The accompanying notes are an integral part of
the condensed consolidated financial statements.
The accompanying notes are an integral part
of the condensed consolidated financial statements.
The accompanying notes are
an integral part of the condensed consolidated financial statements.
The accompanying notes are an integral part of
the condensed consolidated financial statements.
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 sizes, and BasaMesh™, a line of Basalt Geogrid
Mesh Rolls, intended to replace welded wire mesh (made of steel) and other fiber reinforced polymer (“FRB”) grids and mesh.
BasaMix™ is designed
to help absorb the stresses associated with early-aged plastic shrinkage and settlement cracking in concrete, as well as providing an
increased toughness for enhanced reinforcement in Slab-on-Grade ("SOG”) and precast elements. BasaMix™ also serves in
a “system approach” for optimum performance of a concrete element when used in conjunction with our BasaFlex™ rebar.
BasaMesh™ is designed
for secondary and temperature shrinkage reinforcement. BasaMesh™ can also work in conjunction with the BasaFlex™ rebar or
BasaMix™ for a total reinforcement program.
Each of our products is specifically
designed to extend the lifecycle of concrete products by eliminating “concrete spalling.” Spalling results from the steel
reinforcing materials embedded within the concrete member rusting (contrary to popular belief, concrete is porous and water can permeate
into concrete). Rusting leads to the steel expanding and eventually causing the surrounding concrete to delaminate, crack, or even break
off, resulting in potential structural failure. We believe that each Basanite product addresses this important need along with other key
requirements in today’s construction market.
(B) Liquidity and Management Plans
Since inception, the Company
has incurred net operating losses and used cash in operations. As of March 31, 2022, and December 31, 2021, respectively, the Company
reported:
|
· |
an accumulated deficit of $47,641,714 and $46,121,210; |
|
· |
a working capital deficiency of $4,516,218 and $3,304,637; and |
|
· |
cash used in operations of $71,166 and $4,507,418. |
Losses have principally occurred
as a result of the substantial resources required for product research and development and for marketing of the Company’s products;
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 in the quarter ended March 31, 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™. While the Company expects to expand its manufacturing capacity during 2022, based on our current limited
manufacturing capacity there is no guarantee that orders will actually be received or that orders, if received, can be properly fulfilled.
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 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’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.
At March 31, 2022, the Company
had cash of $241,408 compared to $109,514 at December 31, 2021. During the quarter ended March 31, 2022, cash on hand was increased due
to cash received from the sale of Common Stock pursuant to a private placement offering and to the exercise of Common Stock warrants (see
note 8).
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, the expected
term of the option, the expected volatility of the price of our Common Stock, risk-free interest rates and the expected dividend yield
of our Common Stock. The assumptions used to determine the fair value of the stock awards represent management’s best estimates.
These estimates involve inherent uncertainties and the application of management’s judgment.
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 three months
ended March 31, 2022. There were no such valuations during the three months ended March 31, 2021:
Schedule of Fair Value Assumptions | |
| | | |
| | |
| |
Three months
ended | | |
Three months
ended | |
| |
March 31,
2022 | | |
March 31,
2021 | |
Expected price volatility | |
| 145.76 | % | |
| — | |
Risk-free interest rate | |
| 2.55 | | |
| — | |
Expected life in years | |
| 5 | | |
| — | |
Dividend yield | |
| — | | |
| — | |
(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.
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") up to $250,000. The Company’s credit risk in the event of failure of these financial
institutions is represented by the difference between the FDIC limit and the total amounts on deposit. Management monitors the financial
institutions credit worthiness in conjunction with balances on deposit to minimize risk. The Company from time to time may have amounts
on deposit in excess of the insured limits.
(D) Inventories
The Company’s inventories
consist of raw materials, work in process and finished goods, both purchased and manufactured. Inventories are stated at lower of cost
or net realizable value. Cost is determined on the first-in, first-out basis. Raw materials inventory
consists of basalt fiber and other necessary elements to produce the basalt rebar. On a quarterly basis, the Company analyzes its inventory
levels and records allowances for inventory that has become obsolete and inventory that has a cost basis in excess of the expected net
realizable value.
