Range of Number Contractual Weighted Average Aggregate
Exercise Prices Outstanding Life (Years) Exercise Price Intrinsic Value
         
$0.01 - $0.50 1,727,778 3.107 $0.27 —

 

Stock Warrants:

 

The following table summarizes all warrant grantsprovides the activity in warrants for the respective periods:

Schedule of Warrants Activity            
      Weighted     
      Average  Aggregate 
  Total Warrants  Exercise Price  Intrinsic Value 
             
Balance at January 1, 2021  38,920,378  $0.27  $2,973,660 
 Granted  100,271,288   0.29   — 
Exercised  (1,000,000)  0.12   — 
Balance at December 31, 2021  138,191,666  $0.29  $3,824,750 
Granted  5,242,424   0.33   — 
Balance at March 31, 2022  143,434,090  $0.29  $1,147,100 
Granted  500,000   0.33   — 
Expired - cancelled  (2,045,000)  0.49   — 
Balance at June 30, 2022  141,889,090   0.29  $204,000 

Warrants exercisable and outstanding to consultants, directors and employees as well as investors as ofat June 30, 2021, and December 31, 2020, and the related changes during these periods2022 are presented below.as follows:

 

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 

During the six months ended June 30, 2021, 40,700,000 five-year 5 warrants were issued. During the six months ended June 30, 2021, 1,000,000 warrants were exercised.

During the three months ended June 30, 2021, and 2020, total stock-based compensation expense amounted to $482,953 and $0, respectively.

During the six months ended June 30, 2021, and 2020, total stock-based compensation expense amounted to $647,963 and $0, respectively.

16 

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(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.

Schedule of Warrants Exercisable and Outstanding        
    Weighted Average    
    Remaining    
Range of Number Contractual Weighted Average Aggregate
Exercise Prices Outstanding Life (Years) Exercise Price Intrinsic Value
         
$0.01 - $0.50 140,346,047 3.57 $0.28 $204,000
$0.51 - $1.00 1,543,043 1.00 $0.60 —
  141,889,090     $204,000

 

NOTE 1311 – SUBSEQUENT EVENTS

 

On July 7, 2021, the Company issued a promissory note with an entity managed by Ronald J. LoRicco, Sr., a member of our Board of Directors, in exchange for $50,000 bearing an interest rate of 10% per annum. The maturity date for the promissory note is July 23, 2021. The note payable remains outstanding as of this filing.

On July 7, 2021, the Company issued a promissory note with Michael V. Barbera, our Chairman of the Board, in exchange for $50,000 bearing an interest rate of 10% per annum. The maturity date for the promissory note is July 23, 2021. The note payable remains outstanding as of this filing.

On July 9, 2021, 600,000 shares of common stock 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 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,11, 2022, the Company entered into definitive securities purchasea Sale/Leaseback Agreement (the “Agreement”) with Quayco, LLC, a Pennsylvania limited liability company (the “Lessor”). The Company had previously ordered certain specialized BasaMax™ Pultrusion Machines (the “Machines”) from Upstate Custom Products LLC, a South Carolina limited liability company (the “Manufacturer”). The Machines are to be used to manufacture the Company’s basalt fiber reinforced polymer (BFRP) rebar products. Pursuant to the Agreement, the Lessor will pay the Lessee $450,000 and the Lessee will transfer to the Lessor secured rights to the ownership of one (1) BasaMaxTM Tetrad Pultrusion Machine and all rights under the sales orders and agreements with 17 accredited investors and issued an aggregate of 19,398,144 shares of common stock, Warrant As to purchase upthe Machine from Manufacturer. The Company had previously recorded this amount in accounts payable and Construction in Progress; at the date of the loan, the amount of $450,000 will be transferred from accounts payable to an aggregateRight 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),Use Lease Liability. Loan fees will be charged for aggregate gross proceeds to the Company of 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,this loan for which Aegis received customary cash fees and expense reimbursements.24 months.

 

The net proceeds of the Offering (approximately $

4,770,000) will be used by the Company for expansion of its manufacturing capability, sales and marketing, satisfaction of certain indebtedness and general working capital purposes.

 

 

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ITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following 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 three and six months ended June 30, 2022, and 2021, 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 in Form-10-K for the period ended December 31, 2021, and filed with the SEC on April 15, 2022.

