UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM
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For the quarterly period ended:
or
For the transition period from: _____________ to _____________
Commission File Number:
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(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction | (I.R.S. Employer |
| of incorporation or organization) | Identification No.) |
(Address of Principal Executive Office) (Zip Code)
(Registrant’s telephone number, including area code)
_______________________________________________
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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Securities registered pursuant to Section 12(b) of the Act: None.
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. ☒
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). ☒
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 ¨ | |
| 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 ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Shares Outstanding as of November 15, 2021 | |
| Common Stock, $0.001 par value per share |
BASANITE, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. – FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
BASANITE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2021 (UNAUDITED) AND DECEMBER 31, 2020
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Deposits and other current assets | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Lease right-of-use asset | ||||||||
| Fixed assets, net | ||||||||
| Total long term assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued legal liability | ||||||||
| Notes payable | ||||||||
| Notes payable – related party | ||||||||
| Notes payable - convertible, net | ||||||||
| Notes payable - convertible - related party, net | ||||||||
| Subscription liability | ||||||||
| Lease liability - current portion | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| Lease liability - net of current portion | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred stock, $ par value, shares authorized, issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding, respectively as of September 30, 2021, and December 31, 2020 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ | $ | ||||||
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 AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(UNAUDITED)
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue | ||||||||||||||||
| Products Sales - rebar | $ | $ | $ | $ | ||||||||||||
| Total Cost of goods sold | ||||||||||||||||
| Gross (loss) profit | ( | ) | ( | ) | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Payroll, taxes and benefits | ||||||||||||||||
| Consulting | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| NET LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Gain on settlement of legal contingency | ||||||||||||||||
| Miscellaneous income | ||||||||||||||||
| Gain on settlement of payable | ||||||||||||||||
| Loss on extinguishment of debt | ( | ) | ( | ) | ( | ) | ||||||||||
| Loan forgiveness | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of shares outstanding - basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 2 |
BASANITE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(UNAUDITED)
| Additional | Total | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders' | ||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Capital | Deficit | Equity (Deficit) | ||||||||||||||||||||||
| Balance January 1, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Warrants exercised for cash | — | |||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||
| Stock issued for cash | — | |||||||||||||||||||||||||||
| Warrants issued | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance March 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock issued for cash | — | |||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||
| Warrants issued | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance June 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock issued for cash | — | |||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
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 NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(UNAUDITED)
| Additional | Total | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders' | ||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | Capital | Deficit | Equity (Deficit) | ||||||||||||||||||||||
| Balance January 1, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance March 31, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock issued for cash | — | |||||||||||||||||||||||||||
| Return of shares issued as loan committee fee | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Conversion of convertible debt and debt discount | — | |||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance June 30, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock issued for cash | — | |||||||||||||||||||||||||||
| Warrants exercised for cash | — | |||||||||||||||||||||||||||
| Conversion of convertible debt and debt discount | — | |||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
| 4 |
BASANITE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(UNAUDITED)
| For the nine months ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Lease right-of-use asset amortization | ||||||||
| Depreciation | ||||||||
| Amortization of debt discount | ||||||||
| Gain on settlement of legal contingency | ( | ) | ( | ) | ||||
| Gain on settlement payable | ( | ) | ||||||
| Loss on extinguishment of debt | ||||||||
| Loan forgiveness | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ( | ) | ||||
| Accounts receivable | ( | ) | ||||||
| Other current assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Subscription liability | ( | ) | ||||||
| Lease liability | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of equipment | ( | ) | ( | ) | ||||
| Deposits on machinery and equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of common stock | ||||||||
| Proceeds from warrants exercised for cash | ||||||||
| Repayment of convertible notes payable and convertible notes payable related party | ( | ) | ( | ) | ||||
| Proceeds from notes payable and notes payable related party | ||||||||
| Proceeds from convertible notes payable and convertible notes payable related party | ||||||||
| Repayment of notes payable and notes payable related party | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| NET INCREASE IN CASH | ||||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Forgiveness of Paycheck Protection Program loan and accrued interest | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Conversion of notes payable into common stock | $ | $ | ||||||
| Return of loan commitment shares | $ | $ | ( | ) | ||||
| Issuance of warrants for services | $ | $ | ||||||
| Recording of debt discount on convertible notes | $ | $ | ||||||
| Conversion of convertible notes payable into common stock | $ | $ | ||||||
| Conversion of note payable in exchange for cash | $ | $ | ||||||
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”) 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 Plans
Since inception, the Company has incurred net operating losses and used cash in operations. As of September 30, 2021, and December 31, 2020, respectively, the Company reported:
| · | an accumulated deficit of $ |
| · | a working capital deficiency of $ |
| · | cash used in operations of $ |
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, 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™. Based on our current limited manufacturing capacity there is no guarantee that orders will actually be received.
We have historically satisfied our working capital requirements through the sale of restricted common stock and the issuance of warrants 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 September 30, 2021, the
Company had cash of $
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.
| 7 |
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(B) Principles of Consolidation
The 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.
(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 $
(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 September 30, 2021 and December 31, 2020 was comprised of:
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Finished goods | $ | $ | ||||||
| Work in process | ||||||||
| Raw materials | ||||||||
| Total inventory | $ | $ | ||||||
(E) Fixed assets
Fixed assets consist of the following:
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Computer equipment | $ | $ | ||||||
| Machinery | ||||||||
| Leasehold improvements | ||||||||
| Office furniture and equipment | ||||||||
| Land improvements | ||||||||
| Website development | ||||||||
| Construction in process | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| 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 nine months ended September 30, 2021 was $
(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.
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:
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Options | ||||||||
| Warrants | ||||||||
| Convertible securities | ||||||||
| Total | ||||||||
The Company recognizes compensation costs to employees under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation – Stock Compensation. Under FASB ASC Topic 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the grant.
The Company entered into a
consulting agreement with Bridgeview Capital on July 9, 2020, for strategic planning and financial markets services in exchange for
shares of restricted common stock as compensation. The term of the agreement is
for six months with the option for renewal quarterly. Upon execution of the agreement,
shares were due within 5 days of execution. The execution date fair value of the shares was $
per share or $174,000. If the Company agrees to renew each quarter, an additional
shares are to be issued per quarter. On July 9, 2021, the Company agreed to renew another quarter and issued
restricted common shares per the agreement. The renewal date fair value of the shares was $
per share or $
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. 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, shares are to be issued per quarter. On July 9, 2021, the Company agreed to renew another quarter and issued restricted common shares per the agreement. The renewal date fair value of the shares was $per share or $
| 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 renewed
consulting agreement with Frederick Berndt on September 3, 2021, for strategic planning and financial markets services in exchange for shares of restricted common
stock and cash compensation of $
Upon execution of the renewed
agreement, warrants were issued for the previous agreement’s
fulfillment. The execution date fair value of the warrants was $ per warrant or $
(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.
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.
NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS
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 September 30, 2021.
| 10 |
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 – 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 $
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 September 30, 2021, are as follows:
| 2021 | $ | ||||
| 2022 | |||||
| 2023 | |||||
| 2024 | |||||
| Total minimum lease payments | |||||
| Discount | ( |
) | |||
| Operating lease liability | $ |
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 September 30, 2020, the weighted-average remaining lease term is
NOTE 5 – NOTES PAYABLE – CONVERTIBLE
Convertible Notes payable, net of the related debt
discounts, totaled $
On
August 3, 2020, the Company issued an unsecured convertible promissory note to an investor in exchange for $
Interest expense for the Company’s convertible notes payable for
the three and nine months ended September 30, 2021, was $
Accrued interest for the Company’s
convertible notes payable on September 30, 2021, and December 31, 2020 was $
| 11 |
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 – NOTES PAYABLE – CONVERTIBLE – RELATED PARTY
Convertible Notes
payable – related party, net of the related debt discounts, totaled
$
On
August 3, 2020, the Company issued a secured convertible promissory note to certain investors in exchange for $
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 $
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 $
On August 17, 2021, the Company completed an offering which subsequently reset the executable price of the outstanding convertible shares of the note payable, thus resulting in a new price per share of $.
Interest expense for the Company’s convertible notes payable –
related parties for the three and nine months ended September 30, 2021, was $
Accrued interest for the Company’s
convertible notes payable – related parties on September 30, 2021, and December 31, 2020, was $
| 12 |
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 – NOTES PAYABLE
Notes payable totaled $
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
On February 25, 2021, the Company
entered a promissory note agreement with its bank for $
On April 2, 2021, the Company
issued a promissory note with an investor in exchange for $
On April 9, 2021, the Company
issued a promissory note with an investor in exchange for $
On April 16, 2021, the Company
issued a promissory note with an investor in exchange for $
On April 16, 2021, the Company
issued a promissory note with an investor in exchange for $
Interest expense for the Company’s
notes payable for the three and nine months ended September 30, 2021, was $
Accrued interest for the Company’s
notes payable on September 30, 2021, and December 31, 2020, was $
NOTE 8 – NOTES PAYABLE - RELATED PARTY
Related party
notes payable totaled $
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 $
On July 7, 2021, the Company issued a promissory note with Michael V. Barbera, our Chairman of the Board, in exchange for $
On July 15, 2021, the Company
issued a promissory note with David Anderson, our Chief Operating Officer, in exchange for $
On July 26, 2021, the Company issued a promissory
note with David Anderson, our Chief Operating Officer, in exchange for $
13
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 $
On August 6, 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 $
Interest expense for the Company’s
notes payable – related party for the three and nine months ended September 30, 2021, was $
Accrued interest for the Company’s
notes payable - related party on September 30, 2021, and December 31, 2020, was $
NOTE 9 – COMMITMENTS AND CONTINGENCIES
On October 28, 2021 the Company proposed a liquidation of liability to John Cessario. The proposed settlement would be shares of Basanite common stock with a value of $0.33 per share. The Company elected to accrue an estimate for this amount in the third quarter of 2021.
Supplier Agreement -- MEP Consulting Engineers, Inc.
On July 23, 2020, the Company entered into an Exclusive Supplier Agreement with MEP Consulting Engineers, Inc. (“MEP”) of Miami, Florida. MEP engaged the Company as its sole and exclusive supplier and producer of basalt fiber reinforced polymer (“BFRP”) rebar, with the intent of developing a proprietary rebar to be named “Hurricane Bar.” The agreement also provides MEP with exclusive distribution rights to the Company’s BasaFlex™ BFRP rebar and other Company products in Miami-Dade County.
The agreement is targeting substantial
volumes of South Florida construction projects in the works, which is expected to generate material revenues over the
The Company did produce
product under this contract for the period ending September 30, 2021. The Company generated $
Supplier Agreement -- CR Business Consultants, Inc.
On October 22, 2020, the Company entered into an Exclusive Supplier Agreement with CR Business Consultants, Inc. (“CRBC”). CRBC agreed to utilize the Company as its exclusive supplier for all Company products, and the Company has granted CRBC exclusive distribution rights of the Company’s products in the Republic of Costa Rica and the Republic of Panama. Furthermore, CRBC has key relationships that could be a source of additional customers for the Company in other territories with no geographic restrictions.
The agreement is targeting
multiple large projects in Costa Rica, to include the rebuilding of the Port of Limon, which Basanite has been specified. The
recognized construction projects are expected to produce material revenues over the
The Company has not generated revenue under this contract for the period ending September 30, 2021.
| 14 |
BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 10 – STOCKHOLDERS’ DEFICIT
On July 9, 2021,
On August 17, 2021, the Company
conducted the closing of a private placement offering to accredited investors of the Company’s units at a price of $0.275 per unit,
with each unit consisting 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 (“Exercise Price”)
and (iii) an additional five-year, immediately exercisable warrant to purchase one 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,
as defined in the offering agreements. In connection with the closing,
The Company
sold and restricted common shares to various investors for the three and nine months ended September 30, 2021 (including the shares sold in the Offering described above), for cash
proceeds totaling $
Stock Options:
The following table summarizes all option grants outstanding to consultants, directors and employees as of September 30, 2021, and December 31, 2020 and the related changes during these periods are presented below.
| September 30, 2021 | December 31, 2020 | |||||||
| Options outstanding and exercisable | ||||||||
| Weighted-average exercise price | $ | $ | ||||||
| Aggregate intrinsic value | $ | $ | ||||||
| Weighted-average remaining contractual term (years) | ||||||||
The Company chose 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 three months ended September 30, 2021, options were cancelled. During the nine months ended September 30, 2021, options were cancelled. The company granted options for the period ending September 30, 2021.
Stock Warrants:
The following table summarizes all warrant grants outstanding to consultants, directors and employees as well as investors as of September 30, 2021, and December 31, 2020 and the related changes during these periods are presented below.
| September 30, 2021 | December 31, 2020 | |||||||
| Warrants outstanding and exercisable | ||||||||
| Weighted-average exercise price | $ | $ | ||||||
| Aggregate intrinsic value | $ | $ | ||||||
| Weighted-average remaining contractual term (years) | ||||||||
During the three months ended
September 30, 2021,
During the three months ended September 30, 2021 and 2020, total stock-based compensation expense amounted to $ and $respectively. During the nine months ended September 30, 2021 and 2020, total stock-based compensation expense amounted to $ and $ respectively.
As of September 30, 2021, $
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BASANITE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 12 – RELATED PARTIES
In addition to those transactions discussed in Notes 6 and 8, the Company had no further related party transactions.
NOTE 13 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements as of September 30, 2021 contained herein.
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| ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). These forward-looking statements are based on our management’s beliefs, assumptions, and expectations and on information currently available to our management. Generally, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-looking statements, which generally are not historical in nature. All statements that address operating or financial performance, events, or developments that we expect or anticipate will occur in the future are forward-looking statements, including without limitation our expectations with respect to customer leads, product sales, future financings, or the commercial success of our 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.
Basanite, Inc., and its wholly owned subsidiaries are herein referred to as the "Company", “we”, “our”, or “us”.
