Press Releases

SG Blocks Reports Second Quarter 2020 Financial Results

Management to Host Conference Call Today at 4:30 p.m. ET

BROOKLYN, N.Y.--(BUSINESS WIRE)-- SG Blocks, Inc. (Nasdaq: SGBX) (“SG Blocks” or the “Company”), a leading designer, innovator and fabricator of container-based structures, reported its financial results for the second quarter ended June 30, 2020.

Management Commentary

“Despite the challenges presented by the Covid 19 pandemic, in the second quarter SG Blocks was able to advance its core mission, raised a sufficient capital reserve for operations, and established a supply chain for the fabrication and distribution of container based medical laboratory services and diagnostic centers and the sale of Covid-19 tests,” commented Paul Galvin, CEO of SG, Blocks.

“The receipt of the final planning approval for Monticello Mews is a significant milestone that will help launch SG Residential, the Company’s licensee, which is also actively building in Puerto Rico,” Galvin added. “These royalty streams represent recurring revenue with the potential to earn substantial revenues from the three phases of this 300+ unit project.”

Galvin continued, ”We continued to sign new business throughout the year, the most notable of which was a $4 million manufacturing contract in the south Florida hospitality market. This contract alone potentially represents a 300% increase in revenue over the trailing 4 quarters.”

“The Distribution agreement with OSANG healthcare for its Covid 19 test, our product lines in the education and medical sectors with Grimshaw Architects and our ability to sell and distribute OSANG’s Gene Finder tests throughout North America are all designed to create recurring revenue for the Company,” Galvin continued. “Having access to Grimshaw’s unparalleled global supply chain greatly increases the number of addressable markets for our products.”

Galvin concluded, “We expect the efforts and progress in Q2 will serve as a catalyst for the rest of 2020 and into the new year.”

Second Quarter 2020 Financial Highlights:

  • Revenue of approximately $629,000, as compared to approximately $728,000 in Q2 2019.
  • Gross profit of approximately $374,000, as compared to approximately $267,000 in Q2 2019.
  • Net loss of approximately $838,000, or $(0.16) per basic and diluted share, as compared to a net loss of approximately $972,000, or $(4.02) per basic and diluted share, in Q2 2019.
  • Adjusted EBITDA loss of approximately $533,000, as compared to a loss of approximately $755,000 in Q2 2019. (See below for further discussion about the presentation of Adjusted EBITDA, a non-GAAP financial measurement).
  • Completed a public offering of 440,000 shares of common stock at an offering price of $4.25 per common share for aggregate net proceeds of approximately $1.5 million after deducting underwriting discounts and commissions and other expenses related to the offering.
  • Completed a public offering of 6,900,000 shares of common stock, including the exercise of the over-allotment option, at an offering price of $2.50 per common share for aggregate gross proceeds of approximately $15.6 million after deducting underwriting discounts and commissions and other expenses related to the offering.

Second Quarter 2020 and Subsequent Operational Highlights:

  • Construction backlog decreased to approximately $17.3 million as of June 30, 2020, as compared to $17.6 million as of December 31, 2019. The decrease in backlog is primarily attributable to work in progress or completed contracts during the first six months of 2020.
  • 12 projects under contract, performed activity on 12 projects during Q2 2020.
  • Awarded a contract of approximately $4.0 million to manufacture a boutique, mixed-use hospitality project featuring 24 hospitality units in South Florida, subsequent to Q2 2020.
  • Monticello project received final site planning approval from the Village of Monticello and is now poised to begin excavation on the site. This project is expected to yield 302 units of workforce housing once completed by our licensee.
  • Entered into an agreement with Grimshaw Architects for the design and deployment of a variety of medical modules to allow for point-of-care testing, lab services and other medical procedures.
  • Completed US Customs import license and FDA registration process related to COVID-19 test kits.
  • Announced agreement with RhoHouse LLC, a technology-focused housing start up, to bring well-designed, affordable houses to market using RhoHouse’s CORE modules.
  • Announced partnership with Grimshaw Architects to build prefabricated modular based education facilities.
  • Other business projects in process:
    • Entered into agreement subsequent to Q2 2020 for completion of 40 office boxes in Puerto Rico under our license agreement.
    • Executed purchase orders for two experiential pop-up containers for the University of West Virginia, subsequent to Q2 2020.
    • Executed a design contract for a restaurant expansion in Georgia, subsequent to Q2 2020.
    • “MoLiving” mobile hospitality prototype project for Arizona Investissements is on track to be completed in Q3 2020.
    • “Planet Smoothie” project to be completed in Q3 2020, the project has reached its final construction phase, pending shipment to final destination in Djibouti, Africa.
    • Previously announced Verizon store was completed in Denver area, subsequent to Q2 2020.

Second Quarter 2020 Financial Results

Revenue was approximately $629,000 compared to $728,000 in Q2 2019.

The Company’s backlog decreased to approximately $17.3 million as of June 30, 2020, as compared to approximately $17.6 million at December 31, 2019. The decrease in backlog is primarily attributable to work in progress or completed contracts during the first six months of 2020.

Gross profit was approximately $374,000 as compared to approximately $267,000 in Q2 2019.

Operating expenses decreased by approximately $24,000 to approximately $1.21 million in Q2 2020 compared to approximately $1.24 million in Q2 2019. The decrease was driven by a reduction in payroll and related expenses of approximately $253,000 and a reduction in marketing and business development expense of approximately $53,000, which was partially offset by an increase in general and administrative expenses, primarily due to higher legal fees and consulting expenses, of $260,000.

Net loss totaled approximately $838,000, or $(0.16) per basic and diluted share, compared to a net loss of approximately $972,000, or $(4.02) per basic and diluted share, in Q2 2019.

Adjusted EBITDA loss was approximately $533,000 compared to an Adjusted EBITDA loss of approximately $755,000 in Q2 2019. See below under the heading “Use of Non-GAAP Financial Information” for a discussion of Adjusted EBITDA and a reconciliation of such measure to the most comparable measure calculated under U.S. generally accepted accounting principles ("GAAP").

Balance Sheet

Cash and cash equivalents at June 30, 2020 totaled approximately $16.1 million, as compared to approximately $1.6 million at December 31, 2019.

Further details about the Company’s results will be available in its Quarterly Report on Form 10-Q, accessible in the investor relations section of the Company’s website at www.sgblocks.com and through the U.S. Securities and Exchange Commission’s website.

Conference Call Information

SG Blocks’ CEO, Paul Galvin, and Acting CFO, Gerald Sheeran, will host a listen only conference call.

To access the call, please use the following information:

 

Date:

 

Thursday, August 13, 2020

Time:

 

4:30 p.m. ET, 1:30 p.m. PT

Toll-free dial-in number:

 

1-844-407-9716

International dial-in number:

 

1-201-493-6779

Conference ID:

 

13708167

 

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Hayden IR at (646) 755-7412 or james@haydenir.com.

The conference call will be broadcast live and available for replay at http://public.viavid.com/index.php?id=141187 and via the investor relations section of the Company’s website at www.sgblocks.com.

A replay of the conference call will be available on August 13, 2020, after 7:30 p.m. Eastern time, through August 27, 2020.

 

Toll-free replay number:

 

1-844-512-2921

International replay number:

 

1-412-317-6671

Replay ID:

 

13708167

 

Use of Non-GAAP Financial Information

In addition to its results under GAAP, the Company presents EBITDA and Adjusted EBITDA for historical periods. EBITDA and Adjusted EBITDA are non-GAAP financial measures and have been presented as supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. The Company calculates EBITDA as net income (loss) before interest expense, income tax benefit (expense), depreciation and amortization. It calculates Adjusted EBITDA as EBITDA before certain non-recurring adjustments such stock-based compensation expense. EBITDA and Adjusted EBITDA are presented because they are important metrics used by management as one of the means by which it assesses the Company’s financial performance. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company’s industry. These measures, when used in conjunction with related GAAP financial measures, provide investors with an additional financial analytical framework that may be useful in assessing the Company and its results of operations.

EBITDA and Adjusted EBITDA have certain limitations. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income (loss), or any other measures of financial performance derived in accordance with GAAP. These measures also should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items for which these non-GAAP measures make adjustments. Additionally, EBITDA and Adjusted EBITDA are not intended to be liquidity measures because of certain limitations, including, but not limited to:

  • They do not reflect the Company’s cash outlays for capital expenditures;
  • They do not reflect changes in, or cash requirements for, working capital; and
  • Although depreciation and amortization are non-cash charges, the assets are being depreciated and amortized and may have to be replaced in the future, and these non-GAAP measures do not reflect cash requirements for such replacements.

The non-GAAP information should be read in conjunction with the Company’s consolidated financial statements and related notes.

The following is a reconciliation of EBITDA and Adjusted EBITDA to the nearest GAAP measure, net loss:

 

 

 

Three Months Ended June 30, 2020

 

Three Months Ended June 30, 2020

 

Six

Months Ended June 30, 2020

 

Six

Months Ended June 30, 2020

Net loss

$

(837,973

)

$

(971,709

)

$

(1,585,400

)

$

(1,462,444

)

Addback interest expense

 

3,452

 

 

-

 

 

6,263

 

 

-

 

Addback interest income

 

(6,233

)

 

-

 

 

(11,096

)

 

-

 

Addback depreciation and amortization

 

47,401

 

 

39,417

 

 

94,802

 

 

78,863

 

EBITDA (non-GAAP)

 

(793,353

)

 

(932,292

)

 

(1,495,431

)

 

(1,383,581

)

Addback Litigation Expense

 

131,102

 

 

-

 

 

267,840

 

 

-

 

Addback stock compensation expense

 

129,750

 

 

176,868

 

 

168,514

 

 

339,361

 

Adjusted EBITDA (non-GAAP)

$

(532,501

)

$

(755,424

)

$

(1,059,077

)

$

(1,044,220

)

 

About SG Blocks, Inc.

SG Blocks, Inc. is a premier innovator in advancing and promoting the use of code-engineered cargo shipping containers for safe and sustainable construction. The firm offers a product that exceeds many standard building code requirements, and also supports developers, architects, builders and owners in achieving greener construction, faster execution, and stronger buildings of higher value. Each project starts with GreenSteel™, the structural core and shell of an SG Blocks building, and then customized to client specifications. For more information, visit www.sgblocks.com.

Safe Harbor Statement

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by terminology such as "may," "should," "potential," "continue," "expects," "anticipates," "intends," "plans," "believes," "estimates," and similar expressions and includes statements such as the potential to earn substantial revenues from the three phases of the Monticello Mews 300+ unit project, the $4 million manufacturing contract in the south Florida hospitality market potentially representing a 300% increase in revenue over the trailing 4 quarters, the efforts and progress in Q2 serving as a catalyst for the rest of 2020 and into the new year, finishing construction of the Planet Smoothie container-based structure in Q3 2020, and the “MoLiving” mobile hospitality prototype project for Arizona Investissements being on track to be completed in Q3 2020. These forward-looking statements are based on management's expectations and assumptions as of the date of this press release and are subject to a number of risks and uncertainties, many of which are difficult to predict that could cause actual results to differ materially from current expectations and assumptions from those set forth or implied by any forward-looking statements. Important factors that could cause actual results to differ materially from current expectations include, among others, the Company’s ability to generate revenues as expected from the three phases of the Monticello Mews 300+ unit project, the Company’s ability to generate revenues as expected from the $4 million manufacturing contract in the south Florida hospitality market, the Company’s ability to build on the efforts and progress in Q2 for the rest of 2020 and into the new year, the Company’s ability to complete construction of the Planet Smoothie container-based structure as scheduled, the Company’s ability to complete construction of the “MoLiving” mobile hospitality prototype project for Arizona Investissements as scheduled, the Company’s ability to achieve positive outcomes from the license of its residential technology, the Company’s ability to successfully distribute and generate revenue from the GeneFinder™ COVID-19 Plus RealAmp Kit™, the Company’s ability to capitalize on new commercial and military opportunities, the Company’s ability to maintain compliance with the NASDAQ listing requirements, and the other factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and the Company’s subsequent filings with the SEC, including subsequent periodic reports on Forms 10-Q and 8-K. The information in this release is provided only as of the date of this release, and we undertake no obligation to update any forward-looking statements contained in this release on account of new information, future events, or otherwise, except as required by law.

 

SG BLOCKS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

June 30,

2020

December 31,

2019

 

(Unaudited)

Assets

 

 

Current assets:

 

 

Cash and cash equivalents

$

16,112,907

 

$

1,625,671

 

Accounts receivable, net

 

1,584,252

 

 

1,101,185

 

Contract assets

 

11,830

 

 

106,015

 

Prepaid expenses and other current assets

 

277,034

 

 

73,938

 

Total current assets

 

17,986,023

 

 

2,906,809

 

 

 

 

Property, plant and equipment, net

 

9,899

 

 

11,747

 

Goodwill

 

1,223,520

 

 

1,223,520

 

Long-term note receivable

 

661,096

 

 

 

Intangible assets, net

 

2,226,244

 

 

2,298,805

 

Deferred contract costs, net

 

173,337

 

 

193,730

 

Total Assets

$

22,280,119

 

$

6,634,611

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

Current liabilities:

 

 

Accounts payable and accrued expenses

$

1,863,384

 

$

2,105,505

 

Contract liabilities

 

148,851

 

 

168,957

 

Total current liabilities

 

2,012,235

 

 

2,274,462

 

 

 

Commitments and contingencies

 

 

 

 

 

Stockholders’ equity:

 

 

Preferred stock, $1.00 par value, 5,405,010 shares authorized; none issued or outstanding

 

 

 

 

Common stock, $0.01 par value, 25,000,000 shares authorized; 8,596,189 issued and outstanding as of June 30, 2020 and 1,157,890 issued and outstanding as of December 31, 2019

 

85,962

 

 

11,579

 

Additional paid-in capital

 

39,351,139

 

 

21,932,387

 

Accumulated deficit

 

(19,169,217

)

 

(17,583,817

)

Total stockholders’ equity

 

20,267,884

 

 

4,360,149

 

Total Liabilities and Stockholders’ Equity

$

22,280,119

 

$

6,634,611

 

 
 

SG BLOCKS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

 

For the

Three Months Ended

June 30,

 

For the

Three Months Ended

June 30,

 

For the

Six Months Ended

June 30,

 

For the

Six Months Ended

June 30,

 

2020

 

2019

 

2020

 

2019

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

Revenue:

 

 

Construction services

$

534,526

 

$

675,170

 

$

623,867

 

$

2,333,244

 

Engineering services

 

94,423

 

 

52,738

 

 

203,838

 

 

129,788

 

Total

 

628,949

 

 

727,908

 

 

827,705

 

 

2,463,032

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

Construction services

 

193,208

 

 

435,671

 

 

265,119

 

 

1,594,900

 

Engineering services

 

61,508

 

 

24,919

 

 

142,372

 

 

56,709

 

Total

 

254,716

 

 

460,590

 

 

407,491

 

 

1,651,609

 

 

 

 

 

 

Gross profit

 

374,233

 

 

267,318

 

 

420,214

 

 

811,423

 

 

 

 

 

 

Operating expenses:

 

 

 

 

Payroll and related expenses

 

392,338

 

 

645,627

 

 

664,146

 

 

1,284,177

 

General and administrative expenses

 

766,750

 

 

506,664

 

 

1,258,064

 

 

839,664

 

Marketing and business development expense

 

30,899

 

 

84,216

 

 

63,237

 

 

131,575

 

Pre-project expenses

 

25,000

 

 

2,520

 

 

25,000

 

 

18,451

 

Total

 

1,214,987

 

 

1,239,027

 

 

2,010,447

 

 

2,273,867

 

 

 

 

 

 

Operating loss

 

(840,754

)

 

(971,709

)

 

(1,590,233

)

 

(1,462,444

)

 

 

 

 

 

Other income (expense):

 

 

 

 

Interest expense

 

(3,452

)

 

 

 

(6,263

)

 

 

Interest income

 

6,233

 

 

 

 

11,096

 

 

 

Total

 

2,781

 

 

 

 

4,833

 

 

 

 

 

 

 

 

Loss before income taxes

 

(837,973

)

 

(971,709

)

 

(1,585,400

)

 

(1,462,444

)

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(837,973

)

$

(971,709

)

$

(1,585,400

)

$

(1,462,444

)

 

 

 

 

 

Net loss per share - basic and diluted:

 

 

 

 

Basic and diluted

$

(0.16

)

$

(4.02

)

$

(0.48

)

$

(6.43

)

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

Basic and diluted

 

5,369,132

 

 

241,881

 

 

3,278,913

 

 

227,602

 

 
 

SG BLOCKS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

 

$0.01 Par Value

Common Stock

Additional

Paid-in

Accumulated

Total

Stockholders’

 

Shares

Amount

Capital

Deficit

Equity

Balance at March 31, 2020

1,170,524

 

$

11,705

$

21,970,903

 

$

(18,331,244

)

$

3,651,364

 

Stock-based compensation

 

 

 

129,750

 

 

 

 

129,750

 

Conversion of restricted stock units to common stock

12,000

 

 

120

 

(120

)

 

 

 

 

Conversion of debt exchange to common stock

73,665

 

 

737

 

205,526

 

 

 

 

206,263

 

Issuance of common stock, net of issuance costs

7,340,000

 

 

73,400

 

17,045,080

 

 

 

 

17,118,480

 

Net loss

 

 

 

 

 

(837,973

)

 

(837,973

)

Balance at June 30, 2020

8,596,189

 

$

85,962

$

39,351,139

 

$

(19,169,217

)

$

20,267,884

 

 

 

 

 

 

Balance at December 31, 2019

1,157,890

 

$

11,579

$

21,932,387

 

$

(17,583,817

)

$

4,360,149

 

Stock-based compensation

 

 

 

168,514

 

 

 

 

168,514

 

Conversion of restricted stock units to common stock

24,672

 

 

246

 

(246

)

 

 

 

 

Reverse stock split settlement

(38

)

 

 

(122

)

 

 

 

(122

)

Conversion of debt exchange to common stock

73,665

 

 

737

 

205,526

 

 

 

 

206,263

 

Issuance of common stock, net of issuance costs

7,340,000

 

 

73,400

 

17,045,080

 

 

 

 

17,118,480

 

Net loss

 

 

 

 

 

(1,585,400

)

 

(1,585,400

)

Balance at June 30, 2020

8,596,189

 

$

85,962

$

39,351,139

 

$

(19,169,217

)

$

20,267,884

 

 

 

$0.01 Par Value

Common Stock

Additional

Paid-in

Accumulated

Total

Stockholders’

 

Shares

Amount

Capital

Deficit

Equity

Balance at March 31, 2019

213,002

 

$

2,130

$

17,958,022

 

$

(11,154,012

)

$

6,806,140

 

Stock-based compensation

 

 

 

231,182

 

 

 

 

231,182

 

Issuance of common stock, net of issuance costs

42,388

 

 

424

 

552,285

 

 

 

 

552,709

 

Net loss

 

 

 

 

 

(971,709

)

 

(971,709

)

Balance at June 30, 2019

255,390

 

$

2,554

$

18,741,489

 

$

(12,125,721

)

$

6,618,322

 

 

 

 

 

 

Balance at December 31, 2018

213,002

 

$

2,130

$

17,741,214

 

$

(10,663,277

)

$

7,080,067

 

Stock-based compensation

 

 

 

447,990

 

 

 

 

447,990

 

Issuance of common stock, net of issuance costs

42,388

 

 

424

 

552,285

 

 

 

 

552,709

 

Net loss

 

 

 

 

 

(1,462,444

)

 

(1,462,444

)

Balance at June 30, 2019

255,390

 

$

2,554

$

18,741,489

 

$

(12,125,721

)

$

6,618,322

 

 
 

SG BLOCKS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

 

For the Six Months Ended June 30, 2020

For the Six Months Ended June 30, 2019

 

(Unaudited)

(Unaudited)

Cash flows from operating activities:

 

 

Net loss

$

(1,585,400

)

$

(1,462,444

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

Depreciation expense

 

1,848

 

 

6,301

 

Amortization of intangible assets

 

72,561

 

 

72,562

 

Amortization of deferred license costs

 

20,393

 

 

 

Bad debt expense (benefit)

 

 

 

(54,000

)

Interest income on long-term note receivable

 

(11,096

)

 

 

Stock-based compensation

 

168,514

 

 

339,361

 

Changes in operating assets and liabilities:

 

 

Accounts receivable

 

(483,067

)

 

351,820

 

Contract assets

 

94,185

 

 

239,524

 

Prepaid expenses and other current assets

 

(203,096

)

 

756,393

 

Accounts payable and accrued expenses

 

(235,858

)

 

(846,261

)

Contract liabilities

 

(20,106

)

 

(1,150,458

)

Net cash used in operating activities

 

(2,181,122

)

 

(1,747,202

)

 

 

 

Cash flows provided by investing activities:

 

 

Advances in note receivable

 

(650,000

)

 

 

Net cash used in investing activities

 

(650,000

)

 

 

 

 

 

Cash flows from financing activities:

 

 

Proceeds from public stock offering, net of issuance costs

 

17,118,480

 

 

552,709

 

Proceeds from long-term note payable

 

200,000

 

 

 

Settlement of common stock from reverse stock split

 

(122

)

 

 

Net cash provided by financing activities

 

17,318,358

 

 

552,709

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

14,487,236

 

 

(1,194,493

)

 

 

Cash and cash equivalents - beginning of period

 

1,625,671

 

 

1,368,395

 

 

 

Cash and cash equivalents - end of period

$

16,112,907

 

$

173,902

 

 

 

 

 

Supplemental disclosure of non-cash operating activities:

 

 

Non-cash conversion of long-term note payable to common stock

$

200,000

 

$

 

Non-cash conversion of accrued interest of long-term note payable to common stock

 

6,263

 

 

 

Non-cash conversion of accrued salary to restricted stock units to common stock

 

 

 

108,629

 

Total non-cash operating activities

$

206,263

 

$

108,629

 

 

 

Media
Rubenstein Public Relations
Christina Levin
Account Director
212-805-3029
clevin@rubensteinpr.com

or

James Carbonara
Hayden IR
(646) 755-7412
james@haydenir.com

Brett Maas
Hayden IR
(646) 536-7331
brett@haydenir.com

Source: SG Blocks, Inc.