The Company’s inventory
at March 31, 2022 and December 31, 2021 was comprised of:
Schedule of Inventories | |
| | | |
| | |
| |
| | |
| |
| |
March 31, 2022 | | |
December 31, 2021 | |
| |
(Unaudited) | | |
| |
Finished goods | |
$ | 213,114 | | |
$ | 328,229 | |
Work in process | |
| 55,395 | | |
| 35,213 | |
Raw materials | |
| 284,156 | | |
| 351,213 | |
Total inventory | |
$ | 552,665 | | |
$ | 714,655 | |
(E) Fixed assets
Fixed assets consist of the
following:
Schedule of Fixed Assets | |
| | | |
| | |
| |
March 31, 2022 | | |
December 31, 2021 | |
| |
(Unaudited) | | |
| |
Computer equipment | |
$ | 141,910 | | |
$ | 133,654 | |
Machinery | |
| 728,245 | | |
| 717,437 | |
Leasehold improvements | |
| 166,252 | | |
| 166,252 | |
Office furniture and equipment | |
| 71,292 | | |
| 71,292 | |
Land improvements | |
| 7,270 | | |
| 7,270 | |
Website development | |
| 2,500 | | |
| 2,500 | |
Construction in process | |
| 3,103,784 | | |
| 2,408,986 | |
| |
| 4,221,253 | | |
| 3,507,391 | |
Accumulated depreciation | |
| (304,148 | ) | |
| (270,566 | ) |
| |
$ | 3,917,105 | | |
$ | 3,236,825 | |
Depreciation expense for the
three months ended March 31, 2022 was $33,583 compared to $31,709 for the three months ended March 31, 2021.
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
(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 | |
| | | |
| | |
| |
March 31, 2022 | | |
December 31, 2021 | |
| |
(Unaudited) | | |
| |
Options | |
| 2,727,778 | | |
| 4,227,778 | |
Warrants | |
| 143,434,090 | | |
| 138,191,666 | |
Convertible securities | |
| 7,324,407 | | |
| 6,970,063 | |
Total | |
| 153,486,275 | | |
| 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.
On
March 24, 2022, the Company issued 300,000 shares of Common Stock with a contract price of $0.33 per
share to a service provider for
investor relations services. These shares were valued for accounting purposes at the commitment date market price of $0.193 per share
for a total value of $57,900; $14,797 of this amount was amortized to non-cash compensation during the three months ended March 31, 2022. See note 8.
Effective
March 25, 2022, the Company issued a five-year warrant to purchase 2,000,000
shares of Common Stock at an exercise price $0.33
per share to its Chief Executive Officer pursuant to an employment agreement. Warrants to 1,000,000 shares with a grant date fair
value of $166,823 vested upon issuance,
and a warrant to purchase 1,000,000 shares with a grant date fair value of $166,823 will vest one year from the date of issuance.
The Company charged the amount of $169,565
to stock-based compensation during the three months ended March 31, 2022 in connection with these warrants. See note 8.
(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 those goods or services. The timing of revenue 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 product is delivered to the customer’s delivery
site.
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
All
revenues recognized are net of trade allowances, cash discounts, and sales returns. Trade allowances are based on the estimated
obligations. Adjustments to earnings resulting from revisions to estimates on discounts and returns have been immaterial for each of
the reported periods. Shipping and handling amounts billed to a customer as part of a sales transaction are included in revenues,
and the related costs are included in cost of goods sold. Shipping and handling is treated as a fulfillment activity, rather than a
promised service, and therefore is not considered a separate performance obligation. During the three months ended March 31, 2022
and 2021, the Company incurred shipping and handling costs in the amount of $8,355
and $0, respectively.
NOTE 3 – 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, which 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 March 31, 2022, are as follows:
Schedule of Operating Lease Liability | | |
| | |
2022 | | |
$ | 322,961 | |
2023 | | |
| 440,308 | |
2024 | | |
| 110,888 | |
Total minimum lease payments | | |
| 874,157 | |
Discount | | |
| (123,782 | ) |
Operating lease liability | | |
$ | 750,375 | |
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 March 31, 2022, the weighted-average remaining lease term is 2.0 years and the weighted-average discount rate used to determine the
operating lease liability was 15.0%. For the three months ended March 31, 2022 and 2021, the Company expensed $107,116 and 106,919, respectively
for rent.
NOTE 4 – NOTES PAYABLE
Notes payable totaled $460,747 and $466,762 on March
31, 2022, and December 31, 2021, respectively.
On
February 25, 2021, the Company entered a promissory note agreement with its bank for $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.
On
March 31, 2021 the Company entered financing arrangements to finance the insurance premiums for its liability coverage. The financings
have an interest rate of 9.40% and last through March of 2022. The balance as of March 31, 2022 and December 31, 2021 $0 and $6,015,
respectively.
