UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-Q

———————

(Mark One)

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

For the quarterly period ended: ~~June 30, 2022~~March 31, 2023

¨ 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~~2660 NW 15th ~~Avenue~~Court, Unit 108, Pompano Beach, Florida 33069

(Address of Principal Executive Office) (Zip Code)

(954) 532-4653

(Registrant’s telephone number, including area code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

———————

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

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 and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ 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 checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

Indicate the number of shares outstanding of each of the issuer’s classes of ~~Common Stock,~~common stock as of the latest practicable date.

Class		Shares Outstanding as of ~~August 15, 2022~~May 19, 2023
Common Stock, $0.001 par value per share		~~253,217,402~~257,156,796

BASANITE, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page No.
	PART I. – FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of ~~June 30, 2022~~March 31, 2023 (Unaudited) and December 31, ~~2021~~2022	1
	Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2023 and ~~Six Months ended June 30,~~ 2022 ~~and 2021~~	2
	Condensed Consolidated Statements of Stockholder’s (Deficit) Equity (Unaudited) for ~~Six~~Three Months ~~ended June 30,~~Ended March 31, 2023 and 2022 ~~and 2021~~	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1416
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20

	PART II. – OTHER INFORMATION

Item 1.	Legal Proceedings	2122
Item 1A.	Risk Factors	2122
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2122
Item 3.	Defaults Upon Senior Securities	2122
Item 4.	Mine Safety Disclosures	2122
Item 5.	Other Information	2122
Item 6.	Exhibits	2122
Signatures		2223

PART I. – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

BASANITE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	March 31,			December 31,
	2023			2022

CURRENT ASSETS
Cash	$	30,703		$	30,340
Accounts receivable, net		68,202			67,960
Prepaid expenses		111,034			137,370
TOTAL CURRENT ASSETS		209,939			235,670

Lease right-of-use asset, financing		127,289			153,270
Fixed assets, net		498,174			530,238
TOTAL NON–CURRENT ASSETS		625,463			683,508

TOTAL ASSETS		835,402		$	919,178


LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	$	1,853,361		$	1,713,045
Accrued expenses		556,563			438,870
Accrued legal liability		165,000			165,000
Subscription liability		1,300,000			1,300,000
Notes payable		299,458			304,243
Notes payable - related party		695,000			605,000
Notes payable - convertible - related party, net		2,144,357			2,144,357
Due to shareholders		505,000			505,000
Lease liability - current portion		94,530			93,186
TOTAL CURRENT LIABILITIES		7,613,269			7,268,701

Lease liability - net of current portion		32,759			56,915

TOTAL LIABILITIES		7,646,028			7,325,616

STOCKHOLDERS’ (DEFICIT) EQUITY
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, 253,217,402 and 253,217,402 shares issued and outstanding, respectively		253,218			253,218
Additional paid-in capital		47,497,620			47,433,354
Accumulated deficit		(54,561,464	)		(54,093,010	)
TOTAL STOCKHOLDERS’ (DEFICIT) EQUITY		(6,810,626	)		(6,406,438	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	835,402		$	919,178

June 30, 2022 December 31, 2021
(Unaudited)
ASSETS

CURRENT ASSETS
Cash $ 58,893 $ 109,514
Accounts receivable, net 24,256 7,817
Inventory 317,972 714,655
Prepaid expenses 104,805 127,806
Deposits and other current assets 253,436 265,553
TOTAL CURRENT ASSETS 759,362 1,225,345

Lease right-of-use asset, operating 605,621 749,116
Lease right-of-use asset, financing, related-party 451,050 —
Fixed assets, net 3,462,492 3,236,825
TOTAL NON CURRENT ASSETS 4,519,163 3,985,941

TOTAL ASSETS $ 5,278,525 $ 5,211,286

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

CURRENT LIABILITIES
Accounts payable $ 1,469,978 $ 1,175,682
Accrued expenses 890,932 407,454
Accrued legal liability 165,000 165,000
Subscription liability 1,300,000 —
Notes payable 500,515 466,762
Notes payable - related party 300,000 300,000
Notes payable - convertible - related party, net 1,689,745 1,689,745
Lease liability – operating, current portion 357,080 325,339
Lease liability – financing, related party, current portion 3,892 —
TOTAL CURRENT LIABILITIES 6,677,142 4,529,982

Lease liability – operating, net of current portion 312,781 499,546
Lease liability – financing, related party, net of current portion 445,257 —

TOTAL LIABILITIES 7,435,180 5,029,528

STOCKHOLDERS’ (DEFICIT) EQUITY
Preferred stock, $0.001 par value, 5,000,000 shares authorized, NaN 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 251,885 248,842
Additional paid-in capital 47,177,393 46,054,126
Accumulated deficit (49,585,933 ) (46,121,210 )
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY (2,156,655 ) 181,758

TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY $ 5,278,525 $ 5,211,286

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

BASANITE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

~~(UNAUDITED)~~

For the three months ended For the six months ended
June 30, June 30,
2022 2021 2022 2021
Revenue
Products sales - rebar $ 288,050 $ 15,549 $ 546,339 $ 19,685

Total cost of goods sold 611,163 19,493 1,196,974 20,809

Gross (loss) (323,113 ) (3,944 ) (650,635 ) (1,124 )

OPERATING EXPENSES
Sales, general, and administrative 1,035,717 1,447,580 2,083,095 2,512,447
Total operating expenses 1,035,717 1,447,580 2,083,095 2,512,447

NET LOSS FROM OPERATIONS (1,358,830 ) (1,451,524 ) (2,733,730 ) (2,513,571 )

OTHER INCOME (EXPENSE)
Gain on settlement of legal contingency — 320,037 — 344,522
Liquidated damages – loan commitment (403,643 ) — (426,759 ) —
Miscellaneous income — 3,116 — 3,116
Loss on extinguishment of debt — (3,056,892 ) — (6,743,015 )
Gain on loan forgiveness — — — 124,143
Interest expense (181,589 ) (133,211 ) (304,234 ) (205,874 )
Total other income (expense) (585,232 ) (2,866,950 ) (730,993 ) (6,477,108 )

NET LOSS $ (1,944,062 ) $ (4,318,474 ) $ (3,464,723 ) $ (8,990,679 )

Net loss per share – basic $ (0.01 ) $ (0.02 ) $ (0.01 ) $ (0.04 )
Net loss per share – diluted $ (0.01 ) $ (0.02 ) $ (0.01 ) $ (0.04 )

Weighted average number of shares outstanding – basic 251,800,462 227,837,337 250,996,454 227,115,792
Weighted average number of shares outstanding – diluted 251,800,462 227,837,337 250,996,454 227,115,792


	For the three months ended
	March 31,
	2023			2022
Revenue
Products sales	$	115,118		$	258,289
Total cost of goods sold		19,751			585,811

Gross (loss) profit		95,367			(357,522	)

OPERATING EXPENSES
Sales, general, and administrative		434,784			1,047,378
Total operating expenses		434,784			1,047,378

NET LOSS FROM OPERATIONS		(339,417	)		(1,374,900	)

OTHER INCOME (EXPENSE)
Interest expense		(129,037	)		(145,761	)
Total other income (expense)		(129,037	)		(145,761	)

NET LOSS	$	(468,454	)	$	(1,520,661	)

Net loss per share –
Basic	$	(0.002	)	$	(0.006	)
Diluted	$	(0.002	)	$	(0.006	)

Weighted average number of shares outstanding –
Basic		253,217,402			250,183,512
Diluted		253,217,402			250,183,512

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

BASANITE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE ~~SIX~~THREE MONTHS ENDED ~~JUNE 30,~~MARCH 31, 2023 AND 2022 ~~AND 2021~~

(UNAUDITED)

Additional Total
Common Stock Paid-in Accumulated Stockholders’
Shares Par Value Capital Deficit Deficit
Balance January 1, 2021 224,836,785 $ 224,838 $ 28,714,488 $ (29,643,387 ) $ (704,061 )
Warrants exercised for cash 1,000,000 1,000 122,500 — 123,500
Stock-based compensation 600,000 600 173,400 — 174,000
Stock issued for cash 450,000 450 89,550 — 90,000
Warrants Issued — — 3,686,123 — 3,686,123
Net loss — — — (4,672,205 ) $ (4,672,205 )

Balance March 31, 2021 226,886,785 $ 226,888 $ 32,786,061 $ (34,315,592 ) $ (1,302,643 )

Stock issued for cash 735,669 735 241,041 — 241,776
Stock-based compensation 900,000 900 554,625 — 555,525
Warrants issued — — 3,362,091 — 3,362,091
Net loss — — (4,318,474 ) (4,318,474 )

Balance June 30, 2021 228,522,454 $ 228,523 $ 36,943,818 $ (38,634,066 ) $ (1,461,725 )


														Total
									Additional					Stockholders'
	Preferred Stock				Common Stock				Paid-in		Accumulated			(Deficit)
	Shares		Par Value		Shares		Par Value		Capital		Deficit			Equity

Balance January 1, 2022		—	$	—		248,840,144	$	248,842		46,054,126		(46,121,210	)	$	181,758

Stock issued in private placement offering, net of cost of $50,409		—		—		2,121,212		2,121		647,470		—			649,591
Stock issued for exercise options		—		—		500,000		500		124,500		—			125,000
Stock issued to service provider		—		—		300,000		300		57,600		—			57,900
Warrants issued to management		—		—		—		—		169,565		—			169,565
Net loss		—		—		—		—		—		(1,520,661	)		(1,520,661	)

Balance March 31, 2022		—	$	—		251,761,356	$	251,763		47,053,261		(47,641,871	)	$	(336,847	)

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

BASANITE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

FOR THE ~~SIX~~THREE MONTHS ENDED ~~JUNE 30,~~MARCH 31, 2023 AND 2022 ~~AND 2021~~

(UNAUDITED)


									Additional					Total
	Preferred Stock				Common Stock				Paid-in		Accumulated			Stockholders'
	Shares		Par Value		Shares		Par Value		Capital		Deficit			Deficit

Balance January 1, 2023		—	$	—		253,217,402	$	253,218	$	47,433,354	$	(52,642,392	)	$	(6,406,438	)
Stock based compensation		—		—		—		—		64,266		—			—
Net loss		—		—		—		—		—		(468,454	)		(2,299,422	)

Balance March 31, 2023		—	$	—		253,217,402	$	253,218	$	47,497,620	$	(54,561,464	)	$	(6,810,626	)

Total
Stockholders’
Common Stock Paid-in Accumulated Equity
Shares Par Value Capital Deficit (Deficit)
Balance January 1, 2022 248,840,144 $ 248,842 $ 46,054,126 $ (46,121,210 ) $ 181,758

Stock issued for cash, net of costs of $50,409 2,121,212 2,121 647,470 — 649,591
Stock issued for exercise of warrants 500,000 500 124,500 — 125,000
Stock issued to service provider 300,000 300 57,600 — 57,900
Warrants issued to management — — 169,565 — 169,565
Net loss — — — (1,520,661 ) (1,520,661 )

Balance March 31, 2022 251,761,356 $ 251,763 $ 47,053,261 $ (47,641,871 ) $ (336,847 )

Shares issued to related party for services 122,713 122 18,162 — 18,284
Vesting of warrants issued to management — — 41,706 — 41,706
Warrants issued to Related Party for services provided — 64,264 — 64,264
Net loss — — — (1,944,062 ) (1,944,062 )

Balance June 30, 2022 251,884,069 $ 251,885 $ 47,177,393 $ (49,585,933 ) $ (2,156,655 )

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

BASANITE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the three months ended
	March 31,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		(468,454	)	$	(1,520,661	)
Adjustments to reconcile net loss to net cash used in operating activities:
Lease right-of-use asset amortization		25,981			70,313
Depreciation		32,064			33,583
Stock-based compensation		64,226			229,223
Changes in operating assets and liabilities:
Prepaid expenses		26,336			8,551
Inventory		—			161,990
Accounts receivable		(242	)		(19,998	)
Deposits and other current assets		—			11,929
Accounts payable and accrued expenses		258,009			770,746
Subscription liability		—			400,000
Lease liability		(22,812	)		(74,510	)
Net cash used in operating activities		(84,852	)		71,166

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment		—			(713,863	)
Net cash used in investing activities		—			(713,863	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock, net		—			649,591
Proceeds from exercise of stock options		—			125,000
Proceeds from notes payable and notes payable related party		90,000			—
Repayments of notes payable and notes payable related party		(4,785	)		—
Net cash provided by financing activities		85,215			774,591

NET INCREASE IN CASH		363			131,894

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		30,340			109,514

CASH AND CASH EQUIVALENTS AT END OF PERIOD		30,703		$	241,408

Supplemental cash flow information:
Cash paid for interest		—		$	—
Forgiveness of Paycheck Protection Program loan and accrued interest	$	—		$	—

Supplemental disclosure of non-cash investing and financing activities:
Common stock issued for services		—		$	57,900

For the six months ended
June 30,
2022 2021
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,464,723 ) $ (8,990,679 )
Adjustments to reconcile net loss to net cash used in operating activities:
Lease right-of-use asset amortization 143,495 122,501
Lease right-of-use asset amortization, financing lease, related party (1,050 ) —
Depreciation and amortization 67,165 63,925
Gain on settlement of legal contingency — (344,522 )
Loss on extinguishment of debt — 6,743,015
Loan forgiveness — (124,143 )
Stock-based compensation 426,856 729,525
Changes in operating assets and liabilities:
Prepaid expenses (18,383 ) (89,632 )
Inventory 396,683 (231,584 )
Accounts receivable (16,439 ) (208,930 )
Deposits and other current assets 12,117 —
Accounts payable and accrued expenses 1,227,774 203,873
Subscription liability 1,300,000 (40,000 )
Lease liability, operating leases (155,024 ) (127,850 )
Net cash used in operating activities (81,529 ) (2,294,501 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (742,832 ) (270,330 )
Net cash used in investing activities (742,832 ) (270,330 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Lease liability, financing lease – related party (851 ) —
Proceeds from sale of common stock, net of costs 649,591 331,776
Proceeds from exercise of warrants — 123,500
Proceeds from exercise of stock options 125,000 —
Proceeds of convertible notes payable and convertible notes payable related party — 579,741
Repayments of convertible notes payable and convertible notes payable related party — (35,000 )
Proceeds from notes payable and notes payable related party — 1,391,194
Repayments of notes payable and notes payable related party — (8,485 )
Net cash provided by financing activities 773,740 2,382,726

NET INCREASE (DECREASE) IN CASH (50,621 ) (182,105 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 109,514 259,505

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 58,893 $ 77,400

Supplemental cash flow information:
Cash paid for income taxes $ — $ —
Cash paid for interest $ — $ 4,016
Forgiveness of Paycheck Protection Program loan and accrued interest $ — $ 124,143

Supplemental disclosure of non cash investing and financing activities:
Common stock issued for services $ 57,900 $ —
Issuance of warrants for services $ 64,264 $ 64,045
Conversion of note payable in exchange for warrants $ — $ 305,199
Accounts payable paid by financing lease, related party $ 450,000 $ —

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

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN

(A) Description of Business

Basanite, Inc., a Nevada corporation (the “Company”, “Basanite”, “we”, “us”, “our” or similar terminology), through our wholly owned subsidiary, Basanite Industries, LLC, a Delaware limited liability company (“BI”), manufactures a range of “green” (environmentally friendly), sustainable, non-corrosive, lightweight, composite products used in concrete reinforcement by the construction industry. Our core product is BasaFlex™, a basalt fiber reinforced polymer reinforcing bar (“rebar”) which we believe is a stronger, lighter, sustainable, non-conductive and corrosion-proof alternative to traditional steel.

Our two other main product lines are BasaMix™, which are fine denier basalt fibers available in various sizes, and BasaMesh™, a line of Basalt Geogrid Mesh Rolls, intended to replace welded wire mesh (made of steel) and other fiber reinforced polymer (“FRB”) grids and mesh.

BasaMix™ is designed to help absorb the stresses associated with early-aged plastic shrinkage and settlement cracking in concrete, as well as providing an increased toughness for enhanced reinforcement in Slab-on-Grade (“("SOG”) and precast elements. BasaMix™ also serves in a “system approach” for optimum performance of a concrete element when used in conjunction with our BasaFlex™ rebar.

BasaMesh™ is designed for secondary and temperature shrinkage reinforcement. BasaMesh™ can also work in conjunction with the BasaFlex™ rebar or BasaMix™ for a total reinforcement program.

Each of our products is specifically designed to extend the lifecycle of concrete products by eliminating “concrete spalling.” Spalling results from the steel reinforcing materials embedded within the concrete member rusting (contrary to popular belief, concrete is porous and water can permeate into concrete). Rusting leads to the steel expanding and eventually causing the surrounding concrete to delaminate, crack, or even break off, resulting in potential structural failure. We believe that each Basanite product addresses this important need along with other key requirements in today’s construction market.

(B) Liquidity and Management Plans

Since inception, the Company has incurred net operating losses and used cash in operations. As of ~~June 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, respectively, the Company reported:

·•

an accumulated deficit of $~~49,585,933~~54,561,464 and $~~46,121,210~~54,093,010;

·•

a working capital deficiency of $~~5,917,780~~8,028,793 and $~~3,304,637~~7,033,031; and

·•

cash used in operations of $~~81,529~~84,852 and ~~$4,507,418.~~ $~~2,294,501~~71,166

Losses have principally occurred as a result of the substantial resources required for product research and development ~~establishment and upgrading of our manufacturing facility and equipment,~~ and for ~~certification, government approval and~~ marketing of the Company’s products; including the general and administrative expenses associated with the organization.

While we have generated relatively little revenue to date, revenue from sales of product began to increase ~~during the first half of 2022 (including~~in the quarter ended ~~June 30, 2022),~~March 31, 2021, and we continue to receive inquiries and solicit orders from a range of customers for our products, indicating what we believe is a significant level of market interest for BasaFlex™ and BasaMix ™ products. We also spent time and resources during the first half of 2022 in introducing our products to, and receiving approvals and certifications from, various county and local government agencies to have our products used in such agencies’ construction projects,. While the Company ~~plans~~expects to expand its manufacturing capacity during ~~2022,~~2023, based on our current limited manufacturing capacity there is no guarantee that orders ~~secured from marketing and governmental approval activities~~ will actually be received or that orders, if received, can be properly fulfilled.

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN (CONTINUED)

We have historically satisfied our working capital requirements through the sale of restricted ~~Common Stock~~common stock of the Company, $0.001 par value per share (the “Common Stock”), and the issuance of warrants to purchase Common Stock and promissory notes. Until we are able to internally generate meaningful revenue and positive cash flow, we will attempt to fund working capital requirements through third party financing, including through potential private or public offerings of our securities as well as bridge or other loan arrangements. However, a number of factors continue to hinder the Company’s ability to attract new capital investment. We cannot provide any assurances that the required capital will be obtained at all, or that the terms of such required capital may be acceptable to us. If we are unable to obtain adequate financing, we may reduce our operating activities to reduce our cash use until sufficient funding is secured. If we are unable to secure funding when needed, our results of operations may suffer, and our business may fail.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties.

At ~~June 30, 2022,~~March 31, 2023, the Company had cash of $~~58,893~~30,703 compared to $~~109,514~~30,340 at December 31, ~~2021.~~2022. During the quarter ended March 31, 2023, cash on hand was increased due to cash received from the receipt of cash from Directors whom loaned the company funds in order to pay for services engaged by the company and payroll liabilities.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) Use of Estimates in Financial Statements

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

Stock-based compensation and stock awards related to convertible debt instruments are recognized based on the fair value of the awards granted. The fair value of each award or conversion feature is typically estimated on the grant date using the Black-Scholes pricing model. The Black-Scholes pricing model requires the input of highly subjective assumptions, including the fair value of the underlying Common Stock, the expected term of the option, the expected volatility of the price of our Common Stock, risk-free interest rates and the expected dividend yield of our Common Stock. The assumptions used to determine the fair value of the stock awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment.

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 ~~six~~three months ended ~~June 30, 2022. There were no such valuations during the six months ended June 30, 2021:~~March 31, 2023 and 2022, respectively:

Schedule of Fair Value Assumptions
	Six months			Six months
	ended			ended		Three months			Three months
	June 30,			June 30,		ended			ended
	2022			2021		March 31,			March 31,
	(Unaudited)					2022			2021
Expected price volatility		144.76-145.73	%		N/A		176.23	%		145.76	%
Risk-free interest rate		2.55-2.88			N/A		5.63			2.55
Expected life in years		5			N/A		5			5
Dividend yield		—			N/A		—			—

(B) Principles of Consolidation

The condensed consolidated financial statements include the accounts of Basanite, Inc. and its wholly owned subsidiaries, Basanite Industries, LLC and Basalt America, LLC. All intercompany balances have been eliminated in consolidation. The Company’s operations are conducted primarily through Basanite Industries, LLC. Basalt America, LLC is currently inactive.

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(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”~~“("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' creditworthiness~~institutions credit worthiness in conjunction with balances on deposit to minimize risk. The Company from time to time may have amounts on deposit in excess of the insured limits.

(D) Inventories

The Company’s inventories consist of raw materials, work in process and finished goods, both purchased and manufactured. Inventories are stated at lower of cost or net realizable value. Cost is determined on athe first-in, first-out basis. Raw materials inventory consists of basalt fiber and other necessary elements to produce ~~BasaFlex™ rebar and our other products.~~the basalt rebar. On a quarterly basis, the Company analyzes its inventory levels and records allowances for inventory that has become obsolete and inventory that has a cost basis in excess of the expected net realizable value.

The ~~Company’s~~Company had no inventory ~~at June 30, 2022~~as of March 31, 2023 and December 31, ~~2021 was comprised of:~~2022.

Schedule of Inventories
June 30, December 31,
2022 2021
(Unaudited)
Finished goods $ 61,339 $ 328,229
Work in process 73,019 35,213
Raw materials 183,614 351,213
Total inventory $ 317,972 $ 714,655

(E) Fixed assets

Fixed assets consist of the following:

Schedule of Fixed Assets
June 30, December 31,
2022 2021
(Unaudited)
Computer equipment $ 166,679 $ 133,654
Machinery 728,245 717,437
Leasehold improvements 170,452 166,252
Office furniture and equipment 71,292 71,292
Land improvements 7,270 7,270
Website development 2,500 2,500
Construction in process 2,653,784 2,408,986
3,800,222 3,507,391
Accumulated depreciation (337,730 ) (270,566 )
$ 3,462,492 $ 3,236,825

Schedule of Fixed Assets
	March 31,			December 31,
	2023			2022
		(Unaudited)
Computer equipment	$	224,473		$	224,473
Machinery		728,245			728,245
Leasehold improvements		—			—
Office furniture and equipment		763			763
Land improvements		—			—
Website development		2,500			2,500
Construction in process		—			—
		943,701			943,701
Accumulated depreciation		(346,527	)		(404,463	)
	$	498,174		$	530,238

Depreciation expense for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023 was $~~33,493~~32,064 ~~and~~compared to $~~66,751~~33,583~~, respectively; depreciation expense~~ for the three months ~~and six months~~ ended ~~June 30, 2021, was $32,216, and $63,925, respectively.~~March 31, 2022.

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(F) Deposits and other current assets

The Company’s deposits and other current assets consist of the deposits made on equipment, security deposits, utility deposits and other receivables. The deposits are reclassified as part of the fixed asset cost when received and placed into service.

(G) Loss Per Share

The basic loss per share is calculated by dividing the ~~Company’s~~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~~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
	June 30,		December 31,		March 31,		December 31,
	2022		2021		2023		2022
	(Unaudited)					(Unaudited)
Options		1,727,778		4,227,778		1,477,778		1,477,778
Warrants		141,889,090		138,191,666		135,435,757		139,555,757
Convertible securities		7,696,765		6,970,063		8,016,068		8,016,068
Total		151,313,633		149,389,507		144,929,573		149,049,573

(H) 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 recognized $64,226 in stock-based compensation during the three months ended March 31, 2023.

(I) Revenue Recognition

We recognize revenue when control of the promised goods or services is transferred to the Company’s customers in an amount that reflects the consideration we expected to be entitled to in exchange for those goods or services. The timing of revenue recognition largely is dependent on shipping terms. Revenue is recorded at the time of shipment for terms designated free on board (“FOB”) shipping point. For sales transactions designated FOB destination, revenue is recorded when the product is delivered to the customer’s delivery site.

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

All revenues recognized are net of trade allowances, cash discounts, and sales returns. Trade allowances are based on the estimated obligations. Adjustments to earnings resulting from revisions to estimates on discounts and returns have been immaterial for each of the reported periods. Shipping and handling amounts billed to a customer as part of a sales transaction are included in revenues, and the related costs are included in cost of goods sold. Shipping and handling ~~are~~is treated as a fulfillment ~~activities,~~activity, rather than a promised ~~services,~~service, and therefore ~~are~~is not considered a separate performance ~~obligations.~~obligation. During the ~~six~~ three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company incurred shipping and handling costs in the amount of $~~16,537~~6,340 and $08,355, respectively.

NOTE 3 – OPERATING LEASE

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

The right-of-use asset is composed of the sum of all remaining lease payments plus any initial direct costs and is amortized over the life of the expected lease term. For the expected term of the lease,On December 31, 2022 the Company ~~used~~vacated the initial term of the five-year lease. If the Company does elect to exercise its option to extend the lease for another five years, for which the election will be treated as a lease modification, the lease will be reviewed for remeasurement.

~~The future minimum lease payments to be made under the operating~~ lease, as of ~~June 30, 2022, are as follows:~~ this filing the Company has not entered into a new commercial lease for a manufacturing facility. The Company is actively engaged in a nation-wide search to secure a manufacturing facility.

Schedule of Operating Lease Liability
2022 $ 215,310
2023 440,308
2024 110,884
Total minimum lease payments 766,502
Discount (96,641 )
Operating lease liability $ 669,861

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 June 30, 2022, the weighted-average remaining lease term is ~~2.0~~ ~~years and the weighted-average discount rate used to determine the operating lease liability was~~ ~~15.0~~%. For the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company expensed $~~220,863~~0 and $~~214,036~~107,116, respectively for rent.

NOTE 4 – ~~FINANCING LEASE – RELATED PARTY~~NOTES PAYABLE

Notes payable totaled $299,458 and $304,243 for March 31, 2023, and December 31, 2022, respectively.

On ~~April 27,~~March 31, 2022 the Company entered ~~into~~financing arrangements to finance the insurance premiums for its liability coverage. The financings have an Equipment Rental Agreement (the “Agreement”) with First New Haven Mortgage Company, LLC, a Connecticut limited liability company and an affiliate of the Company (the “Lessor”). Ronald J. LoRicco, a member of the Company’s Board of Directors, is the co-managing member of the Lessor and has an indirect pecuniary interest in the Lessor. In accordance with Nevada corporate law, the Agreement was independently reviewed and approved by the unanimous vote of the disinterested directors of the Company, with Mr. LoRicco recusing himself from voting.

~~Pursuant to the Agreement, the Lessor paid approximately $450,000~~ to Upstate Custom Products LLC, a South Carolina limited liability company (the “Manufacturer”) on April 22, 2022, to purchase a single, specialized BasaMax™ Tetrad Basalt Rebar Pultrusion Machine to be used to manufacture the Company’s products (the “Machine”). The Company had previously ordered the Machine from the Manufacturer, and pursuant to the Agreement, the Lessor secured rights to the ownership of the Machine and rights under all the sales orders and agreements to purchase the Machine from Manufacturer to the Lessor. The loan amount was paid directly to the Manufacturer. The Company has elected to use a market interest rate of ~~21%~~9.40% and last through March of 2023. The balance as of March 31, 2023 and December 31, 2022 $0 and $3,245, ~~this rate in line with the available options the Company would be subject to. Pursuant to this lease, the Company will make payments in the amount of $8,250~~ ~~per month for 24 months, followed by a final payment in the amount of $450,000.~~respectively.

~~The future minimum lease payments to be made under the financing lease as of June 30, 2022, are as follows:~~

Schedule of Financing Lease Liability
2022 $ 41,250
2023 99,000
2024 474,750
Total minimum lease payments 615,000
Discount (165,851 )
Financing lease liability $ 449,149

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 54 – NOTES PAYABLE

~~Notes payable totaled $500,515~~ ~~and $466,762~~ ~~on June 30, 2022, and December 31, 2021, 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 applied for forgiveness of this loan on January 17, 2022; the Company received notice of forgiveness on August~~ ~~1, 2022.~~

~~The Company enters into financing arrangements for its liability insurance premiums. The financings have a term of one year and an interest rate of~~ ~~9.40%. The balance due on these financings as of June 30, 2022 and December 31, 2021 $39,768~~ ~~and $6,015, respectively.~~ -- (CONTINUED)

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 ~~April~~October 2, 2022. The Company also issued a warrant to purchase 2,000,000 shares of Common Stock at an exercise price of $0.20 per share expiring in 5 years. ~~On April 2, 2022,~~The note was not paid by its due date. As of the ~~due~~ date of this ~~note was extended~~filing, the noteholder has not issued a formal demand for payment and the Company is in negotiations with the noteholder to ~~October 2, 2022~~.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 ~~April~~October 9, 2022. The Company also issued a warrant to purchase 500,000 shares of Common Stock at an exercise price of $0.20 per share expiring in 5 years. ~~On April 2, 2022,~~The note was not paid by its due date. As of the ~~due~~ date of this ~~note was extended~~filing, the noteholder has not issued a formal demand for payment and the Company is in negotiations with the noteholder to ~~October 9, 2022~~.remedy the past-due status.

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 ~~April~~October 16, 2022. The Company also issued a warrant to purchase 250,000 shares of Common Stock at an exercise price of $0.25 per share expiring in 5 years. ~~On April 2, 2022,~~The note was not paid by its due date. As of the ~~due~~ date of this ~~note was extended~~filing, the noteholder has not issued a formal demand for payment and the Company is in negotiations with the noteholder to ~~October 16, 2022~~.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 ~~April~~October 16, 2022. The company also issued a warrant to purchase 200,000 shares of Common Stock at an exercise price of $0.25 per share expiring in 5 years. ~~On April 2, 2022,~~The note was not paid by its due date. As of the ~~due~~ date of this ~~note was extended~~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.

During the three months ended March 31, 2022, the Company made principal payments in the amount of $~~October 16, 2022~~0. on notes payable.

Interest expense for the Company’s notes payable for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 was $~~16,493~~17,051 ~~and $32,300, respectively,~~ compared to $~~29,802~~ ~~and $30,177~~15,807 for the three ~~and six~~ months ended ~~June 30, 2021, respectively.~~March 31, 2021.

Accrued interest for the Company’s notes payable on ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 was $~~69,655~~112,812 and $~~42,773~~99,886, respectively, and is included in accrued expenses on the accompanying condensed consolidated balance sheets.

NOTE 65 – NOTES PAYABLE – RELATED PARTY

Notes payable ~~– Related Party,~~- related party totaled $~~300,000~~695,000 ~~on June 30,~~March 31, 2022 and $605,000 December 31, 2021, respectively.

On April 2, 2021, the Company issued a promissory note towith 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~~October 2, 2022. The ~~Company~~company also issued ~~a warrant to purchase~~ 1,500,000 ~~shares of Common Stock~~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.. On April 2, 2022, the due date of this note was extended to October 2,31, 2022. As of the date of this report, the note has not been called.

On April 2, 2021, the Company issued a promissory note towith 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~~October 2, 2022. The ~~Company~~company also issued ~~a warrant to purchase~~ 1,500,000 ~~shares of Common Stock~~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. On April 2, 2022, the due date of this note was extended to October 2,31, 2022. As of the date of this report, the note has not been called.

~~Interest expense~~On August 31, 2022 the Company issued a promissory note to a board member in exchange for ~~the Company’s notes~~$37,000 bearing an interest rate of 10% per annum and payable ~~– related party for the three and six months ended June 30, 2022 was $~~on ~~16,365~~August 31, 2023 ~~and $32,015, respectively. Interest expense for the Company’s notes payable – related party for the three and six months ended June 30, 2021, was $~~0 ~~and $13,335, respectively.~~.

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.

~~Accrued~~

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’s notes~~Company issued a promissory note to a board member in exchange for $10,000 bearing an interest rate of 10% per annum and payable ~~- related party~~ on ~~June 30, 2022, and December 31, 2021, was $74,629~~August 29, 2023 ~~and $42,614, respectively, and is included in accrued expenses on the accompanying condensed consolidated balance sheets.~~.

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 5 – NOTES PAYABLE – RELATED PARTY -- (CONTINUED)

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 February 14, 2023 the Company issued a promissory note to a board member in exchange for $10,000 bearing an interest rate of 20% per annum and payable February 14, 2024.

On February 24, 2023 the Company issued a promissory note to a board member in exchange for $50,000 bearing an interest rate of 20% per annum and payable February 24, 2024.

Interest expense for the Company’s notes payable – related party for the three months ended March 31, 2023 and 2022 was $23,599 and $15,560, respectively. Accrued interest for the Company’s notes payable - related party on March 31, 2022, and December 31, 2022, was $139,900 and $116,300, respectively, and is included in accrued expenses on the accompanying condensed consolidated balance sheets.

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 76 – NOTES PAYABLE – CONVERTIBLE – RELATED PARTY

Convertible Notes payable – related party totaled $~~1,689,746~~2,144,357 on ~~June 30, 2022,~~March 31, 2023, and December 31, ~~2021.~~2022.

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 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 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 ~~5-year~~5-year warrants to purchase an aggregate of 15,000,000 shares of Common Stock with an exercise price of $0.20 per share. 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.

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~~$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 5-year warrants to purchase an aggregate of 7,500,000 shares of ~~Common Stock~~common stock with an exercise price of $0.35 per share. 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 of February 12, ~~2022.~~2022. 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 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 $454,612 calculated as of the date of amendment and restatement determined the principal amount of the new note. No additional consideration was provided.

Interest expense for the Company’s convertible notes payable – related parties for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, was $~~102,398~~107,218 ~~and~~ ~~199,843, respectively,~~ compared to $~~84,605~~97,445 ~~and $151,521, respectively,~~ for the three ~~and six~~ months ended ~~June 30, 2021.~~March 31, 2022.

Accrued interest for the Company’s convertible notes payable – related parties on ~~June 30, 2022,~~March 31, 2023 and December 31, ~~2021,~~2022, was $~~426,865~~237,085 and $~~227,022~~129,867, respectively, and is included in accrued expenses on the condensed consolidated balance sheets.

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 87 – COMMITMENTS AND CONTINGENCIES

The Company is the obligor under certain promissory notes that are currently past due (although formal events of default have not been declared). See notes 4 and 5.

The Company is presently in default of its obligations under the terms of the Company’s private placement which closed in August 2021 to file a registration statement for an underwritten public offering and concurrently ~~an application for~~ listing on a national stock exchange. As a result, the Company is required to pay liquidated damages in the amount of $53,345 per month starting in March 2022, and $~~106,690~~ ~~per month, beginning on June 1, 2022. The~~the maximum amount of such liquidated damages could be approximately $~~480,104~~480,000 if such ~~filings~~filing is not made.

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 ~~not made. The~~identical, except that the Warrant B has a call feature in favor of the Company, ~~has accrued~~as defined in the ~~full amount~~offering agreements. In connection with the closing, the Company entered into definitive securities purchase agreements with 19 accredited investors and issued an aggregate of ~~this liability, resulting in charges~~19,398,144 shares of $~~403,643~~common stock, Warrant A to purchase up to an aggregate of 19,398,144 shares of common stock, and $~~426,759~~Warrant B to ~~operations during~~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 ~~three and six months ended June 30, 2022, respectively. During~~Company of approximately $5,334,490. Costs of the ~~three months ended June 30, 2022, a payment~~offering in the amount of ~~$53,345 was made~~$611,603 were charge to additional paid in ~~connection with these obligations; at June 30,~~capital. As of December 31, 2022 the Company also accrued the amount of ~~$426,759 was recorded on~~$386,759 as liquidated damages due to the investors in the Company’s ~~balance sheet as~~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 ~~accrued liability.~~underwritten public offering and concurrent listing of the Common Stock on a national exchange.

NOTE 98 – STOCKHOLDERS’ DEFICIT

~~On May 23, 2022,~~No activity for the ~~Company issued~~ ~~2,000,000~~ ~~warrants with a fair value of $257,059~~ ~~to a~~ ~~Key Honey, LLC. During the three months~~period ended ~~June 30, 2022,~~ ~~500,000~~ ~~of these warrants were vested and with a value of $64,264. Key Honey, LLC is owned and operated by Richard Gibbs III, a non-affiliated shareholder. Key Honey, LLC provides the Company with sales, operations and marketing work product and consultancy.~~March 31, 2023.

~~The Company raised $1,300,000~~ pursuant to a private placement of Common Stock and warrants – this amount is carried on the Company’s balance sheet as a current liability as of June 30, 2022 because the shares have not yet been issued to the investors.

~~Effective May 27, 2022, the Company issued~~ ~~122,713~~ ~~shares of Common Stock at a price of $0.149~~ ~~per share to a board member for commission on a sale. The amount of $18,284~~ ~~was charged to non-cash compensation.~~

~~During the three months ended June 30, 2022, the company charged the amount of $41,706~~ ~~to non-cash compensation representing the vesting of warrants issued to the Company’s Chief Executive Officer.~~

~~BASANITE, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

NOTE 109 – OPTIONS AND WARRANTS

Stock Options:

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

Schedule of Option Activity
Total Options Weighted Average Aggregate Intrinsic
Outstanding Exercise Price Value

Balance at January 1, 2021 4,542,500 $ 0.41 $ —
Issued 1,277,778 0.27 —
Cancelled / Expired (1,592,500 ) 0.53 —
Balance at December 31, 2021 4,227,778 $ 0.33 $ 19,500
Exercised (500,000 ) 0.25 —
Cancelled / Expired (1,000,000 ) 0.55 —
Balance at March 31, 2022 2,727,778 $ 0.26 $ —
Cancelled / Expired (1,000,000 ) 0.25 —
Balance at June 30, 2022 1,727,778 $ 0.27 $ —

Schedule of Option Activity
	Total Options			Weighted Average		Aggregate Intrinsic
	Outstanding			Exercise Price		Value

Balance at January 1, 2022		4,227,778			0.33	$	—
Issued		(20,000,000			0.35		—
Cancelled / Expired		(750,000	)		0.25		—
Balance at December 31, 2022		1,477,778		$	0.33	$	6,898
Exercised		—			0.27		—
Cancelled / Expired		—			0.27		—
Balance at March 31, 2023		1,477,778		$	0.27	$	—

BASANITE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 9 – OPTIONS AND WARRANTS – (CONTINUED)

Options exercisable and outstanding at ~~June 30, 2022~~March 31, 2023 are as follows:

Schedule of Options Exercisable and Outstanding

Schedule of Options and Warrants Exercisable and Outstanding

Weighted Average

Remaining

Range of

Number

Contractual

Weighted Average

Aggregate

Number

Contractual

Weighted Average

Aggregate

Exercise Prices

Outstanding

Life (Years)

Exercise Price

Intrinsic Value

Outstanding

Life (Years)

Exercise Price

Intrinsic Value

$0.01 - $0.50

1,727,778

3.107

$0.27

—

1,477,778

2.83

$0.27

—

During the three months ended March 31, 2023, options to acquire 500,000 shares of Common Stock ~~Warrants:~~at a price of $0.25 per share were exercised. See note 8.

Stock Warrants:

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

Schedule of Warrants Activity
Weighted
Average Aggregate
Total Warrants Exercise Price Intrinsic Value

Balance at January 1, 2021 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
Granted 5,242,424 0.33 —
Balance at March 31, 2022 143,434,090 $ 0.29 $ 1,147,100
Granted 500,000 0.33 —
Expired - cancelled (2,045,000 ) 0.49 —
Balance at June 30, 2022 141,889,090 0.29 $ 204,000

Schedule of Warrants Activity
	Total Warrants			Weighted Average Exercise Price		Aggregate Intrinsic Value

Balance at January 1, 2022		138,191,666		$	0.29	$	3,824,750
Granted		7,242,424			0.29		—
Exercised		(1,333,333	)		0.29		—
Cancelled		3,545,000
Balance at December 31, 2022		139,555,757		$	0.29	$	150,667
Granted		—			0.29		—
Balance at March 31, 2023		139,555,757		$	0.29	$	150,667

Warrants exercisable and outstanding at ~~June 30, 2022~~March 31, 2023 are as follows:

Schedule of Warrants Exercisable and Outstanding
		Weighted Average						Weighted Average
		Remaining						Remaining
Range of	Number	Contractual	Weighted Average	Aggregate	Range of	Number		Contractual	Weighted Average	Aggregate
Exercise Prices	Outstanding	Life (Years)	Exercise Price	Intrinsic Value	Exercise Prices	Outstanding		Life (Years)	Exercise Price	Intrinsic Value

$0.01 - $0.50	140,346,047	3.57	$0.28	$204,000		139,555,757	3.46		$0.29	$150,667
$0.51 - $1.00	1,543,043	1.00	$0.60	—		—	0.85		$0.60	—
	141,889,090			$204,000		139,555,757				$150,667

NOTE 1110 – SUBSEQUENT EVENTS

Thomas Richmond Services Agreement

On ~~July 11, 2022,~~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 ~~a Sale/Leaseback~~an Employment Services Agreement (the “Agreement”) with Quayco, LLC, a Pennsylvania limited liability company (the “Lessor”). The Company had previously ordered certain specialized BasaMax™ Pultrusion Machines (the “Machines”) from Upstate Custom Products LLC, a South Carolina limited liability company (the “Manufacturer”). The Machines are to ~~be used to manufacture~~serve as the ~~Company’s basalt fiber reinforced polymer (BFRP) rebar products. Pursuant to the Agreement, the Lessor will pay the Lessee $450,000~~ ~~and the Lessee will transfer to the Lessor secured rights to the ownership of one (1) BasaMax~~^TM Tetrad Pultrusion Machine and all rights under the sales orders and agreements to purchase the Machine from Manufacturer. The Company had previously recorded this amount in accounts payable and Construction in Progress; at the dateChief Growth Officer of the ~~loan,~~Company. The terms of Giorgio’s employment with the ~~amount of $450,000~~ ~~will be transferred from accounts payable to Right of Use Lease Liability. Loan fees will be charged~~Company and his job description are provided for ~~this loan for 24 months.~~in an Employment Agreement, dated April 6, 2023, between the Company and Giorgio.

1315

ITEM 2.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~The following~~This overview provides a high-level discussion of our operating results and some of the trends that affect our business. We believe that an understanding of these trends is important to understand our financial results for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this report, and our audited consolidated financial statements and accompanying notes included in the Annual Report in Form-10-K for the period ended December 31, ~~2021,~~2022 and filed with the SEC on ~~April 15, 2022.~~May 16, 2023.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). These forward-looking statements are based on our management’s beliefs, assumptions, and expectations and on information currently available to our management. Generally, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-looking statements, which generally are not historical in nature. All statements that address operating or financial performance, events, or developments that we expect or anticipate will occur in the future are forward-looking statements, including without limitation our expectations with respect to the timing for our planned manufacturing expansion, the benefits of our products, customer leads, product sales, financings, or the commercial viability of, and prospects for, our business model. We may not actually achieve the plans, projections or expectations disclosed in forward-looking statements, and actual results, developments or events (including, without limitation, those related to our planned manufacturing capacity expansion and our sales and marketing initiatives) could differ materially from those disclosed in the forward-looking statements. Our management believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on forward-looking statements because they speak only as of the date when made. We do not assume any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by federal securities laws and the rules of the Securities and Exchange Commission (the “SEC”). We may not actually achieve the plans, projections or expectations disclosed in our forward-looking statements, and actual results, developments or events could differ materially and adversely from those disclosed in the forward-looking statements. Forward-looking statements are subject to a number of significant risks and uncertainties, including without limitation those described from time to time in our reports filed with the SEC.

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q as well as the risk factors and other disclosures contained in our Annual Report on Form 10-K for the period ended December 31, ~~2021.~~2022.

Basanite, Inc., and its wholly owned subsidiaries are referred to in this discussion as the “Company”, “we”, “our”, or “us”. “Common ~~Stock”~~stock” refers to the ~~Common Stock~~common stock of the Company.

Overview

On May 30, 2006, Basanite, Inc. was formed as a Nevada corporation. Through our wholly owned subsidiary, Basanite Industries, LLC, a Delaware limited liability company (“BI”), we manufacture a range of “green” (environmentally friendly), sustainable, non-corrosive, lightweight, composite products used in concrete reinforcement by the construction industry. Our core product is BasaFlex™, a basalt fiber reinforced polymer reinforcing bar (“rebar”) which we believe is a stronger, lighter, sustainable, non-conductive and corrosion-proof alternative to traditional steel.

Our two other main product lines are BasaMix™, which are fine denier basalt fibers available in various chopped sizes, and BasaMesh™, a line of Basalt Geogrid Mesh Rolls, intended to replace welded wire mesh (made of steel) and other fiber reinforced polymer grids and mesh.

BasaMix™ is designed to help absorb the stresses associated with early-aged plastic shrinkage and settlement cracking in concrete, as well as providing an increased toughness for enhanced reinforcement in Slab on Grade (SOG) and precast elements. BasaMix™ also serves in a “system approach” for optimum performance of a concrete element when used in conjunction with our BasaFlex™ rebar.

BasaMesh™ is designed for secondary and temperature shrinkage reinforcement. BasaMesh™ can also work in conjunction with the BasaFlex™ rebar or BasaMix™ for a total reinforcement program.

Each of our products is specifically designed to extend the lifecycle of concrete products by eliminating “concrete spalling.” Spalling results from the steel reinforcing materials embedded within the concrete member rusting (contrary to popular belief, concrete is porous, and water can permeate into concrete). Rusting leads to the steel expanding and eventually causing the surrounding concrete to delaminate, crack, or even break off, resulting in potential structural failure. We believe that each of our products addresses this important need along with other key requirements in today’s construction market.

We believe that the following attributes of BasaFlex™ provide it with a competitive advantage in the marketplace:

·•

BasaFlex™ never corrodes: steel reinforcement products rust, leading to spalling and significant repair costs down the road;

•

·•

BasaFlex™ is sustainable: BasaFlex™ is made from Basalt rock, the most abundant rock found on Earth’s surface, and offers a longer product lifecycle than traditional steel (the lack of corrosion allows the life span of concrete products reinforced with BasaFlex to be significantly longer);

·•

BasaFlex™ is “green”: From mining, through production, to installation at the building site, BasaFlex™ has an exceptionally low carbon footprint when compared with that of ~~steel or with carbon fiber or glass fiber reinforced polymer rebar products;~~steel; and

·•

BasaFlex™ has a lower in-place cost: the physical nature of our products relative to steel result in a lower net cost to the contractor once installed, such as: BasaFlex™ is one-quarter of the weight of equivalent sized steel, meaning 4 times the quantity of material can be delivered by the same truck (or container); all Basanite products can be loaded/unloaded and moved around the jobsite by hand – no expensive handling equipment is needed; less concrete is required as BasaFlex™ does not require the extra concrete cover needed when using steel; and Basanite products are safer and easier to use. We believe all these factors materially reduce the net in-place cost of concrete reinforcement.

BI leases a fully permitted, 36,900 square foot facility located in Pompano Beach, Florida equipped with five customized, Underwriters Laboratories approved, pultrusion manufacturing machines for BasaFlex™ production, plus other composite manufacturing equipment. Pultrusion is ~~a manufacturing process for converting reinforced fibers and liquid resin into a fiber-reinforced polymer product.~~ Each of our current pultrusion machines 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 (smaller bar sizes). To date, BI’s operations team has successfully optimized and scaled the capacity of our manufacturing plant to be able to produce up to 22,800 linear feet of BasaFlex™ rebar per shift, per working day, depending on the product mix.

During the past year, we have designed, developed, and prototyped a next generation Pultrusion manufacturing system ~~for BasaFlex~~^TM ~~rebar~~ we call BasaMax™. This new system has been designed in two versions, a quad-line system ~~named “Tetrad”~~ (for smaller bar sizes) and a dual-line system ~~named “Dyad”~~ (for larger bar sizes)~~. Each offers~~, which not only have double the manufacturing capacity of the current machines, ~~for a given bar size,~~ but they also run faster and they fit init the same manufacturing floorspace. We currently have five of these new BasaMax pultrusion machines on order: three quad-line machines and two dual-line machines. Design changes and other improvements we wanted to incorporate (based on reviews of the prototype), coupled with supply chain issues prevalent in today’s economic environment have led to some delay in the completion of the new equipment. We ~~now~~ expect to ~~accept delivery of~~have these ~~custom manufactured~~ new machines ~~early~~ in place during the ~~fourth~~third quarter of ~~2022, with installation and calibration also to be completed in fourth quarter of 2022.~~2023. With the introduction of this new equipment and the ~~subsequent~~ establishment of our planned two-shift operations, our maximum manufacturing capacity for BasaFlex™ rebar will increase to ~~100,000+~~approximately 128,000 linear feet per working day (on a two-shift basis).

Importantly, BI’s own fully equipped Test Lab is utilized to evaluate, validate, and verify each raw material and each batch of completed BasaFlex™ product, ensuring our finished goods meet the required specifications and performance attributes. We are also developing a new process specifically for manufacturing BasaFlex™ shapes (hoops; angles and stirrups) which we call BasaLinks™, which includes developing a next generation pultrusion system as part of this process. We expect our first BasaLinks system to be in place and operational during the ~~fourth~~second quarter of ~~2022.~~2024.

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.

~~more recently, due to rising steel prices, an increasing level of price equivalence between steel rebar and our BFRP rebar.~~

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

~~Known Factors, Trends and Risks Impacting Our Business~~

~~Manufacturing Expansion~~

Our business plan calls for scaling the manufacturing capability at our Florida facility in order to enable the potential for increased revenues and cash flow positive operations, and ultimately to profitability, in as short a timeframe as possible. Following this, we plan to open additional facilities around the country, each designed to service a circular area roughly 1,000 miles in diameter, with the plant at the center. Locations will be selected based upon regional demand and using the South Florida facility as the model.

However, our South Florida manufacturing expansion plans have been hindered by several factors: the COVID-19 pandemic, our slower than expected rate of fundraising and our slower than expected ramp-up in sales. This last item has been caused by multiple factors, including:

~~customer requirements for multiple additional product and facility certifications, in particular from the International Code Council (or ICC) Evaluation Service (known as “ICC-ES”), an~~ ~~industry leader in performing technical evaluations of building products, materials and systems for code compliance;~~ and from the Florida Department of Transportation (“FDOT”). Both certification programs are underway, and each requires separate, long-duration product testing (7 to 9 months). ICC testing is expected to complete by the end of September 2022 with approval to follow; and FDOT testing is expected to complete during the fourth quarter of 2022 with approval to follow;

~~the lack of an ASTM (formerly known as the American Society for Testing and Materials)~~ product standard specifically for basalt fiber rebar (this process is also underway, and a member of our board of directors, Fred Tingberg, who was appointed as our Chief Technology Officer in June 2022 is on the ASTM committee reviewing this; we currently expect the ASTM to be issued in September 2022);

~~our current manufacturing capacity limitations, which have precluded us from bidding or winning several larger potential orders;~~

the Surfside Condo disaster, which has resulted in some local engineers being cautious around new product introductions. We believe, however, that we will be able to make a strong case that BasaFlex™ (which is corrosion proof) can remedy the structural failures (such as what occurred in Surfside) associated with steel reinforcement corrosion;

~~concerns about the current state of our manufacturing capability and our ability to deliver product(s).~~

Our new manufacturing equipment mentioned above is expected to be delivered and the installation and calibration process to commence during the fourth quarter of 2022. The equipment is expected to become fully operational shortly thereafter. We believe the achievement of this would simultaneously resolve questions about our manufacturing capacity and will materially improve our ability to generate sales.

~~Impact of COVID-19~~

The pandemic caused by the novel coronavirus (known as “COVID-19”) and governmental responses and 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. During the first quarter of 2022, while certain of our personnel did contract COVID-19, overall COVID-19 did not have a material impact on our business, in part because we were operating with reduced personnel and personnel could work remotely in certain cases.

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. This could be particularly true as we seek to scale operations during 2022 and hire additional personnel. 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.

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 may continue to rise, and inflation overall could have a significant effect on the economy in general and the construction industry in particular, as well as create volatility in the capital markets. For example, inflation and increased interests could affect the prices of raw materials we use, demand for our products, our ability to attract and retain skilled labor and our ability to obtain financing. We are carefully watching chemical prices, which are following oil and gas prices, as a core component of BasaFlex™ is the chemical resin mix. Prices have risen, but we have been able to raise our own prices to support our margins, largely as the result of the increase in steel prices. We believe we have actually benefitted from the rapid rise in steel prices over the past ~~several fiscal quarters~~6 to 9 months as well as the reduced availability of steel rebar, both of which changes have opened opportunities to more readily introduce our products into the marketplace. As of the date of this report, BasaFlex™ has become directly competitive with steel on price alone, and it is relatively available, whereas steel has been impacted by raw material supply chain constraints. We will seek to continue to take advantage of these opportunities while high steel prices and restricted supply are prevalent.

Supply Chain

In the past year, supply chain shortages or delays have had an immaterial impact on our operations. Our raw material suppliers have maintained a consistent flow of goods which we receive 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.

Supply chain shortages have, however, negatively impacted the scheduled delivery of our new custom manufacturing equipment, which are now scheduled to be installed and calibrated in the fourth quarter of 2022 (we had previously anticipated this process to be completed earlier in 2022). While we believe these supply chain issues are resolved, we still might experience further delays which are beyond our control or that of the machine manufacturer. Such additional delay(s) could further delay the delivery, installation and calibration of our new manufacturing equipment, which in turn would harm our business and/or 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, ~~in Russia,~~ UWF/Kamenny Vek. However, our primary supplier, Mafic, is U.S. based, and has ample capacity to support our current and anticipated future needs with a 100% domestic source of raw materials. We have also recently increased the levels of our safety stock of raw materials as an additional cushion. Nonetheless, we are currently qualifying alternate material from other ~~global~~ suppliers to preserve our options in case of further disruptions.

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. ~~As previously noted, we~~We are currently testing products at two independent laboratories in the pursuit of ICC-ES certification and a FDOT ~~certifications. These also include~~ production facility ~~approvals. ICC-ES~~ approval, all of which is expected by the end of September ~~2022, and FDOT approval by the end of 2022 (including the facility approvals). However, we~~2022. We are already selling to FDOT projects on an individual basis through exemptions or ~~previously issued material~~ specs. ~~Formal~~The FDOT approval will allow us to bid on any ~~FDOT~~ project ~~that is~~ approved ~~to use~~for basalt fiber reinforced polymer products. Until we have obtained these additional approvals, our opportunities to bid on certain projects will be limited.

~~Need to Expand Management Personnel~~

During the quarter ended March 31, 2022, our company and Simon R. Kay (who had been serving as our Acting Interim Chief Executive Officer on a consulting basis) entered into a Transition Services Agreement in contemplation of our search for a permanent Chief Executive Officer. On March 25, 2022, our Board of Directors appointed Mr. Kay as our Chief Executive Officer and President. Additionally, Mr. Kay served as Acting Interim Chief Financial Officer and Acting Interim Principal Financial Officer of our company until August 1^st~~, 2022, when we engaged NowCFO (see below).~~

On August 1, 2022, the Company engaged NowCFO, a third-party consulting firm, to provide chief financial officer services for quarterly reporting and additional accounting matters. However, we believe that hiring a full time Chief Financial Officer is in our company’s long term best interests and the Company continues to recruit and interview candidates.

On February 20, 2022, David L. Anderson (“Anderson”), our Executive Vice President and Chief Operating Officer provided written notice to our Board of Directors of his resignation, and on February 24, 2022, we provided written notice to Anderson that his resignation of employment was accepted, effective immediately. As such, Anderson is not affiliated with us as of February 24, 2022, and the position of Chief Operating Officer remains unfilled as of the date of this report. We will need to fill the position of Chief Operating Officer (or similar position) in order to grow our business as planned.

Results of Operations ~~for the Three Months Ended June 30, 2022, and 2021~~

Revenue: We had revenue of ~~$288,050~~$115,118 from sales of finished goods for the three months ended ~~June 30, 2022, an increase of $272,501~~March 31, 2023, compared to ~~$15,549~~$258,289 in the prior year. While the ~~increase~~decrease in revenue in the year over year periods was relatively significant due to our ~~increasing sales success (across all product lines) in 2022, overall revenues continue to be minimal, largely due to our capacity~~ constraints and limited working capital. We continued our efforts to scale our production capacity, increase our sales, and grow finished goods inventory during the period.

Cost of goods sold: ~~Cost of goods sold was $611,163 for~~During the three months ended ~~June 30, 2022, an increase~~March 31, 2023, we had cost of ~~$591,670~~sales of $19,751 compared to ~~cost of goods sold of $19,493 during~~$585,811 in the prior ~~period. Cost~~year. We began our production activities in late 2021. The first activities were to build test articles for two sets of independent lab tests, and then the commencement of building finished goods ~~sold reflects~~inventory. However, we lost money on a gross margin basis due to normal inefficiencies in the ~~fixed overhead costs absorbed by manufacturing, at low~~start-up and ramping and scaling process, including limited initial sales ~~volumes this results~~volume, and further due to extremely narrow margins on the initial sales of our products as we began introducing them to the marketplace in ~~negative margins. Our gross profit during~~the first quarter of 2022.

Sales, General, and Administrating Expenses: During the three months ended ~~June 30,~~March 31, 2022, ~~was negative $323,113~~selling, general, and administrative were $429,714 compared to ~~negative $3,944 during~~$1,047,378 in the prior ~~period. We expect our gross profit to increase as fixed overhead costs are absorbed over a greater volume~~year. The primary components of ~~sales.~~

~~Sales, general, and administrative:~~ ~~Sales,~~selling, general, and administrative expenses were $1,035,717 during the three months ended June 30, 2022, a decrease of $411,863 compared to $1,447,580 during the prior period. For the current quarter, sales, general, and administrative costs consisted primarily of professional fees of $286,853; payroll and related costs of $239,145, not including stock-based compensation of $197,633; consulting fees of $82,591; investor relations costs of $49,180; research and development of $42,427; advertising and marketing of $42,099; rent of $30,778; computer and IT costs of $26,187, and office costs of $20,839. The primary reason for the decrease in sales, general, and administrative costs compared to the prior period was $443,436 in overhead and depreciation charges in the prior period; these costs were absorbed by cost of sales during the three months ended June 30, 2022.

~~Other Income (Expense):~~

~~Gain on settlement of legal contingency:~~ There was no gain on legal contingency during the three months ended June 30, 2022. During the prior period, the Company recognized a gain on settlement of legal contingency in the amount of $320,037 in connection with the settlement of accounts payable related to legal matters.as follows:

~~Liquidated damages – loan commitment:~~Payroll and related costs: During the three months ended ~~June 30, 2022, the company recognized liquidated damages – loan commitment~~March 31, 2023, payroll and related costs were $124,793 compared to $253,421 in the ~~amount~~prior period. The decrease was due to the reduction of ~~$403,643 in connection with our obligations under~~staff over the ~~terms~~third and fourth quarter of ~~our private placement to file a registration statement for an underwritten public offering and concurrent listing on a national stock exchange. There were no such charges during the prior period.~~

~~Loss on extinguishment of debt:~~ 2022. The Company ~~recognized no loss on extinguishment of debt during~~expects to return to a fully staffed operation by year end 2023.

Stock based compensation: During the three months ended ~~June 30, 2022,~~March 31, 2023, stock-based compensation was $64,266 compared to ~~$3,056,892 during~~$229,223 in the prior period. The decrease is due to a reduction in operational engagement of service providers..

Consulting fees: During the three months ended ~~June 30, 2021. For more information about~~March 31, 2023, consulting fees were $49,615 compared to $$185,351 in the ~~transaction leading to~~prior period. The Company utilized financial consultants in the ~~extinguishment of debt refer to footnote 7 of the financial statements included~~current period in ~~this Form 10-Q.~~connection with its equity financing.

Product testing cost:

~~Interest expense:~~ ~~Interest expense was $181,589 during~~During the three months ended ~~June 30, 2022, an increase of $48,378~~March 31, 2023, product testing costs were $67,556 compared to ~~interest expense of $133,211 during~~$138,605 in the prior period. ~~Interest expense consists~~During the current period, the Company recorded the cost of ~~interest on~~annual testing services with the ~~Company’s notes~~University of Miami and ~~loans payable along with late fees on past due invoices charged by vendors.~~

~~Results~~University of ~~Operations for the Six Months Ended June 30, 2022, and 2021~~Sherbrooke.

~~Revenue:~~Legal fees: ~~We had revenue of $546,339 from sales of finished goods for~~During the ~~six~~three months ended ~~June 30,~~March 31, 2022, legal fees were $6,155 compared to ~~$19,685~~$32,280 in the prior ~~year. While the increase in revenue~~period. Legal fees decreased primarily due a no ongoing matters in the year over year periods was relatively significant due to our increasing sales success (across all product lines) in 2022, overall revenues continue to be small, largely due to our capacity constraints and limited working capital. We continued our efforts to scale our production capacity, increase our sales, and grow finished goods inventory during thecurrent period.

~~Cost of goods sold:~~Accounting and audit fees: ~~Cost of goods sold was $1,196,974 for~~During the ~~six~~three months ended ~~June 30, 2022, an increase of $1,176,165~~March 31, 2023 accounting and audit fees were $22,155 compared to ~~cost of goods sold of $20,809 during~~$67,763 in the prior period. ~~Cost~~Accounting and audit fees consisted of ~~goods sold reflects~~annual audit fees and the fixed overhead costs absorbed by manufacturing, at low sales volumes this results in negative margins. Our gross profit during the six months ended June 30, 2022, was negative $650,635 compared to negative $1,124 during the prior period. We expect our gross profit to increase as fixed overhead costs are absorbed over a greater volumecost of ~~sales.~~

~~Sales, general, and administrative:~~ Sales, general, and administrative expenses were $2,083,095 during the six months ended June 30, 2022, a decrease of $429,352 compared to $2,512,447 during the prior period. For the current six-month period, sales, general, and administrative costs consisted primarily of payroll and related costs of $490,977, not including stock-based compensation of $426,856; professional fees of $386,896; consulting fees of $267,942; research and development of $181,032; investor relations costs of $111,213; advertising and marketing of $71,491; rent of $41,869; computer and IT costs of $41,605; and office costs of $35,160. The primary reason for the decrease in sales, general, and administrative costs compared to the prior period was $443,436 in overhead and depreciation chargesoutside consultants in the ~~prior period; these costs were absorbed by cost~~preparation of ~~sales during~~ the ~~six months ended June 30, 2022.~~

~~Other Income (Expense):~~

~~Gain on settlement of legal contingency:~~ There was no gain on legal contingency during the six months ended June 30, 2022. During the prior period, the Company recognized a gain on settlement of legal contingency in the amount of $344,522 in connection with the settlement of accounts payable related to legal matters.Company’s financial statements.

~~Liquidated damages – loan commitment:~~ During the six months ended June 30, 2022, the company recognized liquidated damages – loan commitment in the amount of $426,759 in connection with our obligations under the terms of our private placement to file a registration statement for an underwritten public offering and concurrent listing on a national stock exchange. There were no such charges during the prior period.

~~Loss on extinguishment of debt:~~ The Company recognized no loss on extinguishment of debt during the six months ended June 30, 2022, compared to $6,743,015 during the six months ended June 30, 2021. For more information about the transaction leading to the extinguishment of debt refer to footnote 7 of the financial statements included in this Form 10-Q.

~~Gain on loan forgiveness~~: There was no gain on loan forgiveness during the six months ended June 30, 2022. The Company recognized a gain on loan forgiveness in the amount of $124,143 during the prior period in connection with a note payable loan on May 21, 2021.

~~Interest expense:~~ Interest expense was $304,234 during the six months ended June 30, 2022, an increase of $98,360 compared to interest expense of $205,874 during the prior period. Interest expense consists of interest on the Company’s notes and loans payable along with late fees on past due invoices charged by vendors.

Liquidity and Capital Resources

Since inception, we have incurred net operating losses and negative cash flow. As of ~~June 30, 2022,~~March 31, 2023, we had an accumulated deficit of ~~$49,585,933.~~$55,006,079. We have incurred general and administrative expenses associated with our product development and compliance while concurrently setting up our manufacturing facility, beginning operations, and developing our business plan. We also continue to incur legal fees arising from ongoing activities due to fundraising. We expect operating losses to continue in the short term, and we require additional financing for expanding our manufacturing capability and generally scaling our business until we can generate sufficient revenues to achieve positive cash flow. These conditions raise substantial doubt about our ability to continue as a going concern.

We have historically satisfied our working capital requirements through the sale of restricted ~~Common Stock~~common stock and the issuance of warrants and promissory notes. We will continue our fundraising efforts until we have obtained positive cash flow to cover our expenses. No assurances can be given that we will be successful in raising capital at all or on terms acceptable to us, or at all, and no assurances can be given that even if we raise capital that we will be able to generate sufficient revenue to ~~become~~be cash flow positive.

Notwithstanding proceeds from the sale of our securities, a recent related party equipment lease transaction and warrant and option exercises in ~~2021~~2022 and ~~2022, our~~2023, current working capital is ~~extremely~~very limited and our projected sales revenue (together with our limited working capital) are presently insufficient to maintain our current operations. In order to grow our manufacturing and sales and marketing operations and reach the level of revenue sufficient to provide positive cash flow, we require significant funding of both our expansion plans (which includes the finalization of our current manufacturing expansion plans and potential investments in other manufacturing facilities, as well as increased headcount necessary to operate our manufacturing at planned capacity)~~. This will cover~~ as well as our significant operating deficit while we ~~seek~~seeking to scale our manufacturing capability, secure orders from known potential customers and introduce our products to new customers. We will attempt to raise this capital through third party financing, including potential private or public offerings of our securities (including a potential underwritten offering and ~~up list/re-IPO~~uplist to a national exchange) as well as bridge or other loan arrangements. However, there is a material risk that we will be unable to secure ~~the~~ required capital (whether through an underwritten uplist financing ~~and/or uplisting to a national exchange~~ or otherwise) at all or that the terms of such required financing may be available or acceptable to us. If we are unable to obtain adequate financing, we may reduce our operating activities to reduce our cash use until sufficient funding is secured. If we are unable to secure funding when needed, our results ~~from~~of operations may suffer, and our business may fail.

As of June 30, 2022, we had cash of $58,893 compared to $109,514 as of December 31, 2021. The decrease in cash was due to our net loss of $3,464,723, offset primarily by $636,466 in non-cash expenses, a $1,227,774 increase in accounts payable and a decrease of $396,683 in inventory. We also raised $1,300,000 pursuant to a private placement of Common Stock and warrants – this amount is carried on the Company’s balance sheet as a current liability as of June 30, 2022 because the shares have not yet been issued to the investors. The Company used $742,832 of cash for the purchase of equipment during the period and raised $774,591 from the sales for Common Stock and the exercise of stock options.

Cash Flows

Net cash ~~used in~~provided by (used in) operating activities amounted to ~~$81,529~~$1,859,981 and ~~$2,294,501~~71,166 for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. The ~~decrease~~increase in net cash ~~used in~~provided by (used in) operating activities was primarily a result of an increase in ~~subscription liability in the amount of $1,300,000 and an increase in~~ accounts payable in the amount of ~~$1,227,774~~$1,853,361 during the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023 compared to $1,713,045 in the prior period.

During the ~~six~~three months ended ~~June 30,~~March 31, 2022, we used ~~$742,832~~$900,000 net cash for investing activities compared to ~~$270,330~~$713,863 used in the same period in the prior fiscal year. The increase is largely due to costs associated with the customization, installation, and verification and validation testing of the first BasaMax™ prototype~~BasaMax™~~ pultrusion machine, for the modifications and UL listing of the ~~current~~ production machinery and the final payments for the enhancements made to our production facility as compared to the deposits made on machinery and equipment.

During the six months ended June 30, 2022, we had $773,740 net cash provided by financing from the sale of Common Stock and warrants for net proceeds of $649,591 and exercise of stock options in the amount of $125,000. During the prior period, cash provided by financing activities was $2,382,726.

We do not believe that our cash on hand as of ~~June 30, 2022,~~March 31, 2023, will be sufficient to fund our current working capital requirements to the point where we are generating positive cash flow. We have recently entered into several convertible promissory notes to help fund operations and will require additional working capital in the short term. We continue working towards securing more working capital with a preference towards debt which may be convertible to equity. However, there is no assurance that we will be successful in our efforts or, if we are, that the terms will be beneficial to our shareholders.

Critical Accounting Estimates

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to smaller reporting companies.

ITEM 4.

CONTROLS AND PROCEDURES

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

Our management, under the supervision and with the participation of our Chief Executive Officer ~~our~~(who also serves as Acting Interim Chief Financial ~~Officer~~Officer) and our Controller, carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) through ~~June 30, 2022.~~March 31, 2023.

During our assessment of the effectiveness of internal control over financial reporting as of ~~June 30, 2022,~~March 31, 2023, management identified material weaknesses related to (i) the U.S. GAAP expertise and experience of our internal accounting personnel and (ii) a lack of segregation of duties within accounting functions. As a result of these material weaknesses, our management concluded that our internal control over financial reporting was not effective as of ~~June 30, 2022.~~March 31, 2023.

We are committed to maintaining a strong internal control environment and implementing measures designed to help ensure that the material weaknesses described above are remediated as soon as possible. We believe we will have the opportunity to remediate these weaknesses when adequate funding is secured. We will consider the material weaknesses remediated after the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that the controls are operating effectively.

Because of its inherent limitations, however, readers are cautioned that internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Changes in Internal Control over Financial Reporting

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

2021

PART II. – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

From time to time, we may become involved in legal proceedings that, individually or in the aggregate, could have a material adverse effect on our business, financial condition, cash flows, or results of operations. As of the date of this report, we are not aware of any such proceedings pending against our company.

ITEM 1A.

RISK FACTORS

Not required for smaller reporting companies.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~On June 2, 2022, the Company issued to a related party 122,713 shares of Common Stock with a market value of $0.149 per share.~~None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURE

Not applicable.

ITEM 5.

OTHER INFORMATION

Effective April 27, 2022, we entered into a collaboration framework agreement with MEP World Group, a Florida limited liability company (“MEP”). This collaboration framework agreement terminates and replaces that certain Exclusive Supplier Agreement, dated July 23, 2020, between our company and MEP under which (among other items) MEP was granted exclusive distribution rights to BasaFlex™ and our other products in Miami-Dade County. Pursuant to the new collaboration framework agreement, MEP engaged us for manufacturing services on a non-exclusive basis and to sell products to MEP as its supplier for MEP customers in accordance with the terms of the agreement.None.

ITEM 6.

EXHIBITS

Exhibit
No.		Exhibit Description
31.1		Certification of ~~Interim~~ Chief Executive Officer pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the Securities Exchange Act
31.2		Certification of Chief Financial Officer pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the Securities Exchange Act
32.1		Certification of ~~Interim~~ Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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)
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

2122

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~August 16, 2022~~May 22, 2023


	Basanite, Inc.

	By:	/s/ ~~Timothy Ward~~Jackie Placeres
		~~Timothy Ward~~Jackie Placeres
		~~Acting/~~Acting Interim Chief Financial Officer

2223


	June 30, 2022			December 31, 2021
	(Unaudited)
ASSETS

CURRENT ASSETS
Cash	$	58,893		$	109,514
Accounts receivable, net		24,256			7,817
Inventory		317,972			714,655
Prepaid expenses		104,805			127,806
Deposits and other current assets		253,436			265,553
TOTAL CURRENT ASSETS		759,362			1,225,345

Lease right-of-use asset, operating		605,621			749,116
Lease right-of-use asset, financing, related-party		451,050			—
Fixed assets, net		3,462,492			3,236,825
TOTAL NON CURRENT ASSETS		4,519,163			3,985,941

TOTAL ASSETS	$	5,278,525		$	5,211,286

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

CURRENT LIABILITIES
Accounts payable	$	1,469,978		$	1,175,682
Accrued expenses		890,932			407,454
Accrued legal liability		165,000			165,000
Subscription liability		1,300,000			—
Notes payable		500,515			466,762
Notes payable - related party		300,000			300,000
Notes payable - convertible - related party, net		1,689,745			1,689,745
Lease liability – operating, current portion		357,080			325,339
Lease liability – financing, related party, current portion		3,892			—
TOTAL CURRENT LIABILITIES		6,677,142			4,529,982

Lease liability – operating, net of current portion		312,781			499,546
Lease liability – financing, related party, net of current portion		445,257			—

TOTAL LIABILITIES		7,435,180			5,029,528

STOCKHOLDERS’ (DEFICIT) EQUITY
Preferred stock, $0.001 par value, 5,000,000 shares authorized, NaN 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		251,885			248,842
Additional paid-in capital		47,177,393			46,054,126
Accumulated deficit		(49,585,933	)		(46,121,210	)
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY		(2,156,655	)		181,758

TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY	$	5,278,525		$	5,211,286


	For the three months ended						For the six months ended
	June 30,						June 30,
	2022			2021			2022			2021
Revenue
Products sales - rebar	$	288,050		$	15,549		$	546,339		$	19,685

Total cost of goods sold		611,163			19,493			1,196,974			20,809

Gross (loss)		(323,113	)		(3,944	)		(650,635	)		(1,124	)

OPERATING EXPENSES
Sales, general, and administrative		1,035,717			1,447,580			2,083,095			2,512,447
Total operating expenses		1,035,717			1,447,580			2,083,095			2,512,447

NET LOSS FROM OPERATIONS		(1,358,830	)		(1,451,524	)		(2,733,730	)		(2,513,571	)

OTHER INCOME (EXPENSE)
Gain on settlement of legal contingency		—			320,037			—			344,522
Liquidated damages – loan commitment		(403,643	)		—			(426,759	)		—
Miscellaneous income		—			3,116			—			3,116
Loss on extinguishment of debt		—			(3,056,892	)		—			(6,743,015	)
Gain on loan forgiveness		—			—			—			124,143
Interest expense		(181,589	)		(133,211	)		(304,234	)		(205,874	)
Total other income (expense)		(585,232	)		(2,866,950	)		(730,993	)		(6,477,108	)

NET LOSS	$	(1,944,062	)	$	(4,318,474	)	$	(3,464,723	)	$	(8,990,679	)

Net loss per share – basic	$	(0.01	)	$	(0.02	)	$	(0.01	)	$	(0.04	)
Net loss per share – diluted	$	(0.01	)	$	(0.02	)	$	(0.01	)	$	(0.04	)

Weighted average number of shares outstanding – basic		251,800,462			227,837,337			250,996,454			227,115,792
Weighted average number of shares outstanding – diluted		251,800,462			227,837,337			250,996,454			227,115,792

										Total
										Stockholders’
	Common Stock				Paid-in		Accumulated			Equity
	Shares		Par Value		Capital		Deficit			(Deficit)
Balance January 1, 2022		248,840,144	$	248,842	$	46,054,126	$	(46,121,210	)	$	181,758

Stock issued for cash, net of costs of $50,409		2,121,212		2,121		647,470		—			649,591
Stock issued for exercise of warrants		500,000		500		124,500		—			125,000
Stock issued to service provider		300,000		300		57,600		—			57,900
Warrants issued to management		—		—		169,565		—			169,565
Net loss		—		—		—		(1,520,661	)		(1,520,661	)

Balance March 31, 2022		251,761,356	$	251,763	$	47,053,261	$	(47,641,871	)	$	(336,847	)

Shares issued to related party for services		122,713		122		18,162		—			18,284
Vesting of warrants issued to management		—		—		41,706		—			41,706
Warrants issued to Related Party for services provided				—		64,264		—			64,264
Net loss		—		—		—		(1,944,062	)		(1,944,062	)

Balance June 30, 2022		251,884,069	$	251,885	$	47,177,393	$	(49,585,933	)	$	(2,156,655	)

Schedule of Inventories
	June 30,		December 31,
	2022		2021
	(Unaudited)
Finished goods	$	61,339	$	328,229
Work in process		73,019		35,213
Raw materials		183,614		351,213
Total inventory	$	317,972	$	714,655

Schedule of Operating Lease Liability
2022	$	215,310
2023		440,308
2024		110,884
Total minimum lease payments		766,502
Discount		(96,641	)
Operating lease liability	$	669,861

Schedule of Financing Lease Liability
2022	$	41,250
2023		99,000
2024		474,750
Total minimum lease payments		615,000
Discount		(165,851	)
Financing lease liability	$	449,149

Schedule of Option Activity
	Total Options			Weighted Average		Aggregate Intrinsic
	Outstanding			Exercise Price		Value

Balance at January 1, 2021		4,542,500		$	0.41	$	—
Issued		1,277,778			0.27		—
Cancelled / Expired		(1,592,500	)		0.53		—
Balance at December 31, 2021		4,227,778		$	0.33	$	19,500
Exercised		(500,000	)		0.25		—
Cancelled / Expired		(1,000,000	)		0.55		—
Balance at March 31, 2022		2,727,778		$	0.26	$	—
Cancelled / Expired		(1,000,000	)		0.25		—
Balance at June 30, 2022		1,727,778		$	0.27	$	—

Schedule of Warrants Activity
				Weighted
				Average		Aggregate
	Total Warrants			Exercise Price		Intrinsic Value

Balance at January 1, 2021		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
Granted		5,242,424			0.33		—
Balance at March 31, 2022		143,434,090		$	0.29	$	1,147,100
Granted		500,000			0.33		—
Expired - cancelled		(2,045,000	)		0.49		—
Balance at June 30, 2022		141,889,090			0.29	$	204,000