 

Cautionary Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains “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 the timing for our planned manufacturing expansion, the benefits of our products, customer leads, product sales, future financings, or the commercial successviability of, and prospects for, our business model. We may not actually achieve the plans, projections or expectations disclosed in forward-looking statements, and actual results, developments or events (including, without limitation, those related to our planned manufacturing capacity expansion and our sales and marketing initiatives) 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 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.10-Q as well as the risk factors and other disclosures contained in our Annual Report on Form 10-K for the period ended December 31, 2021.

 

Basanite, Inc., and its wholly owned subsidiaries are herein referred to in this discussion as the "Company"“Company”, “we”, “our”, or “us”. “Common Stock” refers to the Common Stock of the Company.

 

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, 2021, and 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 in Form-10-K for the period ended December 31, 2020 and filed with the SEC on March 31, 2021.

 

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”), 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™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™BasaMix™, which are fine denier basalt fibers available in various chopped sizes, and BasaMesh™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 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.

 

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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 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;steel or with carbon fiber or glass fiber reinforced polymer rebar products; 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, 36,900 square foot facility located in Pompano Beach, Florida equipped with five customized, Underwriters Laboratories approved, Pultrusionpultrusion manufacturing machines for BasaFlex™ production, plus other composite manufacturing equipment. Pultrusion is a manufacturing process for converting reinforced fibers and liquid resin into a fiber-reinforced polymer product. Each Pultrusion machineof our current pultrusion machines has up to two linear production lines (we use one or two lines per machine depending on rebar size –size) giving a maximum capacity of 10 manufacturing lines)lines (smaller bar sizes). To date, BI’s operations team has successfully optimized and scaled the capacity of our manufacturing plant to be able to produce up to 25,00022,800 linear feet of BasaFlex™ rebar per shift, per working day, depending on the product mix.

During the past year, we have designed, developed, and prototyped a next generation Pultrusion manufacturing system for BasaFlexTM rebar we call BasaMax™. This new system has been designed in two versions, a quad-line system named “Tetrad” (for smaller bar sizes) and a dual-line system named “Dyad” (for larger bar sizes). Each offers not only have double the manufacturing capacity of the current machines for a given bar size, but they also run faster, and they fit in the same manufacturing floorspace. We currently have five of these new BasaMax pultrusion machines on order: three quad-line machines and two dual-line machines. Design changes and other improvements we wanted to incorporate (based on reviews of the prototype), coupled with supply chain issues prevalent in today’s economic environment have led to some delay in the completion of the new equipment. We now expect to accept delivery of these custom manufactured new machines early in the fourth quarter of 2022, with installation and calibration also to be completed in fourth quarter of 2022. With the introduction of this new equipment and the subsequent establishment of our planned two-shift operations, our maximum manufacturing capacity for BasaFlex™ rebar will increase to 100,000+ linear feet per working day (on a two-shift basis).

Importantly, BI’s own fully equipped Test Lab is utilized to evaluate, validate, and verify each product’sraw material and each batch of completed BasaFlex™ product, ensuring our finished goods meet the required specifications and performance attributes. We are also developing a new process specifically for manufacturing BasaFlex™ shapes (hoops; angles and stirrups) which we call BasaLinks™, which includes developing a next generation pultrusion system as part of this process. We expect our first BasaLinks system to be in place and operational during the fourth quarter of 2022.

 

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;

 

·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.

·more recently, due to rising steel prices, an increasing level of price equivalence between steel rebar and our BFRP rebar.

 

We believe we are well positioned to benefit from this renewed focus, 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.

 

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Known Factors, Trends and Risks Impacting Our Business

Manufacturing Expansion

Our business plan calls for scaling the manufacturing capability at our Florida facility in order to enable the potential for increased revenues and cash flow positive operations, and ultimately to profitability, in as short a timeframe as possible. Following this, we plan to open additional facilities around the country, each designed to service a circular area roughly 1,000 miles in diameter, with the plant at the center. Locations will be selected based upon regional demand and using the South Florida facility as the model.