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 – NOTES PAYABLE -- (CONTINUED)
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 on April 2, 2022. The Company also issued a warrant to purchase 2,000,000 shares
of Common Stock at an exercise price of $0.20 per
share expiring in 5 years. The
note was not paid by its due date. 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.
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 on April 9, 2022. The Company also issued a warrant to purchase 500,000 shares
of Common Stock at an exercise price of $0.20 per
share expiring in 5 years. The
note was not paid by its due date. 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.
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 on April 16, 2022. The Company also issued a warrant to purchase 250,000 shares
of Common Stock at an exercise price of $0.25 per
share expiring in 5 years. The
note was not paid by its due date. 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.
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 on April 16, 2022. The company also issued a warrant to purchase 200,000 shares
of Common Stock at an exercise price of $0.25 per
share expiring in 5 years. The
note was not paid by its due date. 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.
During the three months ended March 31, 2022,
the Company made principal payments in the amount of $4,217 on notes payable.
Interest expense for the Company’s
notes payable for the three months ended March 31, 2022 was $15,807 compared to $376 for the three months ended March 31, 2021.
Accrued interest for the Company’s
notes payable on March 31, 2022 and December 31, 2021 was $58,545 and $42,773, respectively, and is included in accrued expenses on the
accompanying condensed consolidated balance sheets.
NOTE 5 – NOTES PAYABLE – RELATED PARTY
Notes payable - related party totaled $300,000 March
31, 2022 and December 31, 2021.
On
April 2, 2021, the Company issued a promissory note to Paul Sallarulo, a member of our Board of Directors, in exchange for $150,000 bearing
an interest rate of 18%
per annum and payable on April
2, 2022. The Company also issued a warrant to purchase 1,500,000 shares
of Common Stock at an exercise price of $0.20 per
share expiring in 5 years. The
note was not paid by its due date. 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.
On
April 2, 2021, the Company issued a promissory note to Michael V. Barbera, our Chairman of the Board, in exchange for $150,000 bearing
an interest rate of 18%
per annum and payable on April
2, 2022. The Company also issued a warrant to purchase 1,500,000 shares
of Common Stock at an exercise price of $0.20 per
share expiring in 5 years. The
note was not paid by its due date. 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
notes payable – related party for the three months ended March 31, 2022 and 2021 was $15,560 and $0, respectively. Accrued
interest for the Company’s notes payable - related party on March 31, 2022, and December 31, 2021, was $58,264 and $42,614, respectively,
and is included in accrued expenses on the accompanying condensed consolidated balance sheets.
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 – NOTES PAYABLE – CONVERTIBLE – RELATED
PARTY
Convertible Notes payable –
related party totaled $1,689,746 on March 31, 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 $0.35 per
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 months ended March 31, 2022, was $97,445 compared to $66,916
for the three months ended March 31, 2021.
Accrued interest for the Company’s
convertible notes payable – related parties on March 31, 2022 and December 31, 2021, was $324,467 and $227,022, respectively, and
is included in accrued expenses on the condensed consolidated balance sheets.
NOTE
7 – COMMITMENTS AND CONTINGENCIES
The
Company is the obligor under certain promissory notes that are currently past due (although formal events of default have not been declared).
See notes 4 and 5.
The
Company is presently in default of its obligations under the terms of the Company’s private placement which closed in August 2021
to file a registration statement for an underwritten public offering and concurrently listing on a national stock exchange. As a result,
the Company is required to pay liquidated damages in the amount of $53,345 per month starting in March 2022, and the maximum
amount of such liquidated damages could be approximately $480,000 if such filing is not made.
NOTE 8 – STOCKHOLDERS’ DEFICIT
On
January 28, 2022 and February 3, 2022, the Company conducted the initial closings of a private placement offering consisting of
up to $5,000,000 of units at a price of $0.33
per Unit. Each Unit consists of: (i) one share of the Company’s Common Stock, (ii) a five-year, immediately
exercisable warrant (“Warrant A”) to purchase one share of Common Stock at an exercise price of $0.33 per
share and (iii) an additional five-year, immediately exercisable warrant (“Warrant B”) to purchase one share of Common
Stock at $0.33 per
share. The Warrants are identical, except the Warrant Bs will be subject to a call
provision as follows: in the event that, at any time following the Closing, the price of the publicly traded Common Stock is $1.00
or greater (as adjust for stock splits and the like) for five (5) consecutive trading days, the Company may provide five (5) trading
days’ notice to the holders of Warrant B to call the Warrant Bs for a total price of $0.01 for the entire Warrant B. During
such five trading days’ notice period, the holders of Warrant B shall be permitted to exercise their Warrant Bs at the
exercise price. If the Warrant Bs are not so exercised, they will be deemed to be repurchased by the Company in full for $0.01. Pursuant
to the private placement offering, during the three months ended March 31, 2022 the Company issued a total of 2,121,212 shares
of Common Stock, 2,121,212 Warrant
As, and 2,121,212 Warrant B for cash proceeds of $700,000. The Company expensed a total of $59,409 in related costs to the offering which have been capitalized and offset to
the gross proceeds recorded in additional paid in capital.
