two year six months twelve months 0001023994 false --12-31 Q2 2023 two year two year 12 occurrence of an Event of Default (as defined in the Secured Promissory Note), the default interest rate will be 28% per annum, or the maximum legal amount provided by law, whichever is greater. two month one year twelve months 0001023994 2023-08-10 0001023994 us-gaap:PrivatePlacementMember sgbx:DebenturesMember 2023-01-01 2023-06-30 0001023994 us-gaap:PrivatePlacementMember sgbx:DebenturesMember 2023-04-01 2023-06-30 0001023994 sgbx:DebenturesMember us-gaap:PrivatePlacementMember sgbx:WarrantFourMember 2023-01-01 2023-06-30 0001023994 us-gaap:PrivatePlacementMember us-gaap:RestrictedStockMember sgbx:DebenturesMember 2023-06-30 0001023994 us-gaap:PrivatePlacementMember sgbx:WarrantFourMember sgbx:DebenturesMember 2023-06-30 0001023994 us-gaap:PrivatePlacementMember sgbx:DebenturesMember 2023-06-30 0001023994 us-gaap:SubsequentEventMember srt:ChiefOperatingOfficerMember 2023-07-01 2023-08-31 0001023994 sgbx:NonEmployeeAdvisoryDirectorsMember us-gaap:RestrictedStockUnitsRSUMember 2023-04-04 2023-04-04 0001023994 sgbx:PaulGalvinAndSixEmployeesMember us-gaap:RestrictedStockUnitsRSUMember 2023-04-01 2023-06-30 0001023994 us-gaap:RestrictedStockUnitsRSUMember sgbx:EmployeeMember 2023-01-01 2023-06-30 0001023994 sgbx:PaulGalvinAndSixEmployeesMember us-gaap:RestrictedStockUnitsRSUMember srt:MaximumMember 2023-01-01 2023-06-30 0001023994 sgbx:PaulGalvinAndSixEmployeesMember us-gaap:RestrictedStockUnitsRSUMember srt:MinimumMember 2023-01-01 2023-06-30 0001023994 us-gaap:RestrictedStockUnitsRSUMember sgbx:PaulGalvinAndSixEmployeesMember 2023-01-01 2023-06-30 0001023994 us-gaap:RestrictedStockUnitsRSUMember sgbx:EmployeeMember 2022-01-01 2022-12-31 0001023994 us-gaap:PrivatePlacementMember us-gaap:ConvertibleDebtMember 2023-02-07 2023-02-07 0001023994 us-gaap:PrivatePlacementMember us-gaap:ConvertibleDebtMember 2023-02-07 0001023994 sgbx:SGBDevelopmentCorpMember us-gaap:NotesPayableOtherPayablesMember 2022-08-31 2022-08-31 0001023994 sgbx:SGBDevelopmentCorpMember us-gaap:NotesPayableOtherPayablesMember 2022-08-31 0001023994 sgbx:NonEmployeeDirectorMember us-gaap:RestrictedStockUnitsRSUMember 2023-04-04 2023-04-04 0001023994 us-gaap:SubsequentEventMember srt:ChiefFinancialOfficerMember 2023-07-01 2023-07-31 0001023994 us-gaap:CostOfGoodsTotalMember us-gaap:SupplierConcentrationRiskMember 2023-04-01 2023-06-30 0001023994 us-gaap:CorporateAndOtherMember us-gaap:OperatingSegmentsMember 2023-04-01 2023-06-30 0001023994 2022-03-31 0001023994 2023-03-31 0001023994 2023-04-01 2023-06-30 0001023994 us-gaap:NotesPayableOtherPayablesMember 2023-06-30 0001023994 us-gaap:NotesPayableOtherPayablesMember 2023-01-01 2023-06-30 0001023994 sgbx:EmploymentAgreementPaulGavinMember 2020-04-01 2020-04-30 0001023994 sgbx:DevelopmentMember us-gaap:OperatingSegmentsMember 2023-04-01 2023-06-30 0001023994 sgbx:MedicalMember us-gaap:OperatingSegmentsMember 2023-04-01 2023-06-30 0001023994 sgbx:StockBasedCompensationPlanMember sgbx:PayrollMember 2023-04-01 2023-06-30 0001023994 us-gaap:RestrictedStockUnitsRSUMember 2023-05-01 2023-05-01 0001023994 srt:ChiefFinancialOfficerMember 2023-05-01 2023-05-01 0001023994 sgbx:EquityPurchaseAgreementMember 2022-01-01 2022-06-30 0001023994 sgbx:EquityPurchaseAgreementMember 2023-01-01 2023-06-30 0001023994 us-gaap:BuildingMember 2022-12-31 0001023994 us-gaap:BuildingMember 2023-06-30 0001023994 us-gaap:OperatingSegmentsMember sgbx:ConstructionSegmentsMember 2023-04-01 2023-06-30 0001023994 2022-01-01 2022-12-31 0001023994 2022-01-01 2022-06-30 0001023994 us-gaap:RestrictedStockUnitsRSUMember 2023-06-30 0001023994 us-gaap:RestrictedStockMember 2023-04-01 2023-06-30 0001023994 us-gaap:RestrictedStockUnitsRSUMember 2023-04-01 2023-06-30 0001023994 us-gaap:StockOptionMember 2023-04-01 2023-06-30 0001023994 sgbx:StockBasedCompensationPlanMember 2023-04-01 2023-06-30 0001023994 us-gaap:OperatingSegmentsMember 2023-04-01 2023-06-30 0001023994 sgbx:ConstructionAndEngineeringServicesMember 2023-04-01 2023-06-30 0001023994 2021-05-10 0001023994 sgbx:OfficeMember 2023-04-01 2023-06-30 0001023994 srt:HotelMember 2023-04-01 2023-06-30 0001023994 sgbx:MultiFamiliesMember 2023-04-01 2023-06-30 0001023994 us-gaap:NoncontrollingInterestMember 2022-03-31 0001023994 us-gaap:ParentMember 2022-03-31 0001023994 2022-09-08 2022-09-08 0001023994 2020-02-01 2020-02-11 0001023994 us-gaap:RetainedEarningsMember 2022-03-31 0001023994 us-gaap:TreasuryStockMember 2022-04-01 2022-06-30 0001023994 us-gaap:TreasuryStockMember 2022-03-31 0001023994 us-gaap:TreasuryStockMember 2023-04-01 2023-06-30 0001023994 us-gaap:TreasuryStockMember 2023-03-31 0001023994 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001023994 us-gaap:CommonStockMember 2022-03-31 0001023994 us-gaap:RetainedEarningsMember 2023-04-01 2023-06-30 0001023994 us-gaap:NoncontrollingInterestMember 2023-04-01 2023-06-30 0001023994 us-gaap:ParentMember 2023-04-01 2023-06-30 0001023994 sgbx:SalesRevenueGoodNetMember sgbx:CustomerOneMember 2023-04-01 2023-06-30 0001023994 us-gaap:AdditionalPaidInCapitalMember 2023-04-01 2023-06-30 0001023994 us-gaap:CommonStockMember 2023-04-01 2023-06-30 0001023994 us-gaap:NoncontrollingInterestMember 2023-03-31 0001023994 us-gaap:ParentMember 2023-03-31 0001023994 us-gaap:RetainedEarningsMember 2023-03-31 0001023994 us-gaap:AdditionalPaidInCapitalMember 2023-03-31 0001023994 us-gaap:CommonStockMember 2023-03-31 0001023994 sgbx:MedicalRevenueMember 2023-04-01 2023-06-30 0001023994 sgbx:EngineeringServicesMember 2023-04-01 2023-06-30 0001023994 us-gaap:ConstructionMember 2023-04-01 2023-06-30 0001023994 us-gaap:PrivatePlacementMember 2023-02-07 0001023994 us-gaap:PrivatePlacementMember 2023-02-07 2023-02-07 0001023994 us-gaap:OperatingSegmentsMember 2023-06-30 0001023994 sgbx:WarrantFourMember us-gaap:PrivatePlacementMember 2023-02-07 0001023994 sgbx:PeakOneOpportunityFundLpMember us-gaap:WarrantMember us-gaap:PrivatePlacementMember 2023-02-07 0001023994 sgbx:CompanyNoteMember 2022-12-31 0001023994 us-gaap:CorporateAndOtherMember us-gaap:OperatingSegmentsMember 2023-06-30 0001023994 sgbx:DevelopmentMember us-gaap:OperatingSegmentsMember 2023-06-30 0001023994 sgbx:GalvinNoteMember 2022-12-31 0001023994 sgbx:OtherReceivableMember 2022-12-31 0001023994 sgbx:ConstructionRevenueMember 2022-12-31 0001023994 sgbx:OtherReceivableMember 2023-06-30 0001023994 sgbx:ConstructionRevenueMember 2023-06-30 0001023994 us-gaap:WarrantMember 2022-01-01 2022-06-30 0001023994 us-gaap:EmployeeStockOptionMember 2022-01-01 2022-06-30 0001023994 sgbx:NormanBerryIIOwnerLLCMember 2021-04-01 2021-06-30 0001023994 sgbx:WarrantFiveMember 2023-02-01 2023-02-28 0001023994 sgbx:WarrantFiveMember 2023-02-28 0001023994 sgbx:WarrantFourMember 2017-06-30 0001023994 sgbx:WarrantFourMember 2017-06-01 2017-06-30 0001023994 sgbx:EquityPurchaseAgreementMember 2023-02-07 2023-02-07 0001023994 sgbx:EquityPurchaseAgreementMember 2023-02-07 0001023994 sgbx:MedicalMember us-gaap:OperatingSegmentsMember 2023-06-30 0001023994 us-gaap:OperatingSegmentsMember sgbx:ConstructionSegmentsMember 2023-06-30 0001023994 us-gaap:RestrictedStockUnitsRSUMember 2022-01-01 2022-12-31 0001023994 srt:AffiliatedEntityMember 2022-12-31 0001023994 srt:AffiliatedEntityMember 2023-06-30 0001023994 sgbx:TetonMember 2019-01-01 2019-01-01 0001023994 2022-04-01 2022-06-30 0001023994 us-gaap:OperatingSegmentsMember 2022-06-30 0001023994 us-gaap:IntersegmentEliminationMember 2022-01-01 2022-06-30 0001023994 2023-01-01 2023-06-30 0001023994 sgbx:OneToTwoYearMember 2023-06-30 0001023994 us-gaap:ConstructionInProgressMember 2022-12-31 0001023994 us-gaap:LandMember 2022-12-31 0001023994 sgbx:LaboratoryAndTemporaryUnitsMember 2022-12-31 0001023994 sgbx:BuildingHeldForLeasesMember 2022-12-31 0001023994 us-gaap:AutomobilesMember 2022-12-31 0001023994 us-gaap:MachineryAndEquipmentMember 2022-12-31 0001023994 us-gaap:LeaseholdImprovementsMember 2022-12-31 0001023994 sgbx:FurnitureAndOtherEquipmentMember 2022-12-31 0001023994 us-gaap:ComputerEquipmentMember 2022-12-31 0001023994 us-gaap:ConstructionInProgressMember 2023-06-30 0001023994 us-gaap:LandMember 2023-06-30 0001023994 sgbx:LaboratoryAndTemporaryUnitsMember 2023-06-30 0001023994 sgbx:BuildingHeldForLeasesMember 2023-06-30 0001023994 us-gaap:AutomobilesMember 2023-06-30 0001023994 us-gaap:MachineryAndEquipmentMember 2023-06-30 0001023994 us-gaap:LeaseholdImprovementsMember 2023-06-30 0001023994 sgbx:FurnitureAndOtherEquipmentMember 2023-06-30 0001023994 us-gaap:ComputerEquipmentMember 2023-06-30 0001023994 us-gaap:InternetDomainNamesMember 2023-06-30 0001023994 us-gaap:IntellectualPropertyMember 2023-06-30 0001023994 2021-12-31 0001023994 sgbx:ConstructionMaterialsMember 2022-12-31 0001023994 sgbx:ConstructionMaterialsMember 2023-06-30 0001023994 srt:MaximumMember 2023-06-30 0001023994 srt:MinimumMember 2023-06-30 0001023994 us-gaap:TreasuryStockMember 2021-12-31 0001023994 us-gaap:TreasuryStockMember 2023-01-01 2023-06-30 0001023994 us-gaap:NoncontrollingInterestMember 2022-01-01 2022-06-30 0001023994 us-gaap:ParentMember 2022-01-01 2022-06-30 0001023994 sgbx:MedicalRevenueMember 2022-01-01 2022-06-30 0001023994 us-gaap:RestrictedStockMember 2022-04-01 2022-06-30 0001023994 us-gaap:RestrictedStockUnitsRSUMember 2022-04-01 2022-06-30 0001023994 us-gaap:StockOptionMember 2022-04-01 2022-06-30 0001023994 sgbx:StockBasedCompensationPlanMember 2022-04-01 2022-06-30 0001023994 us-gaap:IntersegmentEliminationMember 2022-04-01 2022-06-30 0001023994 us-gaap:OperatingSegmentsMember 2022-04-01 2022-06-30 0001023994 sgbx:ConstructionAndEngineeringServicesMember 2022-04-01 2022-06-30 0001023994 sgbx:OfficeMember 2022-04-01 2022-06-30 0001023994 sgbx:MultiFamiliesMember 2022-04-01 2022-06-30 0001023994 srt:HotelMember 2022-04-01 2022-06-30 0001023994 sgbx:MedicalRevenueMember 2022-04-01 2022-06-30 0001023994 sgbx:EngineeringServicesMember 2022-04-01 2022-06-30 0001023994 us-gaap:ConstructionMember 2022-04-01 2022-06-30 0001023994 us-gaap:EmployeeStockOptionMember 2023-01-01 2023-06-30 0001023994 us-gaap:PrivatePlacementMember 2021-10-25 2021-10-25 0001023994 sgbx:SeriesAWarrantsMember 2021-10-25 2021-10-25 0001023994 sgbx:PreFundedWarrantSharesMember 2021-10-25 2021-10-25 0001023994 us-gaap:CommonStockMember 2021-10-25 2021-10-25 0001023994 sgbx:OsangHealthcareCompanyLtdMember 2021-04-14 2021-04-14 0001023994 sgbx:PurchaseAgreementMember 2019-04-19 0001023994 sgbx:PurchaseAgreementMember 2019-04-19 2019-04-19 0001023994 us-gaap:RetainedEarningsMember 2021-12-31 0001023994 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001023994 us-gaap:CommonStockMember 2021-12-31 0001023994 sgbx:EquityPurchaseAgreementMember srt:MaximumMember 2023-02-07 0001023994 sgbx:EquityPurchaseAgreementMember srt:MinimumMember 2023-02-07 0001023994 us-gaap:NoncontrollingInterestMember 2021-12-31 0001023994 us-gaap:ParentMember 2021-12-31 0001023994 sgbx:FourNonEmployeeDirectorsMember us-gaap:RestrictedStockUnitsRSUMember 2022-11-18 0001023994 2020-05-31 0001023994 2020-05-01 2020-05-31 0001023994 sgbx:FourNonEmployeeDirectorsMember us-gaap:RestrictedStockUnitsRSUMember 2022-11-18 2022-11-18 0001023994 sgbx:PaulGalvinAndSevenEmployeesMember us-gaap:RestrictedStockUnitsRSUMember 2022-01-01 2022-12-31 0001023994 sgbx:PeakOneOpportunityFundLpMember us-gaap:RestrictedStockMember us-gaap:PrivatePlacementMember 2023-02-07 2023-02-07 0001023994 us-gaap:WarrantMember 2023-01-01 2023-06-30 0001023994 sgbx:SecuritiesPurchaseAgreementMember us-gaap:PrivatePlacementMember sgbx:PeakOneOpportunityFundLpMember 2023-02-07 0001023994 us-gaap:AccountsReceivableMember sgbx:CustomerThreeMember 2022-01-01 2022-12-31 0001023994 us-gaap:CorporateAndOtherMember us-gaap:OperatingSegmentsMember 2022-06-30 0001023994 sgbx:DevelopmentMember us-gaap:OperatingSegmentsMember 2022-06-30 0001023994 sgbx:MedicalMember us-gaap:OperatingSegmentsMember 2022-06-30 0001023994 sgbx:ConstructionSegmentsMember us-gaap:OperatingSegmentsMember 2022-06-30 0001023994 us-gaap:CorporateAndOtherMember us-gaap:IntersegmentEliminationMember 2022-01-01 2022-06-30 0001023994 sgbx:DevelopmentMember us-gaap:IntersegmentEliminationMember 2022-01-01 2022-06-30 0001023994 sgbx:MedicalMember us-gaap:IntersegmentEliminationMember 2022-01-01 2022-06-30 0001023994 sgbx:ConstructionSegmentsMember us-gaap:IntersegmentEliminationMember 2022-01-01 2022-06-30 0001023994 us-gaap:CostOfGoodsTotalMember us-gaap:SupplierConcentrationRiskMember 2022-01-01 2022-06-30 0001023994 2018-09-11 2018-09-12 0001023994 2019-06-20 2019-06-21 0001023994 sgbx:ConstructionAndEngineeringServicesMember 2023-01-01 2023-06-30 0001023994 sgbx:MedicalConstructionMember 