However, our South Florida manufacturing expansion plans have been hindered by several factors: the COVID-19 pandemic, our slower than expected rate of fundraising and our slower than expected ramp-up in sales. This last item has been caused by multiple factors, including:

·customer requirements for multiple additional product and facility certifications, in particular from the International Code Council (or ICC) Evaluation Service (known as “ICC-ES”), an industry leader in performing technical evaluations of building products, materials and systems for code compliance; and from the Florida Department of Transportation (“FDOT”). Both certification programs are underway, and each requires separate, long-duration product testing (7 to 9 months). ICC testing is expected to complete by the end of September 2022 with approval to follow; and FDOT testing is expected to complete during the fourth quarter of 2022 with approval to follow;

·the lack of an ASTM (formerly known as the American Society for Testing and Materials) product standard specifically for basalt fiber rebar (this process is also underway, and a member of our board of directors, Fred Tingberg, who was appointed as our Chief Technology Officer in June 2022 is on the ASTM committee reviewing this; we currently expect the ASTM to be issued in September 2022);

·our current manufacturing capacity limitations, which have precluded us from bidding or winning several larger potential orders;

·the Surfside Condo disaster, which has resulted in some local engineers being cautious around new product introductions. We believe, however, that we will be able to make a strong case that BasaFlex™ (which is corrosion proof) can remedy the structural failures (such as what occurred in Surfside) associated with steel reinforcement corrosion;

·concerns about the current state of our manufacturing capability and our ability to deliver product(s).

Our new manufacturing equipment mentioned above is expected to be delivered and the installation and calibration process to commence during the fourth quarter of 2022. The equipment is expected to become fully operational shortly thereafter. We believe the achievement of this would simultaneously resolve questions about our manufacturing capacity and will materially improve our ability to generate sales.

Impact of COVID-19

 

The pandemic caused by the novel coronavirus (“COVID-19”(known as “COVID-19”) and governmental responses and efforts to curb the spread of the pandemic has caused great disruption to the U.S. national and international economies. We have been adversely impacted by COVID-19 in that surfacedwe have been required to temporarily suspend operations during 2020 due to necessary quarantines, and the impact of COVID-19 on the construction industry we service has been significant. Government mandated shutdowns and other measures held less of an impact on our business during 2021, although we did have personnel absent for periods during the year due to COVID-19. During the first quarter of 2022, while certain of our personnel did contract COVID-19, overall COVID-19 did not have a material impact on our business, in December 2019part because we were operating with reduced personnel and spread throughout the world resultedpersonnel could work remotely in certain cases.

The continued prevalence of COVID-19 or outbreaks of new variants thereof could disrupt our supply chain, as well as our own operations due to absenteeism by infected or ill members of management or other employees, or absenteeism by members of management and other employees who elect not to come to work due to illness affecting others in our office or plant, or due to additional necessary quarantines. This could be particularly true as we seek to scale operations during 2022 and hire additional personnel. COVID-19 could also impact members of our Board of Directors as well as key providers of services to us, which could adversely impact the management of our affairs. Additionally, as the COVID-19 pandemic continues to develop, we may be required to continue to spend time and resources in monitoring and adhering to government regulations that impact both our company undergoingand our customers and potential customers as necessary, which could also adversely impact our business and results of operations. We continue to monitor our operations and applicable government recommendations and requirements.

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Inflation & Interest Rate Sensitivity

In the past two fiscal years, inflation has not had a 2-month operational shutdown earlysignificant impact on our business. However, during the second half of 2021 and into 2022, the U.S. economy has entered into a period of increasing inflation. Should inflation persist or increase, interest rates may continue to rise, and inflation overall could have a significant effect on the economy in general and the construction industry in particular, as well as create volatility in the second quartercapital markets. For example, inflation and increased interests could affect the prices of 2020,raw materials we use, demand for our products, our ability to attract and retain skilled labor and our ability to obtain financing. We are carefully watching chemical prices, which are following oil and gas prices, as a core component of BasaFlex™ is the chemical resin mix. Prices have risen, but we have been able to raise our own prices to support our margins, largely as the result of the increase in steel prices. We believe we have actually benefitted from the rapid rise in steel prices over the past several fiscal quarters as well as the reduced availability of steel rebar, both of which changes have opened opportunities to more readily introduce our products into the marketplace. As of the date of this report, BasaFlex™ has become directly competitive with normalsteel on price alone, and it is relatively available, whereas steel has been impacted by raw material supply chain constraints. We will seek to continue to take advantage of these opportunities while high steel prices and restricted supply are prevalent.

Supply Chain

In the past year, supply chain shortages or delays have had an immaterial impact on our operations. Our raw material suppliers have maintained a consistent flow of goods which we receive monthly. Domestic suppliers have increased their in-stock flows to maintain adequate levels with our manufacturing needs. However, we might experience supply chain challenges in the future, which could harm our business operations resuming in June 2019. A second coronavirus related event occurred earlyand our results of operations.

