Item 3.02. Unregistered Sales of
Overview
On
In connection with the Closing, the Company entered into definitive securities
purchase agreements (the "SPAs") with 17 accredited investors (the "Investors")
and issued an aggregate of 19,398,144 shares of common stock, Warrant As to
purchase up to an aggregate of 19,398,144 shares of Common Stock, and Warrant Bs
to purchase up to an aggregate of 19,398,144 shares of Common Stock (for an
aggregate of 38,796,288 Warrant Shares), for aggregate gross proceeds to the
Company of approximately
The net proceeds of the Offering will be used by the Company for expansion of its 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 the Company to the
The Warrant As and Warrant Bs are otherwise identical, except the Warrant Bs
will be subject to a call provision as follows: in the event that, at any time
following the Closing, the price of the publicly traded Common Stock is
The Warrants also contain a most favored nations provision such that if the Company issues 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, the Company has granted the Investors registration rights which require the Company to file two (2) registration statements, as follows:
1. Resale Registration. The Company shall file a Form S-1 registration statement (or equivalent) within 45 days of the Closing ("Filing Date") to register the shares of Common Stock and the Warrant Shares issued in the Offering for public resale (the "Resale Registration"). The Company shall use its commercially reasonable best efforts to cause the Resale Registration to be declared effective within 120 days of the Closing (the "Resale Effective Date"). If the Filing Date and/or the Resale Effective Date is not met, each Investor will be entitled to receive cash liquidated damages penalty equal to 1% of the amount invested in the Offering 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 61stday and 75th day of the
Resale Registration statement being declared effective ("Re-IPO Filing Date") to
effectuate the Re-IPO with an underwritten offering of at least
Right of Participation
Subject to customary exceptions, for thirty-six months after the Closing, the Investors shall have the right to purchase up to 30% of the securities offered by the Company in any subsequent offering upon the same terms as offered to all other offerees.
The SPAs also contains customary representations, warranties and agreements. In addition, subject to certain exceptions, the Company has granted to Aegis a consent right with respect to future financings of the Company for a period of one (1) year from the Closing.
The securities issued in the Offering as described above have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and sales were made pursuant to the exemptions from registration provided by Rule 506(b) of Regulation D ("Reg. D") promulgated under the Securities Act because, among other things, the Investors are "accredited investors" (as defined under Reg. D), the Investors purchased the securities for investment purposes only and not for resale and the Company took appropriate measures to restrict the transfer of the securities sold and verify the accredited investor status of the Investors.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On
Item 8.01. Other Information
In connection with the Offering, the Company provided potential investors, under cover of confidentiality, with the following updated business narrative regarding the Company:
Our two other main product lines are BasaMix™, which are fine denier basalt fibers available in various chopped sizes, and BasaMesh™, a line of Basalt Geogrid Mesh Rolls, intended to replace welded wire mesh (made of steel) and other fiber reinforced polymer ("FRB") grids and mesh.
BasaMix™ is designed to help absorb the stresses associated with early-aged plastic shrinkage and settlement cracking in concrete, as well as providing an increased toughness for enhanced reinforcement in Slab on Grade (SOG) and precast elements. BasaMix™ also serves in a "system approach" for optimum performance of a concrete element when used in conjunction with our BasaFlex™ rebar.
BasaMesh™ is designed for secondary and temperature shrinkage reinforcement. BasaMesh™ can also work in conjunction with the BasaFlex™ rebar or BasaMix™ for a total reinforcement program.
Each of our products is specifically designed to extend the lifecycle of concrete products by eliminating "concrete spalling." Spalling results from the steel reinforcing materials embedded within the concrete member rusting (contrary to popular belief, concrete is porous, and water can permeate into concrete). Rusting leads to the steel expanding and eventually causing the surrounding concrete to delaminate, crack, or even break off, resulting in potential structural failure. We believe that each Basanite product addresses this important need along with other key requirements in today's construction market.
We believe that the following attributes of BasaFlex™ provide it with a competitive advantage in the marketplace:
· BasaFlex™ never corrodes steel reinforcement products rust, leading to spalling
and significant repair costs down the road;
· BasaFlex™ is sustainable: BasaFlexTM is made from Basalt rock, the most
abundant rock found on Earth's surface, and offers a longer product lifecycle than traditional steel (the lack of corrosion allows the life span of concrete products reinforced with BasaFlex to be significantly longer);
· BasaFlex™ is "green": From mining, through production, to installation at the
building site, BasaFlex™ has an exceptionally lowcarbon footprint when compared with that of steel; and
· BasaFlex™ has a lower in-place cost: the physical nature of our products
relative to steel result in a lower net cost to the contractor once installed,
such as: BasaFlexTM is one-quarter of the weight of equivalent sized steel,
meaning 4 times the quantity of material can be delivered by the same truck (or
container); all Basanite products can be loaded/unloaded and moved around the
jobsite by hand - no expensive handling equipment is needed; less concrete is
required as BasaFlexTM does not require the extra concrete cover needed when
using steel; and Basanite products are safer and easier to use. We believe all
these factors materially reduce the net in-place cost of concrete
reinforcement.
BI leases a fully permitted, 36,900 square foot facility located in
We believe that macroeconomic factors are pressuring the construction industry to consider the use of alternative reinforcement materials for the following reasons:
· the increasing need for global infrastructure repair;
· recent design trends towards increasing the lifespan of projects and materials;
· the global interest in promoting the use of sustainable products; and
· increasing consideration of both the long-term costs and environmental impacts
of material selections.
We believe we are well positioned to benefit from this renewed focus,
particularly in light of the renewed
BI submitted its first round of BasaFlex™ rebar products to the
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 in the Company, 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 BasaFlexTM, 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 BasaFlexTM
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 upgraded version of
BasaFlexTM was submitted to the
Early in 2020, Basanite 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. This allows both our engineers and our customers' engineers to easily convert engineering designs for the use of BasaFlex™ in place of steel rebar in all types of 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 (FRP reinforcement for concrete) and ACI 318 (steel reinforcement for concrete). The software is capable of showing all calculations 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 limited manufacturing capacity (which we plan to begin to expand with the net proceeds of this Offering as described below), these inquiries (if they lead to actual orders) would exceed our capability to deliver within the customer's requested timeframe, and largely because of this, there is no guarantee that orders will actually be received.
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 . . .
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. Exhibit No. Description 3.1 Amended and Restated Bylaws ofBasanite, Inc. , adopted onOctober 9, 2020
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