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Basanite, Inc. – ‘S-1’ on 9/29/21

On:  Wednesday, 9/29/21, at 4:06pm ET   ·   Accession #:  1553350-21-864   ·   File #:  333-259880

Previous ‘S-1’:  ‘S-1/A’ on 1/13/12   ·   Next & Latest:  ‘S-1/A’ on 12/14/21   ·   22 References:   By:  Basanite, Inc. – ‘10-K/A’ on 5/10/24 for 12/31/23 By:  Basanite, Inc. – ‘10-K’ on 4/15/24 for 12/31/23 By:  Basanite, Inc. – ‘10-K/A’ on 5/16/23 for 12/31/22 By:  Basanite, Inc. – ‘10-K’ on 4/18/23 for 12/31/22 By:  Basanite, Inc. – ‘10-K’ on 4/15/22 for 12/31/21 By:  Basanite, Inc. – Next & Latest ‘S-1/A’ on 12/14/21 To:  Basanite, Inc. – ‘10-Q’ on 8/23/21 for 6/30/21 To:  Basanite, Inc. – ‘8-K’ on 8/18/21 for 10/9/20 To:  Basanite, Inc. – ‘10-Q’ on 5/17/21 for 3/31/21 To:  Basanite, Inc. – ‘10-K’ on 3/31/21 for 12/31/20 To:  Basanite, Inc. – ‘8-K’ on 2/19/21 for 2/12/21 To:  Basanite, Inc. – ‘8-K/A’ on 8/10/20 for 8/3/20 To:  Basanite, Inc. – ‘8-K’ on 7/31/20 for 7/27/20 To:  Basanite, Inc. – ‘10-K’ on 3/28/19 for 12/31/18 To:  Basanite, Inc. – ‘8-K/A’ on 3/19/19 for 3/4/19 To:  Basanite, Inc. – ‘8-K’ on 3/12/19 for 3/4/19 To:  Basanite, Inc. – ‘8-K’ on / for 1/31/19 To:  Basanite, Inc. – ‘8-K’ on 12/18/18 for 12/12/18 To:  Basanite, Inc. – ‘8-K’ on 5/6/13 for 4/30/13 To:  Basanite, Inc. – ‘8-K’ on 4/3/13 for 4/1/13 To:  Basanite, Inc. – ‘10-K’ on 4/5/12 for 12/31/11 To:  Basanite, Inc. – ‘S-1’ on 11/4/08 

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 9/29/21  Basanite, Inc.                    S-1                   73:8.8M                                   Edgar Filing LLC/FA

Document/Exhibit                   Description                      Pages   Size 

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                Equity Deficit (Unaudited)                                       
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                (Unaudited)                                                      
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                (Policies)                                                       
35: R26         Summary of Significant Accounting Policy            HTML    150K 
                (Policies)                                                       
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                (Tables)                                                         
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                (Details Narrative)                                              
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                (Schedule of Inventory) (Details)                                
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                (Schedule of Depreciation and Amortization Periods               
                for Fixed Assets) (Details                                       
43: R34         Summary of Significant Accounting Policies (Fixed   HTML     48K 
                assets) (Details)                                                
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                (Schedule of Accrued expenses) (Details)                         
45: R36         Summary of Significant Accounting Policies          HTML     29K 
                (Schedule of Accrued legal liability) (Details)                  
46: R37         Summary of Significant Accounting Policies          HTML     32K 
                (Schedule of Dilutive Shares Not Included in Loss                
                Per Share Computation) (Details)                                 
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                (Schedule of Fair Value Assumptions) (Details)                   
48: R39         Summary of Significant Accounting Policies          HTML     34K 
                (Schedule of Provision of Income Taxes) (Details)                
49: R40         Summary of Significant Accounting Policies          HTML     48K 
                (Schedule of Deferred Tax Assets and Liabilities)                
                (Details)                                                        
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                (Details Narrative)                                              
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                Payments under Operating Lease) (Details)                        
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                (Details Narrative)                                              
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                Options and Warrants) (Details)                                  
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                (Details Narrative)                                              
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                Warrants Grants to Consultants, Directors and                    
                Employees) (Details)                                             
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As filed with the U.S. Securities and Exchange Commission on September 29, 2021

Registration No. 333-____________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM  i S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 i Basanite, Inc.

(Exact name of registrant as specified in its charter)

 i 2041 NW 15th Avenue

 i Pompano Beach,  i Florida  i 33069

( i 954)  i 532-4653

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Mr. Simon R. Kay

Acting Interim President and Chief Executive Officer

2041 NW 15th Avenue

Pompano Beach, Florida 33069

(954) 532-4653

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Richard I. Anslow, Esq.

Lawrence A. Rosenbloom, Esq.

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas

New York, New York 10105

Phone: (212) 370-1300

Fax: (212) 370-7889 

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If delivery of the Prospectus is expected to be made pursuant to Rule 434, check the following box.  ☐

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,” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark 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 7(a)(2)(B) of the Securities Act.  ☐

CALCULATION OF REGISTRATION FEE

——————

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission (the “SEC”) acting pursuant to said Section 8(a) may determine.

The information in this prospectus is not complete and may be changed. The securities in this registration statement may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

BASANITE, INC.

58,194,432 shares
common stock

This prospectus relates to the resale of up to an aggregate of 58,194,432 shares of common stock, par value $0.001 per share, of Basanite, Inc. held by selling stockholders named herein, consisting of the following: (i) 19,398,144 shares of the our common stock previously issued to the selling stockholders in a private placement offering that closed on August 17, 2021 (which we refer to herein as the August 2021 Private Placement); (ii) 19,398,144 shares of our common stock underlying warrants (which we refer to as Warrant A) issued the selling stockholders in the August 2021 Private Placement; and (iii) 19,398,144 shares of our common stock underlying warrants (which we refer to as Warrant B) issued the selling stockholders in the August 2021 Private Placement.

The registration of these securities does not mean that the selling stockholders named herein will actually offer or sell any of these shares. Information regarding the selling stockholders and the time and manner in which they may offer and sell the shares under this prospectus is provided under “Selling Stockholders” and “Plan of Distribution” in this prospectus. We have agreed to pay all the costs and expenses of this registration. We will not receive any proceeds from the resale of the above shares of our common stock by the selling shareholders. However, we may receive proceeds from the exercise of the Warrant As and the Warrant Bs exercised other than pursuant to any applicable cashless exercise provisions of the warrants. We are not offering any securities pursuant to this prospectus.

Our common stock is listed for quotation on the OTCQB Marketplace operated by OTC Markets Group, Inc., under the ticker symbol “BASA.” On September 28, 2021, the closing price of our common stock was $0.2720.

Following the effectiveness of the registration statement of which this prospectus forms a part, the sale and distribution of securities offered hereby may be effected in one or more transactions that may take place on the OTCQB Marketplace, including ordinary brokers’ transactions, privately negotiated transactions or through sales to one or more dealers for resale of such securities as principals, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the selling stockholders. The selling stockholders and intermediaries through whom such securities are sold may be deemed “underwriters” within the meaning of the Securities Act of 1933, as amended, or the Securities Act, with respect to the securities offered hereby, and any profits realized, or commissions received may be deemed underwriting compensation.

Investing in our common stock is highly speculative and involves a significant degree of risk. See “Risk Factors” beginning on page 9 of this prospectus for a discussion of information that should be considered before making a decision to purchase our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is September __, 2021.

TABLE OF CONTENTS

Please read this prospectus carefully prior to investing in our common stock. It describes our business, our financial condition, and our results of operations. We have prepared this prospectus so that you will have the information necessary to make an informed investment decision. You should rely only on the information contained in this prospectus. We and the selling stockholders have not authorized anyone to provide you with any information or to make any representations about us, the securities being offered pursuant to this prospectus, or any other matter discussed in this prospectus, other than the information and representations contained or incorporated by reference in this prospectus. If any other information or representation is given or made, such information or representation may not be relied upon as having been authorized by us.

The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Neither the delivery of this prospectus nor any distribution of securities in accordance with this prospectus shall, under any circumstances, imply that there has been no change in our affairs since the date of this prospectus. This prospectus will be updated and made available for delivery to the extent required by the federal securities laws.

We are responsible for the disclosure in this prospectus. However, this prospectus includes industry data that we obtained from internal surveys, market research, publicly available information, and industry publications. The market research, publicly available information, and industry publications that we use generally state that the information contained therein has been obtained from sources believed to be reliable. The information contained herein represents the most recently available data from the relevant sources and publications and we believe remains reliable. We did not fund and are not otherwise affiliated with any of the sources cited in this prospectus. Forward-looking information obtained from these sources is subject to the same qualifications and additional uncertainties regarding the other forward-looking statements in this prospectus.

We own or have rights to trademarks or trade names that we use in connection with the operation of our business, including our corporate names, logos, and website names. In addition, we own or have the rights to copyrights, trade secrets and other proprietary rights that protect the content of our products. This prospectus may also contain trademarks, service marks and trade names of other companies, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this prospectus is not intended to, and should not be read to, imply a relationship with or endorsement or sponsorship of us. Solely for convenience, some of the copyrights, trade names and trademarks referred to in this prospectus are listed without their ©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our copyrights, trade names and trademarks. All other trademarks are the property of their respective owners.

RISK FACTORS

An investment in our common stock is highly speculative and involves a significant degree of risk, including the risks described below. You should carefully consider the risks described below before purchasing our common stock. The risks highlighted here are not the only ones that we may face. For example, additional risks presently unknown to us or that we currently consider immaterial or unlikely to occur could also impair our operations. If any of the risks or uncertainties described below or any such additional risks and uncertainties actually occur, our business, prospects, financial condition, or results of operations could be negatively affected, and you might lose all or part of your investment.

Risks Related to Our Business and Company

We have a history of operating losses and may never achieve cash flow positive or profitable results of operations.

Since our inception, we have not been profitable and have incurred significant losses and cash flow deficits. For the fiscal years ended December 31, 2020, and 2019, we reported net losses of $4,199,331 and $4,308,804 respectively, and negative cash flow from operating activities of $2,799,499 and $2,259,537 respectively. As of December 31, 2020, we had an aggregate accumulated deficit of $29,643,387. For the six months ended June 30, 2021, and 2020, we reported net losses of $8,990,679 and $1,342,722 respectively, and negative cash flow from operating activities of $2,294,501 and $1,040,380, respectively. As of June 30, 2021, we had an aggregate accumulated deficit of $38,634,066. We anticipate that we will continue to report losses and negative cash flow. There is therefore a risk that we will be unable to operate our business in a manner that generate positive cash flow or profit, and our failure to operate our business profitably would damage our reputation and stock price.

There is substantial doubt about our ability to continue as a going concern.

We have generated nominal revenues to date in our current BRFP rebar business model and have generated significant losses from operations. Our revenues are not significant enough to be able to generate profits, and this condition is expected to continue for the foreseeable as we seek to raise funding and invest in our manufacturing capabilities as well as our sales and marketing efforts.  We have incurred operating losses since our inception and will continue to incur net losses until we can produce sufficient revenues to cover our costs. In addition, a number of factors continue to hinder our ability to attract capital investment, and no assurances can be given that we will be able to raise capital in the future on acceptable terms, or at all.  We have concluded that these conditions, in aggregate, raise substantial doubt about our ability to continue as a going concern.  Our independent auditors have included in their audit reports for our most recent fiscal years an explanatory paragraph that states that our net loss and working capital deficiency raises substantial doubt about our ability to continue as a going concern. If we are unable to increase our revenues and establish profitable operations over time, our business might fail.

We have a limited operating history and we have incurred net losses in the past and expect to incur additional losses in the future.

We have a limited operating history in our current business model and have not recorded a profit since inception. As a result of this, and the uncertainty of the market in which we operate, investors have limited ability to assess our future prospects, and we cannot reliably forecast our future results of operations. We expect to increase our operating expenses in the future as a result of refining and upgrading our manufacturing and other internal processes, as well as implementing our sales and marketing strategy. In addition, we expect our operating expenses to increase in the future as we expand our operations. If our operating expenses exceed our expectations, or if we do not generate revenues according to our plans, our financial performance would be adversely affected. If our revenue does not grow to offset these increased expenses, we may not be profitable for the foreseeable future. The continuation of losses over time could impair our ability to implement our business plan and finance our company, which could lead to the failure of our business.

We have a short operating history and a new business model in an emerging market. This makes it difficult to evaluate our future prospects and increases the risk of your investment.

Our limited operating history in our current BRFP rebar business model also makes it difficult for investors to evaluate our future prospects. You must consider our business and prospects in light of the significant risks and difficulties we have encountered and will continue encounter as an early-stage company in a new market. We may not be able to successfully address these risks and difficulties, which could materially harm our business and operating results. In addition, we do not know if our current business model will operate effectively now or in the future. There is a risk, therefore, that current economic conditions or worsening economic conditions, or a prolonged or recurring recession, or any other factors (some of which we may not yet have experienced or anticipated) that have an adverse impact on the construction industry and the potential demand for our rebar product, would have a significant adverse impact on our operating and financial results.

We need substantial additional capital to fund our operations, which, even if obtained, could result in substantial dilution or significant debt service obligations. We may not be able to obtain additional capital on commercially reasonable terms, which could adversely affect our liquidity and financial position.

We will require substantial additional capital to fund the anticipated growth and expansion of our business and to pursue targeted revenue opportunities. Due to many factors, including the early stage of our business and the lack of liquidity in our publicly traded stock, as well as other uncertainties, there is a material risk that we will be unable to raise additional capital on acceptable terms, or at all Even if we are presented with opportunities to raise additional capital, we do not know ahead of time the terms of any such capital raising. In addition, any future sale of our equity securities would dilute the ownership and control of your shares and could be at prices substantially below prices at which our shares currently trade. We may seek to increase our cash reserves through the sale of additional equity or debt securities, including securities convertible into or exercisable for shares of our common stock. The sale of convertible debt securities or additional equity securities could result in additional and potentially substantial dilution to our shareholders. The incurrence of convertible or non-convertible indebtedness would result in increased debt service obligations and could result in operating and financial covenants that would restrict our operations and liquidity. Any failure to raise additional funds on favorable terms could have a material adverse effect on our liquidity and financial condition and require us to significantly curtail or terminate our operations.

We have identified material weaknesses in our internal control over financial reporting.

Give the early-stage nature of our company, we have limited accounting and financial reporting personnel (including the current lack of a fulltime Chief Financial Officer) and other resources with which to address our internal controls and related procedures. We and our independent registered public accounting firm have identified material weaknesses in our internal controls over financial reporting 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. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. If we are unable to remedy our material weaknesses, or if we generally fail to establish and maintain effective internal controls appropriate for a public company, we may be unable to produce timely and accurate financial statements, and we may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and our stock price.

We expect to derive a substantial portion of our future revenue from sales of a single product (BasaFlex), which leaves us reliant on the commercial viability of such product.