Supply chain shortages have, however, negatively impacted the scheduled delivery of our new custom manufacturing equipment, which are now scheduled to be installed and calibrated in the fourth quarter of 2020, when two employees tested positive for COVID-192022 (we had previously anticipated this process to be completed earlier in 2022). While we believe these supply chain issues are resolved, we still might experience further delays which are beyond our control or that of the machine manufacturer. Such additional delay(s) could further delay the delivery, installation and we became concerned they had potentially exposedcalibration of our new manufacturing equipment, which in turn would harm our business and/or our results of operations.

War in Ukraine

The recent war in Ukraine has led the others. Outworld to issue sanctions on the government of an abundance of caution, we temporarilyRussia. This has shut down operationsour ability to procure basalt fiber material from our secondary supplier in Russia, Kamenny Vek. However, our primary supplier, Mafic, is U.S. based, and has ample capacity to support our current and anticipated future needs with a 100% domestic source of raw materials. We have also recently increased the levels of our safety stock of raw materials as an additional cushion. Nonetheless, we are currently qualifying alternate material from other global suppliers to preserve our options in case of further disruptions.

Government Approvals and Specifying of our Products

We continue to pursue additional product and facility qualifications and approvals, and these qualifications and approvals are critical to the market acceptance of our products. As previously noted, we are currently testing products at two independent laboratories in the pursuit of ICC-ES and FDOT certifications. These also include production facility approvals. ICC-ES approval is expected by the end of September 2022, and FDOT approval by the end of 2022 (including the facility approvals). However, we are already selling to FDOT projects on an individual basis through exemptions or previously issued material specs. Formal FDOT approval will allow us to bid on any FDOT project that is approved to use basalt fiber reinforced polymer products. Until we have obtained these additional approvals, our opportunities to bid on certain projects will be limited.

Need to Expand Management Personnel

During the quarter ended March 31, 2022, our company and Simon R. Kay (who had been serving as our Acting Interim Chief Executive Officer on a consulting basis) entered into a Transition Services Agreement in contemplation of our search for one weeka permanent Chief Executive Officer. On March 25, 2022, our Board of Directors appointed Mr. Kay as our Chief Executive Officer and enteredPresident. Additionally, Mr. Kay served as Acting Interim Chief Financial Officer and Acting Interim Principal Financial Officer of our company until August 1st, 2022, when we engaged NowCFO (see below).

On August 1, 2022, the Company engaged NowCFO, a 10-day quarantine period (during thisthird-party consulting firm, to provide chief financial officer services for quarterly reporting and additional accounting matters. However, we believe that hiring a full time certain key employees remained active, working from home). We strictly followed CDC guidelines for required quarantining periodsChief Financial Officer is in our company’s long term best interests and testingthe Company continues to recruit and interview candidates.

On February 20, 2022, David L. Anderson (“Anderson”), our Executive Vice President and Chief Operating Officer provided written notice to our Board of all employees before re-opening. Notwithstanding this, sinceDirectors of his resignation, and on February 24, 2022, we provided written notice to Anderson that his resignation of employment was accepted, effective immediately. As such, Anderson is not affiliated with us as of February 24, 2022, and the beginningposition of Chief Operating Officer remains unfilled as of the third quarterdate of 2020, COVID-19 has not materially impactedthis report. We will need to fill the position of Chief Operating Officer (or similar position) in order to grow 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, our operations or the operations of our third-party partners will depend on future developments, which are uncertain and cannot be predicted with confidence.business as planned.

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Results of Operations for the Three Months Ended June 30, 2022, and 2021

 

Revenue –Revenue: The CompanyWe had $15,549revenue of revenues as a result$288,050 from sales of salesfinished goods for the three months ended June 30, 20212022, an increase of $272,501 compared to $593 for the same period in the prior year and $19,685 of revenues as a result of sales of finished goods sold for the six months ended June 30, 2021 compared to $2,218 for the same period$15,549 in the prior year. Revenues have beenWhile the increase in revenue in the year over year periods was relatively significant due to our increasing sales success (across all product lines) in 2022, overall revenues continue to be minimal, as a result oflargely due to our capacity constraints and limited working capital. We continued our efforts to scale our production capacity, increase our sales, and grow finished goods inventory during the Company’s focus on the scaling of production and inventory.period.

