UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-K

———————

(Mark One)



☒ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the fiscal year ended: December 31, 2022

or



☐TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from: _____________ to
_____________



Commission File Number: 000-53574

———————

Basanite, Inc.

(Exact name of registrant as specified in its
charter)

———————

|Nevada                            |  | 20-4959207         
|--------------------------------- |  | -------------------
|(State or Other Jurisdiction      |  | (I.R.S. Employer   
|of Incorporation or Organization) |  | Identification No.)



2041 NW 15th Avenue, Pompano Beach, Florida
33069

(Address of Principal Executive Office) (Zip
Code)



(954) 532-4653

(Registrant’s telephone number, including
area code)



———————



Securities registered pursuant to Section 12(b) of the Act: None.



|Title of each class | Trading Symbol(s) | Name of each exchange on which registered
|------------------- | ----------------- | -----------------------------------------
|                    |                   |                                          



|Securities registered pursuant to Section 12(g) of the Act:
|-----------------------------------------------------------
|Common Stock, par value $0.001 per share                   
|                                                           

———————

Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes  ☒ No



Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes  ☒ No



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. ☒ Yes  ☐ No



Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232-405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)    Yes  ☒  No  ☐



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.





|Large accelerated filer   ☐ | Accelerated filer   ☐       
|--------------------------- | ----------------------------
|Non-accelerated filer     ☒ | Smaller reporting company  ☒
|                            | Emerging growth company  ☐  





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 13(a) of the Exchange Act. ☐



Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐



If
                                            securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether
                                            the financial statements of the registrant included in the filing reflect the correction
                                            of an error to previously issued financial statements. ☐



Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐



Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes  ☒ No



State the aggregate market value of the voting
and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the
average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second
fiscal quarter: $76,517,652 on June 30, 2022.



On April 14, 2023, the issuer had 251,761,356shares
of common stock outstanding.



















NOTICE OF FILING UNAUDITED FINANCIALS







The Company is
filing this 10K report with the intent to issue an amended 10K with both 2021 and 2022 audited financials within an approximate two-week
timeframe.







BASANITE,
INC.

TABLE OF CONTENTS



|                                                     |                                                                                                                   | Page No.
|---------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | --------
|Cautionary Note Regarding Forward-Looking Statements | ii                                                                                                               
|Summary of Risk Factors                              | iii                                                                                                              
|                                                     |                                                                                                                   |         
|                                                     | PART I.                                                                                                           |         
|                                                     |                                                                                                                   |         
|Item 1.                                              | Business.                                                                                                         | 1       
|Item 1A.                                             | Risk Factors.                                                                                                     | 10      
|Item 1B.                                             | Unresolved Staff Comments.                                                                                        | 26      
|Item 2.                                              | Properties.                                                                                                       | 26      
|Item 3.                                              | Legal Proceedings.                                                                                                | 27      
|Item 4.                                              | Mine Safety Disclosures.                                                                                          | 27      
|                                                     |                                                                                                                   |         
|                                                     | PART II.                                                                                                          |         
|                                                     |                                                                                                                   |         
|Item 5.                                              | Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. | 28      
|Item 6.                                              | Reserved.                                                                                                         | 31      
|Item 7.                                              | Management’s Discussion and Analysis of Financial Condition and Results of Operations.                            | 32      
|Item 7A.                                             | Quantitative and Qualitative Disclosures about Market Risk.                                                       | 36      
|Item 8.                                              | Consolidated Financial Statements and Supplementary Data.                                                         | 36      
|Item 9.                                              | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.                             | 36      
|Item 9A.                                             | Controls and Procedures.                                                                                          | 36      
|Item 9B.                                             | Other Information.                                                                                                | 37      
|Item 9C.                                             | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections                                               | 37      
|                                                     |                                                                                                                   |         
|                                                     | PART III.                                                                                                         |         
|                                                     |                                                                                                                   |         
|Item 10.                                             | Directors, Executive Officers and Corporate Governance.                                                           | 38      
|Item 11.                                             | Executive Compensation.                                                                                           | 42      
|Item 12.                                             | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.                   | 44      
|Item 13.                                             | Certain Relationships and Related Transactions, and Director Independence.                                        | 45      
|Item 14.                                             | Principal Accountant Fees and Services.                                                                           | 47      
|                                                     |                                                                                                                   |         
|                                                     | PART IV.                                                                                                          |         
|                                                     |                                                                                                                   |         
|Item 15.                                             | Exhibits, Financial Statement Schedules.                                                                          | 48      
|Item 16.                                             | Form 10-K Summary.                                                                                                | 49      









i





CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS



All statements, other than statements
of historical fact, included in this Form 10-K, including without limitation the statements under “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and “Description of Business,” are, or may be deemed
to be, “forward-looking statements” within the meaning of the safe harbor provisions
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements involve assumptions, significant known and unknown risks, uncertainties and other factors (many of which may
be out of our control), which may cause the actual results, performance or achievements of our company to be materially different from
any future results, performance or achievements expressed or implied by such forward-looking statements contained in this Form 10-K. In
addition, our management may from time to time make written or oral forward-looking statements with respect to our long-term objectives
or expectations which may be included in our filings with the Securities and Exchange Commission (the “SEC”), reports to stockholders
and information provided in our website. Such statements are similarly subject to the same assumptions, risks, uncertainties and other
factors



The words or phrases “will
likely,” “are expected to,” “is anticipated,” “is predicted,” “forecast,” “estimate,”
“project,” “plans,” “believes,” “may” or similar expressions identify “forward-looking
statements.” Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ
materially from historical earnings and those presently anticipated or projected. We wish to caution you not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. We are calling to your attention important factors that could
affect our financial performance and could cause actual results for future periods to differ materially from any opinions or statements
expressed with respect to future periods in any current statements.



The following list of important
risk factors and uncertainties is not all-inclusive, and we specifically decline to undertake an obligation to publicly revise any forward-looking
statements that have been made to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated
or unanticipated events. Among the factors that could have an impact on our ability to achieve expected operating results and growth plan
goals and/or affect the market price of our stock are:



| | · | our extremely limited cash resources and resulting doubt regarding our ability to continue as a going concern;
| | - | --------------------------------------------------------------------------------------------------------------

| | · | the early-stage nature of our company, including our limited manufacturing capacity;
| | - | ------------------------------------------------------------------------------------

| | · | factors that impair our ability to commence meaningful revenue generating operations, including our ability to raise needed capital,
obtain market acceptance of our products and attract and retain customers;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the amount and timing of required operating costs and capital expenditures related to the maintenance and expansion of our business
operations and infrastructure;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | our ability to secure and maintain key channel partners, including suppliers of raw materials and marketing and distribution partners;
| | - | --------------------------------------------------------------------------------------------------------------------------------------

| | · | our dependence on key personnel;
| | - | --------------------------------

| | · | our ability to comply with applicable laws, rules and regulations and changes in laws, rules and regulations that affect our operations
and the demand for our products;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the long- and short-term impact of the COVID-19 pandemic on the global and United States economy and the impact it may have on our
industry;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------

| | · | our ability to address and adapt to competition effectively, in particular competition with larger, more established companies;
| | - | -------------------------------------------------------------------------------------------------------------------------------

| | · | the impact on our operations of general economic conditions and those economic conditions specific to the construction industry;
| | - | --------------------------------------------------------------------------------------------------------------------------------

| | · | volatility in prices for raw materials; and
| | - | -------------------------------------------

| | · | the impact of natural disasters, catastrophes, pandemics, theft, or sabotage, including by way of hurricanes given our location in
South Florida, for which we may have no or inadequate insurance.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 Annual Report might not occur.

ii







SUMMARY OF RISK FACTORS





Investing in our common
stock is highly speculative and involves a significant degree of risk. You should carefully consider the risks and uncertainties
discussed under the section titled “Risk Factors” elsewhere in this Annual Report before making a decision to invest in our
common stock. Certain of the key risks we face include, without limitation:



| | · | We have a history of operating losses and may never achieve significant revenues or cash flow positive or profitable results of operations.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



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



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



| | · | 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.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | We currently have very limited cash resources and need substantial additional capital
to fund our operations, which, even if obtained, could result in substantial dilution or significant debt service obligations. We are
seeking to raise an estimated 5 million dollars of private and /or public financing. We may not be able to obtain additional capital on
commercially reasonable terms, if at all, which could adversely affect our liquidity and financial position.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| | · | We expect to derive a substantial portion of our future revenue from sales of BasaFlex and other BFRP
products, which leaves us reliant on the commercial viability of such products.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | We may be unable to produce BasaFlex and other BFRP products as the Company has exited its previous Pompano
Beach facility on December 31, 2022, but are currently engaged in searching for a new facility to host its operational and manufacturing
activities.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | We currently have very limited employee resources as all but two employees remain active in their employment
with the Company.
| | - | ------------------------------------------------------------------------------------------------------------------------------



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





iii











| | · | 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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our sales and marketing efforts may not be successful.
| | - | ------------------------------------------------------



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



| | · | 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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | 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.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



| | · | 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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | 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.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



| | · | There is a risk that we may not be able to consummate our contemplated private
and/or public financing.
| | - | -------------------------------------------------------------------------------------------------------



| | · | 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.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The 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.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



iv







| | · | The interests of our principal stockholders, officers, and directors, who collectively and beneficially own approximately 35.11% of
our stock, may not coincide with yours and such stockholders will have the ability to substantially influence decisions with which you
may disagree.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The number of shares of our common stock issuable upon the exercise outstanding warrants and options is substantial.
| | - | --------------------------------------------------------------------------------------------------------------------



| | · | 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.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------











v





PART I



Unless
we have indicated otherwise, or the context otherwise requires, references in this Annual Report to “BASA,” the “Company,”
“we,” “us” and “our” or similar terms refer to Basanite, Inc., a Nevada corporation and its subsidiaries,
collectively.



| | Item 1. | Business.
| | ------- | ---------





Overview



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 BasaFlexTM, a basalt fiber reinforced polymer (“BFRP”) reinforcing bar (known as “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 BasaMixTM, which are fine denier basalt fibers available in various chopped sizes, and BasaMeshTM, a line
of Basalt Geogrid Mesh Rolls, intended to replace welded wire mesh (made of steel).



While we believe our products
have significant market potential and have begun to gain some acceptance in the market (as evidenced by the beginning of revenue growth
which occurred in 2021 and continued in 2022 as below under “Management’s Analysis and Discussion of Results of Operations”),
we are currently conducting relatively limited operations due to lack of adequate funding. We are working to secure additional funding
of approximately 5 million dollars to increase our manufacturing capacity to meet what we believe will be increasing demand for our products,
but until such funding is obtained, there will remain substantial doubt regarding our ability to continue as a going concern



We were formed as a Nevada corporation in 2006 under
the name “Nevada Processing Solutions, Inc.” and entered our current BFRP business in 2017.



Our Products



BFRP is a UV-stable, chemical,
acid and moisture resistant material is sustainable and environmentally friendly and has been engineered to replace steel as it never
rusts, therefore, addressing the industry’s current corrosion issues. BasaFlexTM BFRP rebar is a corrosion proof, chemical,
acid and moisture resistant material, as well as being sustainable and environmentally friendly. BasaFlexTM, unlike alternative fiber
reinforced polymer (“FRP”) products, was designed and engineered to replace steel in certain structures and applications.
Since it is rustproof, BasaFlexTM directly addresses the construction industry’s current issues with reduced structure lifecycles
due to corrosion.



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, and that the following attributes of BasaFlexTM provide it with competitive advantages
in the marketplace:



| | · | BasaFlexTM never corrodes: steel reinforcement products rust, leading to spalling and significant
repair costs down the road;
| | - | ----------------------------------------------------------------------------------------------------------------------------



| | · | BasaFlexTM 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);
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | BasaFlexTM is “green”: From mining, through production, to installation at the
building site, BasaFlexTM has an exceptionally low carbon footprint when compared with that of steel; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





1





| | · | BasaFlexTM has a lower in-place cost: the physical nature of our products relative to steel result in a lower net costto
                                                                                                                                  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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



BasaMixTM 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. BasaMixTM also serves in a “system approach”
for optimum performance of a concrete element when used in conjunction with our BasaFlexTM rebar.



BasaMeshTM is designed for
secondary and temperature shrinkage reinforcement. BasaMeshTM can also work in conjunction with the BasaFlexTM rebar or BasaMixTM
for a total reinforcement program.



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



| | · | the increasing need for global infrastructure repair;
| | - | -----------------------------------------------------

| | · | recent design trends towards increasing the lifespan of projects and materials;
| | - | -------------------------------------------------------------------------------

| | · | the global interest in promoting the use of sustainable products; and
| | - | ---------------------------------------------------------------------

| | · | increasing consideration of both the long-term costs and environmental impacts of material selections.
| | - | ------------------------------------------------------------------------------------------------------



We believe we are well positioned
to benefit from this renewed focus, particularly in light of the interest of the U.S. government in funding infrastructure improvements
(notably the passage of the $1.2 billion Infrastructure Investment and Jobs Act in November 2021) and events such as the tragic collapse
of a residential building in Surfside, Florida.



We submitted our first round of
BasaFlexTM 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 BasaFlexTM. 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 (although presently we have fewer personnel). We have begun selling across
our complete product line and are currently working on securing larger orders. We have also sought to develop strategic commercial relationships
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 enhanced version of BasaFlexTM
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 very promising results on the upgraded BasaFlexTM from the Sherbrooke lab, including best in class performance results in
both tensile and modulus strength. Following on from this success, we have been working with multiple customers and design professionals
to select BasaFlexTM as an alternative to steel in a broader range of applications. These efforts have more recently included work
with CPPB and USS (each as defined below) and our board members Manuel A. Rodriguez and Frederick H. Tingberg, Jr.(who joined our Board
of Directors in December 2021 as described below), all of whom have introduced us to their contacts within the construction industry and
have worked to promote our products.





2





Early in
2021, we contracted with an independent software company to develop BasaProTM, a design software specifically for use with
BasaFlexTM. 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 BasaFlexTM in typical
concrete applications. It allows for both the conversion to BasaFlexTM from steel in existing concrete designs and for original designs
using BasaFlexTM 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. BasaPro’s software outputs include all the 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.



On December 10, 2021, we entered
into a strategic commercial relationship, comprised of two principal five year agreements: an Exclusive Supplier Agreement (the “Supplier
Agreement”) with Concrete Products of the Palm Beaches, Inc. (“CPPB”), and a Distribution Agreement with U.S. Supplies,
Inc. (“USS”). Based in Riviera Beach, Florida, CPPB is a custom precast manufacturer of concrete products for the construction
industry, made from a combination of cement and aggregate raw materials. Based in West Palm Beach, Florida, USS is a domestic and international
distributor of building products and supplies, specialty construction products, and a provider of engineering services. CPPB and USS are
related parties via the common control of Manuel A. Rodriguez (who is a member of our Board of Directors). These contracts are described
further below.



In connection with the transactions
associated with the Supplier Agreement and the Distribution Agreement, we have issued to USS a common stock purchase warrant (the “Strategic
Partner Warrant”). The Strategic Partner Warrant affords USS and its assigns the right, for a five (5) year term, to purchase
up to forty million (40,000,000) shares of our common stock (the “Warrant Shares”) at an exercise price of $0.33 per Warrant
Share. The right to purchase fifty percent (50%) (or 20,000,000) of the Warrant Shares shall vest immediately and the right to purchase
the remaining fifty percent (50%) (or 20,000,000) of the Warrant Shares shall only vest upon our actual receipt of new investment into
our company of not less than $5,000,000 from one or any combination of the following entities or individuals: (i) USS and its affiliates,
(ii) CR Business Consultants, Inc. (any entity controlled by Raphael Salas) and its affiliates or (iii) any person or entity first introduced
to us by any of the foregoing. As of the date of the Annual Report, this investment condition has not been achieved.



In connection with the transactions
contemplated by the Distributor Agreement and the Supplier Agreement, our Board of Directors appointed Manuel A. Rodriguez and Frederick
H. Tingberg, Jr. as members of our Board of Directors. Mr. Rodriguez is an affiliate of and controls each of USS and CPPB, and Mr. Tingberg
(who provides consulting services within the construction industry) was recommended for appointment to our Board of Directors by Mr. Rodriguez.



Recent Developments



On April 6, 2023,
Mr. Michael V. Barbera stepped down from the role of Acting Interim Chief Executive Officer of the Company to retire for personal reasons
while remaining on the Board of Directors.



On April 6, 2023,
the Board of Directors, through a vote of Unanimous Written Consent engaged Mr. Tom Richmond, 64, to serve as the Interim Chief Executive
Officer through August 31, 2023. Mr. Richmond has over 35 years of senior executive experience in general management in B2B and B2C companies.
Mr. Richmond has P&L experience at numerous manufacturing companies that have ranged in size from single plant businesses generating
$20 million in annual sales to multi-plant companies with global operations generating over $500 million in annual sales.



Mr. Richmond
served as President of The Little Tikes Company and EVP of MGA Entertainment from September of 2008 until May of 2014. From September
of 2014 until January of 2017 Mr. Richmond served as Executive Chairman of Dutchland Plastics. From May of 2014 until present he is an
investor and operating partner in CPI Products as well as a consultant and Board Advisor to Semco Plastics which was sold to Tank Holdings
in May of 2022.



Mr. Richmond
is the former EVP of MGA Entertainment and President of The Little Tikes Company, a $500 million multi-national retailer, manufacturer
and marketer of high-quality, innovative children’s products. At The Little Tikes Company, Mr. Richmond is credited with resurrecting
The Little Tikes Company from a distressed asset previously owned by Rubbermaid into a profitable $500 million global branded products
company with a formidable e-commerce business.



Mr. Richmond
is a graduate of Columbia University (Master of Science), New Jersey Institute of Technology (Mechanical Engineering), and New York University
(Executive MBA courses). Additionally, he attended the US Army War College Staff and strategic planning session, General Electric Management
Development Institute, Advanced statistics, Enterprise resource planning, and Various other Professional enhancement programs.



On April 6, 2023,
Mr. Richmond and the Company entered into an agreement to pay Mr. Richmond $12,500 per month commencing for work performed prior to his
engagement on March 15, 2023. He also received 1,000,000 shares of restricted common stock. His engagement agreement also provided for
the Company to issue him warrants to purchase 5,000,000 shares of common stock, exercisable at $.045 per share, which warrants shall be
issued at such date as the Company has successfully received $5 million in gross financing so long as such financing is received while
Mr. Richmond is performing services to the Company.



3







On April 6, 2023, the Board
of Directors, through a vote of Unanimous Written Consent engaged Mr. Michael Giorgi as the Company’s Interim Chief Growth Officer
in a non-executive position.



Mike Giorgi, age 48, an accomplished
and entrepreneurial technology founder and product visionary with extensive experience in directing business development, operations,
strategic planning, and profit and loss oversight. Mr. Giorgi has experience as an executive and operations leader with a prior history
of increasing sales for both B2B and B2C-based organizations. He is an analytical, decisive, and results-oriented leader who champions
the diversification of market channels and spearheads operational improvements to drive productivity and slash costs.



Mr. Giorgi’s professional
experience spans over two decades, with notable accomplishments in each role. At Luminance Brands, Mr. Giorgi served from 1999 to 2023
as President & CEO, where he oversaw the manufacturing of 16,000 SKUs in China, a distribution center in Houston, a showroom in Dallas,
warehouses in New York and California, and a corporate headquarters in Ohio that employed 150 staff. He maintained profit and loss (P&L)
responsibility for a $67M business, orchestrated a corporate headquarters relocation project from California to Ohio that reduced footprint
and generated more than $2M in annual cost savings while streamlining daily operations. Under his leadership, the company grew sales 70%
year over year from 2020 to 2022 and secured a licensing deal with Kathy Ireland Worldwide, generating additional revenue. He also applied
his background in Internet of Things to develop connected lighting products that brought the company into the technology sector, earning
market share and driving sales growth.



Prior to Luminance Brands, Mr.
Giorgi founded Magnum Innovations in 2010, where he conceptualized and filed 12 patents, with six approved and six pending. Magnum focused
on the design, development, and US-based manufacturing of innovative, self-powered wireless lighting and building control products serving
the commercial market; included hardware and Software as a Service (SaaS) based offerings. Under his leadership from 2010 to 2019, Magnum
Innovations secured funds through private money and a capital raise with United Technologies, and grew into a profitable company with
24 employees. He also led product development for innovative services, including Internet of Things (, building automation, and wireless
sensors, gaining market share and recognition as a cutting-edge company.



Before Magnum Innovations, Mr.
Giorgi worked at Magnum Steel & Trading from 1999 to 2008, where he oversaw logistics and supply chain for four reroll mills across
the United States, nurturing strategic partnerships with Norfolk Southern and CSX to secure on-time deliveries and safeguard production.
He contributed to strategic planning and organizational decision-making in concert with executive leadership, aiding the growth of the
company from $80M to $250M in annual revenue during his tenure.



Mr. Giorgi holds progress towards
a Bachelor of Business Administration (BBA) in International Business from Kent State University.





4





Industry Background and Current and Proposed Customers



We are focused on the construction
industry, more specifically on introducing composite products for the reinforcement of concrete and secondarily for asphalt. According
to Grandview Research, the annual concrete reinforcement market in the U.S. is estimated to be approximately $9.4 billion. This market
is 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 these applications, but it has an inherent problem: it corrodes (rusts) and degrades when exposed to air
and water. Every steel reinforcing bar (or rebar) ever used is in some form of degradation due to corrosion. This corrosion leads the
concrete to de-bond from the reinforcement, 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 costly maintenance,
initially with repairs and eventually replacement over the lifetime of the structure. Addressing this problem is our key focus and value
proposition – all of our products are essentially 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.



Infrastructure Investment and Jobs Act (“IIJA”)



The IIJA, signed into law on November
15, 2021, provides for significant national investments in the repair and rebuilding of roads and bridges in the U.S. with a focus on
climate change mitigation, resilience, equity, and safety In the United States, 1 in 5 miles of highways and major roads, and 45,000 bridges,
are in poor condition. The IIJA reauthorizes surface transportation programs for five years and invests $110 billion in additional funding
to repair roads and bridges and support major projects. We believe that our environmentally friendly basalt fiber products are well positioned
to emerge as a technology leader in the expanded market for intelligent construction materials that will benefit from the IIJA. We are
working on identifying opportunities to access federal funding streams this unprecedented U.S. federal investment in public safety, homeland
security, and transportation infrastructure.



Suppler Agreement with CPPB



In December 2021, we entered into
the Supplier Agreement with CPPB, who as a result became a significant customer. Under the terms of the Supplier Agreement, until December
31, 2022, we will sell products to CPPB at an agreed upon discounted price to the price of steel reinforcing bar (such price for steel
rebar being first obtained by CPPB via a competitive third-party quote). We have agreed to this special pricing to afford CPPB the opportunity,
for a one-year period, to incorporate our BFRP products into CPPB’s concrete products, and to offer these combined (and we believe
improved) products to construction projects at prices competitive to prevailing steel reinforcing bar. We believe this collaborative approach
with CPPB will result in both an acceleration of the process to gain regulatory and other required approvals by applicable third parties
(including government agencies) for inclusion in construction projects, as well as an acceleration of market recognition of our products.
Commencing January 1, 2023, we will sell our products to CPPB in accordance with an agreed upon fee schedule based upon our prevailing
prices for the products. Such pricing may be amended from time to time with the mutual prior consent of the parties.