Currently, our primary product is BasaFlex. We are seeking to develop secondary sources of BFRP-based product revenue, but we expect that sales of BasaFlex will account for a significant amount of our anticipated revenue potential for the foreseeable future. We currently market and sell BasaFlex on a limited basis in the United States given our limited resources and manufacturing capacity. Because BasaFlex is different from traditional steel rebar, we cannot assure you that BasaFlex will be widely accepted in the market, and demand may not increase as quickly as we expect. Also, we cannot assure you that BasaFlex will compete effectively as an alternative to other more well-known and well-established alternatives such as steel rebar. Since BasaFlex currently represents our primary product, we are significantly reliant on the level of recurring sales of BasaFlex, and decreased or lower than expected sales of BasaFlex for any reason would cause us to lose all or substantially all of our revenue.

Our operating results may fluctuate in unanticipated ways and for reasons beyond our control.

Our operating results may fluctuate from period to period as a result of a number of factors, many of which are outside of our control. The following and similar factors may affect our operating results:

These and similar factors could cause our results of operations to fluctuate in unanticipated ways and deviate from our forecasts.

We may be unable to develop the manufacturing capability and infrastructure necessary to achieve the potential sales growth.

Achieving revenue and subsequent growth will require that we develop additional infrastructure in our manufacturing capability as well as in sales, technical and client support functions. We cannot assure you that we will have the capital to develop and maintain these capabilities. We will continue to design plans to establish growth; adding manufacturing, technical, sales and sales support resources as capital permits. If we are unable to scale our manufacturing capability or use any of our current marketing initiatives or the cost of such initiatives were to significantly increase, or such initiatives are not successful, we may not be able to attract new customers or retain customers and clients on a cost-effective basis, and as a result, our revenue and results of operations would be affected adversely.

Additionally, our plans for manufacturing expansion through augmentation of new equipment and technology are of concern because they are proprietary in nature, and only available from a limited number of suppliers. Any interruption in sourcing through this supply chain will have an adverse impact to our ability to meet a growing market demand.

Our relationships with our channel partners may be terminated or may not continue to be beneficial in generating new clients, which could adversely affect our ability to increase our client base.

We are developing a network of active channel partners which refer clients to us within different business verticals and geographies. For example, Business Envelope Associates is one of our manufacturers’ representatives, covering the state of Florida. If we are unable to obtain and maintain contractual relationships with key channel partners, or establish new contractual relationships with potential channel partners, we may experience loss of sales and increased costs and resource constraints in adding customers, which could have a material adverse effect on us. The number of clients we are able to add through these marketing relationships is dependent on the marketing efforts of our partners over which we exercise limited control.

Our sales and marketing efforts may not be successful.

We currently market and sell BasaFlex on a very limited basis, mainly through distribution partners but also directly. We plan to significantly increase the scope of our sales and marketing activities, as we grow to include approvals and new material specifications with all major federal, state and local agencies and design-build firms. In particular, we are seeking to develop concrete industry partnerships, targeting large concrete manufacturers and contractors. For specific marketing purposes, we have begun to develop industry specific educational materials, such as white papers and other collaterals to further educate our markets on the use and value of our products versus traditional steel rebar. We are participating in industry committees and associations such as ASTM International (formerly the American Society for Testing and Materials) and the Advisory Council of Managing Agents (known as ACMA). The commercial success of BasaFlex and our other basalt fiber products ultimately depends upon a number of factors, including ultimate material acceptance and necessary specifications required to drive demand generation. BasaFlex and our other products may not gain significant increased market acceptance in the construction industry. While positive customer experiences can be a significant driver of future sales, it is impossible to influence the way this information is transmitted and received amongst participants in the construction industry.

In addition, we may not be able to establish or maintain a suitable sales force or enter into or maintain satisfactory marketing and distribution arrangements with others. Our marketing and sales efforts may not be successful in increasing awareness and sales of BasaFlex or our other products. Furthermore, other marketing efforts like advertising, trade shows and educational seminars may not increase revenue to the extent we currently anticipate.

We may not be able to respond in a timely and cost-effective manner to changes in consumer preferences.

Our products, notably BasaFlex, is and will be subject to changing consumer preferences. A shift in customer demand or expectations; away from the products we offer would result in significantly reduced revenue. Our future success depends in part on our ability to anticipate and develop innovative products to respond to those changes. Failure to anticipate and respond to changing consumer preferences in the products we market could lead to, among other things, lower sales of products, significant markdowns or write-offs of inventory, increased product returns and lower margins. If we are not successful in anticipating, adapting, and responding to changes in consumer demand, our results of operations in future periods will be materially adversely impacted.

Competition for employees in our industry is intense, and we may not be able to attract and retain the highly skilled employees whom we need to support our business.

Our success depends on our ability to attract, train and retain qualified personnel. Competition for qualified technical and business personnel in the construction products industry is intense and we may not be able to hire sufficient personnel to support the anticipated growth of our business. If we fail to attract and retain qualified personnel, our business will suffer. We may not be able to hire and retain such personnel at compensation levels consistent with our market. Many of the companies with which we compete for experienced employees have greater resources and are able to offer more attractive terms of employment. In particular, candidates making employment decisions with respect to publicly traded companies often consider the value of any equity they may receive in connection with their employment. As a result, any lack of liquidity or significant volatility in the price of our publicly traded common stock may adversely affect our ability to attract or retain highly skilled personnel.

In addition, we invest significant time and expense in training employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements and the quality of our services and our ability to serve our clients could diminish, resulting in a material adverse effect on our business.

We may be unable to protect our intellectual property rights, and any inability to protect them could reduce the value of our products and brand.

We are pursuing intellectual property rights for all our proprietary and confidential product and process information and will control access to the same. We have applied for a patent on our BasaFlex product line, which includes both the product design itself and the specific process for its manufacture. In addition, we expect to file for a patent for our new proprietary BasaMax^TM pultrusion equipment. This system would add a layer of intellectual property protection through its electronics, and we believe this is protectable intellectual property. We’ve also secured trademark registrations for our key product names to further protect our brands. However, patents and trademarks may not be granted from our applications, and even if granted, they may not afford adequate protection domestically, or in foreign countries where the laws may not protect our proprietary rights as fully as in the United States, and there can be no assurance that others will not independently develop similar know-how and trade secrets. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies, protocols, and any future products are covered by valid and enforceable patents or are effectively maintained as trade secrets. There is a risk that future patents will be challenged, invalidated, or circumvented, that the scope of any of our patents will not exclude competitors or that the patent rights granted to us will not provide us any competitive advantage. If we do not secure registered intellectual property protection for our products and processes, or if we are otherwise unable to protect our proprietary technology, protocols, systems, trade secrets and know-how, the value of our products and brand may be reduced and our ability to complete effectively and our results of operations could suffer.

We may be unable to create new proprietary technology and related intellectual property, which could harm our business.

Our business depends, in part, on our ability to innovate and create new or improved products and processes, including relating to manufacturing, as well as related trade secrets and know-how. There is a risk that we may be unable innovate due to lack of financial or personnel resources, and even if we do innovate, we may be unable to file new patent or trademark applications, or that if filed, any future patent or trademark applications will result in granted patents and trademarks. Our ability to innovate could harm our ability to compete effectively.

Our patents and other intellectual property is subject to challenges by third parties, and if our intellectual property is successfully challenged or invalidated, our business could be harmed.

Any patents we have obtained or will obtain, may be challenged by re-examination, or otherwise invalidated or eventually found unenforceable. Both the patent application process and the process of managing patent disputes can be time consuming and expensive. If we were to initiate legal proceedings against a third party to enforce a patent related to one of our products, the defendant in such litigation could counterclaim that our patent is invalid and/or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity and/or unenforceability are commonplace, as are validity challenges by the defendant against the subject patent or other patents before the United States Patent and Trademark Office (or USPTO). Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement, failure to meet the written description requirement, indefiniteness, and/or failure to claim patent eligible subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent intentionally withheld material information from the USPTO, or made a misleading statement, during prosecution. Additional grounds for an unenforceability assertion include an allegation of misuse or anticompetitive use of patent rights, and an allegation of incorrect inventorship with deceptive intent. Third parties may also raise similar claims before the USPTO even outside the context of litigation. The outcome is unpredictable following legal assertions of invalidity and unenforceability. With respect to the validity question, for example, and even though we’ve had a third party conduct a search of the subject matter and provide a right to proceed, we cannot be certain that no invalidating prior art existed of which we and the patent examiner were unaware during prosecution. These assertions may also be based on information known to us or the USPTO. If a defendant or third party were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the claims of the challenged patent. Such a loss of patent protection would or could have a material adverse impact on our business.

The standards that the USPTO (and foreign equivalents) use to grant patents are not always applied predictably or uniformly and can change. There is also no uniform, worldwide policy regarding the subject matter and scope of claims granted or allowable in device patents. Accordingly, we do not know the degree of future protection for our proprietary rights or the breadth of claims that will be allowed in any patents issued to us or to others.

However, there can be no assurance that our technology will not be found in the future to infringe upon the rights of others or be infringed upon by others. Moreover, patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made, and patent applications were filed. Because patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our products or product candidates infringe. For example, pending applications may exist that provide support or can be amended to provide support for a claim that results in an issued patent that our product infringes. In such a case, others may assert infringement claims against us, and should we be found to infringe upon their patents, or otherwise impermissibly utilize their intellectual property, we might be forced to pay damages, potentially including treble damages, if we are found to have willfully infringed on such parties’ patent rights. In addition to any damages, we might have to pay, we may be required to obtain licenses from the holders of this intellectual property. We may fail to obtain any of these licenses or intellectual property rights on commercially reasonable terms. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In that event, we may be required to expend significant time and resources to develop or license replacement technology. If we are unable to do so, we may be unable to develop or commercialize the affected products, which could materially harm our business and the third parties owning such intellectual property rights could seek either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation. Conversely, we may not always be able to successfully pursue our claims against others that infringe upon our technology. Thus, the proprietary nature of our technology or technology licensed by us may not provide adequate protection against competitors.

In addition to patents, we rely on trademarks to protect the recognition of our company and products in the marketplace. We also rely on trade secrets, know-how, and proprietary knowledge that we seek to protect, in part, through confidentiality agreements with employees, consultants and others. We cannot assure you that our proprietary information will not be shared, our confidentiality agreements will not be breached, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known to or independently developed by competitors.

Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information and disclosure of our trade secrets or proprietary information could compromise any competitive advantage that we have, which could have a materially adverse effect on our business.

Our success depends, in part, on our ability to protect our proprietary rights to the technologies used in our products and our proprietary scientific protocols. We depend heavily upon confidentiality agreements with our officers, employees, consultants, and subcontractors to maintain the proprietary nature of our technology and our manufacturing processes. These measures may not afford us complete or even sufficient protection and may not afford an adequate remedy in the event of an unauthorized disclosure of confidential information. If we fail to protect and/or maintain our intellectual property, third parties may be able to compete more effectively against us, we may lose our technological or competitive advantage, and/or we may incur substantial litigation costs in our attempts to recover or restrict use of our intellectual property. In addition, others may independently develop technology similar to ours, otherwise avoiding the confidentiality agreements, or produce patents that would materially and adversely affect our business, prospects, financial condition, and results of operations.

Damage to our reputation or our brand, could negatively impact our business, financial condition, and results of operations.

We must grow the value of our brand in order to generate and grow our revenues. We intend to develop a reputation based on the high quality of our rebar and related products as well as on our culture and the experience of our customers. If we do not make investments in areas such as education, marketing, and brand awareness, as well as personnel training, the value of our brand may not increase or may be diminished. Any incident, real or perceived, regardless of merit or outcome, that adversely affects our brand, such as, but not limited to, product failure, accidents, and failure to comply with federal, state, or local regulations, could significantly reduce the value of our brand, expose us to negative publicity and damage our overall business and reputation and negatively impact our financial condition and results of operations.

We depend on certain key personnel.

We substantially rely on the efforts of our current senior management, including Simon R. Kay, our acting interim Chief Financial Officer and President and acting Chief Financial Officer, and David L. Anderson, our Chief Operations Officer. Our business would be impeded or harmed if we were to lose their services. In addition, if we are unable to attract, train and retain highly skilled technical, managerial, product development, sales, and marketing personnel, we may be at a competitive disadvantage and unable to increase revenue. The failure to attract, train, retain and effectively manage employees could negatively impact our research and development, sales and marketing and reimbursement efforts. In particular, the loss of sales personnel could lead to lost sales opportunities as it can take several months to hire and train replacement sales personnel. Uncertainty created by turnover of key employees could adversely affect our business.

Our independent directors and executive officers have limited experience in the management of public companies which poses a risk for us from a corporate governance perspective.

Our directors and executive officers are inexperienced with respect to corporate governance of public companies.  Our directors are often required to make decisions regarding related parties, such as the approval of related party transactions, compensation levels, and oversight of our accounting function. Our directors and executive officer also exercise substantial control over all matters requiring stockholder approval, including the nomination of directors and the approval of significant corporate transactions. We do not have a majority of independent directors and we have not yet been able to implement certain corporate governance measures, the absence of which may cause stockholders to have more limited protections against transactions implemented by our Board of Directors, conflicts of interest and similar matters. Stockholders should bear in mind our current lack of corporate governance measures in formulating their investment decisions.

There is a risk that our PPP loan will not be forgiven in whole or in part.

In February 2021, we received loan proceeds in the amount of approximately $165,000 under the Paycheck Protection Program (or PPP), established as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, which provides economic relief to businesses in response to the COVID-19 pandemic. The loan and accrued interest are forgivable after 24 weeks as long as we use the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and our employee head count remains consistent with our baseline period over the 24-week period after the loan was received. The amount of loan forgiveness will be reduced if we terminate employees or reduce salaries during the 24-week period. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. While we believe that our use of the loan proceeds will meet the conditions for forgiveness of the loan, there is a risk that the loan will not be forgiven or that we will take actions that could cause us to be ineligible for forgiveness of the loan, there is a risk that (i) the loan will not be forgiven, in whole or in part, (ii) we will take actions that could cause us to be ineligible for forgiveness of the loan, in whole or in part or (iii) we may be required to repay the loan, in whole or in part, upon event of default under the loan or upon a breach of applicable PPP regulations.

The novel coronavirus pandemic has and could continue to adversely impact our business by delaying our ability to receive raw materials and manufacture our product or otherwise effectively conduct and manage our business.

The pandemic caused by the novel coronavirus (known as “COVID-19”) and governmental and other efforts to curb the spread of the pandemic has caused great disruption to the U.S. national and international economies. We have been adversely impacted by COVID-19 in that we have been required to temporarily suspend operations during 2020 due to necessary quarantines, and the impact of COVID-19 on the construction industry we are proposing to service has been significant. Moreover, the continued prevalence of COVID-19 or variants thereof could disrupt our supply chain, as well as our own operations due to absenteeism by infected or ill members of management or other employees, or absenteeism by members of management and other employees who elect not to come to work due to illness affecting others in our office or plant, or due to additional necessary quarantines. COVID-19 could also impact members of our Board of Directors as well as key providers of services to us, which could adversely impact the management of our affairs. Additionally, as the COVID-19 pandemic continues to develop, we will continue to spend time and resources in monitoring and adhering to government regulations that impact both our company and our customers and potential customers as necessary, which could also adversely impact our business and results of operations.

Risks Related to Our Industry

We compete with larger, more established companies, and our size and stage of development creates a significant risk for us in our ability to compete.