 

Cost of goods sold: Cost of goods sold – During the three and six months ended June 30, 2021, the Company had cost of sales of $19,493 and $20,809 compared to $1,603 and $2,222, respectivelywas $611,163 for the same period in the prior year.

For the three months ended June 30, 2021,2022, an increase of $591,670 compared to cost of goods sold of $19,493 during the prior period. Cost of goods sold reflects the fixed overhead costs absorbed by manufacturing, at low sales volumes this results in negative margins. Our gross profit during the three months ended June 30, 2022, was negative $323,113 compared to negative $3,944 during the prior period. We expect our gross profit to increase as fixed overhead costs are absorbed over a greater volume of sales.

Sales, general, and administrative: Sales, general, and administrative expenses were $1,035,717 during the three months ended June 30, 2022, a decrease of $411,863 compared to $1,447,580 during the prior period. For the current quarter, sales, general, and administrative costs consisted primarily of professional fees of $286,853; payroll and related costs of $239,145, not including stock-based compensation of $197,633; consulting fees of $82,591; investor relations costs of $49,180; research and development of $42,427; advertising and marketing of $42,099; rent of $30,778; computer and IT costs of $26,187, and office costs of $20,839. The primary reason for the decrease in sales, general, and administrative costs compared to the prior period was $443,436 in overhead and depreciation charges in the prior period; these costs were absorbed by cost of sales during the three months ended June 30, 2022.

Other Income (Expense):

Gain on settlement of legal contingency: There was no gain on legal contingency during the three months ended June 30, 2022. During the prior period, the Company hadrecognized a gross margin from operationsgain on settlement of legal contingency in the amount of $3,944 compared$320,037 in connection with the settlement of accounts payable related to a gross margin in the amount of $1,010 in the same period of the prior year.legal matters.

 

For the six months ended June 30, 2021, the Company had a gross margin from operations in the amount of $1,124 compared to a gross margin in the amount of $4 in the same period of the prior year.

The Company has small margins as it sold existing inventory while preparing for the scaling the manufacture of BasaFlex™.

Operating Expenses

Professional feesLiquidated damages – loan commitment: During the three months ended June 30, 2021, professional fees were $79,355 compared to $53,016 for2022, the same periodcompany recognized liquidated damages – loan commitment in the prior year. Duringamount of $403,643 in connection with our obligations under the six months ended June 30, 2021, professional feesterms of our private placement to file a registration statement for an underwritten public offering and concurrent listing on a national stock exchange. There were $193,087 compared to $162,874 for the same period inno such charges during the prior year. The Company has increased fees as it relates to legal fees with the ongoing litigation, and new supplier and consulting agreements as it tries to secure relationships in the industry.period.

 

Payroll and payroll taxes –Loss on extinguishment of debt: DuringThe Company recognized no loss on extinguishment of debt during the three months ended June 30, 2021, payroll and payroll taxes were $300,6832022, compared to $162,455 for the same period in the prior year. During the six months ended June 30, 2021, payroll and payroll taxes were $554,798 compared to $399,886 for the same period in the prior year. The company retained a total of 27 employees at the period end June 30, 2021 as compared to 9 employees at the close of the June 30, 2020 period.

Consulting – During$3,056,892 during the three months ended June 30, 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 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 largely due to an increase in stock-based compensation expense.

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Other Income

Gain on settlement of legal contingency - During the three months ended June 30, 2021, the Company had a gain of $320,037 compared to $0 for the same period in the prior year. During the six months ended June 30, 2021, the Company had a gain of $344,522 compared to $0 for the same period in the prior year. The increase in the current year is largely due to the writing off of payables that had finalized with regards to legal matters in 2021.

Loan forgiveness - During the three 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, 2021, the Company had forgiveness of $124,143 compared to $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 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, 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 gain of $3,056,892 compared to $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 67 of the financial statements included in this Form 10-Q.

Interest expense: Interest expense - Duringwas $181,589 during the three months ended June 30, 2021,2022, an increase of $48,378 compared to interest expense wasof $133,211 during the prior period. Interest expense consists of interest on the Company’s notes and loans payable along with late fees on past due invoices charged by vendors.

Results of Operations for the Six Months Ended June 30, 2022, and 2021

Revenue: We had revenue of $546,339 from sales of finished goods for the six months ended June 30, 2022, compared to $201,007 for the same period$19,685 in the prior year. While the increase in revenue in the year over year periods was relatively significant due to our increasing sales success (across all product lines) in 2022, overall revenues continue to be small, largely due to our capacity constraints and limited working capital. We continued our efforts to scale our production capacity, increase our sales, and grow finished goods inventory during the period.