2023-01-01 2023-06-30 0001023994 srt:HotelMember 2023-01-01 2023-06-30 0001023994 us-gaap:GovernmentContractMember 2023-01-01 2023-06-30 0001023994 sgbx:MedicalRevenueMember 2023-01-01 2023-06-30 0001023994 us-gaap:NoncontrollingInterestMember 2023-01-01 2023-06-30 0001023994 us-gaap:ParentMember 2023-01-01 2023-06-30 0001023994 2021-07-01 2021-07-14 0001023994 sgbx:StockBasedCompensationPlanMember sgbx:PayrollMember 2022-04-01 2022-06-30 0001023994 us-gaap:CorporateAndOtherMember us-gaap:OperatingSegmentsMember 2022-04-01 2022-06-30 0001023994 2020-08-01 2020-08-27 0001023994 sgbx:DevelopmentMember us-gaap:OperatingSegmentsMember 2022-04-01 2022-06-30 0001023994 sgbx:MedicalMember us-gaap:OperatingSegmentsMember 2022-04-01 2022-06-30 0001023994 2021-05-01 2021-05-31 0001023994 2021-06-01 2021-06-24 0001023994 sgbx:ConstructionSegmentsMember us-gaap:OperatingSegmentsMember 2022-04-01 2022-06-30 0001023994 2016-10-01 2016-10-26 0001023994 2021-10-25 0001023994 us-gaap:IntersegmentEliminationMember us-gaap:CorporateAndOtherMember 2022-04-01 2022-06-30 0001023994 us-gaap:IntersegmentEliminationMember sgbx:DevelopmentMember 2022-04-01 2022-06-30 0001023994 sgbx:ConstructionBacklogMember 2023-01-01 2023-06-30 0001023994 us-gaap:IntersegmentEliminationMember sgbx:MedicalMember 2022-04-01 2022-06-30 0001023994 us-gaap:IntersegmentEliminationMember sgbx:ConstructionSegmentsMember 2022-04-01 2022-06-30 0001023994 sgbx:LiquidityMember 2023-01-01 2023-06-30 0001023994 us-gaap:RetainedEarningsMember 2022-01-01 2022-06-30 0001023994 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-06-30 0001023994 us-gaap:CommonStockMember 2022-01-01 2022-06-30 0001023994 us-gaap:RetainedEarningsMember 2023-01-01 2023-06-30 0001023994 us-gaap:CommonStockMember 2023-01-01 2023-06-30 0001023994 us-gaap:AdditionalPaidInCapitalMember 2023-01-01 2023-06-30 0001023994 sgbx:SpecialUseMember 2023-01-01 2023-06-30 0001023994 us-gaap:RetailMember 2023-01-01 2023-06-30 0001023994 sgbx:OfficeMember 2023-01-01 2023-06-30 0001023994 sgbx:MultiFamiliesMember 2023-01-01 2023-06-30 0001023994 sgbx:SpecialUseMember 2022-01-01 2022-06-30 0001023994 us-gaap:RetailMember 2022-01-01 2022-06-30 0001023994 sgbx:OfficeMember 2022-01-01 2022-06-30 0001023994 sgbx:MultiFamiliesMember 2022-01-01 2022-06-30 0001023994 sgbx:EngineeringServicesMember 2022-01-01 2022-06-30 0001023994 us-gaap:ConstructionMember 2022-01-01 2022-06-30 0001023994 2021-07-14 0001023994 sgbx:EngineeringServicesMember 2023-01-01 2023-06-30 0001023994 us-gaap:ConstructionMember 2023-01-01 2023-06-30 0001023994 us-gaap:StockOptionMember sgbx:StockBasedCompensationPlanMember 2023-01-01 2023-06-30 0001023994 us-gaap:RestrictedStockUnitsRSUMember sgbx:StockBasedCompensationPlanMember 2023-01-01 2023-06-30 0001023994 sgbx:SalesRevenueGoodNetMember sgbx:CustomerOneMember 2023-01-01 2023-06-30 0001023994 us-gaap:VehiclesMember srt:MinimumMember 2023-01-01 2023-06-30 0001023994 srt:MinimumMember us-gaap:FurnitureAndFixturesMember 2023-01-01 2023-06-30 0001023994 srt:MaximumMember us-gaap:FurnitureAndFixturesMember 2023-01-01 2023-06-30 0001023994 sgbx:StockBasedCompensationPlanMember 2022-01-01 2022-06-30 0001023994 us-gaap:RestrictedStockUnitsRSUMember 2022-01-01 2022-06-30 0001023994 srt:MinimumMember us-gaap:BuildingMember 2023-01-01 2023-06-30 0001023994 sgbx:CustomerTwoMember us-gaap:AccountsReceivableMember 2023-01-01 2023-06-30 0001023994 sgbx:StockBasedCompensationPlanMember 2023-01-01 2023-06-30 0001023994 us-gaap:BuildingMember srt:MaximumMember 2023-01-01 2023-06-30 0001023994 us-gaap:ComputerEquipmentMember srt:MinimumMember 2023-01-01 2023-06-30 0001023994 srt:MaximumMember us-gaap:EquipmentMember 2023-01-01 2023-06-30 0001023994 us-gaap:EquipmentMember srt:MinimumMember 2023-01-01 2023-06-30 0001023994 us-gaap:ComputerEquipmentMember srt:MaximumMember 2023-01-01 2023-06-30 0001023994 sgbx:PayrollMember sgbx:StockBasedCompensationPlanMember 2022-01-01 2022-06-30 0001023994 sgbx:PayrollMember sgbx:StockBasedCompensationPlanMember 2023-01-01 2023-06-30 0001023994 sgbx:GalvinNoteMember us-gaap:NotesReceivableMember 2020-01-01 2020-01-21 0001023994 sgbx:CompanyNoteMember us-gaap:NotesReceivableMember 2020-01-01 2020-01-21 0001023994 us-gaap:NotesReceivableMember 2020-01-21 0001023994 us-gaap:NotesReceivableMember 2020-01-01 2020-01-21 0001023994 2019-08-01 2019-08-31 0001023994 us-gaap:IPOMember 2019-08-01 2019-08-31 0001023994 sgbx:WarrantThreeMember 2019-08-31 0001023994 sgbx:WarrantThreeMember 2019-08-01 2019-08-31 0001023994 sgbx:WarrantTwoMember 2019-04-30 0001023994 sgbx:WarrantTwoMember 2019-04-01 2019-04-30 0001023994 sgbx:WarrantOneMember 2019-04-30 0001023994 sgbx:WarrantOneMember 2019-04-01 2019-04-30 0001023994 sgbx:CommonStockIssuedUnderUnderwritingAgreementMember 2019-08-01 2019-08-31 0001023994 srt:MaximumMember us-gaap:VehiclesMember 2023-01-01 2023-06-30 0001023994 us-gaap:NotesReceivableMember sgbx:CompanyNoteMember 2020-01-21 0001023994 us-gaap:NotesReceivableMember sgbx:GalvinNoteMember 2020-01-21 0001023994 2019-08-31 0001023994 2021-10-31 0001023994 us-gaap:IntellectualPropertyMember 2023-01-01 2023-06-30 0001023994 us-gaap:InternetDomainNamesMember 2023-01-01 2023-06-30 0001023994 sgbx:SGBDevelopmentCorpMember 2021-05-10 0001023994 sgbx:PreFundedWarrantSharesMember 2021-10-25 0001023994 sgbx:CommonStockWarrantsMember 2021-10-25 0001023994 us-gaap:PrivatePlacementMember 2021-10-25 0001023994 sgbx:CompanyNoteMember 2020-04-01 2020-04-30 0001023994 sgbx:CompanyNoteMember 2020-04-30 0001023994 us-gaap:NotesReceivableMember 2020-04-01 2020-04-30 0001023994 us-gaap:OperatingSegmentsMember 2023-01-01 2023-06-30 0001023994 sgbx:MedicalMember us-gaap:OperatingSegmentsMember 2023-01-01 2023-06-30 0001023994 sgbx:DevelopmentMember us-gaap:OperatingSegmentsMember 2023-01-01 2023-06-30 0001023994 sgbx:HolaDefendantsMember 2020-04-12 2020-04-13 0001023994 us-gaap:CorporateAndOtherMember us-gaap:OperatingSegmentsMember 2023-01-01 2023-06-30 0001023994 us-gaap:CommonStockMember 2022-04-01 2022-06-30 0001023994 us-gaap:AdditionalPaidInCapitalMember 2022-04-01 2022-06-30 0001023994 us-gaap:RetainedEarningsMember 2022-04-01 2022-06-30 0001023994 us-gaap:ParentMember 2022-04-01 2022-06-30 0001023994 us-gaap:NoncontrollingInterestMember 2022-04-01 2022-06-30 0001023994 2021-10-02 2021-10-31 0001023994 2021-10-02 2021-10-29 0001023994 us-gaap:OperatingSegmentsMember sgbx:ConstructionSegmentsMember 2023-01-01 2023-06-30 0001023994 sgbx:NormanBerryIIOwnerLLCMember 2021-05-31 0001023994 sgbx:JDICumberlandInletLLCMember 2021-06-24 0001023994 sgbx:NormanBerryIIOwnerLLCMember 2021-07-01 2021-09-30 0001023994 sgbx:NormanBerryIIOwnerLLCMember 2021-10-02 2021-12-31 0001023994 sgbx:StockBasedOptionMember 2023-01-01 2023-06-30 0001023994 sgbx:SecuritiesPurchaseAgreementMember us-gaap:PrivatePlacementMember sgbx:PeakOneOpportunityFundLpMember us-gaap:ConvertibleDebtMember 2023-02-07 0001023994 sgbx:SalesRevenueGoodNetMember sgbx:CustomerTwoMember 2022-04-01 2022-06-30 0001023994 sgbx:PeakOneOpportunityFundLpMember us-gaap:RestrictedStockMember us-gaap:PrivatePlacementMember us-gaap:ConvertibleDebtMember 2023-02-07 2023-02-07 0001023994 us-gaap:GovernmentContractMember 2022-01-01 2022-06-30 0001023994 srt:HotelMember 2022-01-01 2022-06-30 0001023994 sgbx:ConstructionAndEngineeringServicesMember 2022-01-01 2022-06-30 0001023994 us-gaap:OperatingSegmentsMember 2022-01-01 2022-06-30 0001023994 us-gaap:CostOfGoodsTotalMember us-gaap:SupplierConcentrationRiskMember 2022-04-01 2022-06-30 0001023994 us-gaap:CommonStockMember 2022-06-30 0001023994 us-gaap:AdditionalPaidInCapitalMember 2022-06-30 0001023994 us-gaap:CostOfGoodsTotalMember us-gaap:SupplierConcentrationRiskMember 2023-01-01 2023-06-30 0001023994 us-gaap:RetainedEarningsMember 2022-06-30 0001023994 us-gaap:ParentMember 2022-06-30 0001023994 us-gaap:NoncontrollingInterestMember 2022-06-30 0001023994 us-gaap:TreasuryStockMember 2022-06-30 0001023994 us-gaap:TreasuryStockMember 2022-01-01 2022-06-30 0001023994 us-gaap:OperatingSegmentsMember sgbx:ConstructionSegmentsMember 2022-01-01 2022-06-30 0001023994 sgbx:MedicalMember us-gaap:OperatingSegmentsMember 2022-01-01 2022-06-30 0001023994 sgbx:DevelopmentMember us-gaap:OperatingSegmentsMember 2022-01-01 2022-06-30 0001023994 us-gaap:CommonStockMember 2022-12-31 0001023994 us-gaap:AdditionalPaidInCapitalMember 2022-12-31 0001023994 us-gaap:TreasuryStockMember 2022-12-31 0001023994 us-gaap:RetainedEarningsMember 2022-12-31 0001023994 us-gaap:ParentMember 2022-12-31 0001023994 us-gaap:NoncontrollingInterestMember 2022-12-31 0001023994 us-gaap:CommonStockMember 2023-06-30 0001023994 us-gaap:AdditionalPaidInCapitalMember 2023-06-30 0001023994 us-gaap:TreasuryStockMember 2023-06-30 0001023994 us-gaap:RetainedEarningsMember 2023-06-30 0001023994 2021-07-26 0001023994 2022-07-05 0001023994 sgbx:PeakOneOpportunityFundLpMember us-gaap:WarrantMember us-gaap:PrivatePlacementMember us-gaap:ConvertibleDebtMember 2023-02-07 0001023994 sgbx:BcvLoanAgreementMember us-gaap:LoansPayableMember sgbx:SGBDevelopmentCorpMember sgbx:BcvSAndGDevcorpMember 2023-04-01 2023-06-30 0001023994 sgbx:BcvLoanAgreementMember us-gaap:LoansPayableMember sgbx:SGBDevelopmentCorpMember sgbx:BcvSAndGDevcorpMember 2023-06-30 0001023994 sgbx:BcvLoanAgreementMember us-gaap:LoansPayableMember sgbx:SGBDevelopmentCorpMember sgbx:BcvSAndGDevcorpMember 2023-06-23 2023-06-23 0001023994 sgbx:BcvLoanAgreementMember us-gaap:LoansPayableMember sgbx:SGBDevelopmentCorpMember sgbx:BcvSAndGDevcorpMember 2023-06-23 0001023994 sgbx:SecurityAgreementMember us-gaap:SecuredDebtMember sgbx:SgEchoLlcMember sgbx:SouthstarFinancialLlcMember 2023-06-30 0001023994 sgbx:SecurityAgreementMember us-gaap:SecuredDebtMember sgbx:SgEchoLlcMember sgbx:SouthstarFinancialLlcMember 2023-04-01 2023-06-30 0001023994 sgbx:NonRecourseFactoringAgreementMember sgbx:ObligationsUponAccountReceivablesMember sgbx:SgEchoLlcMember sgbx:AtcoStructuresAndLogisticsUsaIncMember 2023-06-08 0001023994 sgbx:NonRecourseFactoringAgreementMember sgbx:ObligationsUponAccountReceivablesMember sgbx:SgEchoLlcMember sgbx:SouthstarFinancialLlcMember srt:MinimumMember 2023-06-08 2023-06-08 0001023994 sgbx:NonRecourseFactoringAgreementMember sgbx:ObligationsUponAccountReceivablesMember sgbx:SgEchoLlcMember sgbx:SouthstarFinancialLlcMember srt:MaximumMember 2023-06-08 2023-06-08 0001023994 sgbx:NonRecourseFactoringAgreementMember sgbx:ObligationsUponAccountReceivablesMember sgbx:SgEchoLlcMember sgbx:SouthstarFinancialLlcMember 2023-06-08 2023-06-08 0001023994 sgbx:NonRecourseFactoringAgreementMember sgbx:ObligationsUponAccountReceivablesMember sgbx:SgEchoLlcMember sgbx:SouthstarFinancialLlcMember 2023-06-08 0001023994 sgbx:SecurityAgreementMember us-gaap:SecuredDebtMember sgbx:SgEchoLlcMember sgbx:SouthstarFinancialLlcMember 2023-06-08 0001023994 sgbx:SecurityAgreementMember us-gaap:SecuredDebtMember sgbx:SgEchoLlcMember sgbx:SouthstarFinancialLlcMember 2023-06-08 2023-06-08 0001023994 sgbx:NonRecourseFactoringAndSecurityAgreementMember us-gaap:SecuredDebtMember sgbx:SgEchoLlcMember sgbx:SouthstarFinancialLlcMember srt:MaximumMember 2023-06-08 0001023994 2022-06-30 0001023994 2023-06-30 0001023994 sgbx:NonRecourseFactoringAndSecurityAgreementMember us-gaap:SecuredDebtMember sgbx:SgEchoLlcMember sgbx:SouthstarFinancialLlcMember 2023-06-08 0001023994 sgbx:CashAdvanceAgreementMember sgbx:ObligationsUponFutureReceivablesMember sgbx:SgBuildingBlocksIncMember sgbx:CedarAdvanceLlcMember 2023-05-16 2023-05-16 0001023994 sgbx:CashAdvanceAgreementMember sgbx:ObligationsUponFutureReceivablesMember sgbx:SgBuildingBlocksIncMember sgbx:CedarAdvanceLlcMember 2023-06-30 0001023994 us-gaap:ParentMember 2023-06-30 0001023994 us-gaap:NoncontrollingInterestMember 2023-06-30 0001023994 sgbx:WithinOneYearMember 2023-06-30 0001023994 us-gaap:CorporateAndOtherMember us-gaap:OperatingSegmentsMember 2022-01-01 2022-06-30 0001023994 sgbx:CashAdvanceAgreementMember sgbx:ObligationsUponFutureReceivablesMember sgbx:SgBuildingBlocksIncMember sgbx:CedarAdvanceLlcMember 2023-05-16 0001023994 sgbx:PeakOneOpportunityFundLpMember us-gaap:WarrantMember sgbx:WarrantFourMember us-gaap:PrivatePlacementMember 2023-02-07 0001023994 us-gaap:StockOptionMember sgbx:StockBasedCompensationPlanMember 2022-01-01 2022-06-30 0001023994 sgbx:StockBasedCompensationPlanMember us-gaap:RestrictedStockUnitsRSUMember 2022-01-01 2022-06-30 0001023994 sgbx:SalesRevenueGoodNetMember sgbx:CustomerOneMember 2022-01-01 2022-06-30 0001023994 2022-12-31 xbrli:shares xbrli:pure utr:acre utr:sqft iso4217:USD iso4217:USD xbrli:shares sgbx:Director sgbx:Employee sgbx:Vendors sgbx:Customer sgbx:Number sgbx:Segments
 