Under the terms of the Supplier
Agreement, we are responsible for the engineering conversion calculations required to modify CPPB’s product designs from using steel
rebar to using BasaFlexTM BFRP reinforcement. This will be accomplished through the use of our BasaProTM proprietary
software, with a required review by a Florida licensed professional engineer. CPPB is responsible, among other matters, for taking all
necessary steps to obtain product clearance, validation, importation authorization and any product approvals, regulatory licenses, or
other approvals, permits or material authorizations as may be required by any governmental agency or authority with respect to the importation,
marketing, distribution, sale and use of its concrete products incorporating our products. We believe that the combined efforts of our
company and CPPB will also accelerate the qualification of our products for government and other contracts and help gain the acceptance
of our products for these contracts.





5





The Supplier
Agreement also contains other customary terms and conditions, including with respect to the making of product orders, packaging and delivery,
product warranties, product returns, intellectual property, confidentiality, limitations on liability, indemnification, non-solicitation
of employees, insurance and representations and warranties of the parties.



The Supplier Agreement has a term
of five (5) years, and thereafter the term shall automatically renew for successive one (1) year terms unless terminated by the parties
prior to the end of the initial term or any renewal term. The Supplier Agreement may be terminated (i) by the mutual agreement of the
parties, (ii) upon breach of the Supplier Agreement (with a notice period and an opportunity to cure) and (iii) upon the bankruptcy and
insolvency of a party.



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 BasaFlexTM. 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.



Manufacturing



We previously leased a fully permitted,
36,900 square foot facility located in Pompano Beach, Florida equipped with five customized, Underwriters Laboratories approved, Pultrusion
manufacturing machines for BasaFlexTM 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 BasaFlexTM 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. Depending on our manufacturing needs in the
future, we have and may continue to explore alternative or additional manufacturing or corporate facilities. As of December 31, 2022,
we no longer operate nor manufacture in our previous Pompano Beach facility.



To satisfy what we perceive
the market interest for BasaFlexTM to be, and in particular to address potential large-scale customers like CPPB, we need to significantly
accelerate the expansion of our manufacturing capacity. Our current goal is to locate a new manufacturing facility and restart our manufacturing
operations and ultimately to reach a plant production capacity exceeding 73,000 linear feet per day per day on a two day shift basis (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
BasaMaxTM, has been specifically designed for the manufacture of BasaFlexTM 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 thorough testing in our previous Pompano facility, including
initial production runs, and is currently undergoing modifications and upgrades to the final production configuration.



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 of about 5 million dollars, is to have the first set of five of the new machines installed and be operational by the end of the
third quarter of 2023, and to install and have operational five more, along with additional custom manufacturing equipment, by the third
quarter of 2024 providing sales dictate. This would create the opportunity for BI to ultimately reach our production level target for
the new facility by the close of 2024.



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 relatively 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 BFRP 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.





6





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, BFRP 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) is BWF/Kamenny Vek and SRCS, Inc. as a backup supplier. Our principal suppliers for resin
matrix ingredients are Aalchem, Phlex-Tek, Lindau Chemical and Cabot Labs.



Sales and Marketing



We primarily utilize third party
distribution partners (such as USS, as described further below) 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.



Distribution Agreement with USS



In December 2021, we entered into
a Distribution Agreement with USS. Under the terms of the Distribution Agreement, we are responsible to provide engineering conversion
calculations when required by USS for targeted construction projects. The conversion calculations support the use of BasaFlexTM BFRP
rebar reinforcement, both in new designs or to replace steel reinforcement in existing designs. This engineering work will also be accomplished
through the use of the BasaProTM proprietary software, with a required review by a Florida licensed professional engineer. USS is
responsible for, among other matters, obtaining any required import or export licenses necessary for us to ship our products, including
certificates of origin, manufacturer's affidavits, and a U.S. Federal Communications Commission's identifier, if applicable and any other
licenses required under US or foreign law.



The Distribution Agreement has
a term of five (5) years, and thereafter the term shall automatically renew for successive one (1) year terms unless terminated by the
parties prior to the end of the initial term or any renewal term. The Distribution Agreement may be terminated (i) by the mutual agreement
of the parties, (ii) upon breach of the Distribution Agreement (with a notice period and an opportunity to cure) and (iii) upon the bankruptcy
and insolvency of a party.



The Distribution Agreement also
contains other customary terms and conditions, including with respect to registration of USS customers, packaging, shipping, Product warranties,
Product returns, insurance requirements, intellectual property, confidentiality, limitations on liability, indemnification, non-solicitation
of employees, and representations and warranties of the parties.





7





Intellectual Property



Currently, we have a patent pending
application with the USPTO for BasaFlexTM, 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 BasaFlexTM;
BasaMixTM; BasaMeshTM and BasaWrapTM, 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 Federal and State Departments
of Transportation, the ISO (the International Organization for Standardization) and the US Army Corps of Engineers, in order to satisfy
regulatory requirements for manufacturing and use as concrete reinforcement. The American Concrete Institute (ACI), ASTM (formerly the
American Society for Testing and Materials) and the 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 the 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, we believe doors will open for a myriad of 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.



Moreover, we are subject to various
federal, state, and local laws, rules, and regulations. We are subject to the requirements of the U.S. Department of Labor Occupational
Safety and Health Administration (“OSHA”), particular with respect to our manufacturing facility. In order to maintain compliance
with applicable OSHA requirements, we have established uniform safety and compliance procedures for our operations, and implemented measures
designed to prevent workplace injuries. Our safety programs focus on job hazard identification and prevention, coupled with extensive
on-going job-specific training.



We also are subject to environmental
laws, rules, and regulations that limit discharges into the environment, establish standards for the handling, generation, emission, release,
discharge, treatment, storage, and disposal of hazardous materials, substances, and wastes, and require cleanup of contaminated soil and
groundwater. These laws, ordinances, and regulations are complex, change frequently, and have tended to become more stringent over time.
Many of them provide for substantial fines and penalties, orders (including orders to cease operations), and criminal sanctions for violations.
They may also impose liability for property damage and personal injury stemming from the presence of, or exposure to, hazardous substances.
In addition, certain of our operations require us to obtain, maintain compliance with, and periodically renew, environmental permits.
Certain of these environmental laws, including the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”),
may require the investigation and cleanup of an entity’s or its predecessor’s current or former properties, even if the associated
contamination was caused by the operations of a third party. These laws also may require the investigation and cleanup of third-party
sites at which an entity or its predecessor sent hazardous wastes for disposal, notwithstanding that the original disposal activity accorded
with applicable requirements. Liability under such laws may be imposed jointly and severally, and regardless of fault. In addition, our
operations could in the future be subject to regulations related to climate change.



We have incurred and, if our business
grows, we will continue to incur, costs to comply with the requirements of health and safety, transportation, and environmental laws,
ordinances, and regulations. These requirements could become more stringent in the future, and compliance costs may be material and places
restrictions on our business that we will be required to manage.





8





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
needs are highly technical, with the substantial majority of our employee needs focused on working in engineering, technical and financial
roles. During the year 2022, we decreased our workforce by 99% as a result of market conditions and lack of funding. As of December 31,
2022, we had four 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 December 31, 2022, our employees had the following gender
demographics:



|                        |  | Women |     |   | Men | 
|----------------------- |  | ----- | --- | - | --- | 
|All employees           |  |       | 25  | % |     | 
|Engineers               |  |       | —%  |   |     | 
|Finance                 |  |       | 100 | % |     | 
|Manufacturing           |  |       | —%  |   |     | 
|People Managers         |  |       | —%  |   |     | 
|Individual Contributors |  |       | —%  |   |     | 



At December 31, 2021, our employees
had the following race and ethnicity demographics:



|                         |  | All Employees |     |   | Engineers |  |   | Finance |  |  | Manufacturing |   |  | People Managers |      |   | Individual Contributors | 
|------------------------ |  | ------------- | --- | - | --------- |  | - | ------- |  |  | ------------- | - |  | --------------- | ---- | - | ----------------------- | 
|Black / African American |  |               | —%  |   |           |  | — |         |  |  | —             |   |  |                 | —    |   |                         | 
|Hispanic/Latino          |  |               | 100 | % |           |  | — |         |  |  | 25            | % |  |                 | 75.0 | % |                         | 
|White                    |  |               | —%  |   |           |  | — |         |  |  | —             |   |  |                 | —    |   |                         | 
|Multi-Racial             |  |               | —%  |   |           |  | — |         |  |  | —             |   |  |                 | —    |   |                         | 



Facilities



Our principal office is
leased and located at 2066 N.W. 15th Court, Pompano Beach, FL 33069. The lease is for approximately 1,500 square feet of space,
which includes our temporary office space and our interim production floor. We do not believe the facility is sufficient to support our
current operations, although we have and may continue to explore securing alternative or additional manufacturing or corporate facilities.





9







| | Item 1A. | 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 significant
revenues, positive cash flow, or profitable results of operations.



Since
the inception of current business in 2017, we have generated minimum revenues, have not been profitable and have incurred significant
losses and cash flow deficits. For the fiscal years ended December 31, 2022, and 2021, we reported net losses of $7,534,754 and $16,477,823
respectively, and negative cash flow from operating activities of $3,907,401and
$4,507,418, respectively. As of December 31, 2022, we had an aggregate accumulated deficit of $53,655964 and $46,121,210
in 2021, respectively. 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 generates positive cash flow or profit, and our failure
to operate our business profitably would damage our reputation and stock price.



We have extremely limited cash resources
with which to operate our business, and we may have difficulty in raising capital and may consume resources faster than expected.



We presently have extremely
limited cash resources to meet our current or future capital requirements. We do not expect to generate significant revenues for the foreseeable
future, and we may not be able to raise the funds estimated at 5 million dollars we require immediately or the funds we may require in
the future, which would leave us without resources to continue our operations. We have faced difficulties recently in raising needed capital,
and may continue to have difficulty raising needed capital in the near or longer term as a result of, among other factors, the very early
stage of our business plan. Further, we may consume any available cash resources more rapidly than currently anticipated, resulting in
the need for additional funding sooner than anticipated. Our inability to raise funds could lead to decreases in the price of our common
stock and the failure of our businesses.



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



We have generated nominal revenues
to date in our current BRFP 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 of
our basalt fiber business 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.





10





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 generated meaningful revenues and have not recorded a profit since inception of our current
business model. As a result of this limited and overall negative operating history, and the uncertainty of our business model, 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 strategies. 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 will likely 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 currently have very limited cash resources
and 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 currently have very little
limited cash resources as all of our fundraising in the last year have been expended on operating our business. We will thus 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,
we have had difficulties in raising necessary capital and 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 full-time 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.





11





We may be unable to repay our outstanding
indebtedness, which is past due, which could further strain our allocation of limited cash resources or force us to declare bankruptcy.



We currently owe approximately
$2,027,695 plus $338,000 of accrued interest under a 20% Convertible Promissory Note held by The Richard A.



LoRicco Sr. and Lucille M. LoRicco
Irrevocable Insurance Trust DTD 4/28/95, which is a related party associated with our director Ronald J. LoRicco, Sr.



This note matured on February 12,
2023, and as of the date of this Annual Report, no event of default has been called by the note holder.





Given our limited cash resources
at this time, we have been unable to repay this indebtedness, and interest on this indebtedness continues to accrue. If all or any of
these note holders elect to call an event of default under these notes, we may have increased difficulty raising additional funds and
we could be forced into bankruptcy.



Inflationary pressures have and may continue to hamper our business.



Inflationary pressures, shortages
in the labor market, and increased competition within and outside our industry for talented employees have increased our labor costs,
which could negatively impact our profitability. Particularly in light of our highly specialized manufacturing processes, labor shortages
or lack of skilled labor have led and could in the future lead to increases in costs to meet demand as we roll out incremental programs
to attract and retain talent. Labor shortages may also negatively impact us from servicing any demand that exists for our products or
operating our manufacturing facility efficiently. Further, inflationary pressures could increase our labor costs and other key costs,
such as the cost of raw materials, which would make it harder to operate our business, particularly given our lack of capital resources.
Additionally, we distribute our products and receive vital components for our business through the freight transportation market, and
reduced trucking capacity due to shortages of drivers has led to increased costs and reduced service levels due to lack of freight transportation
availability.



We expect to derive a substantial portion of
our future revenue from sales of BasaFlex and other BFRP products, which leaves us reliant on the commercial viability of such products.



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



We may be unable to derive the benefits
that we currently anticipate from the Supplier Agreement with CPPB and the Distributor Agreement with USS, and Manuel A. Rodriguez, an
affiliate of CPPB and USS, may become subject to conflicts of interest as a result of these agreements.



On December 10, 2021, we entered
into a strategic commercial relationship, comprised of two principal five year agreements: the Supplier Agreement CPPB and the Distribution
Agreement with USS. CPPB and USS are related parties via the common control of Manuel A. Rodriguez (who has been appointed to our Board
of Directors). As a result of these agreements, our business will be dependent on the efforts of CPPB and USS in both purchasing and distributing
our products as well as having our products gain qualification for use in construction materials. We may be unable to derive the benefits
we currently anticipate from these agreements for several reasons, including, without limitation: (i) failure of CPPB to purchase sufficient
quantities of our products, (ii) failure of USS to find new customers for our products, (iii) the inability of CPPB, USS and our company
to have our products qualified for use in construction materials and construction projects and (iv) we may generated extraordinary losses
in our results of operations due to the pricing arrangements we have agreed to with CPPB and USS. In the event we do not derive the benefits
we anticipate from these agreements or generate losses as a result of them, our results of operations will suffer and our business might
fail.





12





Moreover,
Manuel A. Rodriguez, an affiliate of CPPB and USS who became a member of our Board of Directors in December 2021, may become subject to
conflicts of interest as a result of these agreements or in connection with efforts to raise funding for our company if his interests
as the principal of CPPB and/or USS diverge from his duties as a director of our company. Such conflicts of interest may not be resolved
in favor of our shareholders in general, and the existence of such conflicts of interest could cause our business and results of operations
to suffer.



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:



| | · | our ability to gain market acceptance of BasaFlex as an alternative to traditional steel rebar.
| | - | -----------------------------------------------------------------------------------------------

| | · | our ability to compete effectively with larger, more established providers of rebar.
| | - | ------------------------------------------------------------------------------------

| | · | supply chain interruptions or major price increases in raw materials.
| | - | ---------------------------------------------------------------------

| | · | the actions of other rebar manufacturers and distribution companies (including “dumping”
or other price manipulative activity).
| | - | -------------------------------------------------------------------------------------------------------------------------------

| | · | significant reductions in steel rebar and mesh pricing in the market, which would greatly compress margins.
| | - | -----------------------------------------------------------------------------------------------------------

| | · | our ability to attract and maintain customers.
| | - | ----------------------------------------------

| | · | the amount and timing of operating costs and capital expenditures related to the maintenance and expansion
of our business operations and infrastructure.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | general economic conditions and those economic conditions specific to the construction and rebar industries.
| | - | ------------------------------------------------------------------------------------------------------------

| | · | our ability to attract, motivate and retain top-quality employees and distribution partners.
| | - | --------------------------------------------------------------------------------------------



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. Our lack of capital resources has delayed our plans to augment our manufacturing capacity, and there is a risk that
we will not have the capital to develop and maintain the capacity or other capabilities necessary for us to implement our business plan.
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.





13





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. This includes our relationship
with USS. 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 BasaFlexTM 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. BasaFlexTM
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 BasaFlexTM,
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.





14





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 BasaFlexTM 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 BasaMaxTM 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 to 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 inability to innovate could harm our ability to compete effectively.



Our patents and other intellectual property
are 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 (“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.





15





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 current and former 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.





16





We depend on certain key personnel and need
to attract and retain additional personnel.



We substantially rely on the efforts
of our current senior management, including Simon R. Kay, our Chief Executive Officer and President and acting interim Chief Financial
Officer. Our business would be impeded or harmed if we were to lose his services. In addition, we currently need to fill key officer and
other positions, such a permanent Chief Financial Officer. if we are unable to attract, train and retain highly skilled finance, accounting,
technical, managerial, manufacturing, 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.



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 service has been
significant. Government mandated shutdowns and other measures held less of an impact on our business during 2021, although we did have
personnel absent for periods during the year due to COVID-19. Moreover, the continued prevalence of COVID-19 or outbreaks of new 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 may be required to 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. We continue to monitor our operations and applicable government recommendations and requirements.





17





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.



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.



In addition, socioeconomic and
political events beyond our control could lead to a shortage of basalt or volatility in the prices for basalt. The recent war in Ukraine
has led the world to issue sanctions on the government of Russia. This has shut down our ability to procure basalt fiber material from
our secondary supplier, UWF/Kamenny Vek. While we are managing through this particular challenge, similar or worse shortages of, or volatility
in the price of, basalt could adversely eaffect our business and results of operations.





18





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.





19





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 with our company since 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.



20





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 our August
2021 Private Placement, we are required 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. We are presently in default of our obligations under
the terms of the August 2021 Private Placement to file a registration statement for the Re-IPO, and are accruing liquidated damages as
a result to the investors in the August 2021 Private Placement, which we may not have the cash resources to pay. Moreover, investors are
cautioned 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.



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 issued in our August 2021 Private Placement and our early 2022 private placement. As of the date of this Annual Report, approximately
153,131,931 shares of common stock are reserved for issuance under our outstanding convertible notes, options, 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 is listed for
quotation 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.





21





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:



| | · | control of the market for the security by one or a few broker-dealers that are often related to the promoter
or issuer;
| | - | -----------------------------------------------------------------------------------------------------------------------

| | · | manipulation of prices through prearranged matching of purchases and sales and false and misleading press
releases;
| | - | -------------------------------------------------------------------------------------------------------------------

| | · | “boiler room” practices involving high-pressure sales tactics and unrealistic price projections
by inexperienced sales persons;
| | - | -------------------------------------------------------------------------------------------------------------------------------

| | · | excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
| | - | ------------------------------------------------------------------------------------------

| | · | the wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor
losses.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 Annual Report,
we have an outstanding 20% secured promissory note in the aggregate principal amount of $2,027,695, 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 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 $2,027,695
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.



On September 15, 2022, the Company
extended the debt for a newly issued amended and restated secured convertible promissory note with a new principal balance of $2,027,695
bearing an interest rate of 20% per annum and fully payable February 12, 2023. The amended principal of $1,689,746 and accrued interest
of $337,949 calculated as of the date of amendment and restatement determined the principal amount of the new note. No additional consideration
was provided.





22





The interests of our principal
stockholders, officers, and directors, who collectively and beneficially own approximately 38.40% 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 Annual
Report, our principal stockholders, officers, and directors beneficially owned approximately 38.40% 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 Annual
Report, we had warrants outstanding that were exercisable for an aggregate of 142,434,090 shares of common stock. The shares of common
stock issuable upon exercise of these warrants is substantial, currently constituting approximately 57% 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 Annual Report.





23





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 issued in our August 2021 and January 2022 private placements), 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:



| | · | our ability to develop and implement our business plans;
| | - | --------------------------------------------------------

| | · | actual or anticipated fluctuations in our quarterly or annual operating results;
| | - | --------------------------------------------------------------------------------

| | · | changes in financial or operational estimates or projections;
| | - | -------------------------------------------------------------

| | · | conditions in markets generally;
| | - | --------------------------------

| | · | changes in the economic performance or market valuations of companies similar to ours; and
| | - | ------------------------------------------------------------------------------------------

| | · | general economic or political conditions in the United States or elsewhere.
| | - | ---------------------------------------------------------------------------



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 Annual Report. 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.





24





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.





25





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:



| | · | permit our Board of Directors to issue up to 5,000,000 shares of preferred stock, with any rights, preferences, and privileges as
they may designate;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------

| | · | provide that all vacancies on our Board of Directors, including as a result of newly created directorships, may, except as otherwise
required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | 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; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | do not provide for cumulative voting rights, thereby allowing the holders of a majority of the shares of
common stock entitled to vote in any election of directors to elect all of the directors standing for election;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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
Annual Report 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.



| | Item 1B. | Unresolved Staff Comments.
| | -------- | --------------------------



None.



| | Item 2. | Properties.
| | ------- | -----------



Our principal office is leased
and located at 2660 N.W. 15th Court, Unit 108, Pompano Beach, FL 33069. The lease is for approximately 1,500 square feet of
space, which includes our corporate office and our production floor. We do not believe the facility is adequate to support our current
operations, although we have and may continue to explore securing alternative or additional manufacturing or corporate facilities.



26







| | Item 3. | Legal Proceedings.
| | ------- | ------------------



In the ordinary course of operations, the Company may
become a party to legal proceedings which could have a material adverse effect on our business, financial condition, cash flows, or results
of operations. However, to our knowledge, we are not currently subject to any legal proceedings.



| | Item 4. | Mine Safety Disclosures.
| | ------- | ------------------------



Not Applicable.



27





PART
II

| | Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
| | ------- | -------------------------------------------------------------------------------------------------------------



Market Information and Number of Stockholders



Our common stock is listed on the OTCQB Market under the symbol
“BASA.”



As of March 31, 2023, there were
281 holders of record of our common stock. In addition, we believe that a significant number of beneficial owners of our common stock
hold their shares in nominee or in “street name” accounts through brokers, and any such beneficial owners are not included
in this number of holders of record.



Dividend Policy



We have never declared or paid
cash dividends on our common stock. We currently do not anticipate paying any cash dividends or other dividends for the foreseeable future.
Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws,
and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors
that our board of directors may deem relevant.



Repurchases of Common Stock



Not applicable.



Unregistered Sales of Equity Securities and use of Proceeds



All of the issuances referred
to in this section were issued pursuant to exemptions from registration under the Securities Act of 1933, as amended, provided for under
Section 4(a)(2) or Regulation D under such Act.



Issuances 2023



On April 6, 2023, we entered into an agreement with
Thomas Richmond and Michael Giorgi, respectively. An issuance of 1,000,000 shares were issued to each member in consideration for services
in the roles of Acting Interim Chief Executive Officer and Chief Growth officer, respectively.



Issuances in 2022



On January 28, 2022 and February
3, 2022, we conducted the initial closings of a private placement offering consisting of up to $5,000,000 of units at a price of $0.33
per Unit. Each Unit consists of: (i) one share of our common stock (ii) a five-year, immediately exercisable warrant (“Warrant A”)
to purchase one share of common stock at an exercise price of $0.33 per share and (iii) an additional five-year, immediately exercisable
warrant to purchase one share of common stock at $0.33 per share. At these initial closings, an aggregate of $600,000 worth of Units were
sold. The investors participating in the initial closings included affiliates of USS, one of our strategic commercial partners (including
Manuel Rodriguez, one of our directors and individuals or entities with whom USS and its affiliates do business within the construction
industry (collectively, “Strategic Investors”. We anticipate that all investors in this offering will qualify as Strategic
Investors who are introduced to the us by Mr. Rodriguez and his associates. In connection with these initial closings, we entered into
definitive securities purchase agreements with the Strategic Investors and issued an aggregate of 1,818,182 shares of common stock, Warrant
As to purchase up to an aggregate of 1,818,182 shares of common stock, and Warrant Bs to purchase up to an aggregate of 1,818,182 shares
of common stock (for an aggregate of 3,636,364 warrant shares). This offering is ongoing as of the date of this Annual Report.



Pursuant to her employment agreement
with the Company, Jackie Placeres, the Company’s Acting Interim Chief Financial Officer, is entitled to receive options to purchase
Common Stock which vest in quarterly increments over time. The initial tranche of options vested on December 15, 2022, but as a courtesy
to the Company. Mrs. Placeres has waived her right to such options.



Add additional issuances here
from CS/APIC Sheet, if applicable







Issuances in 2021



We entered into a consulting agreement
with Integrous Communications on May 17, 2021 for investor communications services in exchange for shares of restricted common stock as
compensation. During the year ended December 31, 2021, we issued a total of 518,182 shares of common stock with execution date fair values
ranging from $0.275 to $0.299 per share or a total value of $149,700.



We entered into a consulting agreement
with Bridgeview Capital on July 9, 2020 for services in exchange for restricted common stock as compensation. During the year ended December
31, 2020, we issued a total of 600,000 shares of common stock to Bridgeview Capital with an execution date fair value of $0.29 per share
or $174,000. During the year ended December 31, 2021, we issued a total of 1,050,000 shares of common stock with execution date fair values
ranging from $0.23 to $0.35 per share or a total value of $304,500.





28





We entered
into a consulting agreement with Seth Shaw on October 13, 2020 in exchange for restricted common stock as compensation for the consulting
services. No shares were issued during the year ended December 31. 2020. During the year ended December 31, 2021, we issued Mr. Shaw a
total of 750,000 shares of common stock with execution date fair values ranging from $0.23 to $0.35 per share or a total value of $217,500.



On January 26, 2021, an investor
exercised 1,000,000 warrants for restricted common shares at a strike price of $0.1235 per share in exchange for $123,500.



On January 26, 2021, we issued
the 200,000 restricted common shares to the investor in exchange for the funds received and recorded as a subscription liability of $40,000
on December 31, 2020.



On February 11, 2021, we issued 250,000 unrestricted common
shares to an investor in exchange for $50,000.



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.



On February 12, 2021, we issued
an amended and restated secured convertible promissory note to the noteholders 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. 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.



On March 29, 2021, an investor purchased 127,128 restricted
common shares from us in exchange for $23,900.



On April 5, 2021, we issued
the 127,128 restricted common shares to the investor in exchange for the funds received and recorded as a subscription liability of $23,900
on March 31, 2021.



On April 16, 2021, upon the conversion
of a note $300,000 into 3,000,000 common stock warrants additional paid-in capital was generated in the amount of $300,000 for the original
principal of the note.



On May 21, 2021, upon the conversion
of a $300,000 note into 6,000,000 common stock warrants additional paid-in capital was generated in the amount of $300,000 for the original
principal of the note.



On June 10, 2021, 600,000 shares
were issued per the two consulting agreements entered on July 9, 2020, and October 16, 2020, for fundraising services.



On June 10, 2021, 300,000 shares
were issued per the consulting agreement entered on May 17, 2021, for investor relations services.



From June 10 to June 24, 2021, we issued
a total of 608,541 restricted common shares to 14 investors  in exchange for $217,877.





29





On August
17, 2021, we conducted the closing of a private placement offering to accredited investors (in which Aegis Capital Corp. acted as placement
agent) of units at a price of $0.275 per Unit, with each Unit consisting of: (i) one (1) share of common stock, (ii) a five-year, immediately
exercisable warrant (“Warrant A”) to purchase one (1) share of common stock at an exercise price of $0.33 per share and (iii)
an additional five-year, immediately exercisable warrant to purchase one (1) share of common stock at the $0.33 per share (“Warrant
B”). The Warrant A and Warrant B are identical, except that the Warrant B has a call feature in favor of our company. In connection
with the August 2021 Private Placement, we entered into definitive securities purchase agreements 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 shares of common stock
underlying the Warrant As and Warrant Bs), for aggregate gross proceeds to us of approximately $5,334,490.



On September 3, 2021, we entered
into a consulting agreement with Frederick Berndt for strategic planning and financial markets services in exchange for shares of restricted
common stock and cash compensation of $12,500 per month. The term of the agreement is for twelve months with the option for renewal quarterly
for a maximum of two years from the effective date of the agreement. During the year ended December 31, 2021, we issued warrants to purchase
a total of 1,025,000 shares of common stock to Mr. Berndt at exercise prices ranging from $0.30 to $0.33 per share with a total execution
date fair value of $265,933.



On November 22, 2021, we issued
101,364 shares of common stock to Capital Events Management, an affiliate of Integrous Communications, at a grant date fair value of $0.275
per share or $28,875. The grant date fair value was determined pursuant to the existing Integrous contract.-This amount was charged to
stock-based compensation during the year ended December 31, 2021.



On December 10, 2021,
we issued to USS, a strategic partner, a warrant to purchase 40,000,000 shares of common stock (only 20,000,000 of such shares being vested),
exercisable at a price of $0.33 per share with a grant date fair value of $3,907,973.



Issuances in 2020



In April 2020, we issued 4,166,667
restricted common shares, par value $.001 per share, in exchange for the $416,667 received in the prior period from investors. The investors
also received 4,000,000 five-year warrants with an exercise price of $0.30 per share and 16,667 five-year warrants with an exercise price
of $0.40 per share.



In June 2020, we received $200,000
from investors in exchange for 912,409 restricted common shares, par value $.001 per share, for $0.1096 per share and 961,538 restricted
common shares, par value $.001 per share, for $0.104 per share. Both investors received equal amounts of five-year warrants with an exercise
price to be determined as the greater of: (a) three times the purchase price for the common shares pursuant to the subscription agreement;
or (b) the price equal to 80% of the lowest open market closing price of the common shares during the twenty trading days preceding
the 120th calendar day after the purchase date.



On June 24, 2020, noteholders
including entities managed by Ronald J. LoRicco, Sr., a member of the Board of Directors, converted their convertible notes payable with
a principal balance of $360,000. The noteholders converted all principal and accrued interest (where applicable) under these notes in
the amount of $367,163 (which includes interest accrued through June 24, 2020) in exchange for 3,125,201 restricted common shares. As
part of the convertible note agreements, the noteholders were issued five-year warrants of an equal amount.



On July 21, 2020, noteholder Michael
V. Barbera, our Chairman of the Board, converted a promissory note of $50,000 and accrued interest of $2,826 in exchange for 400,195 restricted
common shares and 400,195 five-year warrants with an exercise price of $0.396 per share.



On July 21, 2020, two noteholders
converted promissory notes of $25,000 and accrued interest of $809 each in exchange for 280,532 restricted common shares and 280,532 five-year
warrants with an exercise price of $0.312 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.





30





On July 21,
2020, a noteholder converted two promissory notes totaling $100,000 and accrued interest of $3,523 in exchange for 784,269 restricted
common shares and 517,286 five-year warrants with an exercise price of $0.396 per share.



On August 3, 2020, we issued an
unsecured convertible promissory note to an accredited investor in exchange for $10,000 bearing an interest rate of 18% per annum and
payable in six months. We were to pay interest on the unconverted and then outstanding principal amount of the note at a rate of 18% per
annum, accrued monthly for the first four months of this note and payable thereafter until the maturity date of February 3, 2021, unless
the note is converted or prepaid prior to maturity. The holder may convert the unpaid principal balance of the note into restricted common
stock, par value $0.001 per share, of us at the conversion rate equal to the per share cash price paid for the shares by any third-party
investor(s) with total proceeds to us of not less than $500,000 (the “conversion price”); provided, however, in no event shall
the conversion price ever be less than $0.01 per share. On February 16, 2021, we paid the accredited investor the total amount due of
$11,007, which included $1,007 of accrued interest.



On August 3, 2020, we issued an
unsecured convertible promissory note to Michael V. Barbera, the Chairman of the Board, in exchange for $25,000 bearing an interest rate
of 18% per annum and payable in six months. We were required to pay interest on the unconverted and then outstanding principal amount
of the note at a rate of 18% per annum, accrued monthly for the first four months of this note and payable thereafter until the maturity
date of February 3, 2021, unless the note is converted or prepaid prior to maturity. The holder may convert the unpaid principal balance
of the note into restricted common stock, par value $0.001 per share, of us at the conversion rate equal to the per share cash price paid
for the shares by any third-party investor(s) with total proceeds to us of not less than $500,000 (the “conversion price”);
provided, however, in no event shall the conversion price ever be less than $0.01 per share. On February 16, 2021, we paid the Chairman
the total amount due of $27,518, which included $2,518 of accrued interest.



On August 5, 2020, a noteholder
converted a promissory note of $258,524 and accrued interest of $102,176 in exchange for 2,061,143 restricted common shares.



On August 5, 2020, an
accredited investor received 163,043 restricted common shares and 163,043 five-year warrants with an exercise price of $0.54 per share
in exchange for $30,000.



On August 24, 2020, a noteholder
settled the amount due on several promissory notes totaling $191,965 and accrued interest of $15,729 in exchange for 1,136,364 restricted
common shares and 1,136,364 five-year warrants with an exercise price of $0.396 per share.



On September 25, 2020, an accredited
investor exercised his warrants at an exercise price of $0.075. The investor received 500,000 restricted common shares in exchange for
$37,500.



On September 28, 2020,
we received $90,000 from an accredited investor to purchase 300,000 restricted common stock. The restricted common stock had not been
issued as of September 30, 2020, and therefore, is represented as a subscription liability.



| | Item 6. | Reserved.
| | ------- | ---------





31





| | Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operation.
| | ------- | -------------------------------------------------------------------------------------



You should read the following
discussion and analysis together with the consolidated financial statements and the related notes to those statements included in “Item
8 – Consolidated Financial Statements and Supplementary Data.” The discussion contains forward-looking statements that involve
risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” and elsewhere in this Annual
Report on Form 10-K, our actual results may differ materially from those anticipated in these forward-looking statements.



Overview



The following is 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, 2021, and 2020. 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 Annual Report, and our audited
and unaudited consolidated financial statements and accompanying notes included in this Annual Report.



On May 30, 2006, our company was
formed as a Nevada corporation under the name Nevada Processing Solutions, Inc. Currently, 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 BasaFlexTM, 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 BasaMixTM, which are fine denier basalt fibers available in various chopped sizes, and BasaMeshTM, a line of Basalt Geogrid
Mesh Rolls, intended to replace welded wire mesh (made of steel) and other fiber reinforced polymer grids and mesh.



While we believe our products
have great market potential and have begun to gain some acceptance in the market (as evidenced by the beginning of revenue growth which
occurred in 2021 as discussed below), we are currently conducting relatively limited operations due to a lack of adequate funding. We
are working to secure additional funding to increase our manufacturing capacity to meet what we believe will be increasing demand for
our products, but until such funding is obtained, there will remain substantial doubt regarding our ability to continue as a going concern.



Material Factors Impacting Our Operations



COVID-19



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 service has been
significant. Government mandated shutdowns and other measures held less of an impact on our business during 2021, although we did have
personnel absent for periods during the year due to COVID-19. Moreover, the continued prevalence of COVID-19 or outbreaks of new 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 may be required to 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. We continue to monitor our operations and applicable government recommendations and requirements.





32





Inflation & Interest Rate Sensitivity



In the past two fiscal years,
inflation has not had a significant impact on our business. However, during the second half of 2021 and into 2022, the U.S. economy has
entered into a period of increasing inflation. Should inflation persist or increase, interest rates rise and could have a significant
effect on the economy in general and, thereby, could affect prices for raw materials we use, demand for our products, our ability to attract
and retain skilled labor and our future operating results.



Supply Chain



In the past year, supply chain
shortages or delays have had an immaterial impact on our operations. Relationships with our raw materials suppliers have maintained a
consistent flow of goods received monthly. Domestic suppliers have increased their in-stock flows to maintain adequate levels with our
manufacturing needs. However, we might experience supply chain challenges in the future, which could harm our business and our results
of operations.



War in Ukraine



The recent war in Ukraine has
led the world to issue sanctions on the government of Russia. This has shut down our ability to procure basalt fiber material from our
secondary supplier, UWF/Kamenny Vek. However, our primary supplier Mafic is US based, and has ample capacity to support our current and
anticipated future needs with 100% domestic source of raw materials. Nonetheless, we are currently qualifying alternate material from
other suppliers to preserve our options.



Government Approvals and Specifying of our Products



We continue to pursue additional
product and facility qualifications and approvals, and these qualifications and approvals are critical to the market acceptance of our
products. BI is currently testing products at two independent laboratories in the pursuit of ICC-ES certification, which is expected during
the second quarter of 2022, and a Florida Department of Transportation (“FDOT”) production facility approval, which is expected
in the third quarter of 2023 (we are already selling to FDOT projects on an individual basis through exemptions or specs). The FDOT approval
will allow us to bid on any project approved for BFRP. Until we have obtained these additional approvals, our opportunities to bid on
certain projects will be limited.



Results of Operations



Revenue –We had
$193,194 of revenues as a result of sales of finished goods sold for the year ended December 31, 2022, compared to $193,194 in the prior
year. While the increase in revenue in the year over year periods was material due to our ability to sell some BasaFlexTM product
in 2022, overall revenues have been minimal due to our lack of funding and as a result our continuing shift in focus to the scaling of
production and inventory during both periods.



Cost of goods sold –During the year ended December 31, 2022, we had cost of sales of $1,970,194 compared to $1,970,194 in the prior year. During 2022
we began our production activities -- first activities were to build test articles for two sets of independent lab tests, and then the
commencement of building finished goods inventory. Most of the cost of goods sold is related to inventory valuation, not to sales. However,
we lost money on a gross margin basis due to normal inefficiencies in the start-up and ramping and scaling process, including limited
initial sales volume, and further due to extremely narrow margins on the initial sales of our products as we began introducing them to
the marketplace.



Operating Expenses



Selling, general, and administrative
expenses –During the year ended December 31, 2022, selling, general, and administrative were $8,018,152 compared to $8,018,152in
the prior year. The primary components of selling, general, and administrative expenses were as follows:



| | · | Stock based compensation –During the year ended December 31, 2022, stock based compensation
was $5,043,112 compared to $5,043,112 in the prior year. During the year ended December 31,2022, we also issued warrants with an aggregate
fair value of $900,960 to consultants, and options to directors with a fair value of $263,780.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





33





| | · | Payroll and payroll taxes –During the year ended December 31, 2022, payroll and
                                                                                                                                   payroll taxes were $1,153,540 compared to $1,153,540 in the prior year. We retained a total of 4 employees at the period end
                                                                                                                                   December 31, 2022, as compared to 23 employees at the close of the December 31, 2021 period.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Professional fees –During the year ended December 31, 2022, professional fees were $775,004 compared to $775,004 in
the prior year. The increase was primarily due to legal fees incurred with regard to our fundraising activities.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Consulting Fees –During the year ended December 31, 2022, consulting fees were $544,560
compared to $544,560 in the prior year. The increase was due to consulting agreements connection with our fundraising activities and to
an increase in compensation to our current Chief Executive Officer and President and acting interim Chief Financial Officer.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Facilities and related costs –During the year ended December 31, 2022, costs related to
our facilities were $36,852 compared to $36,852. These costs consisted primarily of rent in the amount of $25,696 and utilities in the
amount of $10,431. The decrease was because the majority of rent and utilities expense was charged to cost of goods sold in the current
year.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Investor relations –During the year ended December 31, 2022, investor relations costs were
$148,517 compared to $148,517 in the prior year. The increase was due to increased capital markets communications.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Depreciation and amortization –During the year ended December 31, 2022,
depreciation and amortization was $8,560 compared to $8,560 in the prior year. The decrease was because the majority of depreciation expense
was charged to cost of goods sold in the current year.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Other Income (Expenses)



Gain on settlement of legal
contingency -During year ended December 31, 2022, we had a gain of $409,127 on the settlement of legal contingencies. There were
no comparable transactions in the prior year.



Gain on sale of asset –We recorded a gain on the sale of assets in the amount of $40,838 in the prior period; there was no comparable transaction during
year ended December 31, 2021.



Gain on settlement
of payables -During year ended December 31, 2022, we had a gain of $39,902 compared to $39,902 in the prior year. The gain in the
current year is due to the settlement of various accounts payable amounts. The gain in the prior year is due to the forgiveness by prior
management of accrued wages.



Miscellaneous income -During
the year ended December 31, 2022, miscellaneous income was $0 compared to $0 in the prior year. The decrease is due to the net settlement
of $125,000 less the contingency fee and expenses paid to the attorney for litigation which occurred in the prior year.



Loss on extinguishment of debt
-During the year ended December 31, 2022, we had a loss of $6,743,015 compared to $6,743,015 in the prior year. The increase in loss
is due to the settlement of various long-standing debts for warrants which exceeded the value of the debt. For more information about
these transactions refer to footnote 6 of the financial statements included in this Annual Report.



Loan forgiveness -During
the year ended December 31, 2022, we had loan forgiveness income of $124,143 compared to $124,143 in the prior year. The increase was
due to the forgiveness of a loan from the U.S. Small Business Administration under the Paycheck Protection Program.



Interest expense -During
the year ended December 31, 2022, interest expense was $512,418 compared to $512,418 in the prior year. The decrease is primarily due
a decrease in the principal amount of debt outstanding during current period.





34





Liquidity and Capital Resources



Since inception, we have incurred
net operating losses and generated negative cash flows in operations. As of December 31, 2022, we had an accumulated deficit of $46,121,210.
At December 31, 2022, we had cash of $109,514 compared to $109,514 at December 31, 2021, and as of the date of this Annual Report, we
have minimal cash on hand, and any funds we can presently raise (either from revenue generating operations or through investment) are
rapidly consumed.



Also, we have incurred and continue
to incur significant general and administrative and other expenses associated with our product development and the establishment and proposed
expansion of our manufacturing facility, beginning revenue generating operations, developing our business model, stock-based compensation
and operating as a public company. We expect operating losses to continue for the foreseeable future, and we presently require and expect
to continue to require substantial additional financing for continued support of our BFRP manufacturing business until we can generate
sufficient revenues to achieve positive cash flow.



Furthermore, we currently owe
approximately $1,690,000 plus $338,000 of accrued interest under a 20% Convertible Promissory Note held by The Richard A. LoRicco Sr.
and Lucille M. LoRicco Irrevocable Insurance Trust DTD 4/28/95, which is a related party associated with our director Ronald LoRicco.
This note matured on February 12, 2022, and as of the date of this Annual Report, no event of default has been called by the note holder.
In addition, in April 2021, we entered into six simple Promissory Notes with certain related parties and their associates for total proceeds
$595,000. These notes each carried a 12-month term at 18% simple interest, and are now due or about to come due. The accumulated interest
under these notes is currently approximately $107,000. Given our limited cash resources at this time, we have been unable to repay this
indebtedness. While we may seek to extend the maturity dates of this indebtedness, we may be unsuccessful in doing so. If all or any of
these note holders elect to call an event of default under these notes, we may have increased difficulty raising additional funds and
we could be forced into bankruptcy.



All of 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 the
Company will be successful in raising future capital.



Notwithstanding proceeds from
the sale of our common stock in early 2022, current working capital and projected sales revenue are insufficient to maintain our current
operations. In order to scale up our manufacturing 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 scaling period. We will attempt to raise this
capital through third party financing, including a private placement of our securities as well as bridge loan arrangements. We cannot
provide any assurances that required capital will be obtained 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, and our business might fail.



Cash Flows



Net cash used in operating activities
amounted to $4,507,418 and $4,507,418 for the years ended December 31, 2022 and 2021, respectively. During the year ended December 31,
2022, we used $2,346,483 net cash for investing activities compared to $2,346,483 used in the prior fiscal year. The increase is largely
due to costs associated with the customization, installation, and verification and validation testing of the first BasaMaxTM prototype
pultrusion machine, for the modifications and UL listing of the production machinery and the final payments for the enhancements made
to our production facility as compared to the deposits made on machinery and equipment.





35





During the
year ended December 31, 2021, we had $6,703,910 net cash provided by financing activities compared to $3,269,438 in the prior year. Sale
of common stock shares for $5,178,163; borrowing of $2,121,247 from the issuance of convertible and short-term notes payable, including
from related parties; less $595,500 of principal repayments on notes and convertible notes, including to related parties, provided the
net cash during the year ended December 31, 2021. Additionally, a note payable in the amount of $300,000 was exchanged for 6,000,000 five-year
warrants on May 21, 2021.



During the year ended December
31, 2022, we had $6,703,910 net cash provided by financing activities compared to $6,703,910 in the prior year. Sale of common stock shares
for $5,178,163; borrowing of $2,121,247 from the issuance of convertible and short-term notes payable, including from related parties;
less $595,500 of principal repayments on notes and convertible notes, including to related parties, provided the net cash during the year
ended December 31, 2022.



Summary of Critical Accounting Policies



Inventory



The Company’s inventories
consist of raw materials, work in process and finished goods, both purchased and manufactured. Inventories are stated at the lower of
cost or net realizable value.



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



There are several new accounting
pronouncements issued or proposed by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by us. Management
does not believe any of these accounting pronouncements has had or will have a material impact on our consolidated financial position
or operating results. See note 3 to the accompanying audited financial statements for further information.



| | Item 7A. | Quantitative and Qualitative Disclosures About Market Risk.
| | -------- | -----------------------------------------------------------



Not applicable.



| | Item 8. | Financial Statements and Supplementary Data.
| | ------- | --------------------------------------------



The requirements of this Item can be found beginning
on page F-1 found elsewhere in the Annual Report.



| | Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
| | ------- | -------------------------------------------------------------------------------------



None.



| | Item 9A. | Controls
and Procedures.
| | -------- | ------------------------





Disclosure Controls and Procedures



We maintain disclosure controls
and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and
that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.



Our management, under the supervision
and with the participation of our Chief Executive Officer, President and acting interim Chief Financial Officer, carried out an evaluation
of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and
15d-15(e) of the Exchange Act) as of December 31, 2022.



36







Because of the identified material
weaknesses on internal control over financial reporting, management has concluded that our disclosure controls and procedures were not
effective as of December 31, 2022.



Management’s Annual Report on Internal Control over Financial
Reporting



Our management is responsible
for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined
in rules promulgated under the Exchange Act, is a process designed by, or under the supervision of, our Chief Executive Officer, President
and acting interim Chief Financial Officer and effected by our Board of Directors, management and other personnel to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of Consolidated Financial Statements for external purposes
in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that:



| | · | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of
our assets;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| | · | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated
Financial Statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations
of our management and our Board of Directors; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets
that could have a material effect on our Consolidated Financial Statements.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Internal control over financial
reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal
control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns
resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper override. Because
of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control
over financial reporting. However, these inherent limitations are known features of the financial reporting process, and it is possible
to design into the process safeguards to reduce, though not eliminate, this risk.



Our management assessed the effectiveness
of our internal control over financial reporting as of December 31, 2022. In making its assessment, management used the criteria established
by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in its 2013 Internal Control — Integrated Framework.
Based on its assessment, management has concluded that our internal control over financial reporting has a material weakness and is not
effective as of December 31, 2022. This weakness consists of an overall lack of a sufficient control environment to produce materially
correct financial statements, including a lack of US GAAP expertise for the types of transactions we have been involved in, a lack of
segregation of duties, and a lack of entity level controls due to no independent audit committee.



As a result of the identified
material weakness, we are working to establish remediation plan which includes hiring additional resources (including a permanent Chief
Financial Officer), creating an independent audit committee, and engaging outside consultants as needed to assist in the evaluation of
non-recurring and unusual transactions and to increase the capacity of our accounting department to serve operational, compliance and
reporting needs.



Changes in Internal Control over Financial Reporting



Except as noted above, no change
in our system of internal control over financial reporting occurred during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.



| | Item 9B. | Other Information.
| | -------- | ------------------



None.



| | Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
| | -------- | --------------------------------------------------------------------



Not applicable.



37





PART III



| | Item 10. | Directors, Executive Officers and Corporate Governance.
| | -------- | -------------------------------------------------------





Directors and Executive Officers



The following table sets forth
certain information regarding our executive officers and directors as of the date of this Form 10-K. Directors are elected annually and
serve until the next annual meeting of shareholders or until their successors are elected and qualify. Executive officers are appointed
by our Board of Directors and their term of office is at the discretion of our Board.





|Name                       |  | Age |  | Position                                          
|-------------------------- |  | --- |  | --------------------------------------------------
|Michael V. Barbera         |  | 69  |  | Acting Interim Chief Executive Officer & President
|Frederick H. Tingberg, Jr. |  | 64  |  | Chief Technology Officer & Director               
|Jackie Placeres            |  | 42  |  | Acting Interim Chief Financial Officer            
|Ronald J. LoRicco, Sr.     |  | 58  |  | Chairman of the Board                             
|Paul M. Sallarulo          |  | 66  |  | Director                                          
|Adam Falkoff               |  | 55  |  | Director                                          
|Manuel A. Rodriguez        |  | 61  |  | Director                                          
|Sergio Salani              |  | 48  |  | Director                                          



Biographical Summaries of Directors and Executive Officers



The following are biographical summaries of the experience of
our directors and executive officers:



Michael V. Barbera, 69,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.



Frederick H. Tingberg, Jr.,
64,has served as a member of the Board of Directors since December 2021. Mr. Tingberg is a construction industry executive with extensive
experience in leading construction and rehabilitation projects. Since 2020, Mr. Tingberg has served as the Chief Executive Officer of
his own construction industry consulting company, Technicon Consulting Group, and since 1993, he has served both in two capacities with
Lanzo Corporation, an infrastructure construction company, first as Business Development Manager and since 2018 as Chief Operating Officer.
At Lanzo, Mr. Tingberg oversaw underground infrastructure construction project operations leading 160 total staff in completing over 20
projects annually. His responsibilities included overseeing safety, environmental compliance, proposals, hard dollar bonded bidding, material
selection, purchasing, financial controls, budgeting, and contracts with strategic partners. From 1984 to 1993, he served as Regional
Pipe & Supply Area Manager for SEMSCO, a division of Clayton Group. Mr. Tingberg holds several state general contractor licenses and
he received a B.S. degree in Materials Engineering from Rensselaer Polytechnic Institute.



Jackie Placeres, 42,
previously served as the Company’s Controller since 2021. Ms. Placeres previously served as the Chief Financial Officer to ISG,
a private government contractor in security and informational technologies from 2018 through May 2021. From 2014 to 2018, she served as
Vice President of Smith Manufacturing growing the Company from 4 million to 18 at the time of acquisition. The Board selected Ms. Placeres
to serve as the Company’s Chief Financial Officer because of her longstanding relationship with the Company and because of her accounting
and public company reporting experience.



Ronald J. LoRicco, Sr., 58,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.





38





Paul M.
Sallarulo, 66,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 Bachelor in Business Administration, and attended SUNY Adirondack between 1975 and 1977 where
he obtained his Associate of Applied Science degree.



Adam Falkoff, 55,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.



Manuel A. Rodriguez, 61,
has served as a member of the Board of Directors since December 2021. Since 2004, Mr. Rodriguez as served as a Vice President of Concrete
Products of the Palm Beaches, Inc. and the President of each of U.S. Supplies, Inc. and U.S. Construction Supply, Inc. In these capacities,
Mr. Rodriguez leads these companies in all of their principal activities, including concrete product manufacturing and distribution both
nationally and internationally, as well as environmental engineering services. Since 2003, he has also served as a Vice President of Beton
Brunet, an infrastructure products and services company, where he overseas Southeastern United States operations. Earlier in his career,
Mr. Rodriguez held several positions in the construction industry, including as a General Manager of Tri-County Concrete (1992 to 2003),
Master Electrician with Stallion Electric (1989 to 1992) and a Geologist with Star Petroleum (1986 to 1989). Mr. Rodriguez is a certified
master electrician in the State of Florida and is associated with several construction and concrete industry trade groups. He earned his
B.S. degree in Geology from the University of Florida.





39





Sergio S. Salani, 54, has
served as a member of the Board of Directors since August 2022.  Mr. Salani is a seasoned entrepreneur with experience in finance,
law, real estate and technology. From 2016 to the present, Mr. Salani has served as the founder, Chief Executive Officer and General Counsel
of Stoneway Group, L.L.C., an advisory firm providing services with regard to legal, finance and real estate matters, international transactions,
specialty finance, technology, commercial real estate investment management and investments in the energy sector. Also from 2016 to the
present, Mr. Salani has served as co-founder and Chief Executive Officer of Ubii.com, a digital marketplace that was launched in February
2021. From 2011 to 2016, he served as co-founder and Chief Executive Officer of Oxford International Group, L.L.C., a privately held financial
firm that acquires high credit quality, highly illiquid assets which was sold to an affiliate of Blackstone Group. From 1997 to 2011,
Mr. Salani served as partner, legal counsel and Senior Vice President of Peachtree Settlement Funding, L.L.C., an
originator of specialty finance receivables such as structured settlements, lottery payment receivables and life settlements,where
he was instrumental in building the company from a start-up to a 480 employee operation and in taking it public in 2006 on London's AIM
Market, a sub-market of the London Stock Exchange. Mr. Salani received a Bachelor of Arts in Finance and Economics as well as a Master
of Business Administration degree from Drexel University and a Juris Doctor from Temple University. He is a member of the bars of Florida
and the District of Columbia.



Corporate Governance Profile



Our Board of Directors consists
of six members. The terms of directors expire at the next annual shareholders’ meeting unless their terms are staggered as permitted
in our Bylaws. Each shareholder is entitled to vote the number of shares owned for as many persons as there are directors to be elected.
Shareholders do not have a right to cumulate their votes for directors.



Committees of the Board of Directors



We currently have an audit committee,
a compensation committee, and a nominating and corporate governance committee. We have not adopted charters for our audit or compensation
committees to date. The below table provides our committee members.



|Committee                           | Chairman | Board Members         
|----------------------------------- | -------- | ----------------------
|Audit                               |          | X                     
|                                    |          |                       
|                                    |          |                       
|                                    |          |                       
|                                    |          |                       
|Compensation                        | X        | Ronald J. LoRicco, Sr.
|                                    |          |                       
|                                    |          |                       
|                                    |          |                       
|Nominating and Corporate Governance | X        | Paul M. Sallarulo     
|                                    |          |                       
|                                    |          |                       



Audit Committee



Our Board of Directors currently does not have an “audit
committee financial expert” serving on its audit committee. Our Board of Directors is currently in the process of obtaining a qualified
individual which meets the definition of “audit committee financial expert”.





40





Director Compensation



The following table provides information
concerning the compensation of our Board members for their services as members of our Board of Directors for 2022 and 2021. The value
attributable to any option awards is computed in accordance with FASB ASC Topic 718. The assumptions made in the valuations of the option
awards are included in Note 11 of the Notes to our Financial Statements for the year ended December 31, 2021 and 2020 appearing elsewhere
in this Annual Report.



For the year ended December 31,
2022:





|Name               |  | Fees earned or paid in cash |   |  | Warrant Awards |   |   | Option Awards |  |   | Non-equity Incentive Plan Compensation |  |  | Nonqualified Deferred Compensation Earnings |   |  | All other Compensation |   |   | Total | 
|------------------ |  | --------------------------- | - |  | -------------- | - | - | ------------- |  | - | -------------------------------------- |  |  | ------------------------------------------- | - |  | ---------------------- | - | - | ----- | 
|Paul Sallarulo     |  | $                           | — |  |                | $ | — |               |  | $ | —                                      |  |  | $                                           | — |  |                        | $ | — |       | 
|Adam Falkoff       |  | $                           | — |  |                | $ | — |               |  | $ | —                                      |  |  | $                                           | — |  |                        | $ | — |       | 
|Michael V. Barbera |  | $                           | — |  |                | $ | — |               |  | $ | —                                      |  |  | $                                           | — |  |                        | $ | — |       | 
|Ronald J. LoRicco  |  | $                           | — |  |                | $ | — |               |  | $ | —                                      |  |  | $                                           | — |  |                        | $ | — |       | 



For the year ended December 31, 2021:



|Name                   |  | Fees earned or paid in cash |   |  | Warrant Awards |   |   | Option Awards |  |   | Non-equity Incentive Plan Compensation |  |  | Nonqualified Deferred Compensation Earnings |   |  | All other Compensation |   |   | Total | 
|---------------------- |  | --------------------------- | - |  | -------------- | - | - | ------------- |  | - | -------------------------------------- |  |  | ------------------------------------------- | - |  | ---------------------- | - | - | ----- | 
|Paul Sallarulo(1)      |  | $                           | — |  |                | $ | — |               |  | $ | —                                      |  |  | $                                           | — |  |                        | $ | — |       | 
|Adam Falkoff(2)        |  | $                           | — |  |                | $ | — |               |  | $ | 102,923                                |  |  | $                                           | — |  |                        | $ | — |       | 
|Michael V. Barbera (3) |  | $                           | — |  |                | $ | — |               |  | $ | 160,857                                |  |  | $                                           | — |  |                        | $ | — |       | 
|Ronald J. LoRicco      |  | $                           | — |  |                | $ | — |               |  | $ | —                                      |  |  | $                                           | — |  |                        | $ | — |       | 



| | (1) | Reflects the value of the portion of health insurance benefits paid by the Company.
| | --- | -----------------------------------------------------------------------------------



| | (2) | Consists of the grant date fair value of options to purchase 500,000 shares of the Company’s common stock at a price of $0.28
per share.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Consists of the grant date fair value of options to purchase 777,778 shares of the Company’s common stock at a price of $0.27
per share.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------



Family Relationships



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



Involvement in Certain Legal Proceedings



None of our directors or executive
officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any
judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining the person
from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal
or state securities laws, except for matters that were dismissed without sanction or settlement. Except as set forth in our discussion
below in “Certain Relationships and Related Transactions”, none of our directors, director nominees or executive officers
has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required
to be disclosed pursuant to the rules and regulations of the SEC.



Code of Ethics



Our Board 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 Basanite,
Inc., 2066 N.W. 15th Court, Pompano Beach, FL 33069, Attention: Mr. Ronald LoRicco, Sr., Chairman.





41





Shareholder Communications



Although we do not have a formal
policy regarding communications with our Board, shareholders may communicate with the Board by writing to us at Basanite, Inc., 2066 N.W.
15th Court, Pompano Beach, FL 33069. Attention: Mr. Ronald LoRicco, Sr., Chairman. Shareholders who would like their submission
directed to a member of the Board may so specify and the communication will be forwarded, as appropriate.



Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Exchange
Act requires our directors and executive officers, and persons who beneficially own more than 10% of a registered class of our equity
securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and the other equity
securities. Officers, directors and 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a)
forms they file. Based solely on a review of the copies of the forms furnished to us, we believe that all filing requirements were complied
with during 2021.



| | Item 11. | Executive Compensation.
| | -------- | -----------------------



The following table summarizes all compensation
recorded by us in the last two completed fiscal years for:



| | · | Our principal executive officer or other individual serving in a similar capacity;
| | - | ----------------------------------------------------------------------------------

| | · | Our two most highly compensated executive officers other than our principal executive
officer who were serving as executive officers at December 31, 2022 as that term is defined under Rule 3b-7 of the Securities Exchange
Act of 1934; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Up to two additional individuals for whom disclosure would have been required but for the fact that the
individual was not serving as an executive officer at December 31, 2022.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|Name                                   |  | Years |      |  | Salary ($) |   |         | Warrant Awards ($) |  |   | Option Awards ($) |  |  | Other Compensation ($) |   |  | Total ($) |  
|-------------------------------------- |  | ----- | ---- |  | ---------- | - | ------- | ------------------ |  | - | ----------------- |  |  | ---------------------- | - |  | --------- | -
|Simon Kay (1)                          |  |       | 2021 |  |            | $ | —       |                    |  | $ | —                 |  |  | $                      | — |  |           | $
|Former President and                   |  |       | 2022 |  |            | $ | 159,615 |                    |  | $ | —                 |  |  | $                      | — |  |           | $
|Chief Executive Officer                |  |       |      |  |            |   |         |                    |  |   |                   |  |  |                        |   |  |           |  
|                                       |  |       |      |  |            |   |         |                    |  |   |                   |  |  |                        |   |  |           |  
|David L. Anderson (2)(3)               |  |       | 2021 |  |            | $ | 195,419 |                    |  | $ | —                 |  |  | $                      | — |  |           | $
|Former Chief Operating Officer         |  |       | 2022 |  |            | $ | 46,758  |                    |  | $ | —                 |  |  | $                      | — |  |           | $
|                                       |  |       |      |  |            |   |         |                    |  |   |                   |  |  |                        |   |  |           |  
|Lisa Gainsborg (4)                     |  |       | 2021 |  |            | $ | —       |                    |  | $ | —                 |  |  | $                      | — |  |           | $
|Former Chief Financial Officer         |  |       | 2022 |  |            | $ | 37,204  |                    |  | $ | —                 |  |  | $                      | — |  |           | $
|                                       |  |       |      |  |            |   |         |                    |  |   |                   |  |  |                        |   |  |           |  
|Jackie Placeres (5)                    |  |       | 2021 |  |            | $ | —       |                    |  | $ | —                 |  |  | $                      | — |  |           | $
|Acting Interim Chief Financial Officer |  |       | 2022 |  |            | $ | 6,731   |                    |  | $ | —                 |  |  | $                      | — |  |           | $

———————

| | (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 and to Chief Executive Officer and President effective March 25, 2022. On November 14th, 2022 we were
provided notice of his resignation and the Board of Directors accepted. Mr. Kay is not associated with our company.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Includes reimbursed cost of health Includes insurance of $15,000.
| | --- | -----------------------------------------------------------------

| | (3) | On February 20, 2022, Mr. Anderson resigned from his position and on February 24, 2022 we provided written notice to Mr. Anderson
that his resignation had been accepted. Therefore, as of February 24, 2022, Mr. Anderson is not associated with our company.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | On December 15, 2022, Ms. Gainsborg resigned from her position and on December 15, 2022, we provided written notice to Ms. Gainsborg
that her resignation had been accepted. Therefore, as of December 15, 2022, Ms. Gainsborg is not associated with our company.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | On December 15, 2022, Mrs.Placeres transitioned to the role of Acting Interim Chief Financial Officer from
Controller for the Company.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------







42





Employment Agreement with Simon R. Kay



We entered into an employment
agreement, dated March 25, 2022, with Simon R. Kay to serve as our Chief Executive Officer and President and Acting Interim Chief Financial
Officer. Mr. Kay had been serving as our Acting Interim Chief Executive Officer, President, and Chief
Financial Officer in a consulting capacity since January 13, 2020. The term of the employment agreement is for an initial period of two
years and provides a base salary of $250,000 annually. Mr. Kay is also eligible to receive a cash bonus of $100,000 upon our achievement
of both: (i) an uplisting of our company from the OTCQB Market to any tier of the Nasdaq, New York Stock Exchange, or NYSE American; and
(ii) our achieving positive cash flow under U.S. generally accepted accounting principles for any fiscal quarter as reported in our filings
with the SEC . Mr. Kay has also been issued a five year warrant to purchase an aggregate 2,000,000 shares of our common stock at an exercise
price of $0.33 per share, with a “cashless exercise” provision. One million shares of the warrant vested upon execution of
the employment agreement, and the remaining one million shares vest on the first anniversary of the execution of the employment agreement.
Mr. Kay’s employment agreement replaced our Transition Services Agreement with Mr. Kay described below.



On
January 20, 2022, we entered into a Transition Services Agreement (the “TSA”) with Simon R. Kay. Prior to the execution of
the TSA, Mr. Kay has been serving as ourActing Interim Chief Executive Officer, President and Chief Financial Officer in a consultant
capacity since January 13, 2020 pursuant to a Consulting Agreement between us and Mr. Kay. Our employment agreement with Mr. Kay terminated
the TSA, except for those provisions which expressly survive termination.



On November 14th, 2022 the
Company was provided notice of his resignation and the Board of Directors accepted. Mr. Kay’s anniversary shares with respect to
his employment agreement were not issued pursuant to the terms of the agreement, no further compensation or consideration was offered.
Mr. Kay is not associated with our company.



Except as otherwise disclosed
above, we have not entered into employment agreements with, nor have we authorized any payments upon termination or change-in-control,
to any of our executive officers or key employees.



How Compensation for our Directors and Executive Officers was Determined



During 2022, our previous Acting
Chief Executive Officer, Simon Kay, was compensated pursuant to a consulting agreement and then later an Employment Agreement; and our
former Chief Operating Officer, David Anderson, was compensated per his employment agreement. Our former Chief Financial Officer, Chief
Financial Officer, was compensated as an at-will employee. Our current Acting Interim Chief Financial Officer is compensated as an at-will
employee. These agreements were negotiated and approved by our Board of Directors.



2022 Option and Warrant Grants to Executive Officers



None.



2021 Option and Warrant Grants to Executive Officers



None.



Outstanding Equity Awards at Fiscal Year-End



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 at December 31, 2022.



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,
2022.



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 at December 31, 2022.



Equity Compensation Plan Information



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.



43







| | Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
| | -------- | -----------------------------------------------------------------------------------------------



The following table shows the
number of shares and percentage of all shares of common stock issued and outstanding as of the date of this Annual Report, held by any
person known to us to be the beneficial owner of 5% or more of our outstanding common stock, by each executive officer and director, and
by all directors and executive officers as a group. The persons named in the table have sole voting and investment power with respect
to all shares beneficially owned. Unless otherwise noted below, each beneficial owner has sole power to vote and dispose of the shares
and the address of such person is our corporate office at 2660 N.W. 15th Court, Unit 108, Pompano Beach, FL 33069. Pursuant
to Rule 13d-3 under the Exchange Act, a person has beneficial ownership of any securities as to which such person, directly or indirectly,
through any contract, arrangement, undertaking, relationship or otherwise has or shares voting power and/or investment power or as to
which such person has the right to acquire such voting and/or investment power within 60 days. Applicable percentage of ownership is based
on 257,156,796 of common stock outstanding as of date of this Annual Report.



|                                                            |  | Number of Shares Beneficially Owned |             |  | Percentage of Shares Outstanding (1) | 
|----------------------------------------------------------- |  | ----------------------------------- | ----------- |  | ------------------------------------ | 
|                                                            |  |                                     |             |  |                                      | 
|Named Executive Officers and Directors:                     |  |                                     |             |  |                                      | 
|Simon R. Kay (2)                                            |  |                                     | 1,000,000   |  |                                      | 
|Michael V. Barbera (3)                                      |  |                                     | 12,653,214  |  |                                      | 
|Ronald J. LoRicco, Sr. (4)                                  |  |                                     | 60,915,912  |  |                                      | 
|Paul Sallarulo (5)                                          |  |                                     | 7,334,493   |  |                                      | 
|Adam Falkoff (6)                                            |  |                                     | 500,000     |  |                                      | 
|Frederick Tingberg Jr.(7)                                   |  |                                     | 1,851,781   |  |                                      | 
|Manuel A. Rodriguez (8)                                     |  |                                     | 20,616,060  |  |                                      | 
|David Anderson                                              |  |                                     | 1,000,000   |  |                                      | 
|All executive officers and directors as a group (7 persons) |  |                                     | 105,871,460 |  |                                      | 

———————

* Less than 1%.



| | (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 Annual Report, 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 a vested warrant shares currently held by Mr. Kay to purchase 1,000,000 shares of common stock at $0.33 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, 195,522 shares issuable upon exercise of common stock purchase warrant exercisable at $0.396
per share, 1,500,000 shares issuable upon exercise of common stock purchase warrant exercisable at $0.20 per share, and 777,778 shares
issuable upon exercise of options to purchase common stock exercisable at $0.27 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, 397,269 shares issuable upon exercise of common stock purchase warrant exercisable at
$0.396 per share, 11,250,000 shares of common stock issuable upon exercise of common stock purchase warrants exercisable at $0.20 per
share, and 5,625,000 shares of common stock issuable upon exercise of common stock purchase warrants exercisable at $0.35 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.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





44







| | (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 and 1,500,000 shares of common stock issuable
upon exercise of common stock warrants exercisable at $0.20 per share.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (6) | Includes 500,000 shares of common stock issuable upon exercise of common stock purchase options held by
Mr. Falkoff exercisable at $0.25 per share.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------

| | (7) | Includes shares currently held by Mr. Tingberg including 1,212,121 shares of common stock issuable upon exercise of common stock purchase
warrants exercisable at $0.33 per share.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (8) | Includes shares currently held by Mr. Rodriguez in addition to 20,606,060 shares issuable upon exercise of common stock purchase warrants
exercisable at $0.33 per share, 20,000,000 of which are held by U.S. Supplies, Inc., an entity controlled by Mr. Rodriguez.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (9) | Includes a vested warrant shares currently held by Mr. Anderson to purchase 1,000,000 shares of common stock at $0.12 per share
| | --- | -------------------------------------------------------------------------------------------------------------------------------



| | Item 13. | Certain Relationships and Related Transactions, and Director Independence.
| | -------- | --------------------------------------------------------------------------



Except as disclosed below, we are currently not a party to any
related party transaction, including transaction in which:



| | · | The amounts involved exceeded or will exceed the lesser of $120,000 or 1% of the average of our Company’s total assets at year-end
for the last two fiscal years, and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | 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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Additional information regarding these transactions can be found
in notes 6, 7 and 9 to the accompanying financial statements.



Transactions
in 2021



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 on April 2, 2021. We also issued 1,500,000 common stock warrants at an exercise price of $0.20 per share expiring in
5 years. As of the date of this filing, the maturity date of the note has passed but the noteholder has not issued a formal demand for
payment.



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 on April 2, 2022. We also issued 1,500,000 common stock warrants at an exercise price of $0.20 per share expiring in 5 years.
As of the date of this filing, the maturity date of the note has passed but the noteholder has not issued a formal demand for payment.



On July 7, 2021, we issued a promissory
note with an entity managed by Ronald J. LoRicco, Sr., a member of our Board of Directors, in exchange for $50,000 bearing an interest
rate of 10% per annum. The maturity date for the promissory note is July 23, 2021. The note payable was paid in full on August 24, 2021.



On July 7, 2021, we issued
a promissory note with Michael V. Barbera, our Chairman of the Board, in exchange for $50,000 bearing an interest rate of 10% per annum.
The maturity date for the promissory note is July 23, 2021. The note payable was paid in full on August 24, 2021.



On July 15, 2021, we issued a
promissory note to David Anderson, our former Chief Operating Officer, in exchange for $20,000 bearing an interest rate of 10% per annum.
The maturity date for the promissory note is July 23, 2021. The note payable was paid in full on August 18, 2021.



On July 26,
2021, we issued a promissory note with David Anderson, our former Chief Operating Officer, in exchange for $30,500 bearing an interest
rate of 10% per annum. The maturity date of the promissory note is August 2, 2021. The note payable was paid in full on August 18, 2021.



On July 27, 2021, we issued
a promissory note with Simon Kay, our Chief Executive Officer, President and acting interim Chief Financial Officer, in exchange for $10,000
bearing an interest rate of 10% per annum.



On August 6, 2021, we issued a
promissory note with an entity managed by Ronald J. LoRicco, Sr., a member of our Board of Directors, in exchange for $100,000 bearing
an interest rate of 10% per annum. The maturity date for the promissory note is August 24, 2021. The note payable was paid in full on
August 24, 2021.



On December 10, 2021, we issued
20,000,000 warrants with an exercise price of $0.33 per share and a grant date fair value of $3,907,973 to USS, a strategic partner controlled
by Manuel Rodriguez, a member of our Board of Directors.



45







Transactions in 2022



On August 31, 2022 the Company
issued a promissory note to a board member in exchange for $37,000 bearing an interest rate of 10% per annum and payable on August 31,
2023.



On August 22, 2022 the Company
issued a promissory note to a board member in exchange for $20,000 bearing an interest rate of 10% per annum and payable on August 22,
2023.



On August 22, 2022 the Company
issued a promissory note to a board member in exchange for $5,000 bearing an interest rate of 10% per annum and payable on August 22,
2023.



On August 29, 2022 the Company
issued a promissory note to a board member in exchange for $25,000 bearing an interest rate of 10% per annum and payable on August 29,
2023.



On August 29, 2022 the Company
issued a promissory note to a board member in exchange for $10,000 bearing an interest rate of 10% per annum and payable on August 29,
2023.



On August 31, 2022 the Company
issued a promissory note to a board member in exchange for $13,000 bearing an interest rate of 10% per annum and payable on August 31,
2023.



On September 9, 2022 the Company
issued a promissory note to a board member in exchange for $60,000 bearing an interest rate of 10% per annum and payable on August 16,
2023.



On September 9, 2022 the Company
issued a promissory note to a board member in exchange for $10,000 bearing an interest rate of 10% per annum and payable on September
9, 2023.



On September 9, 2022 the Company
issued a promissory note to a strategic partner in exchange for $10,000 bearing an interest rate of 10% per annum and payable on September
9, 2023.



On September 9, 2022 the Company
issued a promissory note to a strategic partner in exchange for $15,000 bearing an interest rate of 10% per annum and payable on September
9, 2023.



On September 9, 2022 the Company
issued a promissory note to an investor and advisor to the board, in exchange for $15,000 bearing an interest rate of 10% per annum and
payable on September 9, 2023.



On September 22, 2022 the Company
issued a promissory note to a board member in exchange for $42,500 bearing an interest rate of 10% per annum and payable on March 22,
2023.



On September 22, 2022 the Company
issued a promissory note to an investor and advisor to the board in exchange for $42,500 bearing an interest rate of 10% per annum and
payable on March 22, 2023.



On April 2, 2021, the Company
issued a promissory note to Paul Sallarulo, a member of our Board of Directors, in exchange for $150,000 bearing an interest rate of 18%
per annum and payable on April 2, 2022. The Company also issued a warrant to purchase 1,500,000 shares of Common Stock at an exercise
price of $0.20 per share expiring in 5 years. On April 2, 2022, the due date of this note was extended to October 31, 2022. As of the
date of this report, the note has not been called.



On April 2, 2021, the Company
issued a promissory note to Michael V. Barbera, our Chairman of the Board, in exchange for $150,000 bearing an interest rate of 18% per
annum and payable on April 2, 2022. The Company also issued a warrant to purchase 1,500,000 shares of Common Stock at an exercise price
of $0.20 per share expiring in 5 years. On April 2, 2022, the due date of this note was extended to October 31, 2022. As of the date of
this report, the note has not been called.



46









| | Item 14. | Principal Accounting Fees and Services.
| | -------- | ---------------------------------------



Currently, our Audit Committee
reviews and approves audit and permissible non-audit services performed by its independent registered public accounting firm of Cherry
Bekaert LLP, as well as the fees charged for such services. In its review of non-audit service and its appointment of Cherry Bekaert LLP,
our independent registered public accounting firm for the respective years, the Audit Committee considered whether the provision of such
services is compatible with maintaining independence. All of the services provided and fees charged by Cherry Bekaert LLP were approved
by our Audit Committee.



The following table shows the fees for the years ended December
31, 2022 and 2021:



|                   |  | 2021 |         |  | 2020 |  
|------------------ |  | ---- | ------- |  | ---- | -
|Audit Fees (1)     |  | $    | 180,267 |  |      | $
|Tax Fees           |  | $    | —       |  |      | $
|All Other Fees (2) |  | $    | 54,240  |  |      | $

———————

| | (1) | Fees – these fees relate to the audit of our annual financial statements and the review of our interim quarterly financial statements
billed during the Auditrespective years.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | All other fees – these fees relate to the consent fee for the filing of our comparative financial statements for the previous
year.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------







47







PART IV



| | Item 15. | Exhibits, Financial Statement Schedules.
| | -------- | ----------------------------------------



Exhibits



|            |  |                                                                                                                                     |  | Incorporated by Reference |  |            |  |        |  |                             
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ---------- |  | ------ |  | ----------------------------
|Exhibit No. |  | Exhibit Description                                                                                                                 |  | Form                      |  | Date Filed |  | Number |  | Filed or
Furnished 
Herewith
|2.1         |  | Agreement and Plan of Merger, dated December 11, 2018, between Basanite, Inc. and PayMeOn, Inc.                                     |  | 8-K                       |  | 12/12/18   |  | 2.1    |  |                             
|2.2         |  | Articles of Merger, dated December 12, 2018                                                                                         |  | 8-K                       |  | 12/12/18   |  | 3.1    |  |                             
|3.1         |  | Articles of Incorporation                                                                                                           |  | S-1                       |  | 11/4/08    |  | 3.1    |  |                             
|3.2         |  | Amendment to Articles of Incorporation                                                                                              |  | S-1                       |  | 11/4/08    |  | 3.3    |  |                             
|3.3         |  | Amendment to Articles of Incorporation increasing capital stock and blank check preferred                                           |  | 8-K                       |  | 4/3/13     |  | 3.1    |  |                             
|3.4         |  | Amendment to Articles of Incorporation Name change and reverse split effective May 17, 2013                                         |  | 8-K                       |  | 5/6/13     |  | 3.1    |  |                             
|3.7         |  | Amended and Restated Bylaws                                                                                                         |  | 8-K                       |  | 8/18/21    |  | 3.1    |  |                             
|4.1         |  | Common Stock Warrant for 5,000,000 shares to Richard Krolewski                                                                      |  | 8-K/A                     |  | 3/19/19    |  | 4.1    |  |                             
|4.2         |  | Common Stock Warrant for 5,000,000 shares to David L. Anderson                                                                      |  | 8-K                       |  | 3/12/19    |  | 4.1    |  |                             
|4.3         |  | Form of Common Stock Warrant issued  in connection with September 2018 through March 2019 private placement                         |  | 10-K                      |  | 3/28/19    |  | 10.38  |  |                             
|4.4         |  | Form of Common Stock Warrant issued to 20% Secured Convertible Noteholders, dated February 12, 2021                                 |  | 8-K                       |  | 2/19/21    |  | 4.1    |  |                             
|4.5         |  | Form of Common Stock Warrant issued to 20% Secured Convertible Noteholders, dated May 12, 2021                                      |  | 10-Q                      |  | 5/17/21    |  | 4.2    |  |                             
|4.6         |  | Form of Warrant A issued in the August 2021 Private Placement                                                                       |  | 10-Q                      |  | 8/23/21    |  | 4.1    |  |                             
|4.7         |  | Form of Warrant B issued in the August 2021 Private Placement                                                                       |  | 10-Q                      |  | 8/23/21    |  | 4.2    |  |                             
|4.8         |  | Strategic Partner Warrant, dated December 10, 2021, issued to U.S. Supplies, Inc.                                                   |  | 8-K                       |  | 12/13/21   |  | 4.1    |  |                             
|4.9         |  | Warrant issued to Simon R. Kay, dated March 25, 2022                                                                                |  | 8-K                       |  | 3/31/22    |  | 4.1    |  |                             
|10.1        |  | Commercial Lease Agreement between Basanite Industries LLC and CAMTON, LLC                                                          |  | 8-K                       |  | 1/31/19    |  | 10.1   |  |                             
|10.2        |  | Consulting
    Agreement with Simon R. Kay dated January 13, 2020 and related Statement of Work, amended as of September 16, 2020 + |  |                           |  |            |  |        |  |                             
|10.3        |  | Exclusive Supplier Agreement with MEP Consulting Engineers, Inc.                                                                    |  | 8-K                       |  | 7/31/20    |  | 10.1   |  |                             



48









|10.4    |  | Form of 20% Secured Convertible Promissory Note dated August 3, 2020                                                                                                  |  | 8-K/A |  | 8/10/20  |  | 10.1 |  |   |  |  |  |  
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----- |  | -------- |  | ---- |  | - |  |  |  | -
|10.5    |  | Security Agreement dated August 3, 2020, relating to 20% Secured Convertible Promissory Note                                                                          |  | 8-K/A |  | 8/10/20  |  | 10.2 |  |   |  |  |  |  
|10.6    |  | Form of Amended and Restated 20% Secured Promissory Note, dated February 12, 2021                                                                                     |  | 8-K   |  | 2/19/21  |  | 10.1 |  |   |  |  |  |  
|10.7    |  | Form of Amended and Restated 20% Secured Promissory Note, dated May 12, 2021                                                                                          |  | 10-Q  |  | 5/17/21  |  | 10.2 |  |   |  |  |  |  
|10.8    |  | Form of Securities Purchase Agreement, dated August 17, 2021                                                                                                          |  | 10-Q  |  | 8/23/21  |  | 10.1 |  |   |  |  |  |  
|10.9    |  | Form of Placement Agent Agreement between the Company and Aegis Capital Corp., dated August 17, 2021                                                                  |  | 10-Q  |  | 8/23/21  |  | 10.2 |  |   |  |  |  |  
|10.10   |  | Form of Director Offer Letter, dated December 10, 2021, for Manuel A. Rodriguez and Frederick H. Tingberg, Jr.                                                        |  | 8-K   |  | 12/13/21 |  | 10.1 |  |   |  |  |  |  
|10.11   |  | Distribution Agreement between the Company and U.S. Supplies, Inc. dated December 10, 2021 *                                                                          |  |       |  |          |  |      |  |   |  |  | 
|10.12   |  | Exclusive Supplier Agreement between the Company and Concrete Products of The Palm Beaches, Inc., dated December 10, 2021. *                                          |  |       |  |          |  |      |  |   |  |  | 
|10.13   |  | Form of Transition Services Agreement, dated January 20, 2022 between the Company and Simon R. Kay                                                                    |  | 8-K   |  | 1/26/22  |  | 10.1 |  |   |  |  |  |  
|10.14   |  | Employment Agreement dated March 25, 2022 for Simon R. Kay                                                                                                            |  | 8-K   |  | 3/31/22  |  | 10.1 |  |   |  |  |  |  
|14.1    |  | Code of Ethics                                                                                                                                                        |  | 10-K  |  | 4/5/12   |  | 14.1 |  |   |  |  |  |  
|21.1    |  | List of subsidiaries of the Company                                                                                                                                   |  | 10-K  |  | 3/31/21  |  | 21.1 |  |   |  |  |  |  
|31.1    |  | Certification Pursuant to Rule 13a-14(a)/15d-14(a)                                                                                                                    |  |       |  |          |  |      |  | X |  |  |  |  
|31.2    |  | Certification Pursuant to Rule 13a-14(a)/15d-14(a)                                                                                                                    |  |       |  |          |  |      |  | X |  |  |  |  
|32.1    |  | Certification Pursuant to Section 1350                                                                                                                                |  |       |  |          |  |      |  | X |  |  |  |  
|101.INS |  | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |  |       |  |          |  |      |  |   |  |  |  | X
|101.SCH |  | Inline XBRL Taxonomy Extension Schema Document                                                                                                                        |  |       |  |          |  |      |  |   |  |  |  | X
|101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document                                                                                                          |  |       |  |          |  |      |  |   |  |  |  | X
|101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document                                                                                                           |  |       |  |          |  |      |  |   |  |  |  | X
|101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document                                                                                                                |  |       |  |          |  |      |  |   |  |  |  | X
|101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document                                                                                                         |  |       |  |          |  |      |  |   |  |  |  | X
|104     |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)                                                                              |  |       |  |          |  |      |  |   |  |  |  | X



_____________________

* Certain portions of this exhibit have been redacted in accordance
with Item 601(b)(10)(iv) of Regulation S-K because they are private, confidential and not material.

+ Indicates a management contract
or a compensatory plan, contract or arrangement.



| | Item 16. | Form 10-K Summary.
| | -------- | ------------------



Not applicable.





49





SIGNATURES



Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.



Date: April 17, 2023



| | Basanite, Inc.
| | --------------
| |               
| | By:           
| |               
| |               



Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.



|Signature                     |  | Title                                  |  | Date          
|----------------------------- |  | -------------------------------------- |  | --------------
|                              |  |                                        |  |               
|/s/ Thomas Richmond           |  | Acting Interim Chief Executive Officer |  | April 17, 2023
|Thomas Richmond               |  |                                        |  |               
|                              |  |                                        |  |               
|/s/ Jackie Placeres           |  | Acting Interim Chief Financial Officer |  | April 17, 2023
|Jackie Placeres               |  |                                        |  |               
|                              |  |                                        |  |               
|/s/ Ronald J. LoRicco, Sr.    |  | Chairman of the Board                  |  | April 17, 2023
|Ronald J. LoRicco, Sr.        |  |                                        |  |               
|                              |  |                                        |  |               
|/s/ Paul M. Sallarulo         |  | Director                               |  | April 17, 2023
|Paul M. Sallarulo             |  |                                        |  |               
|                              |  |                                        |  |               
|/s/ Manuel A. Rodriguez       |  | Director                               |  | April 17, 2023
|Manuel A. Rodriguez           |  |                                        |  |               
|                              |  |                                        |  |               
|/s/ Frederick H. Tingberg Jr. |  | Director                               |  | April 17, 2023
|Frederick H. Tingberg Jr.     |  |                                        |  |               
|                              |  |                                        |  |               
|/s/ Adam S. Falkoff           |  | Director                               |  | April 17, 2023
|Adam S. Falkoff               |  |                                        |  |               
|                              |  |                                        |  |               
|/s/ Sergio Salani             |  | Director                               |  | April 17, 2023
|Sergio Salani                 |  |                                        |  |               





50





INDEX TO FINANCIAL
STATEMENTS



BASANITE, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS



|                                                                    |  |     
|------------------------------------------------------------------- |  | ----
|                                                                    |  | Page
|                                                                    |  |     
|                                                                    |  |     
|                                                                    |  |     
|Unaudited Consolidated Balance Sheets                               |  | F-5 
|                                                                    |  |     
|Unaudited Consolidated Statements of Operations                     |  | F-6 
|                                                                    |  |     
|Unaudited Consolidated Statements of Stockholders’ Equity (Deficit) |  | F-7 
|                                                                    |  |     
|Unaudited Consolidated Statements of Cash Flows                     |  | F-8 
|                                                                    |  |     
|Notes to Unaudited Consolidated Financial Statements                |  | F-10





F-1











F-2





BASANITE, INC. AND
SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE
SHEETS



|                                                                                                                                         |  |                    |             |   |      |   |             |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ----------- | - | ---- | - | ----------- | -
|                                                                                                                                         |  | As of December 31, |            
|                                                                                                                                         |  | 2022               |             |   | 2021 |  
|ASSETS                                                                                                                                   |  |                    |             |   |      |   |             |  
|                                                                                                                                         |  |                    |             |   |      |   |             |  
|CURRENT ASSETS                                                                                                                           |  |                    |             |   |      |   |             |  
|Cash                                                                                                                                     |  | $                  | 30,340      |   |      | $ | 109,514     |  
|Accounts receivable, net                                                                                                                 |  |                    | 522,494     |   |      |   | 7,817       |  
|Inventory                                                                                                                                |  |                    | (401,993    | ) |      |   | 714,655     |  
|Prepaid expenses                                                                                                                         |  |                    | 137,370     |   |      |   | 127,806     |  
|Deposits and other current assets                                                                                                        |  |                    | 177,875     |   |      |   | 265,553     |  
|TOTAL CURRENT ASSETS                                                                                                                     |  |                    | 466,085     |   |      |   | 1,225,345   |  
|                                                                                                                                         |  |                    |             |   |      |   |             |  
|Lease right-of-use asset                                                                                                                 |  |                    | 1,354,392   |   |      |   | 749,116     |  
|Fixed assets, net                                                                                                                        |  |                    | 2,946,877   |   |      |   | 3,236,825   |  
|TOTAL NON CURRENT ASSETS                                                                                                                 |  |                    | 4,301,268   |   |      |   | 3,985,941   |  
|                                                                                                                                         |  |                    |             |   |      |   |             |  
|TOTAL ASSETS                                                                                                                             |  | $                  | 4,767,354   |   |      | $ | 5,211,286   |  
|                                                                                                                                         |  |                    |             |   |      |   |             |  
|                                                                                                                                         |  |                    |             |   |      |   |             |  
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                                                                           |  |                    |             |   |      |   |             |  
|                                                                                                                                         |  |                    |             |   |      |   |             |  
|CURRENT LIABILITIES                                                                                                                      |  |                    |             |   |      |   |             |  
|Accounts payable                                                                                                                         |  | $                  | 1,713,045   |   |      | $ | 1,175,682   |  
|Accrued expenses                                                                                                                         |  |                    | 416,023     |   |      |   | 407,454     |  
|Accrued legal liability                                                                                                                  |  |                    | 165,000     |   |      |   | 165,000     |  
|Notes payable                                                                                                                            |  |                    | 304,243     |   |      |   | 466,762     |  
|Notes payable - related party                                                                                                            |  |                    | 605,000     |   |      |   | 300,000     |  
|Notes payable - convertible, net                                                                                                         |  |                    | —           |   |      |   | —           |  
|Notes payable - convertible - related party, net                                                                                         |  |                    | 2,144,357   |   |      |   | 1,689,745   |  
|Subscription liability                                                                                                                   |  |                    | 1,805,000   |   |      |   | —           |  
|Lease liability - current portion                                                                                                        |  |                    | 426,898     |   |      |   | 325,339     |  
|TOTAL CURRENT LIABILITIES                                                                                                                |  |                    | 7,579,567   |   |      |   | 4,529,982   |  
|                                                                                                                                         |  |                    |             |   |      |   |             |  
|Lease liability - net of current portion                                                                                                 |  |                    | 994,809     |   |      |   | 499,546     |  
|                                                                                                                                         |  |                    |             |   |      |   |             |  
|TOTAL LIABILITIES                                                                                                                        |  |                    | 8,574,376   |   |      |   | 5,029,528   |  
|                                                                                                                                         |  |                    |             |   |      |   |             |  
|STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                           |  |                    |             |   |      |   |             |  
|Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued and outstanding                                              |  |                    | —           |   |      |   | —           |  
|Common stock, $0.001 par value, 1,000,000,000 shares authorized, 251,884,069 and 248,840,144 shares issued and outstanding, respectively |  |                    | 253,218     |   |      |   | 248,842     |  
|Additional paid-in capital                                                                                                               |  |                    | 47,455,915  |   |      |   | 46,054,126  |  
|Accumulated deficit                                                                                                                      |  |                    | (51,516,155 | ) |      |   | (46,121,210 | )
|TOTAL STOCKHOLDERS' EQUITY(DEFICIT)                                                                                                      |  |                    | (3,807,022  | ) |      |   | 181,758     |  
|                                                                                                                                         |  |                    |             |   |      |   |             |  
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                                                                     |  | $                  | 4,767,354   |   |      | $ | 5,211,286   |  



The accompanying notes are an integral part
of the consolidated financial statements.



F-3





BASANITE, INC. AND
SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF
OPERATIONS



|                                                        |  |                    |             |   |      |   |             |  
|------------------------------------------------------- |  | ------------------ | ----------- | - | ---- | - | ----------- | -
|                                                        |  | For the year ended |            
|                                                        |  | December 31,       |            
|                                                        |  | 2022               |             |   | 2021 |  
|Revenue                                                 |  |                    |             |   |      |  
|Products sales - rebar                                  |  | $                  | 1,356,164   |   |      | $ | 193,194     |  
|                                                        |  |                    |             |   |      |   |             |  
|Total cost of goods sold                                |  |                    | 2,427,919   |   |      |   | 1,970,604   |  
|                                                        |  |                    |             |   |      |   |             |  
|Gross (loss) profit                                     |  |                    | (1,071,754  | ) |      |   | (1,777,410  | )
|                                                        |  |                    |             |   |      |   |             |  
|OPERATING EXPENSES                                      |  |                    |             |   |      |   |             |  
|Selling, general, and administrative expenses           |  |                    | 3,554,396   |   |      |   | 8,018,152   |  
|Total operating expenses                                |  |                    | 3,554,396   |   |      |   | 8,018,152   |  
|                                                        |  |                    |             |   |      |   |             |  
|NET LOSS FROM OPERATIONS                                |  |                    | (4,626,150  | ) |      |   | (9,795,562  | )
|                                                        |  |                    |             |   |      |   |             |  
|OTHER INCOME (EXPENSE)                                  |  |                    |             |   |      |   |             |  
|Gain on settlement of legal contingency                 |  |                    | —           |   |      |   | 409,127     |  
|Liquidated Damages                                      |  |                    | (426,759    | ) |      |   | —           |  
|Gain on settlement of payables                          |  |                    | —           |   |      |   | 39,902      |  
|Miscellaneous income                                    |  |                    | 30          |   |      |   | —           |  
|Loss on extinguishment of debt                          |  |                    | —           |   |      |   | (6,743,015  | )
|Loan forgiveness                                        |  |                    | 170,095     |   |      |   | 124,143     |  
|Interest expense                                        |  |                    | (512,162    | ) |      |   | (512,418    | )
|Total other income (expense)                            |  |                    | (768,796    | ) |      |   | (6,682,261  | )
|                                                        |  |                    |             |   |      |   |             |  
|LOSS FROM CONTINUING OPERATIONS                         |  |                    | (5,394,945  | ) |      |   | (16,477,823 | )
|                                                        |  |                    |             |   |      |   |             |  
|Deemed dividends                                        |  |                    | —           |   |      |   | —           |  
|                                                        |  |                    |             |   |      |   |             |  
|NET LOSS                                                |  | $                  | (5,394,945  | ) |      | $ | (16,477,823 | )
|                                                        |  |                    |             |   |      |   |             |  
|Net loss per share - basic                              |  | $                  | (0.021      | ) |      | $ | (0.070      | )
|Net loss per share - diluted                            |  | $                  | (0.021      | ) |      | $ | (0.070      | )
|                                                        |  |                    |             |   |      |   |             |  
|Weighted average number of shares outstanding - basic   |  |                    | 251,488,656 |   |      |   | 235,473,411 |  
|Weighted average number of shares outstanding - diluted |  |                    | 251,488,656 |   |      |   | 235,473,411 |  



The accompanying notes are an integral part
of the consolidated financial statements.





F-4





BASANITE, INC. AND
SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY (DEFICIT)



|                                           |  |                 |   |  |              |   |   |         |  |  |             |  |  |               |         |  |         |   |            |                  | 
|------------------------------------------ |  | --------------- | - |  | ------------ | - | - | ------- |  |  | ----------- |  |  | ------------- | ------- |  | ------- | - | ---------- | ---------------- | 
|                                           |  |                 |   |  |              |   |   |         |  |  |             |  |  | Additional    |         |  |         |   |            | Total            | 
|                                           |  | Preferred Stock |   |  | Common Stock |   |   | Paid-in |  |  | Accumulated |  |  | Stockholders' |        
|                                           |  | Shares          |   |  | Par Value    |   |   | Shares  |  |  | Par Value   |  |  | Capital       |         |  | Deficit |   |            | Equity (Deficit) | 
|                                           |  |                 |   |  |              |   |   |         |  |  |             |  |  |               |         |  |         |   |            |                  | 
|Balance January 1, 2022                    |  |                 | — |  |              | $ | — |         |  |  | 248,840,144 |  |  | $             | 248,842 |  |         | $ | 46,054,126 |                  | 
|Warrants exercised for cash                |  |                 | — |  |              |   | — |         |  |  | 1,833,333   |  |  |               | 1,833   |  |         |   | 223,167    |                  | 
|Stock-based compensation                   |  |                 | — |  |              |   | — |         |  |  | 422,713     |  |  |               | 422     |  |         |   | 297,320    |                  | 
|Warrants issued to related party           |  |                 | — |  |              |   | — |         |  |  | —           |  |  |               | —       |  |         |   | —          |                  | 
|Stock issued for cash                      |  |                 | — |  |              |   | — |         |  |  | 2,121,212   |  |  |               | 2,121   |  |         |   | 647,470    |                  | 
|Warrants issued to management              |  |                 | — |  |              |   | — |         |  |  | —           |  |  |               | —       |  |         |   | 211,271    |                  | 
|Warrants issued for extinguishment of debt |  |                 | — |  |              |   | — |         |  |  | —           |  |  |               | —       |  |         |   | —          |                  | 
|Net loss                                   |  |                 | — |  |              |   | — |         |  |  | —           |  |  |               | —       |  |         |   | —          |                  | 
|Balance December 31, 2022                  |  |                 | — |  |              | $ | — |         |  |  | 253,217,402 |  |  | $             | 253,218 |  |         | $ | 47,433,354 |                  | 



|                                           |  |                 |   |  |              |   |   | Additional |  |  |             |  |  | Total         |        
|------------------------------------------ |  | --------------- | - |  | ------------ | - | - | ---------- |  |  | ----------- |  |  | ------------- | -------
|                                           |  | Preferred Stock |   |  | Common Stock |   |   | Paid-in    |  |  | Accumulated |  |  | Stockholders' |        
|                                           |  | Shares          |   |  | Par Value    |   |   | Shares     |  |  | Par Value   |  |  | Capital       |        
|                                           |  |                 |   |  |              |   |   |            |  |  |             |  |  |               |        
|Balance January 1, 2021                    |  |                 | — |  |              | $ | — |            |  |  | 224,836,785 |  |  | $             | 224,838
|Warrants exercised for cash                |  |                 | — |  |              |   | — |            |  |  | 1,000,000   |  |  |               | 1,000  
|Stock-based compensation                   |  |                 | — |  |              |   | — |            |  |  | 2,419,546   |  |  |               | 2,420  
|Warrants issued to related party           |  |                 | — |  |              |   | — |            |  |  | —           |  |  |               | —      
|Stock issued for cash                      |  |                 | — |  |              |   | — |            |  |  | 20,583,813  |  |  |               | 20,584 
|Warrants issued for extinguishment of debt |  |                 | — |  |              |   | — |            |  |  | —           |  |  |               | —      
|Net loss                                   |  |                 | — |  |              |   | — |            |  |  | —           |  |  |               | —      
|Balance December 31, 2022                  |  |                 | — |  |              | $ | — |            |  |  | 248,840,144 |  |  | $             | 248,842





The accompanying notes are an integral part
of the consolidated financial statements.





F-5





BASANITE, INC. AND
SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF
CASH FLOWS



|                                                                                    |  |                    |             |   |      |   |             |  
|----------------------------------------------------------------------------------- |  | ------------------ | ----------- | - | ---- | - | ----------- | -
|                                                                                    |  | For the year ended |            
|                                                                                    |  | December 31,       |            
|                                                                                    |  | 2022               |             |   | 2021 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                               |  |                    |             |   |      |   |             |  
|Net loss                                                                            |  | $                  | (16,477,823 | ) |      | $ | (16,477,823 | )
|Adjustments to reconcile net loss to net cash used in operating activities:         |  |                    |             |   |      |   |             |  
|Lease right-of-use asset amortization                                               |  |                    | 255,051     |   |      |   | 255,051     |  
|Depreciation                                                                        |  |                    | 129,693     |   |      |   | 129,693     |  
|Amortization of debt discount                                                       |  |                    | —           |   |      |   | —           |  
|Gain on settlement of legal contingency                                             |  |                    | (409,127    | ) |      |   | (409,127    | )
|Gain on settlement of payable                                                       |  |                    | (39,902     | ) |      |   | (39,902     | )
|Loss on sale of asset                                                               |  |                    | —           |   |      |   | —           |  
|Loss on inventory obsolescence                                                      |  |                    | —           |   |      |   | —           |  
|Deemed dividend                                                                     |  |                    | —           |   |      |   | —           |  
|Gain on extinguishment of debt                                                      |  |                    | 6,743,015   |   |      |   | 6,743,015   |  
|Loan forgiveness                                                                    |  |                    | (124,143    | ) |      |   | (1,124,143  | )
|Stock-based compensation                                                            |  |                    | 1,135,139   |   |      |   | 1,135,139   |  
|Warrants issued to related party                                                    |  |                    | 3,907,973   |   |      |   | 3,907,973   |  
|Changes in operating assets and liabilities:                                        |  |                    |             |   |      |   |             |  
|Prepaid expenses                                                                    |  |                    | 7,938       |   |      |   | 7,938       |  
|Inventory                                                                           |  |                    | (268,080    | ) |      |   | (268,080    | )
|Accounts receivable                                                                 |  |                    | (5,910      | ) |      |   | (5,910      | )
|Deposits and other current assets                                                   |  |                    | (189,558    | ) |      |   | (189,558    | )
|Accounts payable and accrued expenses                                               |  |                    | 1,137,108   |   |      |   | 1,137,108   |  
|Subscription liability                                                              |  |                    | (40,000     | ) |      |   | (40,000     | )
|Lease liability                                                                     |  |                    | (268,792    | ) |      |   | (268,792    | )
|Net cash used in operating activities                                               |  |                    | (4,507,418  | ) |      |   | (4,507,418  | )
|                                                                                    |  |                    |             |   |      |   |             |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                               |  |                    |             |   |      |   |             |  
|Purchase of equipment                                                               |  |                    | (2,346,483  | ) |      |   | (2,346,483  | )
|Net cash used in investing activities                                               |  |                    | (2,346,483  | ) |      |   | (2,346,483  | )
|                                                                                    |  |                    |             |   |      |   |             |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                               |  |                    |             |   |      |   |             |  
|Proceeds from sale of common stock and exercise of warrants                         |  |                    | 5,178,163   |   |      |   | 5,178,163   |  
|Proceeds from convertible notes payable and convertible notes payable related party |  |                    | 500,000     |   |      |   | 500,000     |  
|Repayment of convertible notes payable and convertible notes payable related party  |  |                    | (35,000     | ) |      |   | (35,000     | )
|Proceeds from notes payable and notes payable related parties                       |  |                    | 1,621,247   |   |      |   | 1,621,247   |  
|Repayment of notes payable and notes payable related parties                        |  |                    | (560,500    | ) |      |   | (560,500    | )
|Net cash provided by financing activities                                           |  |                    | 6,703,910   |   |      |   | 6,703,910   |  
|                                                                                    |  |                    |             |   |      |   |             |  
|NET (DECREASE) INCREASE IN CASH                                                     |  |                    | (149,991    | ) |      |   | (149,991    | )
|                                                                                    |  |                    |             |   |      |   |             |  
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                    |  |                    | 259,505     |   |      |   | 259,505     |  
|                                                                                    |  |                    |             |   |      |   |             |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                          |  | $                  | 109,514     |   |      | $ | 109,514     |  



(Continued)

The accompanying notes are an integral part
of the consolidated financial statements.



F-6







BASANITE, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF
CASH FLOWS (CONTINUED)



|                                                                        |  | For the year ended |          
|----------------------------------------------------------------------- |  | ------------------ | ---------
|                                                                        |  | December 31,       |          
|                                                                        |  | 2022               |          
|Supplemental cash flow information:                                     |  |                    |          
|Cash paid for interest                                                  |  | $                  | 26,663   
|                                                                        |  |                    |          
|Supplemental disclosure of non-cash investing and financing activities: |  |                    |          
|Forgiveness of Paycheck Protection Program loan and accrued interest    |  | $                  | 124,143  
|Conversion of note payable into common stock                            |  | $                  | —        
|Return of loan commitment shares                                        |  | $                  | —        
|Issuance of warrants for services and options as compensation           |  | $                  | 4,437,686
|Recording of debt discount on convertible notes                         |  | $                  | —        
|Conversion of convertible notes payable into equity                     |  | $                  | 2,610,005
|Conversion of note payable in exchange for warrants                     |  | $                  | 300,000  



The accompanying notes are an integral part
of the consolidated financial statements.





F-7





BASANITE, INC. AND
SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021



NOTE 1 – ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN



(A) Description of Business



On May 30, 2006, Basanite, Inc.
was organized as a Nevada corporation. Basanite and its wholly owned subsidiaries are herein referred to as “Basanite,” the
"Company", “we”, “our”, or “us”. Currently based in Pompano Beach, Florida, the Company
intends to manufacture concrete-reinforcing products made from basalt fiber reinforced polymers (“BFRP”), such as its primary
product BasaFlex. This UV-stable, chemical, acid and moisture resistant material is sustainable and environmentally friendly and has been
engineered to replace steel as it never rusts, therefore, addressing the industry’s current corrosion issues.



The Company’s wholly owned
subsidiary created in 2018, Basanite Industries, LLC (“BI”) manufactures BasaFlexTM, a basalt fiber reinforced polymer
rebar. BFRP rebar is a stronger, lighter, sustainable, non-conductive and non-corrosive alternative for traditional steel rebar and wire
mesh. BI leases a fully permitted and Underwriters Laboratories (“UL”) approved 36,900 square foot facility located in Pompano
Beach, Florida, equipped with five customized Pultrusion machines. Each machine has two linear production lines (a total capacity of 10
manufacturing lines). BI’s operations team is currently in the processes of optimizing and scaling the manufacturing plant to produce
11,000 to 17,000 linear feet of BFRP rebar per line, 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.



The manufacture of concrete reinforcement
products made from continuous basalt fiber creates substantial benefits for the construction industry, including but not limited to, the
following:



| | · | BasaFlexTM never rusts – steel reinforcement products rust, causing time and repair costs down
the road;
| | - | -------------------------------------------------------------------------------------------------------

| | · | BasaFlexTM is sustainable; with a longer lifecycle – production of our products results in
exceptionally low carbon footprint when compared with steel. The lack of corrosion allows the “lifespan” of concrete products
to be significantly longer; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | BasaFlexTM has a lower final, in place cost – the physical nature of our products relative
to steel (4X lighter, easily transportable, “coil-able”, safer and easier to use) reduces the all-in cost of reinforcement
when all factors are considered.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(B) Liquidity and Management Plans



Since inception, the Company has incurred net operating
losses and used cash in operations. As of December 31, 2022 and 2021, respectively, the Company reported:



| | · | an accumulated deficit of approximately $46.1 million and $46.1 million;
| | - | ------------------------------------------------------------------------

| | · | a working capital deficiency of approximately $3.3 million and $3.3 million; and
| | - | --------------------------------------------------------------------------------

| | · | cash used in operations of approximately $4.5 million and $4.5 million.
| | - | -----------------------------------------------------------------------



Losses have principally occurred as a result of the
substantial resources required for product research and development and for marketing of the Company's products; including the general
and administrative expenses associated with the organization.



At December 31, 2022, the Company had cash of $109,514 compared
to $109,514 at December 31, 2021.







F-11


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021






We have historically satisfied
our working capital requirements through the sale of restricted common stock and the issuance of warrants and promissory notes. Until
we are able to internally generate positive cash flow, we will attempt to fund working capital requirements through third party financing,
including through private placement of our securities as well as bridge loan arrangements. However, a number of factors continue to hinder
the Company’s ability to attract new capital investment. We cannot provide any assurances that the required capital will be obtained
or that the terms of such required capital may be acceptable to us. If we are unable to obtain adequate financing, we may reduce our operating
activities to reduce our cash use until sufficient funding is secured.



These conditions raise substantial
doubt about the Company's ability to continue as a going concern. These consolidated financial statements do not include any adjustments
to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities
that may result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional
funding and implement its strategic plan provides the opportunity for the Company to continue as a going concern.



NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



(A) Use of Estimates in Financial Statements



The presentation of financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.



Stock-based
compensation and stock awards related to convertible debt instruments are recognized based on the fair value of the awards granted. The
fair value of each award or conversion feature is 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 inherentuncertainties and the application of management’s judgment.



(B) Principles of Consolidation



The consolidated financial statements
include the accounts of Basanite, Inc. and its wholly owned subsidiaries, Basanite Industries, LLC and Basalt America, LLC, formerly known
as Rockstar Acquisitions, LLC. All intercompany balances have been eliminated in consolidation.



(C) Cash



The Company considers all highly
liquid temporary cash instruments with an original maturity of three months or less to be cash equivalents. The Company places its cash,
cash equivalents and restricted cash on deposit with financial institutions in the United States, which are insured by the Federal Deposit
Insurance Company ("FDIC") up to $250,000. The Company's credit risk in the event of failure of these financial institutions
is represented by the difference between the FDIC limit and the total amounts on deposit. Management monitors the financial institutions
credit worthiness in conjunction with balances on deposit to minimize risk. The Company from time to time may have amounts on deposit
in excess of the insured limits.



(D) Inventories



The Company’s inventories
consist of raw materials, work in process and finished goods, both purchased and manufactured. Inventories are stated at the lower of
cost or net realizable value. Cost is determined on the first-in, first-out basis. Raw materials inventory consists primarily of basalt
fiber and other necessary elements to produce the basalt rebar. On a quarterly basis, the Company analyzes its inventory levels and records
allowances for inventory that has become obsolete and inventory that has a cost basis in excess of the expected net realizable value.
An impairment charge due to cost basis in excess of fair market value in the amount of $1,535,356 was recorded during the year ended December
31, 2022. During the year ended December 31, 2021, the Company recorded a loss related to obsolete inventory in the amount of $1,535,356.





F-12


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021




The Company’s inventory at December 31, 2022 and 2021
was comprised of:



|Schedule of Inventories    |  |              |   |  |              |   |         | 
|-------------------------- |  | ------------ | - |  | ------------ | - | ------- | 
|                           |  | December 31, |   |  | December 31, |  
|                           |  | 2022         |   |  | 2021         |  
|                           |  |              |   |  |              |  
|Finished goods             |  | $            | — |  |              | $ | 328,229 | 
|Work in process            |  |              | — |  |              |   | 35,213  | 
|Raw materials and supplies |  |              | — |  |              |   | 351,213 | 
|Total inventory            |  | $            | — |  |              | $ | 714,655 | 





(E) Fixed assets



Fixed assets are stated
at cost, subject to adjustments for impairment, less accumulated depreciation and amortization. Depreciation and amortization are computed
using a straight-line method over the following estimated useful lives:



|Schedule of Depreciation and Amortization Periods for Fixed Assets |                       
|------------------------------------------------------------------ | ----------------------
|Computer equipment                                                 | 3 years               
|Machinery                                                          | 7 years               
|Leasehold improvements                                             | 15 years or lease term
|Office furniture and equipment                                     | 5 years               
|Land improvements                                                  | 15 years              
|Website development                                                | 3 years               



Maintenance and repairs are charged to expenses as incurred,
and improvements to leased facilities and equipment are capitalized.



Fixed assets consist of the following:



|Schedule of Fixed Assets       |  |                  |           |   |                  |   |           |  
|------------------------------ |  | ---------------- | --------- | - | ---------------- | - | --------- | -
|                               |  | December
    31, |           |   | December
    31, |  
|                               |  | 2022             |           |   | 2021             |  
|                               |  |                  |           |   |                  |  
|Computer equipment             |  | $                | 133,654   |   |                  | $ | 133,654   |  
|Machinery                      |  |                  | 717,437   |   |                  |   | 717,437   |  
|Leasehold improvements         |  |                  | 166,252   |   |                  |   | 166,252   |  
|Office furniture and equipment |  |                  | 71,292    |   |                  |   | 71,292    |  
|Land improvements              |  |                  | 7,270     |   |                  |   | 7,270     |  
|Website development            |  |                  | 2,500     |   |                  |   | 2,500     |  
|Construction in process        |  |                  | 2,408,986 |   |                  |   | 2,408,986 |  
|Total fixed assets             |  |                  | 3,507,391 |   |                  |   | 3,507,391 |  
|Accumulated depreciation       |  |                  | (270,566  | ) |                  |   | (270,566  | )
|Total fixed assets, net        |  | $                | 3,236,825 |   |                  | $ | 3,236,825 |  



Depreciation expense for the year ended December 31, 2022 was
$129,693 compared to $129,693 for the year ended December 31, 2021.



The Company’s long-lived
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted
future net cash flows expected to be generated by that asset. If the carrying amount of an asset exceeds its estimated future undiscounted
cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.



F-13


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021




(F) Deposits and other current assets





There were no such reclassifications
during the year ended December 31, 2022 nor 2021.



(G) Accrued expenses



The Company’s accrued expenses consist of the following:



|Schedule of Accrued Expenses |  |              |         |  |              |   |         | 
|---------------------------- |  | ------------ | ------- |  | ------------ | - | ------- | 
|                             |  | December 31, |         |  | December 31, |  
|                             |  | 2022         |         |  | 2021         |  
|Accrued payroll and taxes    |  | $            | —       |  |              | $ | —       | 
|Accrued interest             |  |              | 312,409 |  |              |   | 312,409 | 
|Credit cards payable         |  |              | 177     |  |              |   | 177     | 
|Other accrued expenses       |  |              | 94,868  |  |              |   | 94,868  | 
|Total accrued expenses       |  | $            | 407,454 |  |              | $ | 407,454 | 





(H) Accrued legal liabilities



The Company’s accrued legal liabilities consist of the
following:



|Schedule of Accrued Legal Liability |  |              |         |  |              |   |         | 
|----------------------------------- |  | ------------ | ------- |  | ------------ | - | ------- | 
|                                    |  | December 31, |         |  | December 31, |  
|                                    |  | 2022         |         |  | 2021         |  
|Accrued consulting fees             |  | $            | 165,000 |  |              | $ | 165,000 | 
|Judgement payable                   |  |              | —       |  |              |   | —       | 
|Accrued interest on judgement       |  |              | —       |  |              |   | —       | 
|Total accrued legal liability       |  | $            | 165,000 |  |              | $ | 165,000 | 



(I) Loss Per Share



The basic loss per share is calculated
by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the period.
The diluted loss per share is calculated by dividing the Company’s net loss by the diluted weighted average number of shares outstanding
during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially
dilutive debt or equity.



The following are potentially dilutive shares not included in
the loss per share computation:



|Schedule of Dilutive Shares Not Included in Loss Per Share Computation |  |              |             |  |              | 
|---------------------------------------------------------------------- |  | ------------ | ----------- |  | ------------ | 
|                                                                       |  | December 31, |             |  | December 31, | 
|                                                                       |  | 2022         |             |  | 2021         | 
|                                                                       |  |              |             |  |              | 
|Options                                                                |  |              | 4,227,778   |  |              | 
|Warrants                                                               |  |              | 138,191,666 |  |              | 
|Convertible shares                                                     |  |              | 6,970,063   |  |              | 
|                                                                       |  |              | 149,389,507 |  |              | 







F-14


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021




(J) Stock-Based Compensation



The Company recognizes compensation
costs to employees under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 718, Compensation – Stock Compensation. Under FASB ASC Topic 718, companies are required to measure the compensation costs
of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the
period during which employees are required to provide services. Share based compensation arrangements include stock options, restricted
share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured
on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the
grant.



The Company issues various equities
as compensation to consultants, employees, directors, and investors. The Company issued 2,419,546 restricted common shares, 21,025,000
restricted common stock warrants, and 1,277,778 common stock options as compensation with a total fair value of $5,137,261 for the year
ended December 31, 2022.



The Company issued 2,419,546 restricted
common shares, 21,025,000 restricted common stock warrants, and 1,277,778 common stock options as compensation with a total fair value
of $5,137,261 for the year ended December 31, 2021.



As of December 31, 2022 and 2021,
$102,559 and $102,559, respectively, of the fair value of the equity awards granted were recorded as prepaid expenses in the consolidated
balance sheets to be recognized as equity-based compensation in subsequent periods.



For the years ended December 31,
2022 and 2021, total equity-based compensation expense amounted to $5,043,112 and $5,043,112.



The Company used the Black Scholes
valuation model to determine the fair value of the warrants and options issued, using the following key assumptions for the years ended
December 31, 2022 and 2021:



|Schedule of Fair Value Assumptions |                |  |               
|---------------------------------- | -------------- |  | --------------
|                                   | 2022           |  | 2021          
|Expected price volatility          | 144.79-148.70% |  | 144.79-148.70%
|Risk-free interest rate            | 0.78-1.26      |  | 0.78-1.26     
|Expected life in years             | 5              |  | 5             
|Dividend yield                     | —              |  | —             



(K) Income Taxes



The Company has not recorded any
income tax expense or benefit for the years ended December 31, 2022 and 2021 due to its history of net operating losses. The provision
for income taxes was calculated as a result of the following (in thousands):



|Schedule of Provision of Income Taxes          |  |              |        |   |      |   |        |  
|---------------------------------------------- |  | ------------ | ------ | - | ---- | - | ------ | -
|                                               |  | December 31, |       
|                                               |  | 2022         |        |   | 2021 |  
|                                               |  |              |        |   |      |  
|Federal tax at statutory rate                  |  | $            | (3,460 | ) |      | $ | (3,460 | )
|State taxes, net of federal income tax benefit |  |              | —      |   |      |   | —      |  
|Change of valuation allowance                  |  |              | 1,333  |   |      |   | 1,333  |  
|Non-deductible loss on debt                    |  |              | 1,416  |   |      |   | 1,416  |  
|True-ups                                       |  |              | (84    | ) |      |   | (84    | )
|Non-deductible expenses and other              |  |              | 795    |   |      |   | 795    |  
|Provision for income tax                       |  | $            | —      |   |      | $ | —      |  





F-15


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021




The tax effects of temporary
differences that give rise to significant portions of the Company’s deferred tax assets and liabilities are as follows (in thousands):



|Schedule of Deferred Tax Assets and Liabilities           |  |              |        |   |      |   |        |  
|--------------------------------------------------------- |  | ------------ | ------ | - | ---- | - | ------ | -
|                                                          |  | December 31, |       
|                                                          |  | 2022         |        |   | 2021 |  
|Deferred tax assets:                                      |  |              |        |   |      |   |        |  
|Net operating loss carryforwards                          |  | $            | 5,913  |   |      | $ | 5,913  |  
|Accruals and allowances                                   |  |              | 13     |   |      |   | 13     |  
|ROU liability amortization                                |  |              | 202    |   |      |   | 202    |  
|Stock-based compensation                                  |  |              | 1,344  |   |      |   | 1,344  |  
|Total deferred tax assets                                 |  |              | 7,472  |   |      |   | 7,472  |  
|Valuation allowance                                       |  |              | (7,472 | ) |      |   | (7,472 | )
|Total deferred tax assets net of valuation allowance      |  |              | —      |   |      |   | —      |  
|Deferred tax liabilities:                                 |  |              |        |   |      |   |        |  
|ROU asset amortization                                    |  |              | 184    |   |      |   | 184    |  
|Depreciation                                              |  |              | (101   | ) |      |   | (101   | )
|Total deferred tax liabilities                            |  |              | (285   | ) |      |   | (285   | )
|Valuation allowance                                       |  |              | 285    |   |      |   | 285    |  
|Total deferred tax liabilities net of valuation allowance |  |              | —      |   |      |   | —      |  
|Net deferred tax assets                                   |  | $            | —      |   |      | $ | —      |  



The items accounting for the difference between income
taxes computed at the U.S. federal statutory rate and our effective rate were as follows:



|Schedule of difference between income taxes |  |  |        |   |  |  |       |   
|------------------------------------------- |  |  | ------ | - |  |  | ----- | --
|Federal tax at statutory rate               |  |  | (3,460 | ) |  |  | 21.00 | % 
|State taxes, net                            |  |  | —      |   |  |  | 0.00  | % 
|Non-deductible loss on debt                 |  |  | 1,416  |   |  |  | (8.60 | )%
|Other permanent differences                 |  |  | 795    |   |  |  | (4.82 | )%
|True-ups                                    |  |  | (84    | ) |  |  | 0.51  | % 
|Change in Federal valuation allowance       |  |  | 1,333  |   |  |  | (8.09 | )%
|Total tax expenses                          |  |  | —      |   |  |  | 0.00  | % 



As of December 31, 2022, the Company
has a valuation allowance of approximately $7.1 million related to federal net operating loss (“NOL”) carryforwards of approximately
$25.8 million



As of December 31, 2021, the Company
has a valuation allowance of approximately $7.1 million related to federal net operating loss (“NOL”) carryforwards of approximately
$25.8 million.



The amount of the valuation allowance
represented an increase of approximately $1.0 million over the amount recorded as of December 31, 2021 and was due to the increase in
net operating losses. If not utilized, federal net operating losses of $12.8 million may be carried forward indefinitely, and $13 million
will expire at various times between 2031 and 2037. State net operating losses follow the federal tax laws for NOLs.



Management has evaluated all other
tax positions that could have a significant effect on the financial statements and determined the Company had no uncertain income tax
positions at December 31, 2022.



The Company files income tax returns
in the U.S. federal jurisdiction and Florida. The Company is subject to U.S. federal and Florida state tax examinations for certain years
after 2018.



NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS



There are several new accounting
pronouncements issued or proposed by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by the Company.
Management does not believe any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated
financial position or operating results.



In June 2016, the FASB issued
Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326). The ASU introduces
a new credit loss methodology, Current Expected Credit Losses (CECL), which requires earlier recognition of credit losses, while also
providing additional transparency about credit risk. Since its original issuance in 2016, the FASB has issued several updates to the original
ASU. The CECL Methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses
for loans, held-to-maturity securities and other receivables at the time the financial asset is originated or acquired. The expected credit
losses are adjusted each period for changes in expected lifetime credit losses. The methodology replaces the multiple existing impairment
methods in current GAAP, which generally require that a loss be incurred before it is recognized. For available-for-sale securities where
fair value is less than cost, credit related impairment, if any, will be recognized through an allowance for credit losses and adjusted
each period for changes in credit risk. The CECL methodology represents a significant change from existing US GAAP and may result in material
changes to the Company’s accounting for financial assets. The Company is evaluating the effect that ASU 2016-13 will have on its
Consolidated Financial Statements and related disclosures.





F-16


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021




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. For all other entities, the standard will be effective for fiscal years beginning
after December 12, 2023. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, and adoption
must be as of the beginning of the Company’s annual fiscal year. The standard was adopted on January 1, 2021. By no longer recording
embedded conversion features separately from the convertible debt instrument, and instead as a single liability, the Company’s financial
statements will reflect a more simplified view of convertible debt instruments and cash interest expense that is more relevant than an
imputed interest expense that results from the separation of conversion features previously required by U.S. GAAP.



NOTE 4 – OPERATING LEASE



On January 18, 2019, the Company
entered into an agreement to lease approximately 25,470 square feet of office and manufacturing space in Pompano Beach, Florida through
March 2024. On March 25, 2019, the Company entered into an amendment to the agreement to increase the square footage of leased premises
to 36,900 square feet, increasing the Company’s base rent obligation to be approximately $33,825 per month for one year and nine
months, and increasing annually at a rate of three percent for the remainder of the lease term.



In accordance with ASC 842, on
January 18, 2019, the Company entered into and recorded a lease right-of-use asset and a lease liability at a present value of $1,405,804.
The right-of-use asset is composed of the sum of all lease payments plus any initial direct cost and is amortized over the life of the
expected lease term. For the expected term of the lease, the Company used the initial term of the five-year lease.



As of December 31, 2022 the Company
vacated the lease and no further obligation is due. The Company’s headquarters were moved to 2660 NW 15 CT, Unit 108, Pompano Beach,
FL 33069. As of this filing the Company has not entered into a lease agreement with the landlord.



Operating lease liabilities are
based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease
payments, the Company used the incremental borrowing rate based on the information available at the lease commencement date. As of December
31, 2022, the weighted-average remaining lease term is 2.25 years and the weighted-average discount rate used to determine the operating
lease liability was 15.0%. For the years ended December 31, 2022 and 2021, the Company expensed $428,270 and $428,270, respectively, for
rent.



F-17


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021




NOTE 5 – NOTES PAYABLE – CONVERTIBLE



Notes payable – convertible totaled $0 and $0 at December
31, 2022 and December 31, 2021, respectively.



On October 22, 2015, the Company
issued an unsecured promissory note in the principal amount of $300,000 to PDQ Auctions, LLC. The note bears interest at an annual rate
of 7% and was originally payable on or before October 22, 2017 (subsequently extended until May 2021), unless the note was converted or
prepaid prior to the maturity date. Subject to certain limitations, the note may be converted at any time, at the option of the holder,
into shares of the Company’s common stock at a conversion price of $0.35 per share, subject to adjustment. In the event the Company
issues any new or additional promissory notes that pay an interest rate that exceeds 7% per annum (subsequently increased to 10% and then
to 15%), then the holder shall be entitled to request an increase in the interest rate payable on the note to an amount equal to the rate
being paid on the new or additional notes. The conversion of the note may be limited if, upon conversion, the holder thereof would beneficially
own more than 4.9% of the Company’s common stock. The note may be prepaid at the option of the Company commencing 190 days after
the issuance of the note. On May 2, 2018, the Company secured a three-year extension of the convertible note in return for (1) a $5,000
per month payment applicable to current interest and principal beginning on April 22, 2018, and (2) the issuance of 274,575 new, restricted
common shares. The shares were issued on June 13, 2018. On August 3, 2020, the Company negotiated with the noteholder to agree to convert
the remaining principal balance of $258,524 and accrued interest of $102,176, at a conversion price of $0.175 per share, for 2,061,143
restricted common shares. The conversion resulted in a loss on extinguishment of debt in the amount of $121,607.



On October 10, 2019, the Company
entered into a Securities Purchase Agreement with Labrys Fund, LP (the investor) pursuant to which the investor purchased a 15% Convertible
Promissory Note from the Company. Unless there is a specific event of default or the note remains unpaid by April 16, 2020 (the maturity
date), then the investor shall have the ability to convert the principal and interest under the note into shares of the Company's common
stock. If the note is not repaid prior to the maturity date, the per share conversion price into which the principal amount and interest
under the note may be converted is equal to the lesser of (i) 60% multiplied by the lowest trade price of the common stock during the
25 consecutive trading days ending on the latest complete trading day prior to the date of issuance of the note, and (ii) 60% multiplied
by the lowest market price of the common stock during the 25 trading day period ending on the latest complete trading day prior to the
conversion date. Pursuant to the Securities Purchase Agreement, the Company agreed to issue and sell to the investor the note, in the
principal amount of $338,000. The Company received net proceeds from the note of $300,000 after an original issue discount of $33,800
and a reduction for investor’s legal counsel fees of $4,200. Additionally, the Company issued 1,300,000 shares of common stock to
the investor as a commitment fee (the returnable shares) which was valued at $0.10 per share and recorded as an offset to the principal
amount. The returnable shares must be returned to the Company in the event the note is fully paid and satisfied prior to the maturity
date. On April 13, 2020, the Company repaid its remaining obligation under the Securities Purchase Agreement and related 15% Convertible
Promissory Note with Labrys Fund, LP. The Company paid $262,389 in full satisfaction of the note. This amount included $24,389 accrued
interest. On April 16, 2020, the investor returned the originally issued 1,300,000 shares of common stock that was issued as a commitment
fee. Additionally, the transfer agent released the reserve of 21,666,666 shares of common stock in the name of the Investor for issuance
upon conversion.



On March 5, 2020, the Company
issued a convertible promissory note to an accredited investor in exchange for $50,000 bearing an interest rate of 10% per annum and payable
in nine months. After June 5, 2020, the holder may convert the unpaid principal and interest balance of the note into shares of common
stock, par value $0.001 per share, at the conversion rate equal to 80% of the closing price on June 5, 2020 per share. At the time of
conversion, the Company shall immediately also issue a five-year warrant to the holder to purchase an amount of warrants equal to the
$50,000 divided by the conversion price of shares of common stock of the Company. The exercise price for such warrants shall be 3 times
the conversion price. In addition, the warrants shall have an option whereby the Company can require the exercise of the warrants if the
trading price is at or above the warrant price times 190% for 20 consecutive trading days. The conversion price was determined to be $0.132.
A debt discount of $50,000 was recorded on the note payable at resolution of the contingent beneficial conversion feature. The noteholder
converted the promissory note of $50,000 and accrued interest of $1,908 on July 21, 2020 in exchange for 393,246 restricted common shares
and 126,263 five-year warrants with an exercise price of $0.396 per share.





F-18


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021




On April 13, 2020, the Company
entered into several convertible promissory notes. The Company issued convertible notes payable in exchange for $100,000 bearing an interest
rate of 12% per annum and payable in six months. At the option of the holders, the principal and accrued interest may be converted to
shares of common stock at a conversion rate of $0.092 per share. At the time of conversion, the Company shall immediately also issue an
equal amount of five-year warrants to purchase common stock of the Company, at an exercise price of $0.312 per share. The warrants shall
have an option whereby the Company can require the exercise of the warrants if the trading price is at or above $0.69 per share for 20
consecutive trading days. Upon issuance of the notes, the Company recorded debt discounts of $100,000 for the beneficial conversion features
embedded in the notes. One of the noteholders converted their promissory note of $50,000 and accrued interest of $1,181 on June 26, 2020
in exchange for 556,313 restricted common shares and 556,313 five-year warrants with an exercise price of $0.312 per share. The remaining
noteholders converted their promissory notes of $25,000 and accrued interest of $1,618 each on July 21, 2020. Each received in exchange
for their notes 280,532 restricted common shares and 280,532 five-year warrants with an exercise price of $0.312 per share.



On April 13, 2020, the Company
issued a convertible promissory note to an accredited investor in exchange for $50,000 bearing an interest rate of 12% per annum and payable
in six months. After June 5, 2020, the holder may convert the unpaid principal and interest balance of the note into shares of common
stock, par value $0.001 per share, at the conversion rate equal to 80% of the closing price on June 5, 2020 per share. At the time of
conversion, the Company shall immediately also issue a five-year warrant to the holder to purchase the same number of shares of common
stock of the Company as the holder receives in such conversion. The exercise price for such warrants shall be 3 times the conversion price.
In addition, the warrants shall have an option whereby the Company can require the exercise of the warrants if the trading price is at
or above the warrant price plus 150% for 20 consecutive trading days. The conversion price was determined to be $0.132. A debt discount
of $50,000 was recorded on the note payable at resolution of the contingent beneficial conversion feature. The noteholder converted the
promissory note of $50,000 and accrued interest of $1,615 on July 21, 2020 in exchange for 391,023 restricted common shares and 391,023
five-year warrants with an exercise price of $0.396 per share.



On
May 27, 2020, the Company issued a convertible promissory note with an accredited investor in exchange for $60,000
bearing an interest rate of 12%
per annum and payable in six months. At the option of holder, the principal may be converted to shares of common stock at a
conversion rate of $0.11
per share. At the time of conversion, the Company shall immediately also issue an equal amount of five-year warrants to purchase common stock of the Company, at an exercise price of $0.33
per share. The warrants shall have an option whereby the Company can require the exercise of the warrants if the trading price is at
or above $0.825
per share for 20 consecutive trading days. Upon issuance of the note, the Company recorded a debt discount of $60,000
for the beneficial conversion features embedded in the note. The noteholder converted the promissory note on June 26, 2020 in
exchange for 545,455
restricted common shares and 545,455
five-year warrants with an exercise price of $0.33 per share. Accrued interest of $552 was forgiven and reported as a gain on
extinguishment of debt.



On
May 29, 2020, the Company issued a convertible promissory note with an accredited investor in exchange for $50,000
bearing an interest rate of 12%
per annum and payable in six months. At the option of holder, the principal may be converted to shares of common stock at a
conversion rate of $0.108
per share. At the time of conversion, the Company shall immediately also issue an equal amount of five-year warrants to purchase
common stock of the Company, at an exercise price of $0.324
per share. The warrants shall have an option whereby the Company can require the exercise of the warrants if the trading price is at
or above $0.81
per share for 20 consecutive trading days. Upon issuance of the note, the Company recorded a debt discount of $50,000
for the beneficial conversion features embedded in the note. The noteholder converted the promissory note of $50,000
on June 26, 2020 in exchange for 462,963
restricted common shares and 462,963
five-year warrants with an exercise price of $0.324 per share. Accrued interest of $427 was forgiven and reported as a gain on
extinguishment of debt.





F-19


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021




On
June 1, 2020, the Company issued two convertible promissory notes with accredited investors in exchange for $100,000
bearing an interest rate of 12%
per annum and payable in six months. At the option of holder, the principal may be converted to shares of common stock at a
conversion rate of $0.096
per share. At the time of conversion, the Company shall immediately also issue an equal amount of five-year warrants to purchase common stock of the Company, at an exercise price of $0.288
per share. The warrants shall have an option whereby the Company can require the exercise of the warrants if the trading price is at
or above $0.72
per share for 20 consecutive trading days. Upon maturity, the Company shall have the option to convert the unpaid principal balance
of the note under the same terms as above. Upon issuance of the notes, the Company recorded debt discounts of $100,000
for the beneficial conversion features embedded in the notes. The noteholders converted the promissory notes of $100,000
on December 1, 2020 in exchange for 520,834
restricted common shares and 520,834
five-year warrants with an exercise price of $0.288 per share each. Accrued interest of $5,986 was forgiven pursuant to the
conversion terms of the notes.



On
August 3, 2020, the Company issued an unsecured convertible promissory note to an accredited investor in exchange for $10,000 bearing
an interest rate of 18% per annum and payable in six months. The Company shall pay interest on the unconverted and then outstanding principal
amount of the note at a rate of 18% per annum, accrued monthly for the first four months of this note and payable thereafter until the
maturity date of February 3, 2021, unless the note is converted or prepaid prior to maturity. The holder may convert the unpaid principal
balance of the note into restricted common stock, par value $0.001 per share, of the Company at the conversion rate equal to the per share
cash price paid for the shares by any third-party investor(s) with total proceeds to the Company of not less than $500,000 (the “conversion
price”); provided, however, in no event shall the conversion price ever be less than $0.01 per share. On February 16, 2021, the
$10,000 note was paid along with accrued interest in the amount of $1,007.



Interest expense for the Company’s
convertible notes payable was $161 and $161 for the years ended December 31, 2022 and December 31, 2021, respectively. Accrued interest
for the Company’s convertible notes payable at December 31, 2022 and December 31, 2021 was $0 and $0, respectively, and is included
in accrued expenses on the consolidated balance sheets.



NOTE 6 – NOTES PAYABLE – CONVERTIBLE – RELATED PARTY



Notes payable – convertible – related
party totaled $1,689,745 and $1,689,745 at December 31, 2022 and December 31, 2021, respectively.



On April
13, 2020, the demand notes payable entered on January 16, 2020 for $50,000
each from related parties; Michael V. Barbera, our Board Chairman and an entity managed by Ronald J. LoRicco, Sr., a Board Member
were exchanged for convertible notes. The notes were accounted for as an extinguishment and the convertible debt valued at fair
value in accordance with ASC 470. Per the addendums, the interest rate of 10%
was increased to 12%
per annum. The modification also allowed for a conversion option for the holder after June 5, 2020. After June 5, 2020, the holder
may convert the unpaid principal and interest balance of the note into shares of common stock, par value $0.001
per share, at the conversion rate equal to 80%
of the closing price on June 5, 2020 per share. At the time of conversion, the Company shall immediately also issue a five-year
warrant to the holder to purchase the same number of shares of common stock of the Company as the holder receives in such
conversion. The exercise price for such warrants shall be 3 times the conversion price. In addition, the warrants shall have an
option whereby the Company can require the exercise of the warrants if the trading price is at or above the warrant price plus 150%
for 20 consecutive trading days. The conversion price was determined to be $0.132.
Debt discounts of $100,000
were recorded on the notes payable at resolution of the contingent beneficial conversion feature. One noteholder 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. The other noteholder 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.



F-20


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021




On April 13, 2020, the
Company issued a convertible promissory note with Michael V. Barbera, our Board Chairman, in exchange for $25,000
bearing an interest rate of 12%
per annum and payable in six months. After June 5, 2020, the holder may convert the unpaid principal and interest balance of the
note into shares of common stock, par value $0.001
per share, at the conversion rate equal to 80% of the closing price on June 5, 2020 per share. At the time of conversion, the
Company shall immediately also issue a five-year warrant to the holder to purchase the same number of shares of common stock of the Company as the holder receives in such
conversion. The exercise price for such warrants shall be 3 times the conversion price. In addition, the warrants shall have an
option whereby the Company can require the exercise of the warrants if the trading price is at or above the warrant price plus 150%
for 20 consecutive trading days. The conversion price was determined to be $0.132.
A debt discount of $25,000
was recorded on the note payable at resolution of the contingent beneficial conversion feature. The noteholder converted the
promissory note of $25,000
and accrued interest of $809
on July 21, 2020 in exchange for 195,522 restricted common shares and 195,522 five-year warrants with an exercise price of $0.396
per share.



On
April 13, 2020, the Company issued a convertible promissory note with an entity managed by Ronald J. LoRicco, Sr., a member of our
Board of Directors, in exchange for $150,000
bearing an interest rate of 12% per annum and payable in six months. After June 5, 2020, the holder may convert the unpaid principal
and interest balance of the note into shares of common stock, par value $0.001 per share, at the conversion rate equal to 80% of the
closing price on June 5, 2020 per share. At the time of conversion, the Company shall immediately also issue a five-year warrant
to the holder to purchase the same number of shares of common stock of the Company as the holder receives in such conversion. The
exercise price for such warrants shall be 3 times the conversion price. In addition, the warrants shall have an option whereby the
Company can require the exercise of the warrants if the trading price is at or above the warrant price plus 150% for 20 consecutive
trading days. The conversion price was determined to be $0.132. A debt discount of $150,000 was recorded on the note payable at
resolution of the contingent beneficial conversion feature. The noteholder converted the promissory note of $150,000 and accrued
interest of $3,542 on June 26, 2020 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
August 3, 2020, the Company issued an unsecured convertible promissory note to Michael V. Barbera, the Chairman of the Board, in exchange
for $25,000 bearing an interest rate of 18% per annum and payable in six months. The Company shall pay interest on the unconverted and
then outstanding principal amount of the note at a rate of 18% per annum, accrued monthly for the first four months of this note and payable
thereafter until the maturity date of February 3, 2021, unless the note is converted or prepaid prior to maturity. The holder may convert
the unpaid principal balance of the note into restricted common stock, par value $0.001 per share, of the Company at the conversion rate
equal to the per share cash price paid for the shares by any third-party investor(s) with total proceeds to the Company of not less than
$500,000 (the “conversion price”); provided, however, in no event shall the conversion price ever be less than $0.01 per share.
On February 16, 2021, the $25,000 note was paid along with accrued interest in the amount of $2,518.



On August 3, 2020, the Company
issued a secured convertible promissory note to certain investors in exchange for $1,000,000 in the aggregate bearing an interest rate
of 20% per annum and payable in 6 months. The holder may convert the unpaid principal balance of the note into shares of restricted common
stock of the Company at the conversion price equal to $0.275 per share, which conversion price was set with the consummation of the Company’s
private placement of Units (described in note 10) which closed on August 17, 2021. This note contains a negative covenant that requires
the Company to obtain consent prior to incurring any additional equity or debt investments and is secured by all of the assets of the
Company. The Richard A. LoRicco Sr. and Lucille M. LoRicco Irrevocable Insurance Trust DTD 4/28/95, Louis Demaio as Trustee (the “Trust”)
is the holder of $750,000 of the principal amount of this note. The Trust was created by Richard A. LoRicco Sr. and Lucille M. LoRicco,
who were the parents of Ronald J. LoRicco Sr., one of the members of the Company’s Board of Directors and is maintained by an independent
trustee. Ronald J. LoRicco Sr. does not have voting or investment control of or power over the Trust but is an anticipated, partial beneficiary
of the Trust.



On February 12, 2021, the Company
exchanged the original debt for a newly issued amended and restated secured convertible promissory note with a new principal balance of
$1,610,005 bearing an interest rate of 20% per annum and fully payable in 3 months. This was accounted for as a debt extinguishment and
the new promissory note was recorded at fair value in accordance with ASC 470 “Debt”. The original principal of $1,000,000
and accrued interest of $110,005 calculated as of the date of amendment and restatement along with an additional advance of $500,000 determined
the principal amount of the new note. In consideration of the additional advance and the extension of the maturity date of the original
note, the Company issued to the noteholders 15,000,000 5-year common stock warrants with an exercise price of $0.20. The issuance of the
warrants for the extension generated a loss on extinguishment of $3,686,123 for the fair value of the warrants issued.





F-21


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021




On May 12, 2021, the Company extended
the debt for a newly issued amended and restated secured convertible promissory note with a new principal balance of $1,689,746 bearing
an interest rate of 20% per annum and fully payable February 12, 2022. The original principal of $1,610,005 and accrued interest of $79,742
calculated as of the date of amendment and restatement determined the principal amount of the new note. In consideration of the additional
advance and the extension of the maturity date of the original note, the Company issued to the noteholders 7,500,000 5-year common stock
warrants with an exercise price of $0.35. The issuance of the warrants for the extension generated a loss on extinguishment of $1,874,705
for the fair value of the warrants issued. The note was not paid by its due date; as of the date of this filing, the noteholder has not
issued a formal demand for payment and the Company is in negotiations with the noteholder to remedy the past-due status



Update from FN above for Feb 2022



Interest expense for the Company’s
convertible notes payable – related parties was $332,495 and $332,495 for the years ended December 31, 2022 and December 31, 2021,
respectively.



Accrued interest for the Company’s
convertible notes payable – related parties at December 31, 2022 and December 31, 2021 was $227,022 and $227,022, respectively,
and is included in accrued expenses on the consolidated balance sheets.



NOTE 7 – NOTES PAYABLE



Notes payable totaled $466,762
and $466,762 at December 31, 2022 and December 31, 2021, respectively.



During the year ended December
31, 2018, the Company issued unsecured, 4% demand promissory notes to VCVC, LLC (“VCVC”) totaling $260,425. VCVC is the personal
holding company of Vincent L. Celentano, who was our chairman and chief executive officer at the time of the notes. On July 8, 2020, the
Company negotiated with the noteholder 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 resulting in a gain from the extinguishment of
debt. 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 March 31, 2022 and March 30,
2021, the Company entered financing arrangements to finance the insurance premiums for its liability coverage. The financings have an
interest rate of 9.40% and last through March of 2023. The balance as of December 31, 2022 and 2021 was $6,015 and $6,015, respectively.



On February 25, 2021, the Company
entered a promissory note agreement with its bank for $165,747 loan bearing an interest rate of 1.0% per annum. The loan was made pursuant
to the Paycheck Protection Program under the Second Draw PPP Legislation after receiving confirmation from the U.S. Small Business Administration
(“SBA”). The Paycheck Protection Program Flexibility Act requires that the funds be used to maintain the current number of
employees as well as cover payroll-related costs, monthly mortgage or rent payments and utilities and not more than 40% can be expended
on non-payroll-related costs. The applicable maturity date will be the maturity date as established by the SBA. If the SBA does not establish
a maturity date or range of allowable maturity dates, the term will be five years. The Company received forgiveness of the debt in July
2022. The balance as of December 31, 2022 was $0 and 2021 was $165,747.



On April 2, 2021, the Company issued a promissory
note with an investor in exchange for $200,000 bearing an interest rate of 18% per annum and payable on October 2, 2023. The company also
issued 2,000,000 common stock warrants at an exercise price of $0.20 per share expiring in 5 years. The note was not paid by its due date.
As of the date of this filing, the noteholder has not issued a formal demand for payment and the Company is in negotiations with the noteholder
to remedy the past-due status.



On April 9, 2021, the Company
issued a promissory note with an investor in exchange for $50,000 bearing an interest rate of 18% per annum and payable on October 9,
2022. The company also issued 500,000 common stock warrants at an exercise price of $0.20 per share expiring in 5 years. The note was
not paid by its due date. As of the date of this filing, the noteholder has not issued a formal demand for payment and the Company is
in negotiations with the noteholder to remedy the past-due status.





F-22


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021




On April 16, 2021, the Company
issued a promissory note with an investor in exchange for $25,000 bearing an interest rate of 18% per annum and payable on October 16,
2022. The company also issued 250,000 common stock warrants at an exercise price of $0.25 per share expiring in 5 years. As of the date
of this filing, the noteholder has not issued a formal demand for payment and the Company is in negotiations with the noteholder to remedy
the past-due status.



On April 16, 2021, the Company
issued a promissory note with an investor in exchange for $20,000 bearing an interest rate of 18% per annum and payable on October 16,
2022. The company also issued 200,000 common stock warrants at an exercise price of $0.25 per share expiring in 5 years. As of the date
of this filing, the noteholder has not issued a formal demand for payment and the Company is in negotiations with the noteholder to remedy
the past-due status.



On April 16, 2021, the Company
issued a promissory note with an investor in exchange for $300,000 bearing an interest rate of 18% per annum and payable in one year.
The company also issued 3,000,000 common stock warrants at an exercise price of $0.25 per share expiring in 5 years. On May 21, 2021,
the investor converted the promissory note of $300,000 in exchange for 6,000,000 common stock warrants at an exercise price of $0.15 per
share expiring in 5 years. The accrued interest of $5,199 was forgiven. The conversion of the debt to warrants generated a loss on extinguishment
of $1,487,386 for the fair value of the warrants issued.



Interest expense for the Company’s
notes payable was $44,600 and $44,600 for the years ended December 31, 2022 and 2021, respectively.



Accrued interest for the Company’s
notes payable at December 31, 2022 and December 31, 2021 was $42,773 and $42,773, respectively, and is included in accrued expenses on
the consolidated balance sheets.



NOTE 8 – NOTES PAYABLE – RELATED PARTY



Notes payable – related party totaled $300,000 and $300,000
at December 31, 2022 and December 31, 2021, respectively.



On January 16, 2020, the Company
entered into a demand note agreement with our Board Chairman, Michael V. Barbera, in the amount of $50,000. The note has a term of 6 months
bearing an interest rate of 10% per annum. On April 13, 2020, an addendum was executed changing the terms of the note to a convertible
note payable bearing an interest rate of 12% per annum. Per the addendum, the principal and accrued interest is convertible at the option
of the holder after June 5, 2020 at a 20% discount of that days’ closing price. See Note 6 for information regarding this convertible
note payable – related party.



On April 2, 2021, the Company
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 on October 2, 2022. The company also issued 1,500,000 common stock warrants at an exercise price of $0.20 per
share expiring in 5 years. The note was not paid by its due date. As of the date of this filing, the noteholder has not issued a formal
demand for payment and the Company is in negotiations with the noteholder to remedy the past-due status.



On April 2, 2021, the Company
issued a promissory note with Michael V. Barbera, our Chairman of the Board, in exchange for $150,000 bearing an interest rate of 18%
per annum and payable on October 2, 2022. The company also issued 1,500,000 common stock warrants at an exercise price of $0.20 per share
expiring in 5 years. The note was not paid by its due date. As of the date of this filing, the noteholder has not issued a formal demand
for payment and the Company is in negotiations with the noteholder to remedy the past-due status.



On July 7, 2021, the Company issued
a promissory note with an entity managed by Ronald J. LoRicco, Sr., a member of our Board of Directors, in exchange for $50,000 bearing
an interest rate of 10% per annum. The maturity date for the promissory note is July 23, 2021. The note payable was paid in full on August
24, 2021.



On July 7, 2021, the Company issued
a promissory note with Michael V. Barbera, our Chairman of the Board, in exchange for $50,000 bearing an interest rate of 10% per annum.
The maturity date for the promissory note is July 23, 2021. The note payable was paid in full on August 24, 2021.



On July 15, 2021, the Company
issued a promissory note with David Anderson, our former Chief Operating Officer, in exchange for $20,000 bearing an interest rate of
10% per annum. The maturity date for the promissory note is July 23, 2021. The note payable was paid in full on August 18, 2021.





F-23


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021




On July 26, 2021, the Company
issued a promissory note with David Anderson, our former Chief Operating Officer, in exchange for $30,500 bearing an interest rate of
10% per annum. The maturity date of the promissory note is August 2, 2021. The note payable was paid in full on August 18, 2021.



On July 27, 2021, the Company
issued a promissory note with Simon Kay, our Interim Acting Chief Executive Officer and Principal Financial Officer, in exchange for $10,000
bearing an interest rate of 10% per annum. The maturity date of the promissory note is August 3, 2021. The note payable was paid in full
on August 18, 2021.



On August 6, 2021, the Company
issued a promissory note with an entity managed by Ronald J. LoRicco, Sr., a member of our Board of Directors, in exchange for $100,000
bearing an interest rate of 10% per annum. The maturity date for the promissory note is August 24, 2021. The note payable was paid in
full on August 24, 2021.



Add the NP RP 2022 here from
above.



Interest expense for the Company’s
notes payable – related party was $44,985 and $44,985 for the years ended December 31, 2022 and 2021, respectively.



Accrued interest for the Company’s
notes payable at December 31, 2022 and December 31, 2021 was $42,614 and $42,614, respectively, and is included in accrued expenses on
the consolidated balance sheets.



NOTE 9 – COMMITMENTS AND CONTINGENCIES



On July 9, 2021 the Company proposed
a liquidation of liability to an individual with regard to a dispute concerning the acquisition of a territory from Rockstar LLC. The
proposed settlement would be 500,000 shares of Basanite common stock. The Company has accrued a liability in the amount of $165,000 in
connection with this matter. Subsequent to year end, the Company and the individual signed an agreement for settlement.



No commitments and contingencies
to be disclosed for year end December 31, 2022.



Legal Matters



In the ordinary course of operations,
the Company may become a party to legal proceedings. Based upon information currently available, management believes that such legal proceedings,
individually or in the aggregate, will not have a material adverse effect on the Company's business, financial condition, cash flows,
or results of operations except as provided below.



CalSTRS Judgement



On March 31, 2014, the Company
received a “Notice of Default” letter from legal counsel representing the California State Teachers Retirement System (“CalSTRS”)
(the landlord for the Company’s office space) alerting that the Company was in default of its lease for failure to pay monthly rent
for the office space located at 2400 East Commercial Boulevard, Suite 612, Fort Lauderdale, FL 33304. The letter demanded immediate payment
of $41,937 for rent past due as of April 1, 2014. The Company had indicated in writing its intention to cooperate with the landlord while
trying to resolve the matter. On February 11, 2015, the landlord, through its attorneys, filed a motion for summary judgment. The motion
asked for $376,424 in unpaid rent, recovery of abated rents and tenant improvements and $12,442 in attorney’s costs incurred by
the landlord. On April 22, 2015, the motion for unpaid rent, recovery of abated rents and tenant improvements and attorney’s costs
was granted by the Circuit Court of the 17th Judicial Circuit in and for Broward County and the Company has reserved the entire judgement
of $388,866. The total amount is accruing interest at the statutory rate of 4.75%. On August 24, 2021, the Company paid the amount of
$400,000 representing satisfaction of the judgment amount of $388,866 and accrued interest in the amount of $117,203, and recorded a gain
on settlement of judgment in the amount of $106,069.





F-24


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021




RAW Materials Litigation



On or about August 28, 2018, Raw
Energy Materials Corp. filed an action for declaratory relief and breach of contract in Broward County, Florida, in the 17th
Judicial Circuit Court, titled Raw Energy Materials Corp. v. Rockstar Acquisitions, LLC, Paymeon, Inc. (now Basanite, Inc.), and Basalt
America, LLC, CASE NO.: CACE 18-020596. An Amended Complaint was filed on or about December 19, 2018 adding Basanite Industries, LLC as
a defendant, as well as an alleged claim under Florida Statute Section 501.201 and for injunction. The Company filed and has pending an
amended counterclaim for breach of contract, fraud and civil conspiracy against Raw Energy affiliates, including Don Smith, Elina Jenkins,
Global Energy Sciences, LLC, Yellow Turtle Design, LLC, as well as former business affiliates/associates to Don Smith, Richard Laurin
and Robert Ludwig. The nature of the dispute is based on representations (or misrepresentations) the Company alleges were made to it,
as well as breaches of the terms of a licensing agreement, related consulting and other agreements, and failures and refusals of plaintiff
and Don Smith related entities to deliver equipment/machinery and goods paid for by the Company or its affiliates. As it became apparent
that the subject license agreement was effectively worthless and moot to the Company, and the purported and promised trade secrets and
intellectual property were essentially non-existent, the Company and Plaintiff agree to an order terminating that license agreement, which
resulted in the agreed order dated January 28, 2019.



A mediation was scheduled on March
4, 2021 which resulted in an impasse. Negotiations were continued, and on April 14, 2021, Basanite, Inc. entered into a settlement and
release agreement with RAW, LLC (“RAW”), Donald R. Smith, YellowTurtle Design LLC (“YellowTurtle”) and Elina B.
Jenkins among others. The settlement agreement provides for, among other things, the following: (i) a dismissal of the legal action as
to the above-referenced parties and their owners, agents, affiliated companies, successors and assigns, having Case Number 18-020596 (21)
in the Seventeenth Judicial Circuit Court in and for Broward County, Florida (the “Litigation”) upon the Company’s timely
purchase of the shares as set forth in the next paragraph below and (ii) mutual general releases for the above-referenced parties relating
to the Litigation upon the Company’s timely purchase of the shares as set forth in the next paragraph below.



Simultaneously with the execution
of the settlement agreement settling the litigation in full and release of all claims among the parties, the Company entered into stock
purchase agreements with both RAW and YellowTurtle to repurchase the 10,000,000 shares of the Company’s common stock held by RAW
for $1,212,121 and the 6,500,000 shares of the Company’s common stock held by YellowTurtle for $787,879, or an aggregate purchase
price of $2,000,000. On May 17, 2021, the settlement shares were purchased by a group of related and non-related investors which resulted
in the closing of this legal action.



Lustig Litigation



In reviewing court records recently
in late 2020, counsel for the Company found names of its affiliates in a case filed in 2018 by Stephen Lustig against one of the Company's
shareholders. The Company and its affiliates were not served or made a party to that case; and were listed as an attempt by Mr. Lustig
to execute, attach or foreclosure on the defendant shareholder's stock in the Company. The Company did not breach any agreement and was
not engaged in any wrongdoing. The Company was informed that the subject shareholder had made contact with Mr. Lustig and obtained a resolution
between them; a voluntary dismissal was filed on January 4, 2021.



To our knowledge, we are not currently subject to any other
legal proceedings.



Supplier Agreement



On December 10, 2021, the Company
entered into an Exclusive Supplier Agreement with Concrete Products of the Palm Beaches, Inc. (“CPPB”) of Riviera Beach, Florida.
CPPB engaged the Company as its sole and exclusive supplier of BasaFlex, BasaMix, and BasaMesh. On December 10, 2021, the Company issued
a warrant to purchase 40,000,000 shares of the Company’s restricted common stock (20,000,000 shares of which had not vested as of
December 31, 2021) at a price of $0.33 per share to U.S. Supplies, Inc., an affiliate of CPPB. U.S. Supplies, Inc. and CPPB are controlled
by Manny Rodriguez, a Director of the Company.



The Company generated $37,116 in revenue for custom
rebar products delivered under this contract for the year ended December 31, 2022 and $14,420 for the year ended December 31, 2021.





F-25


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021




MEP Consulting Engineers, Inc.



On July 23, 2020, the Company
entered into an Exclusive Supplier Agreement with MEP Consulting Engineers, Inc. (“MEP”) of Miami, Florida. MEP engaged the
Company as its sole and exclusive supplier and producer of basalt fiber reinforced polymer (“BFRP”) rebar, with the intent
of developing a proprietary rebar to be named “Hurricane Bar.” The agreement also provides MEP with exclusive distribution
rights to the Company’s BasaFlexTM BFRP rebar and other Company products in Miami-Dade County.



Pursuant to this agreement, MEP
was provided the ability to exercise options to purchase a total of 5,000,000 restricted common shares of the Company, over the 5 years
from the supplier agreement effective date, tied to sales performance. This option shall automatically expire after the end of the option
period. An extension period was available through specific clauses in the agreement, but the Company elected to not exercise this option.
As of this filing the Company and MEP are no longer affiliated.



The Company generated $0 in revenue for custom rebar
products delivered under this contract for the year ended December 31, 2022, and $31,141 for the year ended December 31, 2021.



CR Business Consultants, Inc.



On October 22, 2020, the Company
entered into an Exclusive Supplier Agreement with CR Business Consultants, Inc. (“CRBC”). CRBC agreed to utilize the Company
as its exclusive supplier for all Company products, and the Company has granted CRBC exclusive distribution rights of the Company’s
products in the Republic of Costa Rica and the Republic of Panama. Furthermore, CRBC has key relationships that could be a source of additional
customers for the Company in other territories with no geographic restrictions.



The agreement is targeting multiple
large projects in Costa Rica, to include the rebuilding of the Port of Limon, which Basanite has been specified. Pursuant to this agreement,
CRBC was provided the ability to exercise options to purchase a total of 5,000,000 restricted common shares of the Company, over the 5
years from the supplier agreement effective date, tied to sales performance. This option shall automatically expire after the end of the
option period. An extension period is available through specific clauses in the agreement. The Company has not generated revenue under
this contract for the year ended December 31, 2022 or 2021.



NOTE 10 – STOCKHOLDERS’ DEFICIT



On April 16, 2020, an investor
returned 1,300,000 shares of common stock previously issued as a loan commitment fee. See Note 5 for further information regarding the
note payable.



On August 17, 2021, the Company
conducted the closing of a private placement offering to accredited investors of the Company’s units at a price of $0.275 per unit,
with each unit consisting of: (i) one share of the Company’s common stock, (ii) a five-year, immediately exercisable warrant (“Warrant
A”) to purchase one share of common stock at an exercise price of $0.33 per share and (iii) an additional five-year, immediately
exercisable warrant to purchase one share of common stock at an exercise price of $0.33 per share (“Warrant B”). The Warrant
A and Warrant B are identical, except that the Warrant B has a call feature in favor of the Company, as defined in the offering agreements.
In connection with the closing, the Company entered into definitive securities purchase agreements with 19 accredited investors and issued
an aggregate of 19,398,144 shares of common stock, Warrant A to purchase up to an aggregate of 19,398,144 shares of common stock, and
Warrant B to purchase up to an aggregate of 19,398,144 shares of Common Stock (for an aggregate of 38,796,288 Warrant Shares), for aggregate
gross proceeds to the Company of approximately $5,334,490. Costs of the offering in the amount of $611,603 were charge to additional paid
in capital. The Company also accrued the amount of $386,759 as liquidated damages due to the investors in the Company’s August 2021
private placement, such liquidated damages being related to the Company’s failure to timely file a registration statement on Form
S-1 for an underwritten public offering and concurrent listing of the Common Stock on a national exchange.



During the year ended December
31, 2022, the Company issued a total 0 restricted common shares in exchange for $0 in net cash proceeds.



During the year ended December
31, 2021, the Company issued a total 20,583,813 restricted common shares in exchange for $5,034,079 in net cash proceeds.





F-26


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021




NOTE 11 – OPTIONS AND WARRANTS



Stock Options:



The following table provides the activity in options for the
respective periods:



|Schedule of Option Activity  |  |  |               |            |   |                |   |       |                 |  |   |        | 
|---------------------------- |  |  | ------------- | ---------- | - | -------------- | - | ----- | --------------- |  | - | ------ | 
|                             |  |  |               |            |   | Weighted       |   |       |                 | 
|                             |  |  | Total Options |            |   | Average        |   |       | Aggregate       | 
|                             |  |  | Outstanding   |            |   | Exercise Price |   |       | Intrinsic Value | 
|Balance at January 1, 2020   |  |  |               | 5,042,500  |   |                | $ | 0.40  |                 |  | $ | —      | 
|Cancelled                    |  |  |               | (500,000   | ) |                |   | (0.25 | )               |  |   |        | 
|Balance at December 31, 2020 |  |  |               | 4,542,500  |   |                | $ | 0.41  |                 |  | $ | —      | 
|Issued                       |  |  |               | 1,277,778  |   |                |   | 0.27  |                 |  |   |        | 
|Cancelled                    |  |  |               | (1,592,500 | ) |                |   | 0.53  |                 |  |   |        | 
|Balance at December 31, 2021 |  |  |               | 4,227,778  |   |                | $ | 0.33  |                 |  | $ | 19,500 | 



Options exercisable and outstanding at December 31, 2021 are
as follows:



|Schedule of Options Exercisable and Outstanding |  |                        |  |                              |  |                      |  |                    
|----------------------------------------------- |  | ---------------------- |  | ---------------------------- |  | -------------------- |  | -------------------
|                                                |  |                        |  | Weighted
    Average         |  |                      |  |                    
|Range
    of                                    |  |                        |  | Remaining                    |  | Weighted
    Average |  | Aggregate          
|Exercise
    Prices                             |  | Number
    Outstanding |  | Contractual
    Life (Years) |  | Exercise
    Price   |  | Intrinsic
    Value
|                                                |  |                        |  |                              |  |                      |  |                    
|$0.01 - $0.50                                   |  | 3,227,778              |  | 2.2                          |  | $0.26                |  | $19,500            
|$0.51 - $1.00                                   |  | 1,000,000              |  | 0.25                         |  | $0.55                |  | —                  
|                                                |  | 4,227,778              |  |                              |  |                      |  | $19,500            



Stock Warrants:



The following table provides the activity in warrants for the
respective periods:



|Schedule of Warrants Activity |  |  |                |             |   |                                 |   |      |                           |  |   |           | 
|----------------------------- |  |  | -------------- | ----------- | - | ------------------------------- | - | ---- | ------------------------- |  | - | --------- | 
|                              |  |  | Total Warrants |             |   | Weighted Average Exercise Price |   |      | Aggregate Intrinsic Value | 
|Balance at January 1, 2020    |  |  |                | 29,849,761  |   |                                 | $ | 0.23 |                           |  | $ | 1,956,750 | 
|Granted                       |  |  |                | 17,180,957  |   |                                 |   | 0.31 |                           |  |   |           | 
|Exercised                     |  |  |                | (7,110,340  | ) |                                 |   | 0.09 |                           |  |   |           | 
|Cancelled                     |  |  |                | (1,000,000  | ) |                                 |   | 0.4  |                           |  |   |           | 
|Balance at December 31, 2020  |  |  |                | 38,920,378  |   |                                 | $ | 0.27 |                           |  | $ | 2,973,660 | 
|Granted                       |  |  |                | 100,271,288 |   |                                 |   | 0.29 |                           |  |   |           | 
|Exercised                     |  |  |                | (1,000,000  | ) |                                 |   | 0.12 |                           |  |   |           | 
|Balance at December 31, 2021  |  |  |                | 138,191,666 |   |                                 | $ | 0.29 |                           |  | $ | 3,824,750 | 



Warrants exercisable and outstanding at December 31, 2021 are
as follows:



|Schedule of Warrants Exercisable and Outstanding |  |                        |  |                              |  |                      |  |                    
|------------------------------------------------ |  | ---------------------- |  | ---------------------------- |  | -------------------- |  | -------------------
|                                                 |  |                        |  | Weighted
    Average         |  |                      |  |                    
|Range
    of                                     |  |                        |  | Remaining                    |  | Weighted
    Average |  | Aggregate          
|Exercise
    Prices                              |  | Number
    Outstanding |  | Contractual
    Life (Years) |  | Exercise
    Price   |  | Intrinsic
    Value
|                                                 |  |                        |  |                              |  |                      |  |                    
|$0.01 - $0.50                                    |  | 135,701,123            |  | 4.01                         |  | $0.28                |  | $3,824,750         
|$0.51 - $1.00                                    |  | 2,490,543              |  | 1.10                         |  | $0.60                |  | —                  
|                                                 |  | 138,191,666            |  |                              |  |                      |  | $3,824,750         







F-27


BASANITE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021




On February 12, 2021, the Company
issued 15,000,000 five year common stock warrants with an exercise price of $0.20 per share and a grant date fair value of $3,686,136
to noteholders pursuant to a debt extinguishment and restructure agreement. On May 12, 2021, the Company issued an additional 7,500,000
five year common stock warrants with an exercise price of $0.35 per share and a grant date fair value of $1,874,705 to the noteholders
for an extension of the debt. The total grant date fair value of the warrants of $5,560,828 was recorded as a loss on extinguishment of
debt during the year ended December 31, 2021. See note 6.



On August 17, 2021, the Company
conducted a private placement of the Company’s units at a price of $0.275 per unit, with each unit consisting of: (i) one share
of the Company’s common stock, (ii) a five-year, immediately exercisable warrant (“Warrant A”) to purchase one share
of common stock at an exercise price of $0.33 per share and (iii) an additional five-year, immediately exercisable warrant to purchase
one share of common stock at an exercise price of $0.33 per share. A total of 38,796,288 warrants were issued pursuant to the private
placement. See note 10.



On December 10, 2021, the Company
issued a warrant to purchase 40,000,000 shares of Common Stock (20,000,000 shares of which had not vested as of December 31, 2021) with
an exercise price of $0.33 per share and a grant date fair value of $3,907,973 to a USS, a related party product distributor. See note
9.



NOTE 12 – SUBSEQUENT EVENTS



Thomas Richmond Services Agreement



On
April 6, 2023, the Board of Directors appointed Mr. Richmond and entered into an Employment Services Agreement to serve as the Acting
Interim Chief Executive Officer of the Company.The terms of Richmond’s employment with the Company and his job description
are provided for in an Employment Agreement, dated April 6, 2023, between the Company and Richmond.



Michael Giorgio Services Agreement



On
April 6, 2023, the Board of Directors appointed Mr. Giorgio and entered into an Employment Services Agreement to serve as the Chief Growth
Officer of the Company.The terms of Giorgio’s employment with the Company and his job description are provided for in an
Employment Agreement, dated April 6, 2023, between the Company and Giorgio.



F-28