Cost of goods sold: Cost of goods sold was $1,196,974 for the six months ended June 30, 2022, an increase of $1,176,165 compared to cost of goods sold of $20,809 during the prior period. Cost of goods sold reflects the fixed overhead costs absorbed by manufacturing, at low sales volumes this results in negative margins. Our gross profit during the six months ended June 30, 2022, was negative $650,635 compared to negative $1,124 during the prior period. We expect our gross profit to increase as fixed overhead costs are absorbed over a greater volume of sales.

Sales, general, and administrative: Sales, general, and administrative expenses were $2,083,095 during the six months ended June 30, 2022, a decrease of $429,352 compared to $2,512,447 during the prior period. For the current six-month period, sales, general, and administrative costs consisted primarily of payroll and related costs of $490,977, not including stock-based compensation of $426,856; professional fees of $386,896; consulting fees of $267,942; research and development of $181,032; investor relations costs of $111,213; advertising and marketing of $71,491; rent of $41,869; computer and IT costs of $41,605; and office costs of $35,160. The primary reason for the decrease in sales, general, and administrative costs compared to the prior period was $443,436 in overhead and depreciation charges in the prior period; these costs were absorbed by cost of sales during the six months ended June 30, 2022.

Other Income (Expense):

Gain on settlement of legal contingency: There was no gain on legal contingency during the six months ended June 30, 2022. During the prior period, the Company recognized a gain on settlement of legal contingency in the amount of $344,522 in connection with the settlement of accounts payable related to legal matters.

Liquidated damages – loan commitment: During the six months ended June 30, 2021,2022, the company recognized liquidated damages – loan commitment in the amount of $426,759 in connection with our obligations under the terms of our private placement to file a registration statement for an underwritten public offering and concurrent listing on a national stock exchange. There were no such charges during the prior period.

Loss on extinguishment of debt: The Company recognized no loss on extinguishment of debt during the six months ended June 30, 2022, compared to $6,743,015 during the six months ended June 30, 2021. For more information about the transaction leading to the extinguishment of debt refer to footnote 7 of the financial statements included in this Form 10-Q.

Gain on loan forgiveness: There was no gain on loan forgiveness during the six months ended June 30, 2022. The Company recognized a gain on loan forgiveness in the amount of $124,143 during the prior period in connection with a note payable loan on May 21, 2021.

Interest expense: Interest expense was $304,234 during the six months ended June 30, 2022, an increase of $98,360 compared to interest expense wasof $205,874 compared to $251,830 for the same period induring the prior year. The decrease isperiod. Interest expense consists of interest on the Company’s notes and loans payable along with late fees on past due to the volume of lending committed to during the second quarter of 2021.invoices charged by vendors.

 

Liquidity and Capital Resources

 

Since inception, we have incurred net operating losses and negative cash flow. As of June 30, 2021, the Company2022, we had an accumulated deficit of $38,634,066. The Company has$49,585,933. We have incurred general and administrative expenses associated with our product development and compliance while concurrently setting up our manufacturing facility, beginning operations, and developing our business plan. The CompanyWe also continuescontinue 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 ofexpanding our BasaFlex™ manufacturing capability and generally scaling our business until we can generate sufficient revenues to achieve positive cash flow. These conditions raise substantial doubt about our ability to continue as a going concern.

 

We have historically satisfied our working capital requirements through the sale of restricted common stockCommon Stock and the issuance of warrants and promissory notes. We will continue our fundraising efforts until we have 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 bebecome cash flow positive.

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), these inquiries (if they lead to 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 proceeds from the sale of our common stock this year,securities, recent related party equipment lease transaction and warrant and option exercises in 2021 and 2022, our current working capital is extremely limited, and our projected sales revenue (together with our limited working capital) are presently insufficient to maintain our current operations. In order to scale upgrow our manufacturing and sales and marketing operations and reach the level of sales revenue sufficient to provide positive cash flow, we require significant funding of both our expansion planplans (which includes the finalization of our current manufacturing expansion plans and potential investments in other manufacturing facilities, as well as increased headcount necessary to operate our manufacturing at planned capacity). This will cover our significant operating deficit through the period while we are scalingseek to scale our manufacturing capability.capability, secure orders from known potential customers, and introduce our products to new customers. We will attempt to raise this capital through third party financing, including potential private or public offerings of our securities (including a potential underwritten offering and up list/re-IPO to a national exchange) as well as bridge or other loan arrangements. We cannot provide any assurancesHowever, there is a material risk that we will be unable to secure the required capital will be obtained(whether through an underwritten financing and/or uplisting to a national exchange or otherwise) at all or that the terms of such required financing may be available or 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. If we are unable to secure funding when needed, our results offrom operations may suffer, and our business may fail.