Overview
This overview provides a high-level discussion of our operating results and some of the trends that affect our business. We believe that an understanding of these trends is important to understand our financial results for the six months ended September 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™, 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 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; 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, pultrusion 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 machine has up to two linear production lines (we use one or two lines per machine depending on rebar size – giving a maximum capacity of 10 manufacturing lines). To date, BI’s operations team has successfully optimized and scaled the capacity of our manufacturing plant to be able to produce up to 25,000 linear feet of BasaFlex™ rebar per shift, per day, depending on the product mix. BI’s own fully equipped Test Lab is utilized to evaluate, validate, and verify each product’s performance attributes. We are also developing a new generation of pultrusion line (which we call BasaMax™) for manufacturing BasaFlex™.
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. |
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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Impact of COVID-19
The novel coronavirus (“COVID-19”) that surfaced in December 2019 and spread throughout the world resulted in our company undergoing a 2-month operational shutdown early in the second quarter of 2020, with normal business operations resuming in June 2019. A second coronavirus related event occurred early in the fourth quarter of 2020, when two employees tested positive for COVID-19 and we became concerned they had potentially exposed the others. Out of an abundance of caution, we temporarily shut down operations for one week and entered a 10-day quarantine period (during this time certain key employees remained active, working from home). We strictly followed CDC guidelines for required quarantining periods and testing of all employees before re-opening. Notwithstanding this, since the beginning of the third quarter of 2020, we do not believe that COVID-19 has materially impacted our operations or those of our third-party partners. However, the continued outbreak or spread of variants of the virus (and private and governmental efforts to curb such outbreaks and spreading) 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 and variants thereof 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.
Other Factors Impacting Our Business
Inflation
In the past two fiscal years, inflation has not had a significant impact on our business. However, we believe the U.S. economy has entered into a period of increasing inflation. Any significant increase in inflation and interest rates could have a significant effect on the economy in general and, thereby, could affect prices for raw materials we use, demand for our products, and our future operating results.
Supply Chain
In the past year, supply chain shortages or delays have had an immaterial impact on our operations. Relationships with our raw materials suppliers have maintained a consistent flow of goods received 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 and our results of operations.
Results of Operations
Revenue – The Company had $155,477 and $175,162 of revenues as a result of sales of finished goods sold for the three and nine months ended September 30, 2021, compared to $2,408 and $4,626, respectively for the same period in the prior year. While the increase in revenue in the year over year periods was material due to our ability to sell some BasaFlex™ product in 2021, overall revenues have been minimal due to our lack of funding and as a result our continuing shift in focus to the scaling of production and inventory during both periods.
Revenue recognition - We recognize revenue when the following criteria are met: (1) Contract with the customer has been identified; (2) Performance obligations in the contract have been identified; (3) Transaction price has been determined; (4) Transaction price has been allocated to the performance obligations; and (5) When (or as) performance obligations are satisfied.
Cost of Goods Sold
Cost of goods sold – During the three and nine months ended September 30, 2021, the Company had cost of sales of $176,994 and $194,687 compared to $919 and $3,065, respectively for the same period in the prior year.
For the three months ended September 30, 2021, the Company had a negative gross margin from operations in the amount of $21,517 compared to a gross margin in the amount of $1,489 in the same period of the prior year.
For the nine months ended September 30, 2021, the Company had a negative gross margin from operations in the amount of $19,525 compared to a gross margin in the amount of $1,561 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 fees – During the three months ended September 30, 2021, and 2020 professional fees were $382,233 compared to $127,294 for the same period in the prior year. During the nine months ended September 30, 2021, and 2020, professional fees were $575,320 compared to $290,168 for the same period in the prior year. The Company has increased fees as it relates to legal fees associated with our financing efforts, and preparation of new supplier and consulting agreements.
Payroll and payroll taxes – During the three and nine months ended September 30, 2021, payroll and payroll taxes were $301,732 and $856,530 compared to $107,284 and $507,170 in the prior year. The Company retained a total of 23 employees at the period end September 30, 2021, as compared to 13 employees at the close of the September 30, 2020, period.
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Consulting - During the three months ended September 30, 2021, consulting fees was $173,050 and $71,260 for the same period in the prior year. During the nine months ended September 30, 2021, consulting fees were $403,675 compared to $170,198 for the same period in the prior year. The increase is due to consulting agreements for the Company’s senior management.
General and administrative – During the three months ended September 30, 2021, general and administrative expenses were $775,941 compared to $$402,217 for the same period in the prior year. The increase is largely due to the stock-based compensation expense in the current year of $252,510 added to the increase in overall general and administrative costs, including but not limited to, supplies, computers, furniture and other overhead costs. During the nine months ended September 30, 2021, general and administrative expenses were $2,309,878 compared to $903,279 for the same period in the prior year. The increase is largely due to the stock-based compensation expense in the current year of $1,371,847 added to that by the increase in overall general and administrative costs.
Other Income
Gain on settlement of legal contingency - During the three months ended September 30, 2021, the Company had a gain of $94,127, compared to $40,838 for the same period in the prior year. During the nine months ended September 30, 2021, the Company had a gain of $438,649 compared to $40,838 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 – California State Teacher’s Retirement System.
Gain on settlement of payable - During the three and nine months ended September 30, 2021, the Company had a gain of $8,131 in 2021 as compared to $292,112 for 2020, respectively. The decrease is due to the Company settling the previously outstanding legal matters in 2020 during the first, second and third quarter of the 2021.
Miscellaneous income - During the three and nine months ended September 30, 2021, miscellaneous income was $0 compared to $0 and $70,817 for the same period in the prior year. The decrease is due to the settlement in 2020 and the allocation of the revenue to the company. In 2021 funds are recognized as part of gain on settlement of legal contingency.
Loan forgiveness - During the three months ended September 30, 2021, the Company had forgiveness of $0 compared to $0 for the same period in the prior year. During the nine months ended September 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 January 4, 2021.
Other Expenses
Loss on Extinguishment of Debt - During the three months ended September 30, 2021, the Company had a loss of $0 compared to $63,914 for the same period in the prior year. During the nine months ended September 30, 2021, the Company had a loss of $6,743,015 compared to $62,934 for the same period in the prior year.
Interest expense - During the three and nine months ended September 30, 2021, and 2020, interest expense was $120,070 and $325,944 compared to $550,094 and $801,925, respectively, for the same period in the prior year. The decrease is mainly due to the payment of debts due to increased cashflow.
Liquidity and Capital Resources
Since inception, we have incurred net operating losses and negative cash flow. As of September 30, 2021, the Company had an accumulated deficit of $40,306,351. The Company has 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 Company also continues to incur legal fees arising from ongoing activities due to fundraising and litigation. We expect operating losses to continue in the short term, and we require additional financing for continued support of our BasaFlex™ manufacturing 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.
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We have historically satisfied our working capital requirements through the sale of restricted common stock and the issuance of warrants and promissory notes. We will continue our fundraising efforts until we have obtained positive cash flow to cover our expenses. No assurances can be given that we will be successful in raising capital at all or on terms acceptable to us, or at all, and no assurances can be given that even if we raise capital that we will be able to generate sufficient revenue to be cash flow positive.
Notwithstanding proceeds from the sale of our common stock this year, current working capital and projected sales revenue are insufficient to maintain our current operations. In order to grow our manufacturing and sales and marketing operations and reach the level of revenue sufficient to provide positive cash flow, we require funding of both our expansion plan (which includes investments in new BasaMax™ pultrusion lines, on which we plan to manufacture our BasaFlex™ rebar at our Pompano facility and potentially other manufacturing facilities) and our operating deficit through the period while we seeking to are scale our manufacturing 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 as well as bridge or other loan arrangements. We cannot provide any assurances that required capital will be obtained at all or that the terms of such required financing may be acceptable to us. If we are unable to obtain adequate financing, we may reduce our operating activities to reduce our cash use until sufficient funding is secured. If we are unable to secure funding when needed, our results of operations may suffer, and our business may fail.
At September 30, 2021, the Company had cash of $1,308,227 compared to $259,505 at December 31, 2020. The increase in cash was due to the closing of our private placement on August 17, 2021 which generated net cash proceeds to us of approximately $4,723,000. Notwithstanding this increase in cash, we will require additional funding as described above.
Cash Flows
Net cash used in operating activities amounted to $3,879,286 and $1,612,928 for the nine months ended September 30, 2021, and 2020, respectively.
During the nine months ended September 30, 2021, we used $1,868,896 net cash for investing activities compared to $115,956 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 BasaMax™ prototype pultrusion machine, for the modifications and UL listing of the production machinery and the final payments for the enhancements made to our production facility as compared to the deposits made on machinery and equipment.
During the nine months ended September 30, 2021, we had $6,796,904 net cash provided by financing activities compared to $2,175,644 in the prior year. Sale of common stock shares for $5,054,662, 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 $417,193 of partial and full repayment of multiple notes payable provided the net cash during the nine months ended September 30, 2021. Further the Company borrowed $1,091,195 from the issuance of notes payable, including from related parties. Additionally, the Company borrowed $300,000 in notes payable which was later exchanged for 6,000,000 five-year warrants on May 21, 2021.
We do not believe that our cash on hand as of September 30, 2021, will be sufficient to fund our current working capital requirements to the point where we are generating positive cash flow. We have recently entered into several convertible promissory notes to help fund operations and will require additional working capital in the short term. We continue working towards securing more working capital with a preference towards debt which may be convertible to equity. However, there is no assurance that we will be successful in our efforts or, if we are, that the terms will be beneficial to our shareholders.
| 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’s management, under the supervision and with the participation of the Company's Interim Chief Executive Officer and 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 September 30, 2021.
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During our assessment of the effectiveness of internal control over financial reporting as of September 30, 2021, management identified material weaknesses related to (i) the U.S. GAAP expertise and experience of our internal accounting personnel and (ii) a lack of segregation of duties within accounting functions. As a result of these material weaknesses, our Chief Executive Officer and Controller concluded that our internal control over financial reporting was not effective as of September 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.
We are committed to maintaining a strong internal control environment and implementing measures designed to help ensure that the material weaknesses described above are remediated as soon as possible. We believe we will have the opportunity to remediate these weaknesses when adequate funding is secured. We will consider the material weaknesses remediated after the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that the controls are operating effectively.
Changes in Internal Control over Financial Reporting
No change in our system of internal control over financial reporting occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. – OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
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.
The Company did not have any open legal matters and is not aware of any pending legal matters as of the filing of this report.
| ITEM 1A. | RISK FACTORS |
Not applicable to 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, 2021 the Company issued to the Holders, on a pro rata basis, Common Stock Warrants to purchase up to an aggregate of 15,000,000 shares of the Company’s Common Stock at a per share exercise price of $0.20 (the “Warrants”). Pursuant to the terms of the Restated Promissory Note, The Richard A. LoRicco Sr. and Lucille M. LoRicco Irrevocable Insurance Trust DTD 4/28/95, Louis Demaio as Trustee will serve as the agent for the benefit of the Holders (the “Agent”). The Agent is a trust created by Richard A. LoRicco Sr. and Lucille M. LoRicco, who were the parents of Ronald J. LoRicco (“Mr. LoRicco”), one of the members of the Company’s Board of Directors (the “Board”) and is maintained by an independent trustee. The Agent is the Holder of $1,207,503.40 of the principal amount of the Restated Promissory Note and the Holder of 11,250,000 of the Warrants. The disinterested members of the Board approved the terms of the Restated Promissory Note. Mr. LoRicco does not have voting or investment control of or power over the Agent but is an anticipated, partial beneficiary of the Agent. On 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.
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. The value of the shares for both agreements is $210,000 and will be expensed over the renewable three-month term of the agreement.
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, the Company entered into definitive securities purchase agreements with 17 accredited investors and issued an aggregate of 19,398,144 shares of common stock, Warrant As to purchase up to an aggregate of 19,398,144 shares of Common Stock, and Warrant Bs to purchase up to an aggregate of 19,398,144 shares of Common Stock (for an aggregate of 38,796,288 Warrant Shares), for 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, for which Aegis received customary cash fees and expense reimbursements.
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.
| 23 |
| ITEM 6. | EXHIBITS |
| Exhibit | Incorporated by Reference | Filed or Furnished | ||||||||
| No. | Exhibit Description | Form | Date Filed | Number | Herewith | |||||
| 31.1 | Certification of Interim Chief Executive Officer pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the Securities Exchange Act | Filed | ||||||||
| 31.2 | Certification of Chief Financial Officer pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the Securities Exchange Act | Filed | ||||||||
| 32.1 | Certification of Interim Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Furnished | ||||||||
| 32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Furnished | ||||||||
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | Filed | ||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | Filed | ||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed | ||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed | ||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | Filed | ||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Filed | ||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | Filed | ||||||||
| 24 |
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: November 15, 2021
| Basanite, Inc. | ||
| By: | /s/ Simon R. Kay | |
| Simon R. Kay | ||
| Company’s Interim Chief Executive Officer and Principal Financial Officer | ||
25
EXHIBIT 31.1
OFFICER’S CERTIFICATE
PURSUANT TO RULE 13a-14(a)/15d-14(a)
I, Simon R. Kay, Interim Chief Executive Officer, President and Chief Financial Officer, certify that:
1. I have reviewed this Form 10-Q for the quarter ended September 30, 2021, of Basanite, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 15, 2021 | By: /s/ Simon R. Kay |
| Name: Simon R. Kay | |
|
Title: Interim Chief Executive Officer, President and Chief Financial Officer (Principal Executive Officer) |
EXHIBIT 31.2
OFFICER’S CERTIFICATE
PURSUANT TO RULE 13a-14(a)/15d-14(a)
I, Simon R. Kay, Interim Chief Executive Officer, President and Chief Financial Officer, certify that:
1. I have reviewed this Form 10-Q for the quarter ended September 30, 2021, of Basanite, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant issuer and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 15, 2021 | By: /s/ Simon R. Kay |
| Name: Simon R. Kay | |
|
Title: Interim Chief Executive Officer, President, and Chief Financial Officer (Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Basanite, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2021 as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
| Date: November 15, 2021 | By: /s/ Simon R. Kay |
| Name: Simon R. Kay | |
|
Title: Acting Interim Chief Executive Officer, President, and Chief Financial Officer (Principal Executive Officer) |
A signed original of this written statement required by Section 906, or other document authentications, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Basanite, Inc. and will be retained by Basanite, Inc. and furnished to the United States Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Basanite, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2021 as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
| Date: November 15, 2021 | By: /s/ Simon R. Kay |
| Name: Simon R. Kay | |
|
Title: Interim Chief Executive Officer, President and Chief Financial Officer (Principal Financial and Accounting Officer) | |
A signed original of this written statement required by Section 906, or other document authentications, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Basanite, Inc. and will be retained by Basanite, Inc. and furnished to the United States Securities and Exchange Commission or its staff upon request.
Cover - shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Nov. 15, 2021 |
|
| Cover [Abstract] | ||
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Quarterly Report | true | |
| Document Transition Report | false | |
| Document Period End Date | Sep. 30, 2021 | |
| Document Fiscal Period Focus | Q3 | |
| Document Fiscal Year Focus | 2021 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity File Number | 000-53574 | |
| Entity Registrant Name | Basanite, Inc. | |
| Entity Central Index Key | 0001448705 | |
| Entity Tax Identification Number | 20-4959207 | |
| Entity Incorporation, State or Country Code | NV | |
| Entity Address, Address Line One | 2041 NW 15th Avenue | |
| Entity Address, City or Town | Pompano Beach | |
| Entity Address, State or Province | FL | |
| Entity Address, Postal Zip Code | 33069 | |
| City Area Code | (954) | |
| Local Phone Number | 532-4653 | |
| Entity Current Reporting Status | Yes | |
| Entity Interactive Data Current | Yes | |
| Entity Filer Category | Non-accelerated Filer | |
| Entity Small Business | true | |
| Entity Emerging Growth Company | false | |
| Entity Shell Company | false | |
| Entity Common Stock, Shares Outstanding | 248,520,598 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, par value | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
| Common stock, shares issued | 248,520,598 | 224,836,785 |
| Common stock, shares outstanding | 248,520,598 | 224,836,785 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Revenue | ||||
| Products Sales - rebar | $ 155,477 | $ 2,408 | $ 175,162 | $ 4,626 |
| Total Cost of goods sold | 176,994 | 919 | 194,687 | 3,065 |
| Gross (loss) profit | (21,517) | 1,489 | (19,525) | 1,561 |
| OPERATING EXPENSES | ||||
| Professional fees | 382,233 | 127,294 | 575,320 | 290,168 |
| Payroll, taxes and benefits | 301,732 | 107,284 | 856,530 | 507,170 |
| Consulting | 173,050 | 71,260 | 403,675 | 170,198 |
| General and administrative | 775,941 | 402,217 | 2,309,878 | 903,279 |
| Total operating expenses | 1,632,956 | 708,055 | 4,145,403 | 1,870,815 |
| NET LOSS FROM OPERATIONS | (1,654,473) | (706,566) | (4,164,928) | (1,869,254) |
| OTHER INCOME (EXPENSE) | ||||
| Gain on settlement of legal contingency | 94,127 | 40,838 | 438,649 | 40,838 |
| Miscellaneous income | 70,817 | |||
| Gain on settlement of payable | 8,131 | 292,112 | 8,131 | 292,112 |
| Loss on extinguishment of debt | (63,914) | (6,743,015) | (62,934) | |
| Loan forgiveness | 124,143 | |||
| Interest expense | (120,070) | (550,094) | (325,944) | (801,925) |
| Total other expense | (17,812) | (281,058) | (6,498,036) | (461,092) |
| NET LOSS | $ (1,672,285) | $ (987,624) | $ (10,662,964) | $ (2,330,346) |
| Net loss per share - basic and diluted | $ (0.007) | $ (0.005) | $ (0.046) | $ (0.011) |
| Weighted average number of shares outstanding - basic and diluted | 238,136,804 | 213,142,631 | 233,829,833 | 207,868,768 |
ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN |
9 Months Ended | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | ||||||||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||
| ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN | 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”) 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:
(B) Liquidity and Management Plans
Since inception, the Company has incurred net operating losses and used cash in operations. As of September 30, 2021, and December 31, 2020, respectively, the Company reported:
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, 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™. Based on our current limited manufacturing capacity there is no guarantee that orders will actually be received.
We have historically satisfied our working capital requirements through the sale of restricted common stock and the issuance of warrants 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 September 30, 2021, the Company had cash of $1,308,227 compared to $259,505 at December 31, 2020. During the quarter ended September 30, 2021, cash on hand was increased due to the closing of our private placement offering in August 2021 (see note 13).
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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.
(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.
(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 September 30, 2021 and December 31, 2020 was comprised of:
(E) Fixed assets
Fixed assets consist of the following:
Depreciation expense for the three and nine months ended September 30, 2021 was $32,430 and $96,355, respectively, compared to $30,102 and $85,875 to the three and nine months ended September 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.
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:
The Company recognizes compensation costs to employees under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation – Stock Compensation. Under FASB ASC Topic 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the grant.
The Company entered into a consulting agreement with Bridgeview Capital on July 9, 2020, for strategic planning and financial markets services in exchange for shares of restricted common stock as compensation. The term of the agreement is for six months with the option for renewal quarterly. Upon execution of the agreement, shares were due within 5 days of execution. The execution date fair value of the shares was $ per share or $174,000. If the Company agrees to renew each quarter, an additional shares are to be issued per quarter. On July 9, 2021, the Company agreed to renew another quarter and issued restricted common shares per the agreement. The renewal date fair value of the shares was $ per share or $122,500.
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. 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, shares are to be issued per quarter. On July 9, 2021, the Company agreed to renew another quarter and issued restricted common shares per the agreement. The renewal date fair value of the shares was $per share or $87,500.
The Company entered into a renewed consulting agreement with Frederick Berndt on September 3, 2021, for strategic planning and financial markets services in exchange for shares of restricted common stock and cash compensation of $12,500 per month. The term of the agreement is for twelve months with the option for renewal quarterly for a maximum of two years from the effective date of the agreement. Previously, The Company entered into a consulting agreement with Frederick Berndt on May 12, 2021 for capital markets advisory services in exchange for restricted warrants to purchase shares of common stock as compensation. The term of the agreement is for twelve months with the option for renewal for an additional six months as needed. If the Company agrees to renew every twelve months, warrants are to be issued at that time. On May 12, 2021, the Company issued restricted common share warrants per the agreement. The execution date fair value of the warrants was $ per warrant or $64,045.
Upon execution of the renewed agreement, warrants were issued for the previous agreement’s fulfillment. The execution date fair value of the warrants was $ per warrant or $79,550.
(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.
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.
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RECENT ACCOUNTING PRONOUNCEMENTS |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Accounting Changes and Error Corrections [Abstract] | |
| RECENT ACCOUNTING PRONOUNCEMENTS | NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS
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 September 30, 2021.
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OPERATING LEASE |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
| OPERATING LEASE | NOTE 4 – 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 September 30, 2021, are as follows:
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 September 30, 2020, the weighted-average remaining lease term is 3.5 years and the weighted-average discount rate used to determine the operating lease liability was 15.0%. For the three months ended September 30, 2021 and 2020, the Company expensed $107,117 and 106,920, respectively for rent. For the nine months ended September 30, 2021 and 2020, the Company expensed $321,153 and $322,103, respectively for rent.
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NOTES PAYABLE – CONVERTIBLE |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Debt Disclosure [Abstract] | |
| NOTES PAYABLE – CONVERTIBLE | NOTE 5 – NOTES PAYABLE – CONVERTIBLE
Convertible Notes payable, net of the related debt discounts, totaled $0 and $10,000 on September 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 nine months ended September 30, 2021, was $0 and $161, respectively, compared to $184,182 and $460,787 to the three and nine months ended September 30, 2020.
Accrued interest for the Company’s convertible notes payable on September 30, 2021, and December 31, 2020 was $0 and $760, respectively, and is included in accrued expenses on the condensed consolidated balance sheets.
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NOTES PAYABLE – CONVERTIBLE – RELATED PARTY |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Notes Payable Convertible Related Party | |
| NOTES PAYABLE – CONVERTIBLE – RELATED PARTY | NOTE 6 – NOTES PAYABLE – CONVERTIBLE – RELATED PARTY
Convertible Notes payable – related party, net of the related debt discounts, totaled $1,689,746 and $1,025,000 on September 30, 2021, and December 31, 2020, respectively.
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 of the Company 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 (described in note 10) 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 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.
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.
On August 17, 2021, the Company completed an offering which subsequently reset the executable price of the outstanding convertible shares of the note payable, thus resulting in a new price per share of $.
Interest expense for the Company’s convertible notes payable – related parties for the three and nine months ended September 30, 2021, was $88,244 and $239,766 compared to $71,803 and $314,582 to the three and nine months ended September 30, 2020.
Accrued interest for the Company’s convertible notes payable – related parties on September 30, 2021, and December 31, 2020, was $134,292 and $86,574, respectively, and is included in accrued expenses on the condensed consolidated balance sheets.
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NOTES PAYABLE |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Debt Disclosure [Abstract] | |
| NOTES PAYABLE | NOTE 7 – NOTES PAYABLE
Notes payable totaled $478,704 and $128,021 on September 30, 2021, and December 31, 2020, 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 September 30, 2021, was $17,957.
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.
On April 2, 2021, the Company issued a promissory note with an investor in exchange for $200,000 bearing an interest rate of 18% per annum and payable in 1 year. The company also issued 2,000,000 common stock warrants at an exercise price of $0.20 per share expiring in 5 years.
On April 9, 2021, the Company issued a promissory note with an investor in exchange for $50,000 bearing an interest rate of 18% per annum and payable in 1 year. The company also issued 500,000 common stock warrants at an exercise price of $0.20 per share expiring in 5 years.
On April 16, 2021, the Company issued a promissory note with an investor in exchange for $25,000 bearing an interest rate of 18% per annum and payable in 1 year. The company also issued 250,000 common stock warrants at an exercise price of $0.25 per share expiring in 5 years.
On April 16, 2021, the Company issued a promissory note with an investor in exchange for $20,000 bearing an interest rate of 18% per annum and payable in 1 year. The company also issued 200,000 common stock warrants at an exercise price of $0.25 per share expiring in 5 years.
Interest expense for the Company’s notes payable for the three and nine months ended September 30, 2021, was $23,666 and $53,784, respectively, compared to $1,405 and $6,110 to the three and nine months ended September 30, 2020.
Accrued interest for the Company’s notes payable on September 30, 2021, and December 31, 2020, was $27,760 and $0, respectively, and is included in accrued expenses on the condensed consolidated balance sheets.
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NOTES PAYABLE - RELATED PARTY |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Notes Payable - Related Party | |
| NOTES PAYABLE - RELATED PARTY | NOTE 8 – NOTES PAYABLE - RELATED PARTY
Related party notes payable totaled $300,000 and $0 on September 30, 2021, and December 31, 2020.
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 was paid in full on August 24, 2021.
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 was paid in full on August 24, 2021.
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 6, 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 $100,000 bearing an interest rate of 10% per annum. The maturity date for the promissory note is August 24, 2021. The note payable was paid in full on August 24, 2021.
Interest expense for the Company’s notes payable – related party for the three and nine months ended September 30, 2021, was $16,635 and $27,648, respectively, compared to $0 and $2,455 for the three and nine months ended September 30, 2020.
Accrued interest for the Company’s notes payable - related party on September 30, 2021, and December 31, 2020, was $27,648 and $0, respectively, and is included in accrued expenses on the condensed consolidated balance sheets.
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COMMITMENTS AND CONTINGENCIES |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | NOTE 9 – COMMITMENTS AND CONTINGENCIES
On October 28, 2021 the Company proposed a liquidation of liability to John Cessario. The proposed settlement would be shares of Basanite common stock with a value of $0.33 per share. The Company elected to accrue an estimate for this amount in the third quarter of 2021.
Supplier Agreement -- MEP Consulting Engineers, Inc.
On July 23, 2020, the Company entered into an Exclusive Supplier Agreement with MEP Consulting Engineers, Inc. (“MEP”) of Miami, Florida. MEP engaged the Company as its sole and exclusive supplier and producer of basalt fiber reinforced polymer (“BFRP”) rebar, with the intent of developing a proprietary rebar to be named “Hurricane Bar.” The agreement also provides MEP with exclusive distribution rights to the Company’s BasaFlex™ BFRP rebar and other Company products in Miami-Dade County.
The agreement is targeting substantial volumes of South Florida construction projects in the works, which is expected to generate material revenues over the 5-year period. As compensation, MEP was provided the ability to exercise options to purchase a total of 5,000,000 restricted common shares of the Company, over the 5 years from the supplier agreement effective date, tied to sales performance. This option shall automatically expire after the end of the option period. An extension period is available through specific clauses in the agreement.
The Company did produce product under this contract for the period ending September 30, 2021. The Company generated $31,141 in revenue for custom rebar products delivered under this contract for the three and nine months ending September 30, 2021.
Supplier Agreement -- CR Business Consultants, Inc.
On October 22, 2020, the Company entered into an Exclusive Supplier Agreement with CR Business Consultants, Inc. (“CRBC”). CRBC agreed to utilize the Company as its exclusive supplier for all Company products, and the Company has granted CRBC exclusive distribution rights of the Company’s products in the Republic of Costa Rica and the Republic of Panama. Furthermore, CRBC has key relationships that could be a source of additional customers for the Company in other territories with no geographic restrictions.
The agreement is targeting multiple large projects in Costa Rica, to include the rebuilding of the Port of Limon, which Basanite has been specified. The recognized construction projects are expected to produce material revenues over the 5-year period. As compensation, CRBC was provided the ability to exercise options to purchase a total of 5,000,000 restricted common shares of the Company, over the 5 years from the supplier agreement effective date, tied to sales performance. This option shall automatically expire after the end of the option period. An extension period is available through specific clauses in the agreement.
The Company has not generated revenue under this contract for the period ending September 30, 2021.
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STOCKHOLDERS’ DEFICIT |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Equity [Abstract] | |
| STOCKHOLDERS’ DEFICIT | NOTE 10 – STOCKHOLDERS’ DEFICIT
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. The value of the shares for both agreements is $210,000 and will be expensed over the renewable three-month term of the agreement.
On August 17, 2021, the Company conducted the closing of a private placement offering to accredited investors of the Company’s units at a price of $0.275 per unit, with each unit consisting 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 (“Exercise Price”) and (iii) an additional five-year, immediately exercisable warrant to purchase one 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, as defined in the offering agreements. In connection with the closing, the Company entered into definitive securities purchase agreements with 19 accredited investors and issued an aggregate of 19,398,144 shares of common stock, Warrant A to purchase up to an aggregate of 19,398,144 shares of common stock, and Warrant B to purchase up to an aggregate of 19,398,144 shares of Common Stock (for an aggregate of 38,796,288 Warrant Shares), for aggregate gross proceeds to the Company of approximately $5,334,490. The Company expensed a total of $611,603 in related costs to the offering which has been capitalized and offset to the gross proceeds recorded in additional paid in capital.
The Company sold and restricted common shares to various investors for the three and nine months ended September 30, 2021 (including the shares sold in the Offering described above), for cash proceeds totaling $4,722,886 and $5,054,662, respectively. The Company sold and restricted common shares to various investors for the three and nine months ended September 30, 2020, for cash proceeds totaling $30,000 and $646,667, respectively.
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OPTIONS AND WARRANTS |
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| Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTIONS AND WARRANTS |
Stock Options:
The following table summarizes all option grants outstanding to consultants, directors and employees as of September 30, 2021, and December 31, 2020 and the related changes during these periods are presented below.
The Company chose 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 three months ended September 30, 2021, options were cancelled. During the nine months ended September 30, 2021, options were cancelled. The company granted options for the period ending September 30, 2021.
Stock Warrants:
The following table summarizes all warrant grants outstanding to consultants, directors and employees as well as investors as of September 30, 2021, and December 31, 2020 and the related changes during these periods are presented below.
During the three months ended September 30, 2021, 39,071,288 five-year warrants were issued. During the nine months ended September 30, 2021, 79,771,288 five-year warrants were issued. During the nine months ended September 30, 2021, warrants were exercised.
During the three months ended September 30, 2021 and 2020, total stock-based compensation expense amounted to $ and $respectively. During the nine months ended September 30, 2021 and 2020, total stock-based compensation expense amounted to $ and $ respectively.
As of September 30, 2021, $43,682 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.
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RELATED PARTIES |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTIES | NOTE 12 – RELATED PARTIES
In addition to those transactions discussed in Notes 6 and 8, the Company had no further related party transactions.
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SUBSEQUENT EVENTS |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 13 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements as of September 30, 2021 contained herein. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Use of Estimates in Financial Statements | (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.
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| Principles of Consolidation | (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.
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| Cash | (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.
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| Inventories | (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 September 30, 2021 and December 31, 2020 was comprised of:
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| Fixed assets | (E) Fixed assets
Fixed assets consist of the following:
Depreciation expense for the three and nine months ended September 30, 2021 was $32,430 and $96,355, respectively, compared to $30,102 and $85,875 to the three and nine months ended September 30, 2020.
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| Deposits and other current assets | (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.
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| 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:
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| Stock-Based Compensation |
The Company recognizes compensation costs to employees under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation – Stock Compensation. Under FASB ASC Topic 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the grant.
The Company entered into a consulting agreement with Bridgeview Capital on July 9, 2020, for strategic planning and financial markets services in exchange for shares of restricted common stock as compensation. The term of the agreement is for six months with the option for renewal quarterly. Upon execution of the agreement, shares were due within 5 days of execution. The execution date fair value of the shares was $ per share or $174,000. If the Company agrees to renew each quarter, an additional shares are to be issued per quarter. On July 9, 2021, the Company agreed to renew another quarter and issued restricted common shares per the agreement. The renewal date fair value of the shares was $ per share or $122,500.
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. 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, shares are to be issued per quarter. On July 9, 2021, the Company agreed to renew another quarter and issued restricted common shares per the agreement. The renewal date fair value of the shares was $per share or $87,500.
The Company entered into a renewed consulting agreement with Frederick Berndt on September 3, 2021, for strategic planning and financial markets services in exchange for shares of restricted common stock and cash compensation of $12,500 per month. The term of the agreement is for twelve months with the option for renewal quarterly for a maximum of two years from the effective date of the agreement. Previously, The Company entered into a consulting agreement with Frederick Berndt on May 12, 2021 for capital markets advisory services in exchange for restricted warrants to purchase shares of common stock as compensation. The term of the agreement is for twelve months with the option for renewal for an additional six months as needed. If the Company agrees to renew every twelve months, warrants are to be issued at that time. On May 12, 2021, the Company issued restricted common share warrants per the agreement. The execution date fair value of the warrants was $ per warrant or $64,045.
Upon execution of the renewed agreement, warrants were issued for the previous agreement’s fulfillment. The execution date fair value of the warrants was $ per warrant or $79,550.
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| Revenue Recognition | (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.
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.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Inventory |
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| Schedule of Fixed Assets |
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| Schedule of Dilutive Shares Not Included in Loss Per Share Computation |
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OPERATING LEASE (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Maturity of Operating Lease Liability |
|
OPTIONS AND WARRANTS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based Payment Arrangement, Option [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Summary of Options and Warrants Assumptions to Estimate Fair Value of Options Granted |
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| Warrant [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Summary of Options and Warrants Assumptions to Estimate Fair Value of Options Granted |
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ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN (Details Narrative) - USD ($) |
9 Months Ended | 12 Months Ended | |
|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
| Accumulated deficit | $ 40,306,351 | $ 29,643,387 | |
| Working capital deficiency | 961,681 | 1,901,875 | |
| Net cash used in operations | 3,879,286 | $ 1,612,928 | 2,799,499 |
| Cash | $ 1,308,227 | $ 259,505 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule of Inventory) (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Accounting Policies [Abstract] | ||
| Finished goods | $ 515,077 | $ 305,550 |
| Work in process | 47,233 | 35,286 |
| Raw materials | 91,818 | 105,739 |
| Total inventory | $ 654,128 | $ 446,575 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule of Dilutive Shares Not Included in Loss Per Share Computation) (Details) - shares |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Dilutive shares not included in loss per share computation | 304,823,303 | 155,696,284 |
| Equity Option [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Dilutive shares not included in loss per share computation | 4,727,778 | 4,542,500 |
| Warrant [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Dilutive shares not included in loss per share computation | 117,691,666 | 38,920,378 |
| Convertible Debt Securities [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Dilutive shares not included in loss per share computation | 182,403,859 | 112,233,406 |
OPERATING LEASE (Schedule of Future Minimum Lease Payments under Operating Lease) (Details) |
Sep. 30, 2021
USD ($)
|
|---|---|
| Leases [Abstract] | |
| 2021 | $ 104,520 |
| 2022 | 427,484 |
| 2023 | 440,308 |
| 2024 | 110,888 |
| Total minimum lease payments | 1,083,196 |
| Discount | (186,527) |
| Operating lease liability | $ 896,669 |
OPERATING LEASE (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|---|
Mar. 25, 2019 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Leases [Abstract] | |||||
| Base rent obligation | $ 33,825 | ||||
| Lease term | 3 years 6 months | 3 years 6 months | |||
| Weighted average discount rate | 15.00% | 15.00% | |||
| Operating lease rent expense | $ 107,117 | $ 106,920 | $ 321,153 | $ 322,103 | |
NOTES PAYABLE – CONVERTIBLE (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
|---|---|---|---|---|---|---|---|
Aug. 03, 2020 |
Feb. 16, 2021 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2020 |
|
| Short-term Debt [Line Items] | |||||||
| Note payable - convertible | $ 0 | $ 0 | $ 10,000 | ||||
| Proceeds from convertible debt | 579,741 | $ 1,720,000 | |||||
| Repayments of convertible debt | 35,000 | 348,000 | |||||
| Convertible Notes Payable 1 [Member] | |||||||
| Short-term Debt [Line Items] | |||||||
| Interest expense | 0 | $ 184,182 | 161 | 460,787 | |||
| Convertible Notes Payable [Member] | |||||||
| Short-term Debt [Line Items] | |||||||
| Interest expense | 88,244 | $ 71,803 | 239,766 | $ 314,582 | |||
| Accrued interest | $ 0 | $ 0 | $ 760 | ||||
| Unsecured Convertible Promissory Note With Investor [Member] | |||||||
| Short-term Debt [Line Items] | |||||||
| Amount of debt conversion | $ 10,000 | ||||||
| Interest rate | 18.00% | ||||||
| Debt Instrument, Term | 6 months | ||||||
| Proceeds from convertible debt | $ 500,000 | ||||||
| Conversion price | $ 0.01 | ||||||
| Repayments of convertible debt | $ 10,000 | ||||||
| Accrued interest paid | $ 1,007 | ||||||
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|---|
Oct. 22, 2020 |
Jul. 23, 2020 |
Sep. 30, 2021 |
Sep. 30, 2021 |
Oct. 28, 2021 |
|
| Product Liability Contingency [Line Items] | |||||
| settlement | 500,000 | ||||
| Options to purchase restricted common shares | 39,071,288 | 39,071,288 | |||
| Rebar [Member] | |||||
| Product Liability Contingency [Line Items] | |||||
| Revenue | $ 31,141 | $ 31,141 | |||
| Agreement With M E P [Member] | |||||
| Product Liability Contingency [Line Items] | |||||
| Agreement period | 5 years | ||||
| Options to purchase restricted common shares | 5,000,000 | ||||
| Options to purchase restricted common shares, period | 5 years | ||||
| Agreement With C R B C [Member] | |||||
| Product Liability Contingency [Line Items] | |||||
| Agreement period | 5 years | ||||
| Options to purchase restricted common shares | 5,000,000 | ||||
| Options to purchase restricted common shares, period | 5 years | ||||
STOCKHOLDERS’ DEFICIT (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 09, 2021 |
Apr. 09, 2021 |
Apr. 02, 2021 |
Apr. 16, 2021 |
Oct. 16, 2020 |
Sep. 30, 2021 |
Jun. 30, 2021 |
Mar. 31, 2021 |
Sep. 30, 2020 |
Jun. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Offsetting Assets [Line Items] | ||||||||||||
| Gain (Loss) on Extinguishment of Debt | $ (63,914) | $ (6,743,015) | $ (62,934) | |||||||||
| [custom:DefinitiveSecuritiesPurchaseAgreementsDescription] | the Company entered into definitive securities purchase agreements with 19 accredited investors and issued an aggregate of 19,398,144 shares of common stock, Warrant A to purchase up to an aggregate of 19,398,144 shares of common stock, and Warrant B to purchase up to an aggregate of 19,398,144 shares of Common Stock (for an aggregate of 38,796,288 Warrant Shares), for aggregate gross proceeds to the Company of approximately $5,334,490. The Company expensed a total of $611,603 in related costs to the offering which has been capitalized and offset to the gross proceeds recorded in additional paid in capital. | |||||||||||
| Stock Issued During Period, Value, New Issues | $ 4,722,886 | $ 241,776 | $ 90,000 | $ 30,000 | $ 616,667 | |||||||
| Investor [Member] | Restricted Common Stock [Member] | ||||||||||||
| Offsetting Assets [Line Items] | ||||||||||||
| Stock Issued During Period, Shares, New Issues | 19,398,144 | 163,043 | 20,583,813 | 6,203,657 | ||||||||
| Stock Issued During Period, Value, New Issues | $ 4,722,886 | $ 30,000 | $ 5,054,662 | $ 646,667 | ||||||||
| Promissory Note [Member] | ||||||||||||
| Offsetting Assets [Line Items] | ||||||||||||
| Gain (Loss) on Extinguishment of Debt | $ 210,000 | |||||||||||
| Promissory Note [Member] | ||||||||||||
| Offsetting Assets [Line Items] | ||||||||||||
| Common stock warrants issued | 600,000 | 500,000 | 2,000,000 | 250,000 | ||||||||
OPTIONS AND WARRANTS (Summary of Options and Warrants Grants to Consultants, Directors and Employees) (Details) - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Share-based Payment Arrangement, Option [Member] | ||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
| Options and Warrants outstanding and exercisable | 4,227,778 | 4,542,500 |
| Weighted-average exercise price | $ 0.33 | $ 0.41 |
| Aggregate intrinsic value | $ 98,556 | $ 118,148 |
| Weighted-average remaining contractual term (years) | 2 years | 3 years 10 months 9 days |
| Warrant [Member] | ||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
| Options and Warrants outstanding and exercisable | 117,691,666 | 38,920,378 |
| Weighted-average exercise price | $ 0.28 | $ 0.28 |
| Aggregate intrinsic value | $ 5,176,833 | $ 2,785,075 |
| Weighted-average remaining contractual term (years) | 4 years 10 days | 3 years 4 months 13 days |
OPTIONS AND WARRANTS (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Share-based Payment Arrangement [Abstract] | ||||
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period | 500,000 | |||
| Option cancelled | 1,592,500 | |||
| Option granted | 1,277,778 | |||
| Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 39,071,288 | 39,071,288 | ||
| Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Exercised | 1,000,000 | |||
| Share-based Payment Arrangement, Expense | $ 327,431 | $ 78,590 | $ 983,803 | $ 78,590 |
| Stock issued | $ 43,682 | |||
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