On
February 4 and February 7, 2022, the Company received an additional total of $300,000 in cash from investors to acquire 909,091 shares
of Common Stock, 909,091 Warrant As, and 909,091 Warrant Bs. These shares were not issued at March 31, 2022 and this amount is carried
on the Company’s balance sheet as subscription liability.
On
February 7 through March 31, 2022, the Company received a total of $100,000 in cash for the exercise of options to purchase 1,333,333
shares of Common Stock at a price of $0.075 per share. These shares were not issued at March 31, 2022 and this amount is carried on the
Company’s balance sheet as subscription liability.
On
March 24, 2022, the Company issued 500,000
shares of Common Stock pursuant to the exercise of stock options at a price of $0.25
per share for cash proceeds of $125,000. The conversion notice was effective March 7, 2022.
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On
March 24, 2022, the Company issued to a service provider 300,000 shares
of Common Stock with a contract price of $0.33 per
share. These shares had a grant date fair value for accounting purposes of $0.193 per share.
NOTE 9 – OPTIONS AND WARRANTS
Stock Options:
The following table provides
the activity in options for the respective periods:
Schedule of Activity in Options and Warrants | |
| | | |
| | | |
| | |
| |
Total Options Outstanding | | |
Weighted Average Exercise Price | | |
Aggregate Intrinsic 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 | | |
$ | — | |
Options exercisable and outstanding at March 31,
2022 are as follows:
Schedule of Options and 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 |
|
2,727,778 |
|
2.21 |
|
$0.26 |
|
— |
During the three months ended
March 31, 2022, options to acquire 500,000 shares of Common Stock at a price of $0.25 per share were exercised. See note 8.
Stock Warrants:
The following table provides
the activity in warrants for the respective periods:
Schedule of Stockholders' Equity Note, Warrants or Rights | | |
| | | |
| | | |
| | |
| | |
Total Warrants | | |
Weighted Average Exercise Price | | |
Aggregate 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 | |
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Warrants exercisable and outstanding
at March 31, 2022 are as follows:
Schedule of Options and 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 |
|
140,943,547 |
|
3.80 |
|
$0.28 |
|
$1,147,100 |
$0.51 - $1.00 |
|
2,490,543 |
|
0.85 |
|
$0.60 |
|
— |
|
|
143,434,090 |
|
|
|
|
|
$114,710 |
On
February 7, 2022 pursuant to a private placement of Common Stock the Company issued 4,242,424 five-year, immediately exercisable
warrants to purchase one share of Common Stock at $0.33 per share. See note 8. On March
25, 2022, the Company issued warrants to its Chief Executive Officer pursuant to an employment agreement: (i) five-year warrants to purchase
1,000,000 shares of Common Stock at a price of $0.33 per share and an issuance date fair value of $166,823, vesting immediately; and (ii)
five-year warrants to purchase 1,000,000 shares of Common Stock at a price of $0.33 per share and an issuance date fair value of $166,823,
which will vest on March 25, 2023. The Company charged the amount of $166,823 to operations during the three months ended March 31, 2022
upon issuance of these warrants. The 1,000,000 unvested warrants are not included in the tables above.
NOTE 10 – SUBSEQUENT EVENTS
Private Placement Offering
Subsequent to March 31, 2022,
the Company received additional funds in connection with its private placement offering. See note 8. In April 2022, a total of $1,250,000
in cash from two investors was received for the purchase of 3,787,879 investment units at a price of $0.33 per unit consisting of a total
of 3,787,879 shares of Common Stock, 3,787,879 Warrant As and 3,787,879 Warrant Bs.
Related Party Equipment Lease
On
April 27, 2022, the Company entered into an Equipment Rental Agreement (the “Agreement”) with First New Haven Mortgage Company,
LLC, a Connecticut limited liability company and an affiliate of the Company (the “Lessor”). Ronald J. LoRicco, a board member,
is the co-managing member of the 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.
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 had previously ordered the Machine 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.