8-K: Basanite Terminates Auditor After PCAOB Withdrawal

Basanite, Inc. terminated its independent registered public accounting firm, Hudgens CPA, PLLC, after discovering the firm withdrew from the PCAOB and ceased operations without notification.

Summary

• Basanite, Inc. (the Company) terminated the services of Hudgens CPA, PLLC, its Independent Registered Public Accounting Firm, on June 2, 2026.
• The termination occurred because the Company discovered that Hudgens CPA, PLLC had withdrawn from the PCAOB and ceased operations as of November and December 2025, without notifying Basanite.
• Hudgens CPA, PLLC's reports on the Company's consolidated financial statements for the fiscal years ended December 31, 2024, and December 31, 2023, did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified.
• There were no disagreements on accounting principles, practices, financial statement disclosure, or auditing scope/procedure between the Company and Hudgens CPA, PLLC during the fiscal years ended December 31, 2024, and December 31, 2023, and the subsequent interim period through June 2, 2026.
• There were also no reportable events within the meaning of Item 304(a)(1)(v) of Regulation S-K during the specified periods.
• The Company has provided Hudgens with a copy of these disclosures and requested a letter to the SEC stating agreement with the statements made.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a moderately negative development. While there were no prior disagreements with the auditor, the unexpected cessation of the auditor's operations introduces an unforeseen operational challenge and potential uncertainty for Basanite's financial reporting continuity.

Positives

• Previous audit reports from Hudgens CPA, PLLC for fiscal years 2023 and 2024 did not contain adverse opinions, disclaimers, or qualifications regarding uncertainty, audit scope, or accounting principles.
• There were no disagreements on accounting principles or practices, financial statement disclosure, or auditing scope or procedure with the former auditor.
• No reportable events were identified with the former auditor.

Negatives

• The Company's independent registered public accounting firm, Hudgens CPA, PLLC, ceased operations and withdrew from the PCAOB without notifying Basanite, leading to an unexpected termination.
• The lack of communication from the former auditor created an unforeseen operational challenge for the Company.

Risks

• Potential for delays in securing a new independent registered public accounting firm, which could impact future financial reporting timelines.
• Regulatory scrutiny or questions regarding the Company's oversight of its service providers, given the auditor's unannounced cessation of operations.
• Uncertainty regarding the transition to a new auditor and potential costs associated with the change.

Future Outlook

The filing does not provide specific forward-looking statements or guidance beyond the immediate need to address the auditor change.

Management Comments

• Ronald J. LoRicco, Sr., Acting CEO, signed the report on behalf of Basanite, Inc.

Industry Context

StockSavvy.ai notes that an auditor change due to the accounting firm ceasing operations and withdrawing from the PCAOB without client notification is an unusual event. This situation differs from standard auditor rotations and could prompt questions about a company's due diligence processes in monitoring its professional service providers. While not directly comparable to specific industry trends, it highlights the importance of robust vendor management.

Comparison to Industry Standards

• This event deviates from typical industry standards where auditor changes are usually planned and communicated, often due to contract expiration, fee disputes, or a desire for fresh perspectives, rather than an auditor's unannounced cessation of operations.
• Most publicly traded companies maintain active communication channels with their independent auditors, and auditors are generally expected to provide timely notice of significant operational changes, such as withdrawing from regulatory bodies like the PCAOB.

Corporate Governance

Stakeholder Impact

• Shareholders may face uncertainty regarding the continuity and timeliness of future financial reporting until a new auditor is appointed.
• Investors might scrutinize the company's internal controls and vendor management processes given the unexpected nature of the auditor's cessation of operations.

Next Steps

• The Company will need to appoint a new independent registered public accounting firm.
• Hudgens CPA, PLLC has been requested to furnish a letter to the Securities and Exchange Commission stating whether it agrees with the disclosures made in the filing.

Key Dates

Recommendation

The termination of the independent auditor due to their cessation of operations is an unexpected event that introduces uncertainty regarding future financial reporting. While there were no reported disagreements or adverse opinions with the former auditor, the company now faces the task of securing a new firm, which could impact reporting timelines and investor confidence. A 'hold' recommendation is appropriate given the immediate operational challenge, balanced by the absence of direct financial reporting issues with the previous auditor.

Keywords

Basanite, Hudgens CPA, auditor change, PCAOB withdrawal, accounting firm, 8-K filing, corporate governance, financial reporting