We are a small early-stage company competing in a mature industry populated by much larger, more established, and better capitalized companies. Our BFRP products for concrete reinforcement compete as an alternative to traditional steel reinforcement, as well as a direct replacement for other FRP rebar and industry established fiber products. The steel rebar industry is price commoditized, very mature and entrenched within our potential customers. Due in part to our early stage and size, we may be unable to convince customers and design professionals that our BFRP products and higher value proposition are a better choice than long-established, lower cost steel, or other accepted FRP products. Our inability to compete with traditional steel rebar, and the larger, more established, and better capitalized companies that produce traditional steel or non-basalt FRP rebar, would cause our business and results of operations to suffer.

Our inability to comply with numerous regulatory requirements that govern our industry could harm our business.

Our products typically require certain approvals and certifications to satisfy regulatory and building code requirements for use as concrete reinforcement. The American Concrete Institute (ACI), ASTM International (formerly the American Society for Testing and Materials), and the International Code Council (ICC) each have very specific testing regimen for FRP materials and strict guidelines regarding the acceptance criteria and product certification process. These include not only the products themselves, but the facility, the equipment and quality control measures used in process as part of the overall approval. There is a risk that we will be unable to secure and maintain such approvals and certifications in the future.  Furthermore, we are dependent on third party independent facilities, such as university laboratories and/or other certifying bodies, to obtain such approvals and certifications, and these come at a significant cost. Our inability to secure approvals and certifications and/or an extended period of time required to obtain such approvals could materially harm our ability to generate revenue.

Our products, which are all made using igneous basalt rock that must be mined from the ground, may become subject to future government laws, rules, and regulations and/or taxation for environmental reasons associated with mining. Such regulatory actions are beyond our control and could result in increases in the cost of basalt stock and/or restrict or prevent raw material availability, and either action would materially harm our ability to meet demand and generate revenue.

We are dependent on the availability of basalt fiber and other raw materials.

We will depend on the timely availability of various raw materials, including basalt fiber, for the manufacture of our products from various different suppliers. Our suppliers are located in the United States and abroad. We are subject to the risk that our suppliers will be unable to provide us with sufficient or satisfactory supply of raw materials for us to maintain production levels necessary to satisfy customers. The processes used to produce extremely fine denier, high tenacity basalt fiber is extremely meticulous and slow, and can be adversely affected by myriad issues which can affect the delicate melting process, the platinum bushings, or other advanced process elements. Additionally, such issues could adversely impact our suppliers’ ability to provide quality raw materials on a timely basis, which in turn could adversely affect our ability to obtain raw materials and conduct business.

Government contracts generally are subject to a variety of governmental regulations, requirements and statutes, the violation or alleged violation of which could have a material adverse effect on our business.

Our business plan will be driven in material part by our ability to enter into contracts funded by federal, state and local governmental agencies. Our contracts with these governmental agencies would generally be subject to specific procurement regulations, contract provisions and a variety of socioeconomic requirements relating to their formation, administration, performance, and accounting and often include express or implied certifications of compliance. Further, government contracts typically provide for termination at the convenience of the customer with requirements to pay us for work performed through the date of termination. We may be subject to claims for civil or criminal fraud for actual or alleged violations of these various governmental regulations, requirements, or statutes. Further, if we fail to comply with any of these various governmental regulations, requirements, or statutes or if we have a substantial number of accumulated Occupational Safety and Health Administration or similar workplace safety violations, any government contracts to which we are a party could be terminated, and we could be suspended from government contracting or subcontracting, including federally funded projects at the state level. Even if we have not violated these various governmental regulations, requirements or statutes, allegations of violations could harm our reputation and require us to incur material costs to defend any such allegations or lawsuits. Should one or more of these events occur, it could have a material adverse effect on our business, financial condition, and results of operations.

If we do not comply with certain federal or state laws, we could be suspended or debarred from government contracting, which could have a material adverse effect on our business.

Various statutes to which our operations are or may in the future be subject, including laws prescribing a minimum wage and regulating overtime and working conditions, provide for mandatory suspension and/or debarment of contractors in certain circumstances involving statutory violations. In addition, the federal and various state statutes provide for discretionary suspension and/or debarment in certain circumstances, including as a result of being convicted of, or being found civilly liable for, fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public contract or subcontract. The scope and duration of any suspension or debarment may vary depending upon the facts of a particular case and the statutory or regulatory grounds for debarment. Any suspension or debarment from government contracting could have a material adverse effect on our business, financial condition, and results of operations.

Our industry is seasonal and subject to adverse weather conditions, which can adversely impact our business.

Construction operations occur outdoors. As a result, seasonal changes and adverse weather conditions can adversely affect our business operations through a decline in both the need for and use of our products. Adverse weather conditions such as extended rainy and cold weather in the spring and fall could reduce demand for our products and reduce sales. Major weather events such as hurricanes, tornadoes, tropical storms, and heavy snows could also adversely affect our ability and the ability of our customers to conduct business. In addition, construction materials production and shipment levels follow activity in the construction industry, which typically occurs in the spring, summer and fall. Thus, our business is likely to be seasonal and subject to fluctuation accordingly.

Changes in the global, national, and local economic environment impacting the construction industry may lead to declines in the construction industry and the demand for our products by our customers.

We plan to sell our products primarily to the construction industry. The construction industry is cyclical and can exhibit a great deal of sensitivity to general economic conditions.  Low demand from the construction industry could adversely impact our financial position, results of operations and/or our cash flows. Economic or other conditions that adversely impact the global, national, or local construction industry may be novel and singular, in nature, such as the COVID 19 virus, or more seasonal and recurring, such global building supply chain shortages, interest rate fluctuations which impact new construction, lack of government funding for construction initiatives. These conditions, most of which will be beyond our control, could adversely impact business and results of operations.

Changes to accepted trade practices, trade agreements, or imposition of tariffs may adversely impact supply and pricing of certain raw materials.

Political events, such as the imposition of tariffs or the dissolution of trade agreements, may negatively impact supply chain and other factors related to our business.  Such events could materially impact supply and pricing of critically necessary raw materials for manufacture of our products. For example, the basalt fiber roving, the primary raw material used in the manufacture of BasaFlex, and our other products is sourced from many parts of the world, and any such events could materially impact our supply and/or pricing. These events could also adversely impact the construction industry and demand for our products in general. Impacts from such events could adversely impact business and results of operations.

Volatility in prices for raw materials may materially, adversely impact our prices.

Depending on our customer demand and availability of raw materials, we may be faced with having to source and purchase raw materials from alternative suppliers, and/or at prices that are above the current market price, or in greater volumes than available. Additionally, other factors such as added capacity of competing steel and/or alternative FRP’s could create negative pricing pressure, which would negatively affect our profit margins.

There are risks associated with the limited number of basalt fiber manufacturers worldwide, who possess a finite capacity to produce fine micron basalt roving that is incorporated into BasaFlex. In the event these manufacturers lack the desire or ability to invest in additional capacity on a timely basis, we may be faced with an inadequate supply of raw material to meet our growth plan. In such an event, it may become necessary to develop a controlled source of basalt fiber, including acquiring or developing a smelting plant to meet our own demand, which will be a costly process and take time and may not be consummated on desirable terms, or at all.

General Business Risks Associated with Our Company

There may be legacy issues (including potential liabilities) arising from or associated with prior management and prior business operations, including potential litigation.

Our company has been in operation since 2006 and as a public company since 2009. During this time, our company has entered and exited several businesses and has undergone three name changes. Current management has only been engaged since the start of the basalt fiber rebar business in 2019, and in that time has had to address several legacy issues which arose under our previous management, including the recent settlement of the lawsuit with Raw Energy, and the resolution of the judgment awarded to the California State Teachers Retirement System, among others. As such, we face the risk that all prior issues and resulting potential liabilities have not been identified, resolved, or accounted for, and if we are required to addresses any new issues as they arise, our management may become distracted from fulfilling our business objectives and we may be faced with unforeseen costs, expenses and liabilities which could damage our reputation and adversely impact our results of operations.

If we fail to manage our anticipated growth, our business and operating results could be harmed.

If we do not effectively manage our anticipated growth, the quality of our products and services could suffer, which could negatively affect our brand and operating results. To effectively manage our potential growth, we will need to improve our operational, financial and management controls and our reporting systems and procedures. These systems enhancements and improvements may require significant capital expenditures and allocation of valuable management resources, especially as we add additional manufacturing capacity to our primary facility in Pompano Beach, Florida or invest in satellite manufacturing facilities. We also need to manage our sub-tier suppliers of the equipment necessary to support our growth. If planned or additional required improvements are not implemented on a timely or cost-effective basis, or they are not implemented at all for any reason, our ability to manage our growth will be impaired and we may have to make significant additional expenditures to address these issues, which could harm our financial position.

We are subject to risks relating to our information technology systems, and any failure to adequately protect our critical information technology systems could materially affect our operations.

We rely on information technology systems across our operations, including for management, supply chain and financial information and various other processes and transactions. As our manufacturing equipment is wirelessly controlled and operated, and the tracing data (which is required for necessary certifications) our equipment produces is stored electronically, our business depends on the security, reliability, and capacity of these systems. Information technology system failures, network disruptions or breaches of security could disrupt our operations, causing delays or cancellation of customer orders or impeding the manufacture or shipment of products, processing of transactions or reporting of financial results. An attack or other problem with our systems could also result in the disclosure of proprietary information about our business or confidential information concerning our customers or employees, which could result in significant damage to our business and our reputation. Advanced cybersecurity threats, such as computer viruses, attempts to access information, and other security breaches, are persistent and continue to evolve, making them increasingly difficult to identify and prevent. Protecting against these threats may require significant resources, and we may not be able to implement measures that will protect against all the significant risks to our information technology systems. In addition, we rely on third party service providers to execute certain business processes and maintain certain information technology systems and infrastructure, and any breach of security on their part could impair our ability to effectively operate. Any breach of our security measures could result in unauthorized access to and misappropriation of our information, corruption of data or disruption of operations or transactions, any of which could have a material adverse effect on our business.

We will not be insured against all potential losses and could be seriously harmed by natural disasters, catastrophes, pandemics, theft, or sabotage.

Our products are currently produced at a single location, and many of our business activities involve or will involve substantial investments in manufacturing. Our facility could be materially damaged by natural disasters such as floods, tornados, hurricanes (particularly given our location in South Florida), fires, earthquakes, pandemics or by theft or sabotage. We could incur uninsured losses and liabilities arising from such events, including damage to our reputation, and/or suffer material losses in operational capacity, which could have a material adverse impact on our business, financial condition, and results of operations.

We could face potential product liability and warranty claims, we may not accurately estimate costs related to such claims, and we may not have sufficient insurance coverage available to cover such claims.

Our products are anticipated to be used in a wide variety of residential, commercial, and industrial applications. We face an inherent business risk of exposure to product liability or other claims in the event our products are alleged to be defective or that the use of our products is alleged to have resulted in harm to others or to property. We may, in the future, incur liability if product liability lawsuits against us are successful. Moreover, any such lawsuits, whether successful or not, could result in adverse publicity to us, which could cause our sales to decline. We maintain insurance coverage to protect us against product liability claims, but that coverage may not be adequate to cover all claims that may arise, or we may not be able to maintain adequate insurance coverage in the future at an acceptable cost. Any liability not covered by insurance or that exceeds our established reserves could materially and adversely impact our business, financial condition, and results of operations. In addition, consistent with industry practice, we provide warranties on many of our products. We may experience costs of warranty claims (limited to replacement) when the product is not performing to the satisfaction of the claimant even though it has not caused harm to others or property. We estimate our future warranty costs based on historical trends and product sales, but we may fail to accurately estimate those costs and thereby fail to establish adequate warranty reserves for them. Warranty claims are not insurable.

Risks Related to Our Securities

There is a risk that we may not be able to consummate our contemplated Re-IPO.

Under the terms of the August 2021 Private Placement, we are required is to conduct a Re-IPO whereby we will seek to raise additional funding in a registered underwritten offering and concurrently list our common stock on a national securities exchange. Investors are cautioned, however, that the Re-IPO may not take for any number of reasons, many of which are beyond our control. You should not invest in our company in reliance on the fact that the Re-IPO will take place. If the Re-IPO does not occur, our common stock would still be quoted on the OTCQB Market, but your opportunity for liquidity in your common stock would be significantly limited. In addition, if we are unable to consummate the Re-IPO on a timely basis or at all, we will owe cash liquidated damages to the investors in the August 20221 Private Placement.

Future sales of our common stock in the public market could lower the price of our common stock and impair our ability to raise funds in future securities offerings.

We may issue a significant number of shares of common stock upon conversion of outstanding convertible notes, or upon exercise of warrants, including the Warrant As and Warrant Bs. As of the date of this prospectus, approximately 303,799,187 shares of common stock are reserved for issuance under our outstanding convertible notes and warrants. Future sales of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could adversely affect the then prevailing market price of our common stock, and could make it more difficult for us to raise funds in the future through private or public offerings of our securities.

Because the market for our common stock is limited, persons who purchase our common stock may not be able to resell their shares at or above the purchase price paid for them.

Our common stock trades on the OTCQB Market, which is not as liquid a market as a national securities exchange such as NASDAQ. There is currently only a limited public market for our common stock. We cannot assure you that an active public market for our common stock will develop or be sustained in the future. If an active market for our common stock does not develop or is not sustained, the price may decline.

Trading in our common stock is subject to special sales practices and may be difficult to sell.

Our common stock is subject to the SEC’s “penny stock” rule, which imposes special sales practice requirements upon broker-dealers who sell such securities to persons other than established distributors or accredited investors. Penny stocks are generally defined to be an equity security that has a market price of less than $5.00 per share. For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Consequently, the rule may affect the ability of broker-dealers to sell our securities and also may affect the ability of our stockholders to sell their securities in any market that might develop.

Stockholders should be aware that, according to the SEC, the market for penny stocks has suffered from patterns of fraud and abuse. Such patterns include:

Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our common stock.

Because we may not be able to attract the attention of major brokerage firms, it could have a material impact upon the price of our common stock.

It is not likely that securities analysts of major brokerage firms will provide research coverage for our common stock since the firm itself cannot recommend the purchase of our common stock under the penny stock rules referenced in an earlier risk factor. The absence of such coverage limits the likelihood that an active market will develop for our common stock. It may also make it more difficult for us to attract new investors at times when we acquire additional capital.

The conversion of our outstanding secured convertible promissory note will result in dilution to existing stockholders and could negatively affect the market price of our common stock.

At the date of this prospectus, we have an outstanding 20% secured promissory note in the aggregate principal amount of $1,689,746, convertible at the option of the principal holder (a trust associated with one of our directors, Ronald J. LoRicco, Sr., which trust acts as agent for all noteholders) into shares of our common stock at a price per share equal to $0.275. If this note is converted into shares of common stock, our issued and outstanding shares would increase. In the event that a market for our common stock develops, to the extent that the holder of this note converts such note, our existing shareholders will experience dilution to their ownership interest in our company. In addition, to the extent that the holder converts such note and then sell the underlying shares of common stock in the open market, our common stock price may decrease.

The principal holder of our outstanding secured convertible promissory note (which holder is associated with one of our directors) has rights which are senior to the rights of our common stockholders, and which may impair our financing efforts.