 

AtAs of June 30, 2021, the Company2022, we had cash of $77,400$58,893 compared to $259,505 at$109,514 as of December 31, 2020. Subsequent2021. The decrease in cash was due to the quarter end, we closedour net loss of $3,464,723, offset primarily by $636,466 in non-cash expenses, a $1,227,774 increase in accounts payable and a decrease of $396,683 in inventory. We also raised $1,300,000 pursuant to a private placement of Common Stock and warrants – this amount is carried on August 17, 2021 that generated netthe Company’s balance sheet as a current liability as of June 30, 2022 because the shares have not yet been issued to the investors. The Company used $742,832 of cash proceeds to usfor the purchase of approximately $4,770,000.equipment during the period and raised $774,591 from the sales for Common Stock and the exercise of stock options.

 

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Cash Flows

 

Net cash used in operating activities amounted to $2,294,501$81,529 and $1,040,380$2,294,501 for the six months ended June 30, 2022, and 2021, and 2020, respectively. In the current periodThe decrease in net cash used in operating activities was primarily a loss was recorded related to the issuance of warrants at fair value issued as compensation for the extension of the maturity dateresult of an amended note.increase in subscription liability in the amount of $1,300,000 and an increase in accounts payable in the amount of $1,227,774 during the six months ended June 30, 2022.

 

During the six months ended June 30, 2021, net2022, we used $742,832 cash used for investing activities were $270,330 compared to $59,377 for$270,330 used in the same period in the prior fiscal year. The increase is largely due to costs associated with the customization, installation, and verification and validation testing of the first prototype BasaMax™ prototype pultrusion machine.machine, for the modifications and UL listing of the current production machinery, and the final payments for the enhancements made to our production facility as compared to the deposits made on machinery and equipment.

 

During the six months ended June 30, 2021,2022, we had $2,382,726$773,740 net cash provided by financing activities compared to $1,087,088from the sale of Common Stock and warrants for net proceeds of $649,591 and exercise of stock options in the amount of $125,000. During the prior year. Issuance of common shares for $331,776, and $123,500 from warrants exercised; borrowing of $579,741 from the issuance of convertible and short-term notes payable, including from related parties; less $35,000 of a full repayment of convertible notes; and less $8,485 of partial repayment of notes payableperiod, cash provided the net cash during the six months ended June 30, 2021. Further the Company borrowed $1,091,194 from the issuance of notes payable, including from related parties. Additionally, the Company borrowed $300,000 in notes payable whichby financing activities was later exchanged for 6,000,0000 five-year warrants on May 21, 2021.$2,382,726.

 

We do not believe that our cash on hand as of June 30, 2021,2022, will be sufficient to fund our current working capital requirements asto the point where we try to develop our fiber reinforced polymer rebar manufacturing business.are generating positive cash flow. We have recently entered into several convertible promissory notes to help fund operations and issued restricted common shares in an effort to raisewill require 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 accompanying condensed consolidated financial statements for more details on recent financing activity.short term. We will continue working towards securing more working capital.capital with a preference towards debt which may be convertible to equity. However, there is no assurance that we will be successful in securing working capitalour efforts or, if we are, that the terms will be beneficial to our shareholders.

 

Risk FactorsCritical Accounting Estimates

 

InvestingThe presentation of financial statements in our securities is speculativeconformity with accounting principles generally accepted in the United States of America requires management to make estimates and involves a high degreeassumptions that affect the reported amounts of risk. You should carefully considerassets and liabilities and disclosure of contingent assets and liabilities at the risk factorsdate of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Please see note 2 to the condensed financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2020 filed with the SEC on 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.this report.

 

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable to smaller reporting companies.

 

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’sOur management, under the supervision and with the participation of the Company's Interimour Chief Executive Officer, our Acting Interim Chief Financial Officer and our 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) through June 30, 2021.2022.

 

22 

During our assessment of the effectiveness of internal control over financial reporting as of June 30, 20212022, 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 Controllermanagement concluded that our internal control over financial reporting was not effective as of June 30, 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.2022.

 

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.

 

Because of its inherent limitations, however, readers are cautioned that 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.

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.

 

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PART II. – OTHER INFORMATION

 

ITEM 1.LEGAL PROCEEDINGS

 

Legal Matters

In the ordinary course of operations, the CompanyFrom time to time, we may become a party toinvolved in legal proceedings. Based upon information currently available, management believesproceedings that, such legal proceedings, individually or in the aggregate, will notcould have a material adverse effect on the Company'sour 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 CalSTRS while trying to resolve the matter. On February 11, 2015, 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 Courtoperations. As 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 on June 30, 2021, and December 31, 2020, is $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 17th 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 has pending an amended counterclaim for breach of contract, fraud, and civil conspiracy against Raw Energy affiliates, including Donald R. Smith, Elina Jenkins, Global Energy Sciences, LLC, YellowTurtle Design, LLC (“YellowTurtle”), as well as former business affiliates/associates to Don Smith, Richard Laurin and Robert Ludwig. The nature of the dispute is based on representations (or misrepresentations) the Company alleges were made to it, as well as breaches of the terms of a licensing agreement, related consulting and other agreements, and failures and refusals of plaintiff and Don Smith related entities to deliver equipment/machinery and 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 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 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 settlement agreement provides for, among other things, the following: (i) a dismissal of the legal action as to the above-referenced parties and their owners, agents, affiliated companies, successors and assigns, having Case Number 18-020596 (21) in the Seventeenth Judicial Circuit Court 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 the above-referenced parties relating to the 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 entered into stock purchase agreements with both RAW and YellowTurtle to repurchase the 10,000,000 shares of the Company’s common stock held by RAW for $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 group of related and non-related investors which resulted in the closingdate of this legal action. As a result of the settlement, the Company recognized a gain on settlement of $320,037 from the derecognition of previously accrued contingent legal liabilities.

To our knowledge,report, we are not currently subject toaware of any legal proceedings.such proceedings pending against our company.

 

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ITEM 1A.RISK FACTORS

 

Not applicable torequired for smaller reporting companies.

 

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On February 12, 2021 (the “Issuance Date”), the Company 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 $1,610,004.54 in principal amount which cancelled and restated in its entirety the 20% Secured Convertible Promissory Note entered into by the Company and the same 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, 2021June 2, 2022, the Company issued to the Holders, on a pro rata basis,related party 122,713 shares of Common Stock Warrants to purchase up to an aggregatewith a market value of 15,000,000 shares of the Company’s Common Stock at a$0.149 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.share.

 

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 $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.

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.

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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 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.Effective April 27, 2022, we entered into a collaboration framework agreement with MEP World Group, a Florida limited liability company (“MEP”). This collaboration framework agreement terminates and replaces that certain Exclusive Supplier Agreement, dated July 23, 2020, between our company and MEP under which (among other items) MEP was granted exclusive distribution rights to BasaFlex™ and our other products in Miami-Dade County. Pursuant to the new collaboration framework agreement, MEP engaged us for manufacturing services on a non-exclusive basis and to sell products to MEP as its supplier for MEP customers in accordance with the terms of the agreement.

 

26 
ITEM 6.EXHIBITS

 

Exhibit  Incorporated by ReferenceFiled or
Furnished
No. Exhibit Description
Form31.1 Date FiledNumberHerewith
4.1Form of Warrant A (relating to August 2021 private placement offering)Filed
4.2Form of Warrant B (relating to August 2021 private placement offering)Filed
10.1Form of Securities Purchase Agreement (relating to August 2021 private placement offering)Filed
10.2Placement Agent Agreement, dated August 17, 2021, between the Company and Aegis Capital Corp. (relating to August 2021 private placement offering)Filed
31.1Certification of Interim Chief Executive Officer pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the Securities Exchange Act
31.2 Filed
31.2Certification of Chief Financial Officer pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the Securities Exchange Act
32.1 Filed
32.1Certification of Interim Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Furnished
32.2Certification 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
101.INS Furnished
101.INSInline 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)
101.SCH Filed
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CAL Filed
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Filed
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Filed
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Filed
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104 Filed
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)Filed

 

 

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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 23, 202116, 2022

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

 

 

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