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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


For the quarterly period ended June 30, 2023

 

OR

 

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

 

For the transition period from ____________ to ____________ 

 

Commission file number: 001-38037

 

SAFE & GREEN HOLDINGS CORP.

(Exact name of registrant as specified in its charter)

 

Delaware

 

95-4463937

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

990 Biscayne Blvd., #501, Office 12Miami, Florida

 

33132

(Address of principal executive offices)

 

(Zip Code)

 

(646) 240-4235

(Registrant’s telephone number, including area code) 

 

Securities registered pursuant to Section 12(b) of the Act: 


Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share 

SGBX

The Nasdaq Stock Market LLC

 

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


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No   


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

 

Large accelerated filer  ☐

Accelerated filer  ☐  

Non-accelerated filer  ☒

Smaller reporting company  


Emerging growth company  


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    


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


As of August 10, 2023 the issuer had a total of [16,016,107shares of the registrant’s common stock, $0.01 par value, outstanding.  


 




SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

FORM 10-​Q


TABLE OF CONTENTS




Page Number

PART I. FINANCIAL INFORMATION
2
ITEM 1. Financial Statements 2

Condensed Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022 2

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited) 3

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited) 4

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (Unaudited) 6

Notes to Condensed Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of Financial Condition and Result of Operations 36
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 47
ITEM 4. Controls and Procedures 47
PART II. OTHER INFORMATION 
48
ITEM 1. Legal Proceedings 48
ITEM 1A. Risk Factors 48
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 51
ITEM 3. Defaults Upon Senior Securities 51
ITEM 4. Mine Safety Disclosures 51
ITEM 5. Other Information 51
ITEM 6. Exhibits 52
SIGNATURES
54

​​​

​​​​​​​​
1


PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements

SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES 

Condensed Consolidated Balance Sheets

 

 

June 30,

2023

 

 

December 31,
 
2022

 

 

 

 (Unaudited)

 

 


 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,601,331

 

 

$

582,776

 

Accounts receivable, net

 

 

646,261

 

 

 

1,280,456

 

Contract assets 

 

 

872,309

 

 

 

36,384

 

Held for sale assets

4,400,361


4,396,826
Inventories

823,135


465,560

Prepaid expenses and other current assets

 

 

983,650

 

 

 

744,211

 

Total current assets

 

 

9,327,047

 

 

 

7,506,213

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

6,990,371

 

 

 

5,608,903

 

Project development costs and other non-current assets

601,228


483,546

Goodwill

 

 

1,309,330

 

 

 

1,309,330

 

Right-of-use asset

2,387,817


4,421,002
Long-term note receivable

876,233


857,534

Intangible assets, net

 

 

1,996,427

 

 

 

1,997,833

 

Deferred contract costs, net

50,981


71,374
Investment in non-marketable securities

700,000


700,000
Investment in and advances to equity affiliates 

3,624,945


3,599,945

Total Assets 

 

$

27,864,379

 

 

$

26,555,680

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

7,026,482

 

 

$

4,009,522

 

Contract liabilities

 

 

168,792

 

 

 

437,271

 

    Lease liability, current maturities

1,076,367


1,225,394
    Assumed liability

20,795


5,795
    Short term notes payable, net

6,815,384


2,648,300

Total current liabilities

 

 

15,107,820

 

 

 

8,326,282

 










Long-term note payable

2,500,000


750,000
Lease liability, net of current maturities

931,399


3,039,836
Total liabilities


18,539,219


12,116,118









Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.00 par value, 5,405,010 shares authorized; none issued or outstanding 

 

 

 

 

 

 

Common stock, $0.01 par value, 25,000,000 shares authorized; 16,016,107 issued and 15,948,789 outstanding as of June 30, 2023 and 12,613,978 issued and 12,590,863 outstanding as of December 31, 2022

 

 

160,161

 

 

 

126,140

 

Additional paid-in capital

 

 

60,189,651

 

 

 

56,173,977

 

Treasury stock, at cost – 67,318 shares as of June 30, 2023 and 23,115 shares as of December 31, 2022

(92,396 )

(49,680 )

Accumulated deficit

 

 

(50,503,232

)

 

 

(41,428,268

)
Total Safe & Green Holdings Corp. stockholders’ equity

9,754,184


14,822,169

Non-controlling interest

 

 

(429,024

)

 

 

(382,607

)
Total stockholders’ equity

9,325,160


14,439,562

Total Liabilities and Stockholders’ Equity

 

$

27,864,379

 

 

$

26,555,680

 

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

2


SAFE & GREEN HOLDINGS CORP. 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,


 

2023
2022

2023

2022

 

(Unaudited)
(Unaudited)

(Unaudited)

(Unaudited)

Revenue:












Construction services $ 5,097,055
$ 4,213,264

$ 10,600,990
$ 5,881,648

Engineering services  




24,320




74,706

Medical revenue




3,317,387




10,203,215

Total  


5,097,055

7,554,971


10,600,990

16,159,569

 














Cost of revenue:














Construction services


5,063,425

4,265,021


10,636,832

5,942,581

Engineering services




10,739




53,892
Medical revenue 


2,507,251




6,904,701

Total   


5,063,425

6,783,011


10,636,832

12,901,174

 














Gross profit (loss)


33,630
771,960


(35,842 )
3,258,395

 














Operating expenses:














Payroll and related expenses


4,184,429

1,211,509


5,498,819

2,355,696

General and administrative expenses


1,357,159

796,812


3,146,115

1,576,833

Marketing and business development expenses


102,900

91,495


190,151

234,830

Total


5,644,488

2,099,816


8,835,085

4,167,359

 














Operating loss


(5,610,858 )
(1,327,856 )

(8,870,927 )
(908,964 )

 














Other income (expense):














Interest expense


(523,971 )
(73,126 )

(811,343 )
(121,975 )

Interest income


9,454

10,979


18,816

23,762
Other income (expense)
569,851

372,407


588,490

491,309

Total


55,334
310,260


(204,037 )
393,096

 














Loss before income taxes  


(5,555,524 )
(1,017,596 )

(9,074,964 )
(515,868 )

Income tax expense   










 














Net loss


(5,555,524 )
(1,017,596 )

(9,074,964 )
(515,868 )

 














Add: net income attributable to noncontrolling interests  

397,764




1,616,669
Net loss attributable to common stockholders of Safe & Green Holdings Corp.  $ (5,555,524 ) $ (1,415,360 )
$ (9,074,964 ) $ (2,132,537 )














Net loss per share attributable to Safe & Green Holdings Corp.














Basic and diluted

$ (0.37 ) $ (0.11 )
$ (0.64 ) $ (0.16 )

 














Weighted average shares outstanding:














Basic and diluted


14,889,077

13,226,451


14,234,301

13,110,821

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

3


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

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


 

 

$0.01 Par Value
Common Stock

 


Additional
Paid-in

 



Treasury


Accumulated

 



Safe & Green Holdings Corp. Stockholders' 

Noncontrolling


Total
Stockholders’

 

 

 

Shares

 


Amount

 


Capital

 



Stock

Deficit

 


Equity


Interests


Equity

 

Balance at March 31, 2023

 


14,302,587

 


$

143,026

 


$

57,605,024

 


$ (49,680 )

$

(44,947,708

)
$ 12,750,662

$ (429,024 )
$ 12,321,638

 

Stock-based compensation

 


 



 


 

2,554,262

 





 

 



2,554,262





2,554,262

 

Treasury stock










(42,716 )




(42,716 )




(42,716 )
Issuance of restricted stock units


1,663,520


16,635


(16,635 )














Common stock issued for services

50,000


500


47,000








47,500





47,500
Noncontrolling interest distribution






















Net loss

 


 



 


 

 





 

(5,555,524

)

(5,555,524 )



(5,555,524 )
Balance at June 30, 2023

16,016,107

$ 160,161

$ 60,189,651

$ (92,396 )
$ (50,503,232 )
$ 9,754,184

$ (429,024 )
$ 9,325,160

































Balance at December 31, 2022  

 


12,613,978

 


$

126,140

 


$

56,173,977

 


$ (49,680 )

$

(41,428,268

)
$ 14,822,169

$ (382,607 )
$ 14,439,562

 

Stock-based compensation







3,210,631








3,210,631





3,210,631
Issuance of restricted common stock

287,512


2,875


434,450








437,325





437,325
Issuance of restricted stock units

3,014,617


30,146


(30,146 )














Common stock issued for services

50,000


500


47,000








47,500





47,500
Issuance of warrants and restricted common stock

50,000


500


353,739








354,239





354,239
Noncontrolling interest distribution



















(46,417 )

(46,417 )
Treasury stock










(42,716 )




(42,716 )




(42,716 )

Net loss

 


 



 


 

 





 

(9,074,964

)

(9,074,964 )




(9,074,964 )

Balance at June 30, 2023

 


16,016,107

 


$

160,161

 


$

60,189,651

 


$ (92,396 )

$

(50,503,232 )
$ 9,754,184

$ (429,024 )
$
9,325,160


  

4


 

SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

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


 

 

$0.01 Par Value
Common Stock

 


Additional
Paid-in

 



Treasury


Accumulated

 



Safe & Green Holdings Corp. Stockholders' 

Noncontrolling


Total
Stockholders’

 

 

 

Shares

 


Amount

 


Capital

 



Stock

Deficit

 


Equity


Interests


Equity

 

Balance at March 31, 2022

 


12,006,873

 


$

120,069

 


$

54,030,291

 


$

$

(33,826,397

)
$ 20,323,963

$ 1,308,640

$ 21,632,603

 

Stock-based compensation

 


 



 


 

631,076

 





 

 



631,076





631,076

 

Issuance of restricted stock units



43,333


433


(433 )














Noncontrolling interest distribution




















(882,000 )

(882,000 )

Net income (loss)

 


 



 


 

 





 

(1,415,360

)

(1,415,360 )

397,764

(1,017,596 )
Balance at June 30, 2022

12,050,206

$ 120,502

$ 54,660,934

$
$ (35,241,757 )
$ 19,539,679

$ 824,404

$ 20,364,083

































Balance at December 31, 2021   

 


11,986,873

 


$

119,869

 


$

53,341,405

 


$

$

(33,109,220

)
$ 20,352,054

$ 1,363,735
$ 21,715,789

 

Stock-based compensation

20,000


200


1,319,962








1,320,162





1,320,162
Issuance of restricted stock units

43,333


433


(433 )














Noncontrolling interest distribution



















(2,156,000 )

(2,156,000 )

Net income (loss) 

 


 



 


 

 





 

(2,132,537

)

(2,132,537 )

1,616,669


(515,868 )

Balance at June 30, 2022

 


12,050,206

 


$

120,502

 


$

54,660,934

 


$

$

(35,241,757 )
$ 19,539,679

$ 824,404
$
20,364,083



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


5



SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Condensed Consolidated Statements of Cash Flows

 

 

For the

Six Months Ended 
June 30, 2023

 


For the

Six Months Ended 
June 30, 2022

 

 

 

(Unaudited)

 


(Unaudited)

 

Cash flows from operating activities:

 

 

 


 

 

Net loss

 

$

(9,074,964

)

$

(515,868

)

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

 

 

 

 


 

 

 

Depreciation expense

 

 

184,964

 


 

210,977

 

Amortization of intangible assets

 

 

93,410

 


 

82,204

 

Amortization of deferred license costs

20,393


20,392
Amortization of debt issuance costs and debt discount

411,811



21,569
Amortization of right of use asset

428,934


232,401
Common stock issued for services

484,825



Bad debt expense

 

 


 

7,024

Interest income on long-term note receivable

 

 

(18,699

)

 

(18,596

)

Stock-based compensation

 

 

3,210,631

 


 

1,280,162

 

Loss on asset disposal




241

Changes in operating assets and liabilities:

 

 

   

 


 

   

 

Accounts receivable

 

 

634,195


 

400,430

Escrow - bond




(4,000,000 )

Contract assets

 

 

(835,925

)

 

41,916

Inventories

(357,575 )

345,705

Prepaid expenses and other current assets

 

 

(239,441

)

 

(276,757

)
Intangible assets

(92,005 )


Accounts payable and accrued expenses

 

 

3,016,961


 

(3,040,292

)

Contract liabilities



(268,479

)

 

332,025

     Due to affiliates



(264,451 )
     Lease liability

(653,213 )

(221,627 )
Assumed liability

15,000



Net cash used in operating activities

 

 

(3,039,177

)

 

(5,362,545

)

 

 

 

 

 


 

 

 

Cash flows from investing activities:

 

 

 

 


 

 

 

Purchase of property, plant and equipment

(526,324 )

(1,751,999 )
Proceeds from sale of equipment




760
Repayment of promissory note



(100,000 )
Project Development Costs

(117,682 )

(726,386 )
Investment in and advances to equity affiliates

(25,000 )

Investment in non-marketable securities



(500,000 )

Net cash used in investing activities

 

 

(669,006

)

 

(3,077,625

)

 

 

 

 

 


 

 

 

Cash flows from financing activities:

 

 

 

 


 

 

 

Repayment of short term notes payable

(2,500,000 )


Proceeds from short-term notes payable and warrants, net of debt issuance costs

6,609,512



Proceeds from long-term notes payable

706,359



Purchase of treasury stock

(42,716 )


Distribution paid to non-controlling interest

(46,417
)

(2,156,000 )

Net cash provided by (used in) financing activities

 

 

4,726,738


 

(2,156,000

)
 

 


 
Net increase/(decrease) in cash and cash equivalents

1,018,555

(10,596,170 )









Cash and cash equivalents - beginning of period

582,776


13,024,381









Cash and cash equivalents - end of period
$ 1,601,331

$ 2,428,211









Supplemental disclosure of non-cash investing and financing activities:







Initial value of lease liability
$

$ 1,801,584

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

6


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)

 

1.

Description of Business 

 

Safe & Green Holdings Corp. (collectively with its subsidiaries, the “Company,” “we”, “us” or “our”) was previously known as SG Blocks, Inc. as well as CDSI Holdings, Inc., a Delaware corporation incorporated on December 29, 1993. On November 4, 2011, CDSI Merger Sub, Inc., the Company’s wholly-owned subsidiary, was merged with and into SG Building Blocks, Inc. (“SG Building,” formerly SG Blocks Inc.) (the “Merger”), with SG Building surviving the Merger and becoming a wholly-owned subsidiary of the Company. The Merger was a reverse merger that was accounted for as a recapitalization of SG Building, as SG Building was the accounting acquirer. Accordingly, the historical financial statements presented are the financial statements of SG Building. 


The Company operates in the following four segments: (i) construction; (ii) medical; (ii) real estate development; and (iv) environmental. The construction segment designs and constructs modular structures built in the Company’s factories. In the medical segment the Company uses its modular technology to provide turnkey solutions to medical testing and treatment and generates revenue from the medical testing. The Company’s real estate development segment builds innovative and green single or multifamily projects in underserved regions nationally using modules (“Modules”) built in one of the Company’s vertically integrated factories. The environmental segment, the newest segment, is a sustainable medical and waste management solution that collects waste and treats waste for safe disposal.

 

The building products developed with the Company's proprietary technology and design and engineering expertise are generally stronger, more durable, environmentally sensitive, and erected in less time than traditional construction methods. The use of the SGBlocks building structure typically provides between four to six points towards the Leadership in Energy and Environmental Design (“LEED”) certification levels, including reduced site disturbance, resource reuse, recycled content, innovation in design and use of local and regional materials. Due to the ability of SGBlocks to satisfy such requirements, the Company believes the products produced utilizing its technology and expertise is a leader in environmentally sustainable construction.


There are three core product offerings that utilize the Company's technology and engineering expertise. The first product offering involves GreenSteel™ modules, which are the structural core and shell of an SGBlocks building. The Company procures the containers, engineer required openings with structural steel enforcements, paint the SGBlocks and then deliver them on-site, where the customer or a customer’s general contractor will complete the entire finish out and installation. The second product offering involves replicating the process to create the GreenSteel product and, in addition, installing selected materials, finishes and systems (including, but not limited to floors, windows, doors, interior painting, electrical wiring and fixtures, plumbing outlets and bathrooms, roofing system) and delivering SGBlocks pre-fabricated containers to the site for a third party licensed general contractor to complete the final finish out and installation. Finally, the third product offering is the completely fabricated and finished SGBlocks building (including but not limited to floors, windows, doors, interior painting, electrical wiring and fixtures, plumbing outlets and bathrooms, roofing systems), including erecting the final unit on site and completing any other final steps. The building is ready for occupancy and/or use as soon as installation is completed. Construction administration and/or project management services are typically included in the Company's product offerings. 


The Company also provides engineering and project management services related to the use and modification of Modules in construction.

 

Construction

During 2020, the Company formed, SG Echo, LLC, a wholly owned subsidiary of the Company. The Company acquired substantially all the assets of Echo DCL (“Echo”), a Texas limited liability company, except for Echo's real estate holdings for which the Company obtained a right of first refusal. Echo is a container/modular manufacturer based in Durant, Oklahoma specializing in the design and construction of permanent modular and temporary modular buildings and was one of the Company's key supply chain partners. Echo caters to the military, education, administration facilities, healthcare, government, commercial and residential customers. This acquisition has allowed the Company to expand its reach for the Modules and offer an opportunity to vertically integrate a large portion of the Company's cost of goods sold, as well as increase margins, productivity and efficiency in the areas of design, estimating, manufacturing and delivery and to become the manufacturer of the Company's core container and modular product offerings. The Company also entered into a joint venture with Clarity Lab Solutions LLC., to provide clinical lab testing related to COVID-19.

Medical

 

As of January 2021 and through the fourth quarter of 2021, the Company’s consolidated financial statements include the accounts of Chicago Airport Testing LLC (“CAT”). The Company had a variable interest in CAT as described further below. CAT is in the business of marketing, selling, distributing, leasing and otherwise commercially exploiting certain products and services in the COVID-19 testing and other medical industry. In addition, during March 2023, the Company formed Safe and Green Medical Corporation. (“SG Medical”).  As of June 30, 2023, SG Medical is inactive.

7


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)


1.

Description of Business (continued)


Real Estate Development

 

In addition, during 2021, the Company formed Safe and Green Development Corporation, formerly, SGB Development Corp. (“SG DevCorp”), which is wholly-owned by the Company. SG DevCorp was formed with the purpose of real property development utilizing the Company's technologies.  SG DevCorp has a minority interest in Norman Berry II Owners LLC and JDI-Cumberland Inlet LLC as described further below.    


Environmental
During 2022, SG Environmental Solutions Corp. (“SG Environmental”) was formed and is focused on biomedical waste removal and will utilize a patented technology that it licenses to shred and disinfect biomedical waste, rendering the waste disinfected, unrecognizable, and of no greater risk to the public health than residential household waste.


2.

Liquidity 


As of June 30, 2023, the Company had cash and cash equivalents of $1,601,331 and a backlog of $2,232,465. See Note 11 for a discussion of construction backlog. Based on our conversations with key customers, the Company anticipates its backlog to convert to revenue over the following period:  



   
2023


Within 1 year
$ 2,232,465

Total Backlog
$ 2,232,465


The Company has incurred losses since its inception, has negative working capital of approximately $5,780,773 and has negative operating cash flows, which has raised substantial doubt about its ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty concerning the Company’s ability to continue as a going concern.     


The Company intends to meet its capital needs from revenue generated from operations and by containing costs, entering into strategic alliances, as well as exploring other options, including the possibility of raising additional debt or equity capital as necessary. There is, however, no assurance the Company will be successful in meeting its capital requirements prior to becoming cash flow positive. The Company does not have any additional sources secured for future funding, and if it is unable to raise the necessary capital at the times it requires such funding, it may need to materially change its business plan, including delaying implementation of aspects of such business plan or curtailing or abandoning such business plan altogether. 


8


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)

 

3.

Summary of Significant Accounting Policies

 

Basis of presentation and principals of consolidation – The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 8 Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. The condensed financial statements and notes should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2022 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission on March 31, 2023. In the opinion of management, all adjustments, consisting of normal accruals, considered necessary for a fair presentation of the interim financial statements have been included. Results for the six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.


Recently adopted accounting pronouncements - New accounting pronouncements implemented by the Company are discussed below or in the related notes, where appropriate.

 

Accounting estimates – The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgements 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 amount of revenues and expenses during the reporting period, together with amounts disclosed in the related notes to the financial statements. The Company's estimates used in these financial statements include, but are not limited to, revenue recognition, stock-based compensation, accounts receivable reserves, inventory valuations, goodwill, the valuation allowance related to the Company’s deferred tax assets, the carrying amount of intangible assets, right of use assets and the recoverability and useful lives of long-lived assets. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.


Operating cycle – The length of the Company’s contracts varies, but is typically between six to twelve months. In some instances, the length of the contract may exceed twelve months. Assets and liabilities relating to contracts are included in current assets and current liabilities, respectively, in the accompanying balance sheets as they will be liquidated in the normal course of contract completion, which at times could exceed one year.


Revenue recognition – The Company determines, at contract inception, whether it will transfer control of a promised good or service over time or at a point in time, regardless of the length of contract or other factors. The recognition of revenue aligns with the timing of when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. To achieve this core principle, the Company applies the following five steps in accordance with its revenue policy: 


                (1)  Identify the contract with a customer


                (2)  Identify the performance obligations in the contract


                (3)  Determine the transaction price

 

                (4)  Allocate the transaction price to performance obligations in the contract

 

                (5)  Recognize revenue as performance obligations are satisfied


On certain contracts, the Company applies recognition of revenue over time, which is similar to the method the Company applied under previous guidance (i.e. percentage of completion). Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress toward complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation indicate a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident. 


9


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)

 

3.

Summary of Significant Accounting Policies (continued)


For product or equipment sales, the Company applies recognition of revenue when the customer obtains control over such goods, which is at a point in time.


The Company entered into a joint venture agreement with Clarity Lab Solutions, LLC (“Clarity Labs”) (the “JV”) in the fourth quarter of 2021. Revenue from the activities of the JV is related to clinical testing services and is recognized when services have been rendered, which is at a point in time.  Included in the consideration the Company expected to be entitled to receive, the Company estimates its contractual allowances, payer denials and price concessions. In addition, the Company formed Chicago Airport Testing, LLC which collected rental revenue from subleasing to a consortium of government entities assisting in COVID-19 testing. For the six months ended June 30, 2023 and 2022, the Company recognized $0 and $10,200,000, respectively related to activities through these two joint ventures, which is included in medical revenue on the accompanying consolidated statements of operations. Due to the ongoing lower affects of COVID-19 restrictions, the JV began to wind down during the fourth quarter of 2022.


Disaggregation of Revenues


The Company’s revenue for the three and six months ended June 30, 2022 was principally derived from construction and engineering contracts related to Modules, and medical revenue derived from lab testing and test kit sales. The Company’s revenues for the three and six months ended June 30, 2023 was principally derived from construction contracts related to Modules The Company's contracts are with customers in various industries. Revenue recognized at a point in time and recognized over time were $0 and $10,600,990, respectively, for the six months ended June 30, 2023. Revenue recognized at a point in time and recognized over time were $10,203,215 and $5,956,354, respectively, for the six months ended June 30, 2022. Revenue recognized at a point in time and recognized over time were $0 and $5,097,055, respectively, for the three months ended June 30, 2023. Revenue recognized at a point in time and recognized over time were $3,317,387 and $4,237,584, respectively, for the three months ended June 30, 2022.

   

The following tables provide further disaggregation of the Company’s revenues by categories:    




Three Months Ended June 30,

Revenue by Customer Type

2023

2022


Construction and Engineering Services:















    Hotel
$ 10,525

%
$ 240,302

3 %

    Multi-Family (includes Single Family)


%


3,988,875

53


    Office

5,086,530


100

%


8,407


Subtotal

5,097,055

100 %

4,237,584

56 %

Medical Revenue:














 Medical (lab testing, kit sales and equipment)


%

3,317,387


44

%


Total revenue by customer type

$

5,097,055


100

%  


$

7,554,971

100

  



Six Months Ended June 30,

Revenue by Customer Type

2023

2022


Construction and Engineering Services:















    Government

$


%
$ 39


%

    Hotel

44,201


%

1,137,547


7 %

    Multi-Family (includes Single Family)


%


86,034

1


    Office

10,556,789


100

%


4,717,750

29


    Retail




%

5,344

%

    Special Use



%

9,640


%

Subtotal

10,600,990

100 %

5,956,354

37 %

Medical Revenue:














 Medical (lab testing, kit sales and equipment)


%

10,203,215


63

%


Total revenue by customer type

$

10,600,990


100

%  


$

16,159,569

100


10


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)

 

3.

Summary of Significant Accounting Policies (continued)

 

Contract Assets and Contract Liabilities 

  

Accounts receivable are recognized in the period when the Company’s right to consideration is unconditional. Accounts receivable are recognized net of an allowance for credit losses. A considerable amount of judgment is required in assessing the likelihood of realization of receivables.

 

The timing of revenue recognition may differ from the timing of invoicing to customers. 

 

Contract assets include unbilled amounts from long-term construction services when revenue recognized under the cost-to-cost measure of progress exceeds the amounts invoiced to customers, as the amounts cannot be billed under the terms of our contracts. Such amounts are recoverable from customers based upon various measures of performance, including achievement of certain milestones, completion of specified units or completion of a contract. Contract assets are generally classified as current within the condensed consolidated balance sheets.

 

Contract liabilities from construction and engineering contracts occur when amounts invoiced to customers exceed revenues recognized under the cost-to-cost measure of progress. Contract liabilities additionally include advanced payments from customers on certain contracts. Contract liabilities decrease as the Company recognizes revenue from the satisfaction of the related performance obligation. Contract liabilities are generally classified as current within the condensed consolidated balance sheet.


Although the Company believes it has established adequate procedures for estimating costs to complete on open contracts, it is at least reasonably possible that additional significant costs could occur on contracts prior to completion. The Company periodically evaluates and revises its estimates and makes adjustments when they are considered necessary.

 

Deferred Contract Costs - Prior to entering into the Exclusive License Agreement (“ELA”) in 2019, the Company was subject to an agreement to construct and develop a certain property (“Original Agreement”). As a result of entering into the ELA in 2019 the property became subject to the ELA and the Company was no longer obliged to its Original Agreement. Upon entering the ELA, the Company had an outstanding accounts receivable balance of $306,143 which was forfeited and recognized this amount as deferred contract costs. This amount was offset by $102,217, which was reimbursement from the licensee for project costs on this project. The Company incurred total deferred contract costs of $203,926The Company considered this amount an incremental cost of obtaining that ELA, because the Company expected to recover those costs through future royalty payments. The Company initially planned to amortize the asset over sixty months, which is the initial term of the ELA because the asset relates to the services transferred to the customer during the contract term. As of June 30, 2023, accumulated amortization related to deferred contract costs amounted to $152,944. During the six months ended June 30, 2023 and 2022, amortization expense relating to the deferred contract costs amounted to $20,393 and $20,392, respectively, and is included in general and administrative expenses on the accompanying consolidated statements of operations. The ELA was terminated on June 15, 2021 but the Company expects to recover the deferred contract costs from the Assignment of Limited Rights Under Membership Interest Redemption Agreement, dated June 15, 2021.


Business Combinations - The Company accounts for business acquisitions using the acquisition method of accounting in accordance with ASC 805 “Business Combinations”, which requires recognition and measurement of all identifiable assets acquired and liabilities assumed at their fair value as of the date control is obtained. The Company determines the fair value of assets acquired and liabilities assumed based upon its best estimates of the acquisition-date fair value of assets acquired and liabilities assumed in the acquisition. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired. Subsequent adjustments to fair value of any contingent consideration are recorded to the Company’s consolidated statements of operations. Costs that the Company incurs to complete the business combination are charged to general and administrative expenses as they are incurred.


Variable Interest EntitiesThe Company accounts for certain legal entities as variable interest entities (“VIE"). When evaluating a VIE for consolidation, the Company must determine whether or not there is a variable interest in the entity. Variable interests are investments or other interests that absorb portions of an entity’s expected losses or receive portions of the entity’s expected returns. If it is determined that the Company does not have a variable interest in the VIE, no further analysis is required and the VIE is not consolidated. If the Company holds a variable interest in a VIE, the Company consolidates the VIE when there is a controlling financial interest in the VIE and therefore are deemed to be the primary beneficiary. The Company is determined to have a controlling financial interest in a VIE when it has both the power to direct the activities of the VIE that most significantly impact the VIE economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to that VIE. This determination is evaluated periodically as facts and circumstances change.

11


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)


3.

Summary of Significant Accounting Policies (continued)


On August 27, 2020 the Company entered into a joint venture agreement with Clarity Lab Solutions, LLC (“Clarity Labs”) (the “JV”).  In consideration and subject to Clarity Lab’s services and commitments and provided the agreement remains valid and in force, and is not terminated, the Company agreed to issue 200,000 restricted shares of the Company’s common stock over a defined vesting period starting in December 1, 2020. The restricted shares of the Company's common stock were not issued to Clarity Labs as certain capital commitments were not met. Clarity Labs is a licensed clinical laboratory that uses specialized molecular testing equipment and that focuses on the diagnosis and treatment of critical diseases, including COVID-19. Clarity Labs was also engaged in the business of manufacturing, importing and distributing various medical tests. Under the JV, the Company and Clarity Labs were to jointly market, sell, and distribute certain products and services (“Clarity Mobile Venture”). The Company has determined it is the primary beneficiary of Clarity Mobile Venture and has thus consolidated the activities in its consolidated financial statements. Due to the ongoing lower affects of COVID-19 restrictions, the JV was wound down during the fourth quarter of 2022.


On January 18, 2021 the Company entered into an operating agreement to form CAT. The purpose of CAT is to market, sell, distribute, lease and otherwise commercially exploit certain products and services in the COVID-19 testing industry.  The Company has determined it is the primary beneficiary of CAT and has thus consolidated the activities in its consolidated financial statements. 


Investment Entities – On May 31, 2021, the Company's subsidiary SG DevCorp agreed to contribute $600,000 to acquire a 50% membership interest in Norman Berry II Owner LLC (“Norman Berry”).  The Company contributed $350,329 and $114,433 of the initial $600,000 in the second quarter and third quarter of 2021 respectively, with the remaining $135,238 funded in the fourth quarter of 2021. The purpose of Norman Berry II Owner LLC is to develop and provide affordable housing in the Atlanta, Georgia metropolitan area.  The Company has determined it is not the primary beneficiary of "Norman Berry" and thus will not consolidate the activities in its consolidated financial statements. The Company will use the equity method to report the activities as an investment in its consolidated financial statements. 


On June 24, 2021, the Company's subsidiary, SG DevCorp, entered into an operating agreement with Jacoby Development for a 10% non-dilutable equity interest for JDI-Cumberland Inlet, LLC (“Cumberland”).  The Company contributed $3,000,000 for its 10% equity interest. During the six months ended June 30, 2023, the Company contributed an additional $25,000The purpose of JDI-Cumberland Inlet, LLC is to develop a waterfront parcel in a mixed-use destination community.  The Company has determined it is not the primary beneficiary of JDI-Cumberland Inlet, LLC and thus will not consolidate the activities in its consolidated financial statements. The Company will use the equity method to report the activities as an investment in its consolidated financial statements.


During the six months ended June 30, 2023, Norman Berry and Cumberland did not have any material earnings or losses as the investments are in development. In addition, management believes there was no impairment as of June 30, 2023.


The approximate combined financial position of the Company’s equity affiliates are summarized below as of June 30, 2023 and December 31, 2022:


Condensed balance sheet information:

June 30, 2023

December 31, 2022

 

 

 

(Unaudited)



(Unaudited)

 

Total assets

$

37,500,000


$

37,500,000


Total liabilities

$

7,100,000

$

7,100,000

Members’ equity

$

30,400,000


$

30,400,000



12


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)


3.

Summary of Significant Accounting Policies (continued)

 

Cash and cash equivalents – The Company considers cash and cash equivalents to include all short-term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less upon acquisition. Cash and cash equivalents totaled $1,601,331 and $582,776 as of June 30, 2023, and December 31, 2022, respectively.


Short-term investment The Company classifies investments consisting of a certificate of deposit with a maturity greater than three months but less than one year as short-term investment.  The Company had no short-term investment as of June 30, 2023 or December 31, 2022, respectively. 

    

Accounts receivable and allowance for credit losses Accounts receivable are receivables generated from sales to customers and progress billings on performance type contracts. Amounts included in accounts receivable are deemed to be collectible within the Company’s operating cycle. The Company recognizes accounts receivable at invoiced amounts. 


The Company adopted ASC 326, Current Expected Credit Losses, on January 1, 2023, which requires the measurement and recognition of expected credit losses using a current expected credit loss model. The allowance for credit losses on expected future uncollectible accounts receivable is estimated considering forecasts of future economic conditions in addition to information about past events and current conditions.


The allowance for credit losses reflects the Company's best estimate of expected losses inherent in the accounts receivable balances. Management provides an allowance for credit losses based on the Company’s historical losses, specific customer circumstances, and general economic conditions. Periodically, management reviews accounts receivable and adjusts the allowance based on current circumstances and charges off uncollectible receivables when all attempts to collect have been exhausted and the prospects for recovery are remote. Recoveries are recognized when they are received. Actual collection losses may differ from our estimates and could be material to our consolidated financial position, results of operations, and cash flows.


Inventory Raw construction materials (primarily shipping containers and fabrication materials) are valued at the lower of cost (first-in, first-out method) or net realizable value. Finished goods and work-in-process inventories are valued at the lower of cost or net realizable value, using the specific identification method. Medical equipment and COVID-19 test and testing supplies are valued at the lower of cost, (first-in, first-out method) or net realizable value. As of June 30, 2023 and December 31, 2022 there was inventory of $823,135 and $465,560, respectively, for construction materials. 


Goodwill – The Company performs its impairment test of goodwill at the reporting unit level each fiscal year, or more frequently if events or circumstances change that would more likely than not reduce the fair value of its reporting unit below its carrying values. The Company performs a goodwill impairment test by comparing the fair value of the reporting unit with its carrying value and recognizes an impairment charge for the amount by which the carrying value exceeds the fair value, not to exceed the total amount of goodwill. The amount by which the carrying value of the goodwill exceeds its implied fair value, if any, is recognized as an impairment loss. There were no impairments during the  six months ended June 30, 2023 or 2022.


Intangible assets Intangible assets consist of $2,766,000 of proprietary knowledge and technology, which is being amortized over 20 years. Included in intangible assets is $68,344 of trademarks, and $207,636 of website costs that are being amortized over 5 years. The Company evaluated intangible assets for impairment during the six months ended June 30, 2023 and 2022 and determined that there are no impairment losses. The accumulated amortization for intangible assets as of June 30, 2023 and 2022 was $1,074,372 and $897,937, respectively. The amortization expense for the six months ended June 30, 2023 and 2022 was $93,410 and $82,204, respectively. The amortization expense for the three months ended June 30, 2023 and 2022 was $47,291 and $40,382, respectively. The estimated amortization expense for the successive five years is as follows:


13


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)


3.

Summary of Significant Accounting Policies (continued)

  


For the year ending December 31:

 

 

 


2023 (remaining)

 

$

96,397

 


2024 

 

 

192,436

 


2025

 

 

189,019

 


2026 

 

 

171,684

 


2027

 

 

168,006

 


Thereafter 

 

 

1,178,886

 


 

 

$

1,996,428

 


Property, plant and equipment – Property, plant and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated lives of each asset. Estimated useful lives for significant classes of assets are as follows: computer and software 3 to 5 years, furniture and other equipment 5 to 7 years, automobiles 2 to 5 years, buildings held for lease 5 to 7 years, and equipment 5 to 29 years. Repairs and maintenance are charged to expense when incurred.


Held For Sale Assets – On May 10, 2021 the Company's subsidiary, SG DevCorp acquired the Lago Vista, Texas property for $3,576,130. Management has implemented a plan to sell this property during 2022, which meets all of the criteria required to classify it as Held for Sale. Including the project development costs associated with Lago Vista of $824,231, the book value is now $4,400,361


Convertible instruments – The Company bifurcates conversion options from their host instruments and accounts for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.


Common stock purchase warrants and other derivative financial instruments – The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provides a choice of net-cash settlement or settlement in the Company’s own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company’s own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if any event occurs and if that event is outside the Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement shares (physical settlement or net-cash settlement). The Company assesses classification of common stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities or equity is required.


Fair value measurements – Financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are carried at cost, which the Company believes approximates fair value due to the short-term nature of these instruments.

 

The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.


14


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)

 

3.

Summary of Significant Accounting Policies (continued)


The Company uses three levels of inputs that may be used to measure fair value:

 

 

Level 1

Quoted prices in active markets for identical assets or liabilities.

 

Level 2

Quoted prices for similar assets and liabilities in active markets or inputs that are observable.

 

Level 3

Inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).


Transfer into and transfers out of the hierarchy levels are recognized as if they had taken place at the end of the reporting period. 


Share-based payments – The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, including non-employee directors, the fair value of a stock option award is measured on the grant date. The fair value amount is then recognized over the period services are required to be provided in exchange for the award, usually the vesting period. The Company recognizes stock-based compensation expense on a graded-vesting basis over the requisite service period for each separately vesting tranche of each award. Stock-based compensation expense to employees and all directors are reported within payroll and related expenses in the consolidated statements of operations. Stock-based compensation expense to non-employees is reported within marketing and business development expense in the condensed consolidated statements of operations.


Income taxes  The Company accounts for income taxes utilizing the asset and liability approach. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes generally represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from the differences between the financial and tax bases of the Company’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted.

 

The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for anticipated tax audit issues based on the Company’s estimate of whether, and the extent to which, additional taxes will be due. If payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the liabilities are no longer determined to be necessary. If the estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result. 

 

Concentrations of credit risk Financial instruments, that potentially subject the Company to concentration of credit risk, consist principally of cash and cash equivalents. The Company places its cash with high credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limits. The Company has not experienced any losses in such account and believes that it is not exposed to any significant credit risk on the account. 
 

With respect to receivables, concentrations of credit risk are limited to a few customers in the construction industry. The Company performs ongoing credit evaluations of its customers’ financial condition and, generally, requires no collateral from its customers other than normal lien rights. At June 30, 2023 and December 31, 2022, 96% and 80%, respectively, of the Company’s gross accounts receivable were due from four and three customers.


Revenue relating to one and two customers represented approximately 96% and 97% of the Company's total revenue for the three months ended June 30, 2023 and 2022, respectively. Revenue relating to one and one customers represented approximately 96% and 90% of the Company's total revenue for the six months ended June 30, 2023 and 2022, respectively.


Cost of revenue relating to two vendors represented approximately 12% of the Company’s total cost of revenue for the three months ended June 30, 2022. Cost of revenue relating to three vendors represented approximately 10% of the Company’s total cost of revenue for the six months ended June 30, 2022. There were no vendors representing 10% or more of the Company’s total cost of revenue for the three or six months ended June 30, 2023. The Company believes it has access to alternative suppliers, with limited disruption to the business, should circumstances change with its existing suppliers.

 

15


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)

 

4.

Accounts Receivable

 

At June 30, 2023 and December 31, 2022, the Company’s accounts receivable consisted of the following: 



 

 

 2023

 

 

2022

 


Billed:

 


 

 


 


   Construction services

$ 785,767

$ 1,310,456

   Other receivable

6,240


115,746

      Total gross receivables

 

 

792,007

 

 

 

1,426,202

 


Less: allowance for credit losses  

 

 

(145,746

)

 

 

(145,746

)

      Total net receivables

 

$

646,261

 

 

$

1,280,456

 


Receivables are evaluated for collectability and allowances for potential losses are established or maintained on applicable receivables.


5.

Contract Assets and Contract Liabilities


Costs and estimated earnings on uncompleted contracts, which represent contract assets and contract liabilities, consisted of the following at June 30, 2023 and December 31, 2022:

 


 

 

2023

 

 

2022

 

 

Costs incurred on uncompleted contracts  

 

$

12,765,232

 

 

$

13,730,177

 


Provision for loss on uncompleted contracts






Estimated earnings to date on uncompleted contracts

 

 

614,825

 

 

(2,160,085

)

Gross contract assets

 

 

13,380,057

 

 

 

11,570,092

 


Less: billings to date

 

 

(12,676,540

)

 

 

(11,970,979

)

    Net contract assets/(liabilities) on uncompleted contracts

 

$

703,517

 

$

(400,887

)


The above amounts are included in the accompanying condensed consolidated balance sheets under the following captions at June 30, 2023 and December 31, 2022. 



 

 

2023

 

 

2022

 

 

Contract assets  

 

$

872,309

 

 

$

36,384

 


Contract liabilities

 

 

(168,792

)

 

 

(437,271

)

 

    Net contract assets (liabilities)

 

$

703,517

 

$

(400,887

)

 

Although management believes it has established adequate procedures for estimating costs to complete on open contracts, it is at least reasonably possible that additional significant costs could occur on contracts prior to completion. The Company periodically evaluates and revises its estimates and makes adjustments when they are considered necessary.


16


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022(Unaudited)


6.

Property, plant and equipment


Property, plant and equipment are stated at cost less accumulated depreciation and amortization and depreciated using the straight-line method over their useful lives. At June 30, 2023 and December 31, 2022, the Company’s property, plant and equipment, net consisted of the following: 

 

 


 

2023

 

 

2022

 

Computer equipment and software    $ 95,700     $ 94,530  
Furniture and other equipment      271,798       271,798  

Leasehold improvements 


17,280


17,280

Equipment and machinery

943,464


943,464

Automobiles

4,638


4,638

Building held for leases

196,416


196,416

Laboratory and temporary units 

1,364,748


1,364,748

Land

1,190,655



1,190,655

Building

969,188




Construction in progress 

2,840,174


2,244,100

 

      Property, plant and equipment

 

 

7,894,061

 

 

 

6,327,629

 

 

Less: accumulated depreciation

 

 

(903,690

)

 

 

(718,726

)

 

      Property, plant and equipment, net 

 

$

6,990,371

 

 

$

5,608,903

 

 

Depreciation expense for the three months ended June 30, 2023 and 2022 amounted to $92,471 and $106,152 respectively. Depreciation expense for the six months ended June 30, 2023 and 2022 amounted to $184,964 and $210,977 respectively.

 

7.

Notes Receivable 


On January 21, 2020, CPF GP 2019-1 LLC (“CPF GP”) issued to the Company a promissory note in the principal amount of $400,000 (the “Company Note”) and issued to Paul Galvin, the Company’s Chairman and CEO, a promissory note in the principal amount of $100,000 (the “Galvin Note”). The transaction closed on January 22, 2021, on which date the Company loaned CPF GP 2019-1 LLC $400,000 and Mr. Galvin personally loaned CPF GP $100,000 on behalf of the Company. The Company Note and Galvin Note were issued pursuant to that certain Loan Agreement and Promissory Note, dated October 3, 2019 (the “Loan Agreement”), as amended on October 15, 2019 and November 7, 2019 by and between CPF GP and the Company, and bear interest at five percent (5%) per annum, payable, together with the unpaid principal amount of the promissory notes, on the earlier of the July 31, 2023 maturity date or upon the liquidation, redemption sale or issuance of a dividend upon the LLC interests in CPF MF 2019-1 LLC, a Texas limited liability company of which CPF GP is the general partner; provided, that the terms of the Galvin Note provide that all interest payments due to Mr. Galvin under the Galvin Note shall be paid directly to, and for the benefit of, the Company.


In April 2020, CPF GP issued to the Company a promissory note in the principal amount of $250,000 (the “Company Note 2”). The transaction closed on April 15, 2021, on which date the Company loaned CPF GP 2019-1 LLC $250,000. The Company Note was issued pursuant to that certain Loan Agreement and Promissory Note, dated October 3, 2019 (the “Loan Agreement 2”), as amended on October 15, 2019 and November 7, 2019 by and between the CPF GP and the Company, and bear interest at five percent (5%) per annum, payable, together with the unpaid principal amount of the promissory notes, on the earlier of the July 31, 2023 maturity date or upon the liquidation, redemption sale or issuance of a dividend upon the LLC interests in CPF MF 2019-1 LLC, a Texas limited liability company of which CPF GP is the general partner.


During the year ended December 31, 2022, the Galvin Note was assigned to the Company and the principal amount of $100,000 was paid to Mr. Galvin. The Company has a promissory note in the principal amount of $100,000 (the "Company Note 3") and the assignment occurred in January 2022. The promissory notes are unaffected by the Settlement and Mutual Release Agreement and remain in effect and outstanding in accordance with the terms of the notes evidencing such loans. 

 

17


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)

 


8.

Notes Payable

On July 14, 2021, SG DevCorp, a subsidiary of the Company, issued a Real Estate Lien Note, in the principal amount of $2,000,000 (the “Short-Term Note”), secured by a Deed of Trust, dated July 14, 2021 (the “Deed of Trust”), on the Company's 50+ acre Lake Travis project site in Lago Vista, Texas and a related Assignment of Leases and Rents, dated July 8, 2021 (“Assignment of Rents”), for net loan proceeds of approximately  $1,948,234 after fees. The Short-Term Note has a term of one (1) year, provides for payments of interest only at a rate of twelve percent (12%) per annum and may be prepaid without penalty commencing nine (9) months after its issuance date. If the Short-Term Note is prepaid prior to nine (9) months after its issuance date, a 0.5% prepayment penalty is due. The Company capitalized $20,000 in interest charges and $4,134 in debt issuance costs during the year ended December 31, 2022 related to the Lago Vista project in accordance with ASC 835-20. On July 14, 2022, the Company entered into a renewal and extension of the Short-Term Note, with a maturity date of January 14, 2023 and all other terms remaining the same.

On September 8,2022, the Company entered into a Second Real Estate Lien Note, in the principal amount of $500,000, with similar terms to the Short-Term Note (“Second Short-Term Note”). The Second Short-Term Note had a maturity date of January 14, 2023.

During January 2023, the Short-Term Note and Second Short-Term Note were extended with a maturity date of February 1, 2024.

On March 31, 2023, LV Peninsula Holding LLC (“LV Peninsula”), a Texas limited liability company and wholly owned subsidiary of SG DevCorp, pursuant to a Loan Agreement, dated March 30, 2023 (the “Loan Agreement”), issued a promissory note, in the principal amount of $5,000,000 (the “LV Note”), secured by a Deed of Trust and Security Agreement, dated March 30, 2023 (the “Deed of Trust”) on the Lake Travis project site in Lago Vista, Texas, a related Assignment of Contract Rights, dated March 30, 2023 (“Assignment of Rights”), on our project site in Lago Vista, Texas and McLean site in Durant, Oklahoma and a Mortgage, dated March 30, 2023 (“Mortgage”), on our site in Durant, Oklahoma.

The proceeds of the LV Note were used to pay off the Short-Term Note and Second Short-Term Note. The LV Note requires monthly installments of interest only, is due on April 1, 2024 and bears interest at the prime rate as published in the Wall Street Journal (currently 8.0%) plus five and 50/100 percent (5.50%), currently equaling 13.5%; provided that in no event will the interest rate be less than a floor rate of 13.5%. The LV Peninsula obligations under the LV Note have been guaranteed by SG DevCorp pursuant to a Guaranty, dated March 30, 2023 (the “Guaranty”), and may be prepaid by LV Peninsula at any time without interest or penalty. The Company incurred $406,825 of debt issuance costs and remitted $675,000 in prepaid interest in connection with the LV Note.

On October 29, 2021, SG Echo, a subsidiary of the Company, entered into a Loan Agreement (“Loan Agreement”) with the Durant Industrial Authority (the “Authority”) pursuant to which it received $750,000 to be used for renovation improvements related to the Company's second manufacturing facility and issued to the Authority a non-interest bearing Forgivable Promissory Note in the principal amount of $750,000 (the “Forgivable Note”). The Forgivable Note is due on April 29, 2029 and guaranteed by the Company, provided, if no event of default has occurred under the Forgivable Note or Loan Agreement, one-third (1/3) of the balance of the Forgivable Note will be forgiven on April 29, 2027, one-half (1/2) of the balance of the Forgivable Note will be forgiven on April 29, 2028, and the remainder of the balance of the Forgivable Note will be forgiven on April 29, 2029. The Loan Agreement includes a covenant by SG Echo to employ a minimum of 75 full-time employees in Durant Oklahoma and pay them no less than 1.5 times the federal minimum wage, and provides SG Echo 24 months to comply with the provision.

In August 2022, SG DevCorp entered into a $148,300 promissory note (“2022 Note”) to purchase property. The 2022 Note bears annual interest at the rate of 9.75%, with interest payments due  monthly until its maturity on September 1, 2023.The 2022 Note is secured by the underlying property.

On February 7, 2023, the Company closed a private placement offering (the “Offering”) of One Million One Hundred Thousand Dollars ($1,100,000.00) in principal amount of the Company’s 8% convertible debenture (the “Debenture”) and a warrant (the “Peak Warrant”) to purchase up to Five Hundred Thousand (500,000) shares of the Company’s common stock, to Peak One Opportunity Fund, L.P. (“Peak One”). Pursuant to a Securities Purchase Agreement, dated February 7, 2023 (the “Purchase Agreement”), the Debenture was sold to Peak One for a purchase price of $1,000,000, representing an original issue discount of ten percent (10%).

In connection with the Offering the Company paid $15,000 as a non-accountable fee to Peak One to cover its accounting fees, legal fees and other transactional costs incurred in connection with the transactions contemplated by the Purchase Agreement and issued 50,000 shares of its restricted common stock (the “Commitment Shares”) to Peak One Investments, LLC (“Investments”), the general partner of Peak One.


18


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)


8.

Notes Payable (continued)


The Debenture matures twelve months from its date of issuance and bears interest at a rate of 8% per annum payable on the maturity date. The Debenture is convertible, at the option of the holder, at any time, into such number of shares of common stock of the Company equal to the principal amount of the Debenture plus all accrued and unpaid interest at a conversion price equal to $1.50 (the “Conversion Price”), subject to adjustment for any stock splits, stock dividends, recapitalizations and similar events and in the event the Company, at any time while the Debenture is outstanding, issues, sells or grants any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues common stock or other securities convertible into, exercisable for, or otherwise entitle any person the right to acquire, shares of common stock, other than with respect to an Exempt Issuance (as defined in the Debenture), at an effective price per share that is lower than the then Conversion Price. In the event of any such anti-dilutive event, the Conversion Price will be reduced at the option of the holder to such lower effective price of the dilutive event, subject to a floor price of $0.40 per share, unless and until the Company obtains shareholder approval for any issuance below such floor price.


The Debenture is redeemable by the Company at a redemption price equal to 110% of the sum of the principal amount to be redeemed plus accrued interest, if any. So long as the Debenture is outstanding, upon any issuance by the Company of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the holder of the Debenture, then the Company shall notify the holder of such additional or more favorable term and such term, at holder’s option, will become a part of the transaction documents with the holder. In no event will the holder be entitled to convert any portion of the Debenture in excess of that portion which would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the outstanding shares of common stock, unless the holder delivers to the Company written notice at least sixty-one (61) days prior to the effective date of such notice that the provision be adjusted to 9.99%.


While the Debenture is outstanding, if the Company receives cash proceeds of more than $1,000,000 (“Minimum Threshold”) in the aggregate from any source or series of related or unrelated sources, the Company shall, within two (2) business days of Company’s receipt of such proceeds, inform the holder of such receipt, following which the holder shall have the right in its sole discretion to require the Company to immediately apply up to 50% of all proceeds received by the Company (from any source except with respect to proceeds from the issuance of equity or debt to officers and directors of the Company) after the Minimum Threshold is reached to repay the outstanding amounts owed under the Debenture.


Upon the occurrence of certain events of default specified in the Debenture, such as a failure to honor a conversion request, failure to maintain the Company’s listing, the Company’s failure to comply with its obligations under Securities Exchange Act of 1934, as amended, a breach of the Company’s representations or covenants, or the failure obtain shareholder approval within 60 days after the Exchange Cap (as defined) is reached, as amended, 110% of all amounts owed to holder under the Debenture, together with default interest at 18% per annum if any, shall then become due and payable.


The Peak Warrant expires five years from its date of issuance. The Peak Warrant is exercisable, at the option of the holder, at any time, for up to 500,000 of shares of common stock of the Company at an exercise price equal to $2.25 (the “Exercise Price”), subject to adjustment for any stock splits, stock dividends, recapitalizations and similar events and in the event the Company, at any time while the Peak Warrant is outstanding, issues, sells or grants any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues common stock or other securities convertible into, exercisable for, or otherwise entitle any person the right to acquire, shares of common stock, other than with respect to an Exempt Issuance, at an effective price per share that is lower than the then Exercise Price. In the event of any such anti-dilutive event, the Exercise Price will be reduced at the option of the holder to such lower effective price of the dilutive event, subject to a floor price of $0.40 per share, unless and until the Company obtains shareholder approval for any issuance below such floor price.


The number of shares of the Company’s common stock that may be issued upon conversion of the Debenture and exercise of the Peak Warrant, and inclusive of the Commitment Shares and any shares issuable under and in respect of the equity purchase agreement, dated February 7, 2023 between the Company and Peak One described below, is subject to an exchange cap (the “Exchange Cap”) of 19.99% of the outstanding number of shares of the Corporation’s common stock on the closing date, 2,760,675 shares, unless shareholder approval to exceed the Exchange Cap is approved.


19


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)

 

8.

Notes Payable (continued)


The Company incurred $80,000 in debt issuance costs in connection with the Debenture. In addition, the initial fair value of the Peak Warrant amounted to $278,239 and the fair value of the restricted shares amounted to $76,000, both of which have been recorded as a debt discount and will be amortized over the effective rate method. For the six months ended June 30, 2023, the Company recognized amortization of debt issuance costs and debt discount of $0 and $0, respectively. For the three months ended June 30, 2023, the Company recognized amortization of debt issuance costs and debt discount of $20,000 and $113,560, respectively. For the six months ended June 30, 2023, the Company recognized amortization of debt issuance costs and debt discount of $33,333 and $189,266, respectively. As of June 30, 2023, the unamortized debt issuance costs and debt discount amounted to $46,667 and $264,793, respectively. 

 

On May 16, 2023, SG Building, entered into a Cash Advance Agreement (“Cash Advance Agreement”) with Cedar Advance LLC (“Cedar” pursuant to which SG Building sold to Cedar $710,500 of its future receivables for a purchase price of $500,000. Cedar is expected to withdraw $25,375 a week directly from SG Building, until the $710,500 due to Cedar is paid in full. In the event of a default (as defined in the Cash Advance Agreement), Cedar, among other remedies, can demand payment in full of all amounts remaining due under the Cash Advance Agreement. SG Building’s obligations under the Cash Advance Agreement have been guaranteed by SG Echo.SG Building incurred $25,000 in debt issuance costs in connection with the Cash Advance Agreement. As of June 30, 2023, the unamortized debt issuance costs amounted to $25,000

 

In connection with the exercise of its option to acquire 19 acres of land and the approximately 56,775 square foot facility located at 101 Waldron Road in Durant Oklahoma (the “Premises”), on June 8, 2023, SG Echo issued a secured commercial promissory note, dated June 1, 2023 (the “Secured Note”), in the principal amount of $1,750,000 with SouthStar Financial, LLC, a South Carolina limited liability company (“SouthStar”), and entered into a Non-Recourse Factoring and Security Agreement, dated June 1, 2023 (the “Factoring Agreement”), with SouthStar providing for its purchase from SG Echo of up to $1,500,000 of accounts receivable, subject to reduction by South Star (the “Facility Amount”).

 

The Secured Note bears interest at 23% per annum and is due and payable on June 1, 2025. The Secured Note is secured by a mortgage (the “Mortgage”) on the Premises and secured by a Security Agreement, dated June 1, 2023 (the “Security Agreement”), pursuant to which SG Echo granted to SouthStar first priority security interest in all of SG Echo’s presently-owned and hereafter-acquired personal and fixture property, wherever located, including, without limitation, all accounts, goods, chattel paper, inventory, equipment, instruments, investment property, documents, deposit accounts, commercial tort claims, letters-of-credit rights, general intangibles including payment intangibles, patents, software trademarks, trade names, customer lists, supporting obligations, all proceeds and products of the foregoing. SG Echo paid to SouthStar an origination fee in the amount of 3% of the face amount of the Secured Note. Upon the occurrence of an Event of Default (as defined in the Secured Promissory Note), the default interest rate will be 28% per annum, or the maximum legal amount provided by law, whichever is greater.

 

The Factoring Agreement provides that upon acceptance of an account receivable for purchase SouthStar will pay to SG Echo eighty percent (80%) of the face amount of the account receivable, or such lesser percentage as agreed by the parties. SG Echo will also pay to SouthStar one and 95/100 percent (1.95%) of the face amount of the accounts receivable for the first twenty-five (25) day period after payment for the accounts receivable is transmitted to SouthStar plus one and 25/100 percent (1.25%) for each additional fifteen (15) day period or part thereof, calculated from the date of purchase until payments received by SouthStar in collected funds on the purchased accounts receivable equals the purchase price of the accounts receivable, plus all charges due SouthStar from SG Echo at the time. An additional one and 50/100 percent (1.50%) per fifteen (15) day period will be charged for invoices exceeding sixty (60) days from advance date. The Factoring Agreement provides that SG Echo may require additional funding from SouthStar (an “Overadvance”) and SouthStar may provide the Overadvance in its sole discretion. In the event of an Overadvance, SG Echo will pay SouthStar an amount equal to three and 90/100 percent (3.90%) of the amount of the Overadvance for the first twenty-five (25) day period after the Overadvance is transmitted to SouthStar plus two and 50/100 percent (2.50%) for each additional fifteen (15) day period or part thereof until payments received by SouthStar in collected funds equals the amount of the Overadvance, plus all charges due SouthStar from SG Echo at the time.

 

The Factoring Agreement provides that SG Echo will also pay a transactional administrative fee of $50.00 for each new account debtor submitted to it and an fee equal to 0.25% of the face amount of all purchased accounts receivable for the handling, collecting, mailing, quality assuring, insuring the risk, transmitting, and performing certain data processing services with respect to the maintenance and servicing of the purchased accounts.

 

20


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)

 

8.

Notes Payable (continued)


As security for the payment and performance of SG Echo’s present and future obligations to SouthStar under the Factoring Agreement, SG Echo granted to SouthStar a first priority security interest in all of SG Echo’s presently-owned and hereafter-acquired personal and fixture property, wherever located, including, without limitation, all accounts, goods, chattel paper, inventory, equipment, instruments, investment property, documents, deposit accounts, commercial tort claims, letters-of-credit rights, general intangibles including payment intangibles, patents, software trademarks, trade names, customer lists, supporting obligations, all proceeds and products of the foregoing.

 

The Factoring Agreement has an initial term of thirty-six (36) months from the first day of the month following the date the first purchased accounts receivable is purchased. Unless terminated by SG Echo, not less than sixty (60) but not more than ninety (90) days before the end of the initial term, the Factoring Agreement will automatically extend for an additional thirty-six (36) months. SG Echo shall be required to provide the same not less than sixty (60) but not more than ninety (90) days notice during any and all renewal terms in order to terminate the Factoring Agreement, and if no notice is provided, the renewal term will extend for an additional thirty-six (36) month period.

 

If SouthStar has not purchased accounts receivable in a quarterly period during any initial or renewal term which exceed fifty percent (50%) of the Facility Amount per calendar quarter, in which $250,000 of the purchased accounts each month must be with ATCO Structures & Logistics (USA) Inc. (“Minimum Amount”), the Factoring Agreement provides that SG Echo will pay to SouthStar, on demand, an additional amount equal to what the charges provided for elsewhere in the Factoring Agreement would have been on the Minimum Amount assuming the number of days from the date of purchase of the Minimum Amount until receipt of payment of the Minimum Amount is thirty one (31) days, less the actual charges paid by SG Echo to SouthStar during such period.

 

Pursuant to a Secured Continuing Corporate Guaranty, dated June 8, 2023 (the “Corporate Guaranty”), the Company has guaranteed SG Echo’s obligations to SouthStar under the Secured Note and Factoring Agreement.

 

Pursuant to a Cross-Default and Cross Collateralization Agreement (the “Cross Default Agreement”), effective June 8, 2023, between SouthStar, SG Echo and the Company, SG Echo’s obligations under the Secured Note and Factoring Agreement are cross-defaulted and cross-collateralized such that any event of default under the Secured Note shall constitute an event of default under the Factoring Agreement at SouthStar’s election (and vice versa, any event of default under the Factoring Agreement shall constitute an event of default under the Secured Note at SouthStar’s election) and any collateral pledged to secure SG Echo’s obligations under the Secured Note shall also secure SG Echo’s obligations under the Factoring Agreement (and vice versa).

 

SG Echo incurred $60,120 in debt issuance costs in connection with the Secured Note. For the three months ended June 30, 2023, the Company recognized amortization of debt issuance costs of $2,505. As of June 30, 2023, the unamortized debt issuance costs amounted to $57,615.

 

On June 23 2023, SG DevCorp, entered into a Loan Agreement (the “BCV Loan Agreement”) with a Luxembourg-based specialized investment fund, BCV S&G DevCorp (“BCV S&G”), for up to $2,000,000 in proceeds, of which it has raised $1,250,000 to date. The Loan Agreement provides that the loan provided thereunder will bear interest at 14% per annum and mature on December 1, 2024. The loan may be repaid by SG DevCo at any anytime following the twelve-month anniversary of its issue date. The loan is secured by 1,999,999 shares of SG DevCorp’s common stock (the “Pledged Shares”), which were pledged by the Company pursuant to an escrow agreement (the “Escrow Agreement”) with American Stock Transfer & Trust Company, LLC, SG DevCorp’s transfer agent, and which represent 19.99% of SG DevCorp’s outstanding shares. The fees associated with the issuance include $70,000 paid to BCV S&G for the creation of the BCV Loan Agreement and $27,500 payable to BCV S&G per annum for maintaining the BCV Loan Agreement. Additionally, $37,500 in broker fees has been paid to Bridgeline Capital Partners S.A. on the principal amount raised of $1,250,000 raised to date. As of June 30, 2023, the Company has paid $35,000 in debt issuance costs. The BCV Loan Agreement further provides that if SG DevCorp’s shares of common stock are not listed on The Nasdaq Stock Market on before August 30, 2023 or if following such listing the total market value of the Pledged Shares falls below twice the face value of the loan, the loan will be further secured by SG DevCorp’s St. Mary’s industrial site, consisting of 29.66 acres and a proposed manufacturing facility in St. Mary’s, Georgia. For the three months ended June 30, 2023, the Company recognized amortization of debt issuance costs of $5,000. As of June 30, 2023, the unamortized debt issuance costs amounted to $30,000.


21


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)


9.

Leases

The Company leases an office, a manufacturing plant and certain equipment under non-cancellable operating lease agreements. The leases have remaining lease terms ranging from one year to ten years

Supplemental balance sheet information related to leases is as follows:  


Balance Sheet Location
June 30, 2023


Operating Leases




Right-of-use assets, net
$
704,090








Current liabilities Lease liability, current maturities 

307,077

Non-current liabilities  Lease liability, net of current maturities
397,013

Total operating lease liabilities
$ 704,090







Finance Leases




Right-of-use assets
$ 1,683,726







Current liabilities Lease liability, current maturities
769,290

Non-current liabilities Lease liability, net of current maturities 
534,386

Total finance lease liabilities 
$ 1,303,676







Weighted Average Remaining Lease Term






Operating leases

2.25 years


Finance leases

1.51 years

Weighted Average Discount Rate 





Operating leases

3%

Finance leases

3%


As the leases do not provide an implicit rate, the Company used an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments, which is reflective of the specific term of the leases and economic environment of each geographic region. 


Anticipated future lease costs, which are based in part on certain assumptions to approximate minimum annual rental commitments under non-cancellable leases, are as follows: 

 


Year Ending December 31:
Operating

Financing

Total


2023 (remaining)
$ 162,000
$ 402,614
$ 564,614

2024

324,000

801,869

1,125,869

2025

243,000

133,645

376,645

Total lease payments

729,000

1,338,128

2,067,128

Less: Imputed interest

24,910

34,452

59,362

Present value of lease liabilities
$ 704,090
$ 1,303,676
$ 2,007,766

 

22


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)

 

10.

Net Income (Loss) Per Share


Basic net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of the common shares issuable upon the exercise of stock options and warrants. Potentially dilutive common shares are excluded from the calculation if their effect is antidilutive. 

  

At June 30, 2023, there were options and warrants of 36,436 and 2,525,020 respectively, outstanding that could potentially dilute future net income per share. Because the Company had a net loss as of June 30, 2023, it is prohibited from including potential common shares in the computation of diluted per share amounts. Accordingly, the Company has used the same number of shares outstanding to calculate both the basic and diluted loss per share. At June 30, 2022, there were restricted stock units, options and warrants of 757,450, 36,436 and 2,025,520 shares of common stock, respectively, outstanding that could potentially dilute future net income per share.


11.

Construction Backlog

 

The following represents the backlog of signed construction and engineering contracts in existence at June 30, 2023 and December 31, 2022, which represents the amount of revenue the Company expects to realize from work to be performed on uncompleted contracts in progress and from contractual agreements in effect at June 30, 2023 and December 31, 2022, respectively, on which work has not yet begun:


 

 

 

2023

 

 

2022

 

 

Balance - beginning of period

 

$

6,810,762

 

 

$

3,217,909

 

 

New contracts and change orders during the period

 

 

6,022,693

 

 

 

13,803,733

 


Adjustments and cancellations, net



1,086,301

 

Subtotal  

 

 

12,833,455

 

 

 

18,107,943

 

 

Less: contract revenue earned during the period

 

 

(10,600,990

)

 

 

(11,297,181

)

 

Balance - end of period

 

$

2,232,465


 

$

6,810,762

 


The Company’s remaining backlog as of June 30, 2023 represents the remaining transaction price of firm contracts for which work has not been performed and excludes unexercised contract options. 


The Company expects to satisfy its backlog which represents the remaining unsatisfied performance obligation on contracts as of June 30, 2023 over the following period:   





2023


Within 1 year 
$ 2,232,465

1 to 2 years




Total Backlog
$ 2,232,465


Although backlog reflects business that is considered to be firm, cancellations, deferrals or scope adjustments may occur. Backlog is adjusted to reflect any known project cancellations, revisions to project scope and cost and project deferrals, as appropriate.


23


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)


12.

Stockholders’ Equity 

Public Offerings – 

In October 2021, the Company closed a registered direct offering and concurrent private placement of its common stock (the "October Offering") that the Company effected pursuant to the Securities Purchase Agreement that it entered into on October 25, 2021 with an institutional investor and received gross proceeds of $11.55 million. Pursuant to the terms of the Securities Purchase Agreement, the Company issued to the investor (A) in a registered direct offering (i) 975,000 shares (the “Public Shares”) of its common stock, and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 2,189,384 shares (the “Pre-Funded Warrant Shares”) of common stock and (B) in a concurrent private placement, Series A warrants to purchase up to 1,898,630 shares (the “Common Stock Warrant Shares”) of common stock (the “Common Stock Warrants,” and together with the Public Shares and the Pre-Funded Warrants, the “Securities”) (the “Offering The Pre-Funded Warrants were immediately exercisable at a nominal exercise price of $0.001 and all Pre-Funded Warrants sold have been exercised. The Common Stock Warrants have an exercise price of $4.80 per share, are exercisable upon issuance and will expire five years from the date of issuance. A.G.P./Alliance Global Partners (the “Placement Agent”) acted as the exclusive placement agent for the transaction pursuant to that certain Placement Agency Agreement, dated as of October 25, 2021, by and between the Company and the Placement Agent (the “Placement Agency Agreement”), the Placement Agent received (i) a cash fee equal to seven percent (7.0%) of the gross proceeds from the placement of the Securities sold by the Placement Agent in the Offering and (ii) a non-accountable expense allowance of one half of one percent (0.5%) of the gross proceeds from the placement of the Gross Proceeds Securities sold by the Placement Agent in the Offering. The Company also reimbursed the Placement Agent’s expenses up to $50,000 upon closing the Offering. The net proceeds to the Company after deducting the Placement Agent’s fees and the Company’s estimated offering expenses was approximately $10.5 million. 

 

Securities Purchase Agreement – In April 2019, the Company issued 42,388 shares of its common stock at $22.00 per share through a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors and accredited investors. Concurrently with the sale of the common stock, pursuant to the Purchase Agreement, the Company also sold common stock purchase warrants to such investors to purchase up to an aggregate of 42,388 shares of common stock. The Company incurred $379,816 in issuance costs from the offering and issued 4,239 warrants to the underwriters. The warrants are further discussed in Note 14.

 

Underwriting Agreement – In August 2019, the Company issued 45,000 shares of its common stock at $17.00 per share pursuant to the terms of an Underwriting Agreement (the “Underwriting Agreement”) to the public. The Company incurred $181,695 in issuance costs from the offering and issued warrants to purchase 2,250 shares of common stock to the underwriter. The warrants are further discussed in Note 14.


Equity Purchase Agreement - On February 7, 2023, the Company entered into an Equity Purchase Agreement (the “EP Agreement”) and related Registration Rights Agreement (the “Rights Agreement”) with Peak One, pursuant to which the Company has the right, but not the obligation, to direct Peak One to purchase up to $10,000,000.00 (the “Maximum Commitment Amount”) in shares of the Company’s common stock in multiple tranches upon satisfaction of certain terms and conditions contained in the EP Agreement and Rights Agreement which includes but is not limited to filing a registration statement with the Securities and Exchange Commission and registering the resale of any shares sold to Peak One. Further, under the EP Agreement and subject to the Maximum Commitment Amount, the Company has the right, but not the obligation, to submit a Put Notice (as defined in the EP Agreement) from time to time to Peak One (i) in a minimum amount not less than $25,000.00 and (ii) in a maximum amount up to the lesser of ( (a) $750,000.00 or (b) 200% of the Average Daily Trading Value (as defined in the EP Agreement).


24


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)


12.

Stockholders’ Equity (continued)


In connection with the EP Agreement, the Company  issued to Investments, the general partner of Peak One, 75,000 shares of its common stock, and agreed to file a registration statement registering the common stock issued or issuable to Peak One and Investments under the Agreement for resale with the Securities and Exchange Commission within 60 calendar days of the Agreement, as more specifically set forth in the Rights Agreement. The registration statement was declared effective on April 14, 2023

 

The obligation of Peak One to purchase the Company’s common stock under the EP Agreement begins on the date of the EP Agreement, and ending on the earlier of (i) the date on which Peak One shall have purchased common stock pursuant to the EP Agreement equal to the Maximum Commitment Amount, (ii) thirty six (36) months after the date of the EP Agreement, (iii) written notice of termination by the Company or (iv) the Company’s bankruptcy or similar event (the “Commitment Period”), all subject to the satisfaction of certain conditions set forth in the EP Agreement.

  

During the Commitment Period, the purchase price to be paid by Peak One for the common stock under the EP Agreement will be 97% of the Market Price, which is defined as the lesser of the (i) closing bid price of the common stock on its principal market on the trading day immediately preceding the respective Put Date (as defined in the Agreement), or (ii) lowest closing bid price of the common stock during the Valuation Period (as defined in the Agreement), in each case as reported by Bloomberg Finance L.P or other reputable source designated by Peak One.

 

The EP Agreement and the Rights Agreement contain customary representations, warranties, agreements and conditions to completing future sale transactions, indemnification rights and obligations of the parties. Among other things, Peak One represented to the Company, that it is an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act, and the Company sold the securities in reliance upon an exemption from registration contained in Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder.


Common Stock Issued for Services – During the six months ended June 30, 2023, the Company issued 337,512 shares of common stock for services provided. The value of the shares amounted to $484,825.


Restricted Stock Units – During the six months ended June 30, 2023, the Company issued 3,014,617 shares of common stock for previously vested restricted stock units. During the six months ended June 30, 2022, the Company issued 43,333 shares of common stock for previously vested restricted stock units.


25


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)


13.

Segments and Disaggregated Revenue 



 

 

Construction

 


Medical

Development



Corporate and support

 


Consolidated

 


Six Months Ended June 30, 2023





















Revenue 

$ 10,600,990

$

$

$

$ 10,600,990

Cost of revenue



10,636,832











10,636,832

Operating expenses



176,987


897


1,217,376


7,439,825


8,835,085

Operating loss

(212,829 )

(897 )

(1,217,376 )

(7,439,825 )

(8,870,927 )

Other income (expense)

252,193




(475,046 )

18,816

(204,037 )

Income (loss) before income taxes

39,364

(897 )

(1,692,422 )

(7,421,009 )

(9,074,964 )

Net income attributable to non-controlling interest















Net income (loss) attributable to common stockholders of Safe & Green Holdings Corp.
$ 39,364
$ (897 )
$ (1,692,422 )
$ (7,421,009 )
$ (9,074,964 )























Total assets
$ 10,546,140

$ (897 )
$ (10,929,782 )
$ 6,383,877

$ 5,999,338

Depreciation and amortization
$
710,578

$

$

$

$ 710,578

Capital expenditures
$

$

$

$

$


























Construction




Medical




Development



Corporate and support




Consolidated



Six Months Ended June 30, 2022 

 



 







  





 






Revenue
$ 5,956,354

$ 10,203,215

$

$

$ 16,159,569

Cost of revenue



5,996,473


6,904,701








12,901,174

Operating expenses



207,646


27,065


597,856


3,334,792


4,167,359

Operating income (loss)

(247,765 )

3,271,449


(597,856 )

(3,334,792 )

(908,964 )

Other income (expense)

490,903



(121,569 )

23,762

393,096

Income (loss) before income taxes

 


243,138



3,271,449


(719,425

)

 

(3,311,030

)

 

(515,868 )

Net income attributable to non-controlling interest

 


 



1,616,669








1,616,669

Net income (loss) attributable to common stockholders of Safe & Green Holdings Corp.
$ 243,138
$ 1,654,780

$ (719,425 )
$ (3,311,030 )
$ (2,132,537 )























Total assets

$ 10,907,679

$ 2,322,505

$
8,902,271

$
10,007,048

$
32,139,503

Depreciation and amortization
$ 286,755

$ 26,820

$ 21,569

$

$ 335,144

Capital expenditures
$ 821,400

$ 28,621

$ 893,785

$ 8,193

$ 1,751,999

Inter-segment revenue elimination
$

$

$

$
$


26


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)

 

13.

Segments and Disaggregated Revenue (continued)



 

 

Construction

 


Medical

Development



Corporate and support

 


Consolidated

 


Three Months Ended June 30, 2023





















Revenue 

$ 5,097,055

$

$

$

$ 5,097,055

Cost of revenue



5,063,425











5,063,425

Operating expenses



58,428





496,463


5,089,597


5,644,488

Operating loss

(24,798 )



(496,463 )

(5,089,597 )

(5,610,858 )

Other income (expense)

233,629




(187,749 )

9,454

55,334

Income (loss) before income taxes

208,831



(684,212 )

(5,080,143 )

(5,555,524 )

Net income attributable to non-controlling interest















Net income (loss) attributable to common stockholders of Safe & Green Holdings Corp.
$ 208,831
$
$ (684,212 )
$ (5,080,143 )
$ (5,555,524 )























Depreciation and amortization
$
562,070

$

$

$

$ 562,070

Capital expenditures
$

$

$

$

$


























Construction




Medical




Development



Corporate and support




Consolidated



Three Months Ended June 30, 2022 

 



 







  





 






Revenue
$ 4,237,585

$ 3,317,386

$

$

$ 7,554,971

Cost of revenue



4,275,759


2,507,252








6,783,011

Operating expenses



99,672


8,093


315,868


1,676,183


2,099,816

Operating income (loss)

(137,846 )

802,041


(315,868 )

(1,676,183 )

(1,327,856 )

Other income (expense)

372,223



(72,942 )

10,979


310,260

Income (loss) before income taxes

 


234,377