The principal holder of the $1,689,746 convertible note mentioned above (a trust associated with one of our directors, Ronald J. LoRicco, Sr., which trust acts as agent for all noteholders) is party to a security agreement with us granting such holder a secured interest in all of our assets. In addition, our agreements with this principal note holder contain a negative covenant explicitly requiring such holder’s consent in order for us to incur any debt or issue of any equity securities. The interests of such debt holder are senior to the rights of our common stockholders and may impede our ability to obtain new financing. Furthermore, such holder’s interest may not coincide with the interests of other stockholders, and such holder may become subject to conflicts of interest given its affiliation with one of our directors. These conflicts may not be resolved in favor of our common stockholders.

The interests of our principal stockholders, officers, and directors, who collectively and beneficially own approximately 22.11% of our stock, may not coincide with yours and such stockholders will have the ability to substantially influence decisions with which you may disagree.

As of the date of this prospectus, our principal stockholders, officers, and directors beneficially owned approximately 22.11% of our common stock. As a result, our principal stockholders, officers, and directors will have the ability to substantially influence matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, this concentration of ownership may delay or prevent a change in control of our company and make some future transactions more difficult or impossible without the support of our controlling stockholders. The interests of such stockholders may not coincide with your interests or the interests of other stockholders.

Certain accredited investors control large blocks of restricted common stock.  Sale of large blocks of common stock could materially impact our stock price.

Historically, we have raised funds from accredited investors through the sale of restricted common stock.  Generally, common stock sold privately to accredited investors has certain resale restrictions under the securities laws that include elements of minimum holding periods, certain other requirements with respect to financial filings of our company and other requirements.  Once these requirements are met, holders of the restricted common stock are able to remove resale restrictions and sell freely in the open market. As our common stock has a limited market for resale, substantial additional supply of stock caused by previously restricted stock coming into the market for resale could have a materially, negative impact on our stock price.

The issuance of preferred stock could grant rights to investors that are not enjoyed by the holders of our common stock.

Our articles of incorporation authorize the Board of Directors, without approval of the shareholders, to cause shares of preferred stock to be issued in one or more series, with the numbers of shares of each series to be determined by the Board of Directors. Our articles of incorporation further authorize the Board of Directors to fix and determine the powers, designations, preferences and relative, participating, optional or other rights (including, without limitation, voting powers, preferential rights to receive dividends or assets upon liquidation, rights of conversion or exchange into common stock or preferred stock of any series, redemption provisions and sinking fund provisions) between series and between the preferred stock or any series thereof and the common stock, and the qualifications, limitations or restrictions of such rights. In the event of issuance, preferred stock could be used, under certain circumstances, as a method of discouraging, delaying, or preventing a change of control of our company. Although we have no present plans to issue additional series or shares of preferred stock, we can give no assurance that we will not do so in the future.

Our inability to remain current on our required securities filings may impact liquidity for certain shareholders and our ability to raise funds.

We rely on third parties to assist us with the preparation of our public filings.  Our financial resources may not be sufficient from time to time to be able to cover the costs associated with these third parties’ services.  Failure to remain current on certain public filings may limit the ability of shareholders to avail themselves of safe harbors when attempting to sell their shares, for example under Rule 144 of the Securities Act of 1933, as amended.  In addition, our inability to present current financial information may impact our ability to raise additional funds and would further require us to pay cash liquidated damages to the investors in the August 2021 Private Placement.

The number of shares of our common stock issuable upon the exercise outstanding warrants is substantial.

As of the date of this prospectus, we had warrants outstanding that were exercisable for an aggregate of 117,416,666 shares of common stock. The shares of common stock issuable upon exercise of these warrants is substantial, currently constituting approximately 39% of the total number of shares of common stock currently issued and outstanding. Therefore, the exercise of a large number of these warrants and public sales of the shares of common stock underlying these warrants would cause substantial dilution to our stockholders and could adversely impact the price of our common stock from time to time. The timing for such dilution and adversely price impact is uncertain as we have no control over when warrants held by third parties will be exercised. For more information regarding the terms of our warrants, please refer to the footnotes accompanying the audited and unaudited financial statements included as part of this prospectus.

Adjustments to the conversion price for certain of our warrants will dilute the ownership interests of our existing stockholders.

Under the terms of certain of our outstanding warrants (notably the Warrant As and Warrant Bs), the exercise price of such warrants may be adjusted downward in certain circumstances. If a downward adjustment were to occur in the exercise price of such warrants, the exercise of such warrants would result in the issuance of a significant number of additional shares of our common stock and cause significant dilution. Moreover, the public sale of such shares could adversely impact the price of our common stock from time to time.

Even if a market for our common stock develops, the market price of our common stock may be significantly volatile, which could result in substantial losses for purchasers.

The market price for our common stock may be significantly volatile and subject to wide fluctuations in response to factors, including the following:

In some cases, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our business operations and reputation.

Future sales of our common stock in the public market could lower the price of our common stock and impair our ability to raise funds in future securities offerings.

We may issue a significant amount of shares of common stock in the future, including shares of common stock upon conversion of preferred stock or convertible notes we have or may issue, or upon the exercise of warrants currently outstanding or which we may issue in the future. Future sales of a substantial number of shares of these shares of common stock in the public market, or the perception that such sales may occur, could adversely affect the then prevailing market price of our common stock, and could make it more difficult for us to raise funds in the future through public or private offerings of our securities.

You may face significant restrictions on the resale of your shares due to state “blue sky” laws.

Each state has its own securities laws, often called “blue sky” laws, which (1) limit sales of securities to a state’s residents unless the securities are registered in that state or qualify for an exemption from registration, and (2) govern the reporting requirements for broker-dealers doing business directly or indirectly in the state. Before a security is sold in a state, there must be a registration in place to cover the transaction, or it must be exempt from registration. The applicable broker-dealer must also be registered in that state.

We do not know whether our securities will be registered or exempt from registration under the laws of any state. A determination regarding registration will be made by those broker-dealers, if any, who agree to serve as market makers for our common stock. We have not yet applied to have our securities registered in any state and will not do so until we receive expressions of interest from investors resident in specific states after they have viewed this prospectus. There may be significant state blue sky law restrictions on the ability of investors to sell, and on purchasers to buy, our securities. You should therefore consider the resale market for our common stock to be limited, as you may be unable to resell your shares without the significant expense of state registration or qualification.

Actions of activist shareholders could be disruptive and potentially costly and the possibility that activist shareholders may seek changes that conflict with our strategic direction could cause uncertainty about the strategic direction of our business.

Activist investors or other stockholders who disagree with our management (including legacy stockholders of our company from a time prior to the commencement of our current business plan) may attempt to effect changes in our strategic direction and how our company is governed or may seek to acquire control over our company. Some investors (commonly known as “activist investors”) seek to increase short-term stockholder value by advocating corporate actions such as financial restructuring, increased borrowing, special dividends, stock repurchases, or even sales of assets or the entire company. Activist campaigns can also seek to change the composition of our Board of Directors, and campaigns that contest or conflict with our strategic direction could have an adverse effect on our results of operations and financial condition as responding to proxy contests and other actions by activist shareholders can disrupt our operations, be costly and time-consuming, and divert the attention of our Board of Directors and senior management from the pursuit of our business strategies. In addition, perceived uncertainties as to our future direction that can arise from potential changes to the composition of our Board of Directors sought by activists may lead to the perception of a change in the direction of the business, instability or lack of continuity which may be exploited by our competitors, may cause concern to our current or potential customers or other partners, may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel and business partners. These types of actions could divert our management’s attention from our business or cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business, all of which could have a material adverse effect on our company.

Our ability to use our net operating losses and research and development credit carryforwards to offset future taxable income may be subject to certain limitations.

In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (or the Code), a corporation that undergoes an “ownership change,” generally defined as a greater than 50% change by value in its equity ownership over a three-year period, is subject to limitations on its ability to utilize its pre-change net operating losses (or NOLs) and its research and development credit carryforwards to offset future taxable income. Our existing NOLs and research and development credit carryforwards may be subject to limitations arising from previous ownership changes, and if we undergo an ownership change, our ability to utilize NOLs and research and development credit carryforwards could be further limited by Sections 382 and 383 of the Code. In addition, our ability to deduct net interest expense may be limited if we have insufficient taxable income for the year during which the interest is incurred, and any carryovers of such disallowed interest would be subject to the limitation rules similar to those applicable to NOLs and other attributes. Future changes in our stock ownership, some of which might be beyond our control, could result in an ownership change under Section 382 of the Code. For these reasons, in the event we experience a change of control, we may not be able to utilize a material portion of the NOLs, research and development credit carryforwards or disallowed interest expense carryovers, even if we attain profitability.

If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading price of our stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Anti-takeover provisions in our charter documents and Nevada law could discourage, delay or prevent a change in control of our company and may affect the trading price of our common stock.

We are a Nevada corporation, and the anti-takeover provisions of the Nevada law may discourage, delay or prevent a change in control by, among other things: (i) prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change in control would be beneficial to our existing stockholders and (ii) making it more difficult to remove our directors and officers, which might discourage transactions that could involve payment to stockholders of a premium over the market price of our securities.

In addition, our certificate of incorporation, as amended, and our amended and restated bylaws may discourage, delay, or prevent a change in our management or control over us that stockholders may consider favorable. In particular, our certificate of incorporation, as amended, and our amended and restated bylaws, among other matters:

The financial and operational projections that we may make from time to time are subject to inherent risks.

The projections that our management may provide from time to time (including, but not limited to, those relating to potential peak sales amounts, product approval, production and supply dates, commercial launch dates, and other financial or operational matters) reflect numerous assumptions made by management, including assumptions with respect to our specific as well as general business, economic, market and financial conditions and other matters, all of which are difficult to predict and many of which are beyond our control. Accordingly, there is a risk that the assumptions made in preparing the projections, or the projections themselves, will prove inaccurate. There will be differences between actual and projected results, and actual results may be materially different from those contained in the projections. The inclusion of the projections in this prospectus should not be regarded as an indication that we or our management or representatives considered or consider the projections to be a reliable prediction of future events, and the projections should not be relied upon as such.

We do not intend to pay dividends on our common stock.

We have never declared or paid any cash dividend on our common stock. We currently intend to retain any future earnings and do not expect to pay any dividends for the foreseeable future. Therefore, you should not invest in our common stock in the expectation that you will receive dividends.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains a number of “forward-looking statements”. Specifically, all statements other than statements of historical facts included in this prospectus regarding our financial position, business strategy and plans and objectives of management for future operations are forward-looking statements. These forward-looking statements are based on the beliefs of management at the time these statements were made, as well as assumptions made by and information currently available to management. When used in this prospectus and the documents incorporated by reference herein, the words “anticipate,” “believe,” “estimate,” “expect,” “may,” “will,” “continue” and “intend,” and words or phrases of similar import, as they relate to our financial position, business strategy and plans, or objectives of management, are intended to identify forward-looking statements. These statements reflect our current view with respect to future events and are subject to risks, uncertainties and assumptions related to various factors.

You should understand that a variety of important factors, including those listed below and those discussed in our periodic reports to be filed with the SEC under the Securities Exchange Act of 1934, as amended, could affect our future results, and could cause those results to differ materially from those expressed in such forward-looking statements. These factors include, without limitation:

Although we believe that our expectations (including those on which our forward-looking statements are based) are reasonable, we cannot assure you that those expectations will prove to be correct. Should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described in our forward-looking statements as anticipated, believed, estimated, expected, or intended.

Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or any other reason. All subsequent forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to herein. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus and the documents incorporated by reference herein might not occur.

USE OF PROCEEDS

We will not receive any proceeds from the sale of the common stock by the selling stockholders. We would, however, receive proceeds upon the exercise of the Warrant As and Warrant Bs held by the selling stockholders which, if such warrants are exercised in full for cash, would be approximately $12.8 million. As of the date of this prospectus, we have not received proceeds from such exercises. Any net proceeds we receive will be used for general corporate and working capital or other purposes that our Board of Directors deems to be in the best interest of our company. As of the date of this prospectus, we cannot specify with certainty the particular uses for the net proceeds we may receive. Accordingly, we will retain broad discretion over the use of these proceeds, if any.

DIVIDEND POLICY

We have never declared or paid any cash dividend on our common stock or preferred stock. We do not anticipate paying any cash dividends on our common stock in the foreseeable future and we intend to retain all of our earnings, if any, to finance our growth and operations and to fund the expansion of our business. Payment of any dividends will be made at the discretion of our Board of Directors, after its taking into account various factors, including our financial condition, operating results, current and anticipated cash needs and plans for expansion. Any dividends that may be declared or paid on our common stock, must also be paid in the same consideration or manner, as the case may be, on our shares of preferred stock, if any.

DETERMINATION OF OFFERING PRICE

The selling stockholders will offer common stock at the prevailing market prices or privately negotiated prices. See “Plan of Distribution”. The price at which the selling stockholders may sell their common stock, or the price of our common stock prevailing in the market from time to time, does not necessarily bear any relationship to our book value, assets, past operating results, financial condition, or any other established criteria of value.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Holders of Common Stock

As of the date of this prospectus, we have approximately 286 holders of record of our common stock. The number of record holders does not include persons, if any, who hold our common stock in nominee or “street name” accounts through brokers.

Market for Common Stock

Our common stock is quoted on the OTCQB Marketplace under the symbol “BASA.” As of September 28, 2021, the last reported sales price of a share of our common stock on the OTCQB Marketplace was $0.2720. The following table sets forth, for the periods indicated, the high and low sales prices per share of our common stock as reported by the OTC Markets Group, Inc.:

These sales prices were obtained from the OTC Market Group, Inc. and do not necessarily reflect actual transactions, retail markups, mark downs or commissions. No assurance can be given that an established public market will develop in our common stock, or if any such market does develop, that it will continue or be sustained for any period of time.

Transfer Agent

Our stock transfer agent is Empire Stock Transfer, Inc., 1859 Whitney Mesa Drive, Henderson, NV 89014, Telephone: (702) 818-5898.

Securities Authorized for Issuance under Equity Compensation Plans

We do not have a formal equity incentive plan at this time, and therefore we have no securities authorized for such issuance under any such plan.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Statements in this report which express "belief," "anticipation" or "expectation," as well as other statements which are not historical facts, are forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results, including those that may be set forth under the "Risk Factors" section of this prospectus and elsewhere in this prospectus, as well as in our annual report on Form 10-K for the year ended December 31, 2020, and subsequently filed quarterly reports on Form 10-Q. See “Cautionary Note Regarding Forward-Looking Statements”.

The following discussion should be read in conjunction with our financial statements and notes thereto included elsewhere in this report.

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 years ended December 31, 2020, and 2019 and the six months ended June 30, 2021, and 2020, respectively. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this prospectus, and our audited and unaudited condensed consolidated financial statements and accompanying notes included in this prospectus.

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.

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:

We lease 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. 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 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 believe that macroeconomic factors are pressuring the construction industry to consider the use of alternative reinforcement materials for the following reasons:

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.

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, COVID-19 has not materially impacted our operations or those of our third-party partners. However, the continued spread of variants of the virus could negatively impact the manufacturing, supply, distribution and sale of our products and our financial results in the future. The extent to which COVID-19 may impact the construction industry, our operations or the operations of our third-party partners will depend on future developments, which are uncertain and cannot be predicted with confidence.

Results of Operations

Comparison of the six months ended June 30, 2021, to the six months ended June 30, 2020

Revenue – The Company had $15,549 of revenues as a result of sales for the three months ended June 30, 2021, compared to $593 for the same period in the prior year and $19,685 of revenues as a result of sales of finished goods sold for the six months ended June 30, 2021, compared to $2,218 for the same period in the prior year. Revenues have been minimal as a result of our focus on the scaling of production and inventory.

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

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

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

We maintain small margins as we sold existing inventory while preparing for the scaling the manufacture of BasaFlex.

Professional fees – During the three months ended June 30, 2021, professional fees were $79,355 compared to $53,016 for the same period in the prior year. During the six months ended June 30, 2021, professional fees were $193,087 compared to $162,874 for the same period in the prior year. The Company has increased fees as it relates to legal fees with the ongoing litigation, and new supplier and consulting agreements as it tries to secure relationships in the industry.

Payroll and payroll taxes – During the three months ended June 30, 2021, payroll and payroll taxes were $300,683 compared to $162,455 for the same period in the prior year. During the six months ended June 30, 2021, payroll and payroll taxes were $554,798 compared to $399,886 for the same period in the prior year. The company retained a total of 27 employees at the period end June 30, 2021, as compared to 9 employees at the close of the June 30, 2020 period.

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

General and administrative – During the three months ended June 30, 2021, general and administrative expenses were $950,167 compared to $283,034 for the same period in the prior year. During the six months ended June 30, 2021, general and administrative expenses were $1,553,937 compared to $500,987 for the same period in the prior year. The increase is largely due to an increase in stock-based compensation expense.

Loss on Extinguishment of Debt - During the three months ended June 30, 2021, we had a loss of $3,056,892 compared to a gain of $980 for the same period in the prior year.  During the six months ended June 30, 2021, we had a loss of $6,743,015 compared to $980 for the same period in the prior year.  

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

Comparison of the year ended December 31, 2020, to the year ended December 31, 2019

Revenue – We had $7,161 of revenues as a result of sales of finished goods sold for the year ended December 31, 2020, compared to $3,892 in the prior year. Revenues have been minimal as a result of our shift in focus to the scaling of production and inventory.

Cost of goods sold – During the year ended December 31, 2020, we had cost of sales of $4,487 compared to $105,010 in the prior year. We have small margins as we sold existing inventory while preparing for the scaling the manufacture of BasaFlex. In the same period in the prior year, we lost money on a gross margin basis due to inefficiencies in the start-up process and extremely narrow margins on the initial sales of like products.

Professional fees – During the year ended December 31, 2020, professional fees were $438,749 compared to $341,906 in the prior year. The Company has increased fees as it relates to legal fees with the ongoing litigation, and new supplier and consulting agreements as it tries to secure relationships in the industry.

Payroll and payroll taxes – During the year ended December 31, 2020, payroll and payroll taxes were $837,348 compared to $865,828 in the prior year. The decrease was due to the termination of the prior CEO in the first quarter of 2020 and the resignation of the CFO in the second quarter of 2020 compared to both being employed during the same period in the prior year.

Consulting – During the year ended December 31, 2020, consulting fees were $270,525 compared to $219,326 in the prior year. The increase is due to consulting agreements for senior management at different rates.

General and administrative – During the year ended December 31, 2020, general and administrative expenses were $1,408,948 compared to $2,483,226 in the prior year. The decrease is largely due to the decrease in stock-based compensation expense by $1,535,726 and the minimal increases in several other general and administrative expenses compared to the prior year.

Loss on inventory obsolescence - During year ended December 31, 2020, we had a loss of $33,062 compared to $0 in the prior year, which resulted from a review of purchased inventory on hand that was deemed unsellable.

Disposition of fixed asset - During year ended December 31, 2020, we had a gain of $40,838 compared to $0 in the prior year.  The gain is due to the sale of an asset during the year.

Miscellaneous income - During the year ended December 31, 2020, miscellaneous income was $70,817 as a result of a gain on the settlement of a lawsuit compared to $4,469 in the prior year. The increase is due to the net settlement of $125,000 less the contingency fee and expenses paid to the attorney for the HLM Storefront litigation.

Gain on settlement of payable - During year ended December 31, 2020, we had a gain of $293,678 compared to $201,617 in the prior year. The gain in the current year is due to the forgiveness by prior management of accrued wages and related expenses whereas in the prior year, the gain is largely due to the writing off of several payables that had exceeded their statute of limitations for collection.

Loss on extinguishment of debt - During the year ended December 31, 2020, we had a loss of $56,948 compared to $0 in the prior year.  The increase in loss is due to the settlement of various long-standing debts for restricted common shares which exceeded the value of the debt.

Impairment of fixed asset - During the year ended December 31, 2020, we had no gain or loss compared to a loss of $1,478 in the prior year.

Interest expense - During the year ended December 31, 2020, interest expense was $898,257 compared to $113,076 in the prior year. The increase is mainly due to the amortization of the debt discounts recorded for the convertible debt.

Liquidity and Capital Resources

Since inception, we have incurred net operating losses and used cash in operations. As of December 31, 2020, we had an accumulated deficit of $29,643,387 and as of June 30, 2021, we had an accumulated deficit of $38,634,066. We have incurred general and administrative expenses associated with our product development and compliance while concurrently setting up our Pompano facility, beginning operations, and developing our business.  We also continue to incur legal fees arising from ongoing litigation.  Based on information currently available, management believes that these ongoing costs are not material to our financial condition, but no assurances can be given that the materiality of these ongoing litigation costs will not change, or that litigation will be resolved in a timely fashion. We expect operating losses to continue in the short term and require additional financing for continued support of our BFRP 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.

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 future capital.

On December 31, 2020, we had cash of $259,505 compared to $129,152 at December 31, 2019. On June 30, 2021, we had cash of $77,400 compared to $259,505 at June 30, 2020. Subsequent to June 30, 2021, we closed a private placement on August 17, 2021, that generated net cash proceeds to us of approximately $4,770,000.

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 scale up operations and reach the level of sales revenue sufficient to provide positive cash flow, we require funding of both our expansion plan and our operating deficit through the period while we are scaling our manufacturing capability. 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.

While we have generated relatively little revenue to date, we continue to receive inquiries from a range of customers for our products, indicating what we believe is a significant level of market interest for BasaFlex™.  Some of these inquiries would be for very large potential orders for new, multi-year construction projects. Based on our current limited manufacturing capacity (which we plan to begin to expand with the net proceeds of the August 2021 Private Placement), these inquiries (if they lead to actual orders) would exceed our capability to deliver within the customer’s requested timeframe, and largely because of this, there is no guarantee that orders will actually be received.

Cash Flows

Net cash used in operating activities amounted to $2,799,499 and $2,259,537 for the years ended December 31, 2020, and 2019, respectively.

During the year ended December 31, 2020, we used $339,586 net cash for investing activities compared to $566,918 used in the prior fiscal year for the modifications and Underwriter’s Laboratories 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 year ended December 31, 2020, we had $3,269,438 net cash provided by financing activities.  Proceeds of $1,797,068 from the sale of stock from accredited investors and related parties for 15,495,629 restricted common shares issued; borrowing of $1,886,727 from the issuance of convertible and short-term notes payable, including from related parties; less $348,000 of full repayment of a convertible note; less $66,357 of full repayment of short-term notes payable.

During the year ended December 31, 2019, we had $2,833,776 net cash provided by financing activities. Proceeds of $2,392,828 net cash from the sale of stock from accredited investors and related parties for 41,034,285 restricted common shares issued; borrowing of $642,760 from the issuance of convertible and short-term notes payable, including from related parties; less $50,000 of a partial repayment of a convertible note; less $54,704 of full repayment of a related party convertible note; and less $97,108 of full repayment of a demand note payable.

We do not believe that our cash on hand on December 31, 2020, will be sufficient to fund our current working capital requirements as we try to develop our fiber reinforced polymer rebar manufacturing business. We entered into convertible promissory notes and issued restricted common shares in an effort to raise additional working capital. We will continue working towards securing more working capital. However, there is no assurance that we will be successful in securing working capital or, if we are, that the terms will be beneficial to our shareholders.

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

During the six months ended June 30, 2021, net cash used for investing activities were $270,330 compared to $59,377 for the same period in the prior 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.

During the six months ended June 30, 2021, we had $2,382,726 net cash provided by financing activities compared to $1,087,088 in the prior year. Issuance of common shares for $331,776, and $123,500 from warrants exercised; borrowing of $579,741 from the issuance of convertible and short-term notes payable, including from related parties; less $35,000 of a full repayment of convertible notes; and less $8,485 of partial repayment of notes payable provided the net cash during the six months ended June 30, 2021. Further we borrowed $1,091,194 from the issuance of notes payable, including from related parties. Additionally, we 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 June 30, 2021 will be sufficient to fund our current working capital requirements as we try to develop our fiber reinforced polymer rebar manufacturing business. We entered into promissory notes and issued restricted common shares in an effort to raise additional working capital. Additionally, we entered into an agreement with Aegis Capital, LLC to secure working capital for equipment and manufacturing improvements. We will continue working towards securing more working capital. However, there is no assurance that we will be successful in securing working capital or, if we are, that the terms will be beneficial to our shareholders.

Summary of Critical Accounting Policies

Use of Estimates – The preparation of the accompanying Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and reported amounts of 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 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.

Recent Accounting Pronouncements

Described below is a new accounting pronouncement issued or proposed by the FASB that has been adopted by us. Management does not believe this accounting pronouncement has had or will have a material impact on our consolidated financial position or operating results, except as disclosed below or in our future filings.

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, our 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 our condensed consolidated financial statements as of June 30, 2021.

BUSINESS

Overview and Recent History

We manufacture a range of “green” (environmentally friendly), sustainable, non-corrosive, lightweight, composite products used as concrete reinforcement by the construction industry. Our core product is BasaFlex™, a basalt fiber reinforced polymer (or BFRP) reinforcing bar (or rebar) which we believe is a stronger, lighter, sustainable, non-conductive, and corrosion-proof alternative to traditional steel. We conduct our business through our wholly owned subsidiary, Basanite Industries, LLC (or BI),

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 (or FRP) 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 excellent surface performance and 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 cracking and “concrete spalling.” Spalling results from the steel reinforcing materials embedded within the concrete member, corroding and rusting due to normally occurring factors like temperature, humidity, pollutants, salt, etc. (contrary to popular belief, concrete is porous, and water does permeate into concrete). Rusting leads to the steel expanding and eventually causing the surrounding concrete to delaminate, crack, spall and 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:

·

We lease a fully permitted, 36,900 square foot facility located in Pompano Beach, Florida which is equipped with five customized, Underwriters Laboratories approved, Pultrusion manufacturing machines for BasaFlex^TM production.  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 produce up to 28,000 linear feet of BasaFlex^TM 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 in real time.

We believe that macroeconomic factors are pressuring the construction industry to consider the use of alternative reinforcement materials for the following reasons:

We believe we are well positioned to benefit from this renewed focus, particularly in light of the renewed U.S. government interest in funding infrastructure improvements and events such as the tragic collapse of a residential building in Surfside, Florida.

We submitted our first round of BasaFlex™ rebar products to the Structures and Materials Department of the University of Miami, an industry accredited independent testing laboratory, to obtain a Certified Test Report which allows us to participate in approved FRP applications, such as precast, architectural, flatwork and other non-structural engineered applications, or in applications where steel is a poor choice, like bridge decks, piers, seawalls, sewage tunneling and nuclear plants.  On May 29, 2020, a Certified Test Report was submitted to us for engineering use.

During the third quarter of 2020, we began initial manufacturing operations and commenced the manufacture of our initial stock of inventory of BasaFlex™.  Also, during this timeframe, we filled key manufacturing positions within our production facility and reached our primary goal of scaling to full capacity single shift operations.  Management also began recruiting other key positions, focused initially on product development, driving sales growth and expanding our market presence.  Our hiring was focused on key areas of excellence, specifically quality assurance; operations and other technical resources; engineering; and sales and marketing. We successfully completed our initial hiring plan and recruited key personnel with over 140 combined years of industry experience. We have begun selling across our complete product line and are currently working on securing larger orders for next year. We have also been engaged in developing strategic partnerships, with multiple testing programs underway (including international locations) across a broad range of applications.

During both the third and fourth quarters of 2020, BI continued research, and development work on BasaFlex^TM, with the goal of increasing its performance results in the category of modulus. While the baseline version easily met the required industry standard for FRP rebar, we have expanded goals for BasaFlex^TM to be able to replace steel rebar in a broader range of applications than the current industry standard allows for. After extensive internal development and testing, a complete test set of bar sizes #3-#8 of an enhanced version of BasaFlex^TM was submitted to the University of Sherbrooke (near Montreal, Canada) for lab testing. Sherbrooke, led by renowned materials scientist Dr. Brahim Benmokrane, is the world recognized leader in testing FRP products for concrete reinforcement. In February of 2021, Basanite obtained stellar results on the upgraded BasaFlex^TM from the Sherbrooke lab, including best in class performance results in both tensile and modulus strength. Following on from this success, Basanite is working with multiple customers and design professionals to select BasaFlex^TM as an alternative to steel in a broader range of applications.

Early in 2021, we contracted with an independent software company to develop BasaPro™, a design software specifically for use with BasaFlex™.  This development effort has been completed and the software is operational.  BasaPro allows both our engineers and engineers of record (EOR) to easily compare engineering designs with steel and the same designs with the recommended use of BasaFlex™ in typical concrete applications.  It allows for both the conversion to BasaFlex™ from steel in existing concrete designs and for original designs using BasaFlex™ and is based upon the application of industry standards ACI 440 (Guide for the Design and Construction of Structural Concrete Reinforced with Fiber-Reinforced Polymer (FRP) Bars) and ACI 318 (Building Code Requirements for Structural Concrete) using structural steel.  The software is capable of showing all calculations using independent test results and pictorial design work in conjunction with applicable building codes.  This means we can now communicate with the design community in their own language.

While we have generated relatively little revenue to date, we continue to receive inquiries from a range of customers for our products, indicating what we believe is a significant level of market interest for BasaFlex™.  Some of these inquiries would be for very large potential orders for new, multi-year construction projects.  Based on our current manufacturing capacity, these inquiries (if they lead to actual orders) would exceed our capability to deliver within the customer’s requested timeframe, and largely because of this, there is no guarantee that orders will actually be received without expansion.

To satisfy what we perceive the market interest for BasaFlex™ to be, and in particular to address potential large-scale customers, we need to significantly accelerate the expansion of our manufacturing capacity. Our current near-term goal is to expand to greater than twice our current capacity by the end of 2021, and ultimately to reach a Pompano plant production capacity exceeding 73,000 linear feet per day per shift (which would be 3 times our current capacity).  To accomplish these goals, we have designed and developed customized pultrusion equipment which offers significantly increased capacity in the same footprint as our current equipment.  Our new technology manufacturing system, named BasaMax™, has been specifically designed for the manufacture of BasaFlex™ using our patent pending process.  Two versions of this equipment have been designed, and these will not only offer double the capacity of our current equipment (per machine), but also each will run at faster and more efficient rates.  A prototype has completed preliminary testing in our Pompano facility and has recently been qualified for production.

Based on this trial, we are planning a two-phase plant expansion, eventually including a total of 10 of these new machines.  Our goal, subject to raising sufficient funding, is to have the first set of five of the new machines installed and be operational by the first quarter of 2022, and to install and have operational five more, along with additional custom manufacturing equipment, by the fourth quarter of 2022 providing sales dictate. This would create the opportunity for BI to ultimately reach our production level target for the Pompano facility by the close of 2022.

Industry Background and Current and Proposed Customers

We are focused on the construction industry, specifically on products for the reinforcement of primarily concrete but also asphalt. According to Grandview Research, the annual concrete reinforcement market in the U.S. is estimated to be approximately $9.4 billion. This industry very established and resistant to change; however the reinforcement of concrete using traditional steel products and methods have proven to be problematic. Almost every concrete building and foundation in the world was originally built using steel reinforcement. Steel is a long-time proven product for this use, but it has an inherent problem: it corrodes (rusts) due to naturally occurring phenomenon. Every steel reinforcing bar (or rebar) ever used is in some form of degradation due to corrosion. This corrosion causes the concrete to de-bond, crack and ultimately fail: the process is called “Spalling.” This corrosion problem has been recognized by the governing bodies to the point that they have written into code a definition of the “acceptable” amount of corrosion on steel rebar prior to its use. Regardless, the bar continues to rust and ultimately this leads to necessary maintenance, repair and eventual replacement over its lifetime. Addressing this problem is our key focus and the definitive basis for its future success – all of our products are corrosion proof. In addition, we believe our disruptive alternative to steel reinforcement also offers greater strengths, giving the end-user alternatives for concrete reinforcing elements that will never require maintenance or replacement for as much as 100 years or more.

Our customer base is a mix between the design-build community and government agencies who can specify our products, and wholesalers (distributors), contractors and concrete producers who will use, and sell our products.

Competition

The competitive landscape for concrete reinforcement is intense and can generally be divided into two categories: steel reinforcement, the incumbent since its beginnings in the nineteenth century, and alternative fiber reinforced polymer (FRP) reinforcement, which is gaining traction globally but remains a fairly new concept in the U.S. There is reinforcement of some type in most every cubic yard of concrete that is poured, and steel rebar producers are present in every major U.S. city. In contrast, there are only a handful of FRP manufacturers, and these can be segmented into 3 major types of FRPs used in construction rebar: carbon, fiberglass and basalt. We believe basalt FRP has a wider application temperature range, higher oxidation resistance, higher radiation resistance, higher compression strength and higher shear strength than its previously noted contemporaries. We believe it also represents the best value proposition.

We believe our major competitors in the BFRP space specifically include, Neuvokas, Kodiak, Armastek, Galen, Sudaglass and several manufacturers based in China. Other, non-basalt FRP competitors include Owens Corning/Mateen, Liberty, American Fiberglass Rebar, Tuf-Bar, Pulltrall and Pultron. As noted, FRP is relatively new in the U.S., and thus we also compete with major international providers of traditional steel rebar. Given the early stage of our company, we believe all of our competitors are larger, more established, and more financially stable than our company.

Sources of Raw Materials

The sourcing of our raw materials is a primary focus for our management. It is incumbent upon us to pre-plan our requirements prior to, and in conjunction with, our actual growth and developing an understanding of manufacturing lead-times and other obstacles that may restrain the flow of our established supply chain. Our current suppliers are aware of our aggressive plans for growth and are committed to helping us achieve those plans by adding capacity and developing/expanding long term agreements, with commitments for growth. Our principal suppliers for basalt continuous fiber roving (which is a key component of BasaFlex) are Mafic, BWF/Kamenny Vek and SRCS, Inc. Our principal suppliers for resin matrix ingredient are Aalchem, Phlex-Tek, Lindau Chemical and Cabot Labs.

Sales and Marketing

We primarily utilize third party distribution partners to market and sell our products, with a small amount of direct marketing business that isn’t typically covered by distribution arrangements (such as one-off technology-driven segments on the construction industry such as ultra-high-performance concrete, engineered cementitious composite concrete or geopolymer concrete). We also can generate sales through private label arrangements for larger company as well as export sales. As part of our distribution-focused marketing efforts, we focus on design-build companies, engineering, and architectural firms, as well as military, federal, state and local government agencies in an effort to drive material acceptance and specification approvals. We have secured multiple independent representatives and distributors to date, as detailed in the graphic below, with plans to enter into arrangements to secure additional geographic coverage. We’ve also contracted with other representation to bring our products and message to other parts of the world.

Intellectual Property

Currently, we have a patent pending application with the USPTO for BasaFlex, and plan to augment our intellectual property portfolio with other novel products, processes, and equipment. Additionally, we have secured registered trademarks on our company name as well as our key product names, including BasaFlex™; BasaMix™; BasaMesh™ and BasaWrap™, with the near-term intent to secure BasaPro, BasaMax and BasaLinks. These trade names represent our BFRP Rebar, Basalt Chopped Fiber, BFRP Geogrid Mesh, Basalt Reinforcing Wrap Kit, Software Program, Proprietary Pultrusion Equipment and Configured BFRP Shapes respectively.

Government Regulation

Basalt fiber reinforced polymer rebar is subject to various testing and certifications from various private and public entities, such as the Department of Transportation and the US Army Corps of Engineers, in order to satisfy regulatory requirements for use as concrete reinforcement. The American Concrete Institute (ACI), (formerly the American Society for Testing and Materials) and International Code Council (ICC) have very specific testing regimen for FRP materials and strict guidelines regarding the acceptance criteria and certification process. It includes not only the products themselves, but the facility, the manufacturing equipment, and the quality control measures used in process as part of the overall approval. The testing protocols are very expensive and run approximately $30,000 per bar size for the full required testing protocols. However, once the products have met all the federal, state and local building code requirements, doors will open for myriad other applications and opportunities. There is no guarantee, however, that we will be able to secure such approvals and certifications in the future.  Furthermore, we are dependent on third party independent groups, such as university laboratories and other certifying bodies, to obtain approvals and certifications. Inability to secure approvals and certifications could materially harm our ability to generate revenue.

In addition, our operations are subject to stringent and complex federal, state and local laws and regulations governing the environmental, health and safety aspects of our operations or otherwise relating to environmental protection. These laws and regulations may impose numerous obligations on our operations, including (i) the acquisition of a permit or other approval before conducting regulated activities: (ii) restriction of the types, quantities and concentration of materials that can be released into the environment; (iii) the application of specific health and safety criteria addressing worker protection; and (iv) the imposition of substantial liabilities for pollution resulting from our operations.

Also, our business plan will be driven in material part by our ability to enter into contracts funded by federal, state, and local governmental agencies. Our contracts with these governmental agencies would generally be subject to specific procurement regulations, contract provisions and a variety of socioeconomic requirements relating to their formation, administration, performance, and accounting and often include express or implied certifications of compliance.

Employees and Consultants

Our employees are essential to our purpose—to create an innovative, sustainable, productive, and extended future; our values—teamwork and innovation; and our strategy and execution.  A truly innovative workforce needs to be diverse and leverage the skills and perspectives of various backgrounds and experiences. In attracting a diverse workforce, we stress the teamwork approach as well as the life work balance philosophy. Our workforce is highly technical, with the substantial majority of our employees working in engineering, technical and financial roles. During the year 2020, we increased our workforce by 155%.  As of August 31, 2021, we had twenty-three full time employees, all of which are employed for the continuing operations.  None of our employees are represented by a labor union, nor governed by any collective bargaining agreements.  We consider relations with our labor force as satisfactory.  

As of August 31, 2021, our employees had the following gender demographics:

As of August 31, 2021, the race and ethnicity demographics of employees are as follows:

Corporate Information

We were originally incorporated under the name “Nevada Processing Solutions Inc.” in Nevada in May 2006. We subsequently changed our name to twice, first to “MMax Media Inc.” and then to PayMeOn, Inc., in each case to reflect the businesses our company conducted at that time. In 2017, we changed our business again to the current business of manufacturing basalt fiber rebar products, and in December 2018, we changed our name to Basanite, Inc. to reflect our current business.

Our principal executive and operations facility is located at 2041 NW 15th Avenue, Pompano Beach, Florida 33069, and our telephone number is (954) 532-4653.

MANAGEMENT

Set forth below is information regarding our current directors and executive officers as of the date of this prospectus:

There are no family relationships between any of our directors or executive officers.

Simon R. Kay has served as the interim acting Chief Executive Officer and President since March 2020. He also has served as our Acting Chief Financial Officer since March 2020. Mr. Kay has an extensive record of achievement directing business, sales, new product development, and operations management with the aerospace sector.  His previous experience included roles as COO of Aerospace Technologies Group from 2002 to 2006 and President and CEO from January 2007 to March 2019. Mr. Kay has also worked for divisions of Fortune 500 Companies in both operations management and sales and marketing roles.  From 1996 to 1998 he worked in operations management and sales for Gulfstream Aerospace (a division of General Dynamics) and from 1993 to 1995 he worked in a sales and marketing role for Raytheon Aircraft. Mr. Kay received his Masters of Business Administration from Georgetown University in 1990 and his Bachelor of Science in Professional Aeronautics, with a focus in Aviation Business Administration) from Embry-Riddle Aeronautical University in 1988.

David L. Anderson has served as the Executive Vice President and Chief Operations Officer since May 2019.  Prior to his service in these positions, Mr. Anderson served as the Interim Acting CEO and Principal Financial Officer of our company from August 2018 to May 2019; where he founded and developed our operating subsidiary. Prior to this, from 1988 to 1992, Mr. Anderson was the National Sales Manager for ESI, a bulk and liquid level instrumentation company, where he built and trained sales and distribution networks serving the industrial tank industry.  Additionally, Mr. Anderson served as the Vice President at Fabpro Oriented Polymers, a division of Polymer Group, Inc. (PGI) for 16 years from 1998 to 2013, where he provided leadership and oversight in operations, engineering, and sales, before the company was sold to a private equity group in which Anderson was instrumental in the sales process. During his tenure at Fabpro, Anderson drove sustainable year over year growth and guided it to become the largest producer of synthetic fibers for reinforcement in North America, as well as all divisions holding the first or second market share position in North America.  Since 2013, Mr. Anderson has served as a consultant to several manufacturing companies, including time Fabpro for the better part of a year in 2014. Others consulting engagements Monahan Filaments, Bergkamp, Inc., EY Technologies and Durable Products Group, a research and development company focused on fibrous materials in concrete. Mr. Anderson attended Emporia State University and Wichita State University’s School of Business from 1981 to 1984.

Michael V. Barbera has served as our Chairman of the Board since January 2020 and having served as a member of the Board of Directors since February 2019.  Mr. Barbera has served as the Chief Executive Officer of Analytical Maintenance Services, Inc. (“AMS") located in Boca Raton, Florida since 1998. AMS, a privately held company, provides analytical instrument services, instrumentation, comprehensive training courses and general application support to both the chemical and pharmaceutical industries. Mr. Barbera received a Bachelor of Science in Electronic Engineering in 1977 from the Florida Keys Community College and a Bachelor of Professional Studies in Science from Barry University in 1990. Mr. Barbera also served in the United States Navy from 1972 through 1978, where he specialized in Aviation Electronics.

Ronald J. LoRicco, Sr. has served as a member of our Board of Directors since June 2017. Mr. LoRicco is an attorney practicing in the areas of civil litigation, insurance defense, criminal law, estate planning and administration and workers' compensation. He is also admitted to practice in Florida and United States District Court for the District of Connecticut. Mr. LoRicco is a member of the American, Connecticut, and New Haven Bar Associations, American Trial Lawyers Association and Connecticut Trial Lawyers Association. He attended Fairfield University where he received a Bachelor of Arts degree in 1986. He received a Juris Doctor degree from Quinnipiac College School of Law, formerly known as the University of Bridgeport School of Law, in 1989.

Paul M. Sallarulo has served as a member of our Board of Directors since April 2017. He served as Chairman of the Board, President and CEO of Nexera Medical Inc. from July 2006 through 2015.  Previously, Mr. Sallarulo had an extensive financial career in capital markets and investment banking in senior positions with Wachovia Securities, where he was the Senior Vice President from July 2003 through June 2006 and Prudential Securities, where he served as Senior Vice President from October 2001 through July 2003. Additionally, Mr. Sallarulo served as Vice President at Meridian Capital Markets from February 1991 to August 1996. Mr. Sallarulo was appointed Commissioner of the North Broward Hospital District by Florida Governor Jeb Bush for two four-year terms beginning in January of 1999. While there, he oversaw four major hospitals, thirty-eight clinics, six thousand professionals, and a budget in excess of $2 billion, and served as Chairman of the Legal Review Committee from 2002 to 2005, Joint Conference Committee from 2004 to 2006, Broward Health Foundation from 2002 through 2004, Community Relations Committee for Broward General Hospital from 2002 to 2004, and Community Relations Committee for Imperial Point Medical Center from 2005 to 2006, respectively. Mr. Sallarulo served on the Board of Directors of Foss Manufacturing, LLC Company, Board of Trustees of Nova Southeastern University, Chairman of the Board of Governors of Nova Southeastern University - Wayne Huizenga School of Business, President of the International Alumni Association of NSU, Nova Southeastern University College of Dental Medicine Advisory Board, and was inducted as the first Honorary member into Sigma Beta Delta Society – International Honor Society in Business, Management and Administration. Mr. Sallarulo also served as a member of the Planning and Zoning Board of Fort Lauderdale, Broward County Personal Advisory Board Fort Lauderdale, the Fort Lauderdale Marine Advisory Board, and the Economic Development Advisory Board. Mr. Sallarulo was Co-Founder of Broward Bank of Commerce and served on the Board of Directors. Mr. Sallarulo assisted in the sale of Broward Financial Holdings, the parent company of Broward Bank of Commerce, to Home BancShares, parent company of Centennial Bank in 2014. Mr. Sallarulo currently serves on the Regional Board of Directors of Centennial Bank and serves on the Loan Committee, and Strategic Planning Committee. Mr. Sallarulo received his M.B.A from Nova Southeastern University in 1984. Previous to that, Mr. Sallarulo attended Bernard Baruch College from 1978 to 1981 where he obtained his Bachelors in Business Administration, and attended SUNY Adirondack between 1975 and 1977 where he obtained his Associate of Applied Science degree.

Adam Falkoff has served as a member of the Board of Directors since September 2020. Mr. Falkoff has over 20 years of experience in public policy, international relations, and business development. He has advised CEOs of the Fortune 100, Presidents, Prime Ministers, Cabinet Ministers and Ambassadors. Since 2000, Mr. Falkoff has served as the President of CapitalKeys, a bipartisan global public policy and strategic consulting firm based in Washington D.C. His expertise is to successfully help clientele understand, anticipate, and navigate the complex public policy environment as well as strategies for business development driving client revenues. Earlier in his career he served as professional staff in the United States Senate. Mr. Falkoff was a 2018 recipient of the Ellis Island Medal of Honor for service to the United States of America and named in the Power 100 of Washington, D.C. by Washington Life Magazine. Mr. Falkoff has been an invited guest speaker, panelist, and moderator on a wide range of public policy and business development related topics in several industries. He has appeared in The Wall Street Journal, The Palm Beach Post, Politico, Roll Call, The Hill, The Washington Diplomat, Jack O'Dwyer's Newsletter, Capitol File, Washington Life, National Journal, Technology Law Journal, Greenwire, Appliance Magazine, and The Opportunist Magazine. Mr. Falkoff received a B.A. from Duke University and both an M.B.A. and M.I.M. (Master of International Management) from the Thunderbird School of Global Management on an academic scholarship in 1992. Mr. Falkoff also holds a Certificate in International Law from the University of Salzburg, Institute on International Legal Studies.

Involvement in Certain Legal Proceedings

From time to time, we may be involved in various legal proceedings and claims arising in the ordinary course of business. Management believes that the dispositions of these matters, individually or in the aggregate, are not expected to have a material adverse effect on our financial condition. However, depending on the amount and timing of such disposition, an unfavorable resolution of some or all of these matters could materially affect the future results of operations or cash flows in a particular year.

Board Committees and Director Independence

Director Independence

Of our current directors, we have determined that Adam Falkoff, Ronald. J. LoRicco, Sr., and Paul M. Sallarulo are “independent” as defined by applicable rules and regulations.

Board Committees

Our Board of Directors has established three standing committees — Audit, Compensation and Nominating. None of these standing committees currently operate under a charter, but it is the intention of our Board of Directors to adopt such committee charters in the future.

Audit Committee

Our Board of Directors has an Audit Committee, composed of Ronaldo J. LoRicco, Sr. and Adam Falkoff, who are independent directors as defined in accordance with section Rule 10A-3 of the Exchange Act and the rules of the NASDAQ Stock Market. Mr. LoRicco, Sr. serves as chairman of the committee. Our Board of Directors has not yet determined which member of the Audit Committee is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K. Our Audit Committee oversees our corporate accounting, financial reporting practices and the audits of our financial statements. The Audit Committee is also responsible for the appointment, termination and oversight of our independent auditors, and also undertakes such responsibilities customarily associated with audit committees of publicly traded companies.

Compensation Committee

Our Board of Directors also has a Compensation Committee, which reviews or recommends the compensation arrangements for our officers and employees and also assists the Board of Directors in reviewing and approving matters such as company benefit and insurance plans, including monitoring the performance thereof. The Compensation Committee also undertakes such responsibilities customarily associated with compensation committees of publicly traded companies. The Compensation Committee is composed of Adam Falkoff, Ronald. J. LoRicco, Sr. and Paul M. Sallarulo, who are who are independent directors as defined in accordance with section Rule 10A-3 of the Exchange Act and the rules of the NASDAQ Stock Market. At present, this committee does not have a chairman.

Nominating Committee

Our Board of Directors has a Nominating Committee composed of Paul M. Sallarulo, Ronald J. LoRicco, Sr., and Adam Falkoff, who are who are independent directors as defined in accordance with section Rule 10A-3 of the Exchange Act and the rules of the NASDAQ Stock Market. Mr. Sallarulo serves as the chairman of the committee. The Nominating Committee is charged with proposing potential director nominees to the Board of Directors for consideration also undertakes such responsibilities customarily associated with nominating committees of publicly traded companies. The Nominating Committee will consider director nominees recommended by security holders.

Code of Ethics

Our Board of Directors has adopted a Code of Ethics that applies to all of our employees, including our officers. The Code of Ethics also applies to our directors. The Code of Ethics provides written standards that we believe are reasonably designed to deter wrongdoing and promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, full, fair, accurate, timely and understandable disclosure and compliance with laws, rules and regulations, including insider trading, corporate opportunities and whistle-blowing or the prompt reporting of illegal or unethical behavior. A request for a copy can be made in writing to us at 2041 N.W. 15th Avenue, Pompano Beach, FL 33069, Attention: Mr. Michael V. Barbera, Chairman.

Executive Compensation and Summary Compensation Table

The following table lists specified compensation we paid or accrued during each of the fiscal years ended December 31, 2020, and 2019 to the Chief Executive Officer and our two other most highly compensated executive officers, collectively referred to as the “named executive officers,” in 2019:

For definitional purposes, these individuals are sometimes referred to as the “named executive officers”.

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¹ Served as a consultant and advisor to the Board effective January 13, 2020, later transitioning to Interim Acting Chief Executive Officer effective March 9, 2020.

² Resigned effective July 6, 2020, later serving as a consultant to us as Financial Controller.

³ Terminated effective March 6, 2020.

⁴ Relocation reimbursement of $15,000 was received as per the employment contract.

⁵ Warrants were granted while serving as a consultant to us.

Outstanding Equity Awards to Officers on December 31, 2020

On August 16, 2018, as part of his compensation package for his consulting agreement, David Anderson, prior to being employed as our Chief Operating Officer, received 2,500,000 five-year warrants at a strike price of $0.1235. These warrants remained outstanding on December 31, 2020.

On March 4, 2019, as part of his compensation package for employment, Richard M. Krolewski, our former Chief Executive Officer, was granted immediate vesting in 5,000,000 warrants at a strike price of $0.1235 per share expiring in 5 years.  In 2020, he sold 2,500,000 warrants in a private transaction. The private party later exercised one million warrants on January 21, 2021.  4,000,000 of these warrants remained outstanding at December 31, 2020.

On May 23, 2019, as part of her compensation package for employment, Isabella Barbera, our former Chief Financial Officer, was granted immediate vesting in 1,000,000 options at a strike price of $0.55 per share expiring in 10 years.  These options remained outstanding on December 31, 2020.

Outstanding Equity Awards to Directors on December 31, 2020

We do not have outstanding equity awards to our directors.

Equity Incentive Plan Information

We do not have a formal equity incentive plan at this time.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Our Board of Directors recognizes that related person transactions present a heightened risk of conflicts of interest. The audit committee has the authority to review and approve all related party transactions involving our directors or executive officers.

Under the policy, when management becomes aware of a related person transaction, management reports the transaction to the audit committee and requests approval or ratification of the transaction. Generally, the audit committee will approve only related party transactions that are on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third person. The audit committee will report to the full board all related person transactions presented to it.

Except as disclosed below, we are currently not a party to any related party transaction, including transactions in which: (i) the amounts involved exceeded or will exceed the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two fiscal years, and (ii) a director, executive officer or holder of more than 5% of our common stock or any member of his or her immediate family had or will have a direct or indirect material interest.

On April 2, 2021, we issued a promissory note with Paul Sallarulo, a member of our Board of Directors, in exchange for $150,000 bearing an interest rate of 18% per annum and payable in 1 year. The company also issued 1,500,000 common stock warrants at an exercise price of $0.20 per share expiring in 5 years.

On April 2, 2021, we issued a promissory note with Michael V. Barbera, our Chairman of the Board, in exchange for $150,000 bearing an interest rate of 18% per annum and payable in 1 year. The company also issued 1,500,000 common stock warrants at an exercise price of $0.20 per share expiring in 5 years.

On January 16, 2020, we entered into a demand note agreement with our Board Chairman, Michael V. Barbera, in the amount of $50,000. The note had a term of 6 months bearing an interest rate of 10% per annum.

On January 16, 2020, we entered into a demand note agreement with an entity managed by Ronald J. LoRicco, Sr., a member of our Board of Directors, in the amount of $50,000. The note had a term of 6 months bearing an interest rate of 10% per annum.

On April 13, 2020, the two demand notes payable entered on January 16, 2020 for $50,000 each from related parties was exchanged for convertible debt.  The noteholders, Michael V. Barbera, our Board Chairman and an entity managed by Ronald J. LoRicco, Sr., a member of our Board of Directors, converted the promissory notes.  Mr. Barbera converted the promissory note of $50,000 and accrued interest of $2,440 on June 26, 2020 in exchange for 397,269 restricted common shares and 397,269 five-year warrants with an exercise price of $0.396 per share. Mr. LoRicco converted the promissory note of $50,000 and accrued interest of $2,826 on July 21, 2020 in exchange for 400,195 restricted common shares and 400,195 five-year warrants with an exercise price of $0.396 per share.

On June 26, 2020, an entity managed by Ronald J. LoRicco, Sr., a member of our board of directors, converted a promissory note of $150,000 and accrued interest of $3,542 in exchange for 1,163,201 restricted common shares and 1,163,201 five-year warrants with an exercise price of $0.396 per share.

On July 8, 2020, we negotiated with an entity managed by Vincent L. Celentano, who was at the time a more than 5% beneficial stockholder of our company who held several demand notes payable to agree to settle the remaining principal balance of $191,965 and accrued interest of $15,729 for $150,000 of restricted common shares.  The remaining balance of $57,694 was forgiven.  The conversion price of $0.132 per share was agreed upon for 1,136,364 restricted common shares and an equal amount of five-year warrants with an exercise price of $0.396 per share.

On July 21, 2020, noteholder Michael V. Barbera, our Chairman of the Board, converted a promissory note of $25,000 and accrued interest of $809 in exchange for 195,522 restricted common shares and 195,522 five-year warrants with an exercise price of $0.396 per share.

On August 3, 2020, we issued an unsecured convertible promissory note bearing an interest rate of 18% per annum and payable in six months to Michael V. Barbera, the Chairman of the Board, in exchange for $25,000.

On August 3, 2020, we issued a secured convertible promissory note bearing an interest rate of 20% per annum and payable in six months to The Richard A. LoRicco Sr. and Lucille M. LoRicco Irrevocable Insurance Trust DTD 4/28/95, Louis Demaio as Trustee (the “Trust”) and certain other accredited investors (together with the Trust, the “Holders”) in exchange for $1,000,000.  The Trust was the holder of $750,000 of the principal amount of this note. The Trust was created by the parents of Ronald J. LoRicco Sr. (a member of our Board of Directors) and is maintained by an independent trustee. Mr. LoRicco does not have voting or investment control of or power over the Trust but is an anticipated, partial beneficiary of the Trust. The Holders may convert the unpaid principal balance of the note into shares of restricted common stock at $0.275 per share. The note contains a negative covenant that requires us to obtain consent of the Agent (as defined below) prior to incurring any additional equity or debt investments and is secured by all of our assets. If we consummate 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 us of not less than $3,000,000, the Agent, at its sole discretion and by providing written notice to us, may elect to extend the maturity date of the note by an additional six months. On February 12, 2021, we issued an amended and restated secured convertible promissory note to the Holders in exchange for $1,610,005 bearing an interest rate of 20% per annum and payable in three months. 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, we issued to the Holders, on a pro rata basis, 15,000,000 five-year common stock warrants with an exercise price of $0.20. As part of the amendment and restatement of the note, the Trust was named as the agent for the benefit of the Holders (the “Agent”). On May 12, 2021, we extended the maturity of this note 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 note, we issued to the Holders, on a pro rata basis, 7,500,000 5-year common stock warrants with an exercise price of $0.35.

During the week of November 20, 2020, during the discounted warrant event whereby accredited investor could exercise their outstanding warrants at 50% of their stated exercise price, several related parties exercised their warrants at a discount.  Paul Sallarulo, a member of our Board of Directors, exercised 2,000,000 warrants originally issued with an exercise price of $0.075 for $75,000 or $0.0375 a share.  Michael V. Barbera, our Chairman of the Board, exercised 1,000,000 warrants originally issued with an exercise price of $0.075 for $37,500 or $0.0375 per share.  An entity managed by Ronald J. LoRicco, Sr., a member of our Board of Directors, exercised 1,163,201 warrants originally issued with an exercise price of $0.396 for $230,314 or $0.198 per share.  The entity also purchased 11,632 discounted restricted common shares at $0.20 per share for $2,326.

On April 2, 2021, we issued a promissory note with Paul Sallarulo, a member of our Board of Directors, in exchange for $150,000 bearing an interest rate of 18% per annum and payable in 1 year. The company also issued 1,500,000 common stock warrants at an exercise price of $0.20 per share expiring in 5 years.

On April 2, 2021, we issued a promissory note with Michael V. Barbera, our Chairman of the Board, in exchange for $150,000 bearing an interest rate of 18% per annum and payable in 1 year. The company also issued 1,500,000 common stock warrants at an exercise price of $0.20 per share expiring in 5 years.

PRINCIPAL STOCKHOLDERS

The following table lists information regarding the beneficial ownership of our equity securities as of the date of this prospectus by (1) each person whom we know to beneficially own more than 5% of the outstanding shares of our common stock, (2) each director, (3) each officer named in the summary compensation table below, and (4) all directors and executive officers as a group. Unless otherwise indicated, the address of each officer and director is 2041 NW 15th Avenue, Pompano Beach, Florida 33069.

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(1) Shares of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assume the exercise of all options and other securities convertible into common stock beneficially owned by such person or entity currently exercisable or exercisable within 60 days of the date of this prospectus, except as otherwise noted. Shares issuable pursuant to the exercise of stock options and other securities convertible into common stock exercisable within 60 days are deemed outstanding and held by the holder of such options or other securities for computing the percentage of outstanding common stock beneficially owned by such person but are not deemed outstanding for computing the percentage of outstanding common stock beneficially owned by any other person.

(2) Includes shares currently held by Mr. Anderson in addition to 2,500,000 shares of common stock issuable upon exercise of common stock purchase warrants exercisable at $0.1235 per share.

(3) Includes shares currently held by Mr. Barbera and Analytical Maintenance Services, Inc. Profit Sharing Plan, where Mr. Barbera is the trustee.  Includes 50,000 shares of common stock issuable upon exercise of common stock purchase warrant exercisable at $0.40 per share, 50,000 shares issuable upon exercise of common stock purchase warrant exercisable at $0.60 per share, 200,000 shares issuable upon exercise of common stock purchase warrant exercisable at $0.15 per share, 1,000,000 shares issuable upon exercise of common stock purchase warrant exercisable at $0.075 per share, 400,195 shares issuable upon exercise of common stock purchase warrant exercisable at $0.396 per share, and 195,522 shares issuable upon exercise of common stock purchase warrant exercisable at $0.396 per share.

(4) Includes shares held by RVRM Holdings, Inc., First New Haven Mortgage Company, LLC and LoRi Co., which are controlled by our director, Ronald J. LoRicco, Sr.  Includes 500,000 shares of common stock issuable upon exercise of common stock purchase option exercisable at $0.25 per share, and 397,269 shares issuable upon exercise of common stock purchase warrant exercisable at $0.396 per share.  In addition, an entity related to Mr. LoRicco currently holds a $1.6 million secured convertible note that does not have a stated conversion rate but cannot convert for any less than $0.01 per share.

(5) Includes shares currently held by Mr. Sallarulo in addition to 250,000 shares of common stock issuable upon exercise of common stock purchase options exercisable at $0.25 per share.

DESCRIPTION OF SECURITIES

Common Stock

As of this date of the prospectus, there are 248,520,598 shares of common stock outstanding. Currently, our articles of incorporation authorize us to issue and have outstanding one billion five million shares of capital stock, of which one billion is for common stock.

There are currently no dividends paid on the common stock by us. We intend to retain any earnings for use in our business activities, so it is not expected that any dividends on our common stock will be declared and paid in the foreseeable future.

The holders of common stock are entitled to one vote per share on all matters to be voted on by stockholders and are entitled to receive such dividends, if any, as may be declared from time to time by our Board of Directors from funds legally available therefore, subject to the dividend preferences of the preferred stock, if any. Upon our liquidation or dissolution, the holders of common stock are entitled to share ratably in all assets available for distribution after payment of liabilities and liquidation preferences of the preferred stock, if any. Holders of common stock have no preemptive rights, no cumulative voting rights and no rights to convert their common stock into any other securities. Any action taken by holders of common stock must be taken at an annual or special meeting or by written consent of the holders of not less than 10% of our capital stock entitled to vote on such action.

Preferred Stock

Our articles of incorporation allows for the issuance of 5,000,000 shares of preferred stock, but no preferred shares are currently outstanding. The unissued shares of preferred stock are “blank check” shares, meaning that the rights, preferences and privileges of such shares shall be as our Board of Directors may designate.

Warrants

As of the date of this prospectus, warrants to purchase 117,691,666 shares of our common stock are issued and outstanding. Below is a summary of the Warrant As and Warrant Bs issued in the August 2021 Private Placement (we refer to the Warrant As and Warrant Bs collectively as the Warrants). The 38,796,288 shares of our common stock underlying the Warrants are being registered for resale pursuant to the registration statement of which this prospectus forms a part.

The Warrants are immediately exercisable, have a 5-year term and an exercise price of $0.33 per share (the Exercise Price). The Warrants contain customary stock-based (but not price-based) anti-dilution provisions, except that (i) if any subsequent uplisting and concurrent registered offering by us to the New York Stock Exchange, NYSE American or Nasdaq exchange (which we refer to the Re-IPO) is priced below the Exercise Price, then the Exercise Price shall reset on a one-time basis to the offering price of the Re-IPO and (ii) subject to certain exceptions, if prior to the consummation of a Re-IPO, we sell securities at a price less than the Exercise Price then in effect, or issue derivative securities with an exercise or conversion price below the Exercise Price then in effect, the Exercise Price shall be adjusted downward to equal such lesser sales or exercise or conversion price.

The Warrant As and Warrant Bs are otherwise identical, except the Warrant Bs are subject to a call provision as follows: in the event that, at any time, the price of our publicly traded common stock is $1.00 or greater (as adjust for stock splits and the like) for five (5) consecutive trading days, we may provide five (5) trading days’ notice to the holders of Warrant B to call the Warrant Bs for a total price of $0.01 for the entire Warrant B. During such five trading days’ notice period, the holders of Warrant B shall be permitted to exercise their Warrant Bs at the Exercise Price. If the Warrant Bs are not so exercised, they will be deemed to be repurchased by us in full for $0.01.

The Warrants also contain a most favored nation provision such that if we issue any subsequent warrants with rights that are more favorable than the rights contained in the Warrants, such rights shall attach to the Warrants.

Additional Securities Not Registered

We have other securities presently outstanding, including (i) convertible notes which are presently convertible into an aggregate of 22,500,000 shares of our common stock at a weighted average conversion price of $0.25 and (ii) additional warrants to purchase an aggregate of 117,416,666 shares of our common stock with a weighted average exercise price of $0.28.

Nevada Anti-Takeover Matters

Certain provisions of our articles of incorporation, as amended, our amended and restated bylaws, and Nevada law may have the effect of delaying, deferring, or discouraging another person from acquiring control of our company. Nevada has enacted the following legislation that may deter or frustrate takeovers of Nevada corporations:

Authorized but Unissued Common Stock – Our authorized but unissued shares of common stock are available for future issuance without stockholder approval. These additional shares may be used for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions, and employee benefit plans. The existence of authorized but unissued shares of common stock may enable our Board of Directors to issue shares of stock to persons friendly to existing management.

Authorized but Unissued Preferred Stock – Our authorized but unissued shares of preferred stock are available for future issuance without stockholder approval. Our board of directors, in its discretion, may set the rights, preferences, and privileges of the preferred stock. These rights, preferences, and privileges could afford the holders of such preferred stock with economic rights that are senior to the rights of our common stockholders and may include rights which could grant such holders the ability to block a change of control of our company or otherwise discourage third parties from considering an investment in or acquisition of our company.

Stockholder Nominations – Our amended and restated bylaws provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide advance notice in writing, and also specify requirements as to the form and content of a stockholder’s notice. This could discourage third parties from seeking representation on our Board of Directors, which (if such representation was granted) in turn could lead to a change in policy towards mergers and acquisitions involving our company.

Evaluation of Acquisition Proposals – The Nevada Revised Statutes expressly permit our Board of Directors, when evaluating any proposed tender or exchange offer, any merger, consolidation or sale of substantially all of our assets, or any similar extraordinary transaction, to consider all relevant factors including, without limitation, the social, legal, and economic effects on our employees, customers, suppliers, and other relevant interest holders, and on the communities and geographical areas in which they operate. Our Board of Directors may also consider the amount of consideration being offered in relation to the then current market price of our outstanding shares of capital stock and our then current value in a freely negotiated transaction.

Control Share Acquisitions – The Nevada Revised Statutes contain a control share acquisitions statute designed to afford stockholders of public corporations in Nevada protection against acquisitions in which a person, entity or group seeks to gain voting control. With enumerated exceptions, the statute provides that shares acquired within certain specific ranges will not possess voting rights in the election of directors unless the voting rights are approved by a majority vote of the public corporation’s disinterested stockholders. Disinterested shares are shares other than those owned by the acquiring person or by a member of a group with respect to a control share acquisition, or by any officer of the corporation or any employee of the corporation who is also a director. The specific acquisition ranges that trigger the statute are acquisitions of shares possessing one-fifth or more but less than one-third of all voting power; acquisitions of shares possessing one-third or more but less than a majority of all voting power; or acquisitions of shares possessing a majority or more of all voting power. Under certain circumstances, the statute permits the acquiring person to call a special stockholders’ meeting for the purpose of considering the grant of voting rights to the holder of the control shares. The statute also enables a corporation to provide for the redemption of control shares with no voting rights under certain circumstances.

Business Combinations – The Nevada Revised Statutes contain a business combinations statute designed to afford stockholders of publicly traded Nevada corporations protection against combinations (as broadly defined in the statute) with a person, entity or group that acquires beneficial ownership of ten percent or more of the corporation’s voting securities or that falls within the statute’s definition of an interested stockholder in another manner, without prior approval of the board of directors or approval by stockholders who are not related to the interested stockholder.  The statute imposes material restrictions on combinations with such person, entity or group within four years after it became an interested stockholder.

SELLING STOCKHOLDERS

The shares of common stock being offered by the selling stockholders listed below were issued in the August 2021 Private Placement. Other than the relationships as purchasers under the SPAs (as defined below) and described herein, to our knowledge, no material relationships exist between any of the selling stockholders and us nor have any such material relationships existed within the past three years. As used herein, the term “selling stockholders” means the selling stockholders listed in the section of this prospectus captioned “Selling Stockholders” and such holders’ donees, pledgees, transferees, or other successors-in-interest selling shares of common stock or interests in shares of common stock received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer.

Summary of August 2021 Private Placement

On August 17, 2021, we conducted the closing of a private placement offering to accredited investors of units at a price of $0.275 per unit, with each unit consisting of: (i) one (1) share of our common stock, (ii) a five-year, immediately exercisable warrant (which we refer to as Warrant A) to purchase one (1) share of common stock at an exercise price of $0.33 per share (which we refer to as the Exercise Price) and (iii) an additional five-year, immediately exercisable warrant to purchase one (1) share of common stock at the Exercise Price (which we refer to as Warrant B, which we refer collectively with Warrant A as the Warrants, with the shares of our common stock underlying the Warrants being referred to as the Warrant Shares).

In connection with the closing of the August 2021 Private Placement, we entered into definitive securities purchase agreements (or the SPAs) with 19 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 of approximately $5,334,490. No actual units were issued in the August 2021 Private Placement. Aegis Capital Corp. acted as the placement agent in connection with the August 2021 Private Placement, for which Aegis received customary cash fees and expense reimbursements.

We are utilizing net proceeds of the August 2021 Private Placement for expansion of our manufacturing capability, sales and marketing, satisfaction of certain indebtedness and general working capital purposes.

The Warrants

The Warrant As and Warrant Bs contain customary stock-based (but not price-based) anti-dilution provisions, except that (i) if any subsequent uplisting and concurrent registered offering by us to the New York Stock Exchange, NYSE American or Nasdaq exchange (which we refer to the Re-IPO) is priced below the Exercise Price, then the Exercise Price shall reset on a one-time basis to the offering price of the Re-IPO and (ii) subject to certain exceptions, if prior to the consummation of a Re-IPO, we sell securities at a price less than the Exercise Price then in effect, or issue derivative securities with an exercise or conversion price below the Exercise Price then in effect, the Exercise Price shall be adjusted downward to equal such lesser sales or exercise or conversion price.

The Warrant As and Warrant Bs are otherwise identical, except the Warrant Bs are subject to a call provision as follows: in the event that, at any time, the price of our publicly traded common stock is $1.00 or greater (as adjust for stock splits and the like) for five (5) consecutive trading days, we may provide five (5) trading days’ notice to the holders of Warrant B to call the Warrant Bs for a total price of $0.01 for the entire Warrant B. During such five trading days’ notice period, the holders of Warrant B shall be permitted to exercise their Warrant Bs at the Exercise Price. If the Warrant Bs are not so exercised, they will be deemed to be repurchased by us in full for $0.01.

The Warrants also contain a most favored nation provision such that if we issue any subsequent warrants with rights that are more favorable than the rights contained in the Warrants, such rights shall attach to the Warrants.

Registration Rights

Pursuant to the SPAs, we have granted the investors in the August 2021 Private Placement registration rights which require us to file two (2) registration statements, as follows:

1.       Resale Registration. We are required to file a Form S-1 registration statement (or equivalent) by October 1, 2021 (or Filing Date) to register the shares of common stock and the Warrant Shares issued in the August 2021 Private Placement for public resale (we refer to this registration as the Resale Registration). We have filed the registration statement of which this prospectus forms a part in order to satisfy such filing obligation, and the selling stockholders are the investors in the August 2021 Private Placement. We are required to use our commercially reasonable best efforts to cause the Resale Registration to be declared effective by December 15, 2021 (or the Resale Effective Date). If the Filing Date and/or the Resale Effective Date is not met, each investor in the August 2021 Private Placement will be entitled to receive cash liquidated damages penalty equal to 1% of the amount invested in the August 2021 Private Placement per month for the first 90 days following the Filing Date or Resale Effective Date (as the case may be), to be increased to 2% per month thereafter, in each case pro-rated for each 30-day period. Such damages to be capped at six months of penalties in the aggregate.

2.       Uplist Registration Statement. The Company shall file a second Form S-1 registration statement (or equivalent) between the 61^st day and 75th day of the Resale Registration statement being declared effective (we refer to this as the Re-IPO Filing Date) to effectuate the Re-IPO with an underwritten offering of at least $15,000,000 in gross proceeds. We are required to use our commercially reasonable best efforts to close the Re-IPO within 180 days of the date the Resale Registration is declared effective. If the Re-IPO Filing Date is not met, each investor in the August 2021 Private Placement will be entitled to receive a cash liquidated damages penalty equal to 1% of the amount invested in the August 2021 Private Placement, pro-rated for each 30-day period up to 90 days to be increased to 2% thereafter. Such damages to be capped at six months of penalties.

No assurances can be given that we will be able to effectuate the Re-IPO on terms satisfactory to us or at all.

Right of Participation

Subject to customary exceptions, for thirty-six months after the closing of the August 2021 Private Placement, the investors in the August 2021 Private Placement shall have the right to purchase up to 30% of the securities offered by us in any subsequent offering upon the same terms as offered to all other offerees.

The SPAs also contain customary representations, warranties, and agreements. In addition, subject to certain exceptions, we have granted to Aegis a consent right with respect to future financings of our company until August 17, 2022.

Selling Stockholder Table

The table below lists the selling stockholders and other information regarding the beneficial ownership of the shares of common stock by each of the selling stockholders. The table below sets forth information as of the date of this prospectus, to our knowledge, about the beneficial ownership of our common stock by the selling stockholders both before and immediately after this offering. Because the selling stockholders may sell, transfer, or otherwise dispose of all, some, or none of their shares of common stock, we cannot determine the number of such shares that will be sold, transferred or otherwise disposed of by the selling stockholders, or the amount or percentage of shares of our common stock that will be held by the selling stockholders upon termination of any particular offering. See “Plan of Distribution.” For purposes of the table below, we assume that the selling stockholders will sell all of their shares of common stock.

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*        Less than 1%.

PLAN OF DISTRIBUTION

We are registering the shares of common stock to permit the resale of these shares of common stock by the holders thereof from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock. We will bear all fees and expenses incident to our obligation to register the shares of common stock. As used herein, the term “selling stockholders” means the selling stockholders listed in the section of this prospectus captioned “Selling Stockholders” and such holders’ donees, pledgees, transferees or other successors-in-interest selling shares of common stock or interests in shares of common stock received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer.

The selling stockholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers, or agents. If the shares of common stock are sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be affected in transactions, which may involve transactions:

If the selling stockholders effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. The selling stockholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.

The selling stockholders may pledge or grant a security interest in some or all of the warrants or shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act, amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees, or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

The selling stockholders and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this prospectus forms a part.

The selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.

We will pay all expenses of the registration of the shares of common stock pursuant to the securities purchase agreement, including, without limitation, SEC filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that a selling stockholder will pay all underwriting discounts and selling commissions, if any.

Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.

LEGAL MATTERS

Certain legal matters with respect to the shares of common stock offered hereby will be passed upon by Saltzman Mugan Dushoff, LLC.

EXPERTS

The consolidated financial statements of Basanite, Inc. as of December 31, 2020 and 2019, and for each of the years in the two-year period ended December 31, 2020, included in our Annual Report on Form 10K, have been incorporated by reference herein in reliance upon the report of Cherry Bekaert LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting in auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-1 with the SEC with respect to our common stock offered by this prospectus. This prospectus does not contain all of the information set forth in the registration statement. You should refer to the registration statement and its exhibits for additional information. Whenever we make references in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete, and you should refer to the exhibits attached to the registration statement for the copies of the actual contract, agreement or other document.

Our fiscal year ends on December 31. We are a reporting company and file annual, quarterly, and current reports, and other information with the SEC. Our SEC filings are available to the public on the SEC’s Internet site at http://www.sec.gov. We maintain a website at www.basaniteindustries.com. Information contained in or accessible through our website is not and should not be considered a part of this prospectus and you should not rely on that information in deciding whether to invest in our common stock.

INDEX TO FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Basanite, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Basanite, Inc. (the “Company”) as of December 31, 2020 and 2019, and the consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As more fully discussed in Note 1 to the consolidated financial statements, the Company’s significant operating losses and need to raise additional funds to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding those matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Debt and Equity Instruments

As disclosed in Notes 5, 6, 7, 8, and 10 to the consolidated financial statements, the Company has entered into convertible and nonconvertible note agreements containing attached warrants with individuals including related parties. The accounting for the transactions were complex, as it required assessment as to whether features, other than the conversion feature, required bifurcation and separate valuation. Additionally, the transactions were complex as they required valuation of the conversion feature in the debt instrument, which involved estimation of the fair value of the debt instrument absent of any conversion feature, and evaluation of the appropriate classification of the conversion feature in the financial statements.

Our audit procedures included the following:

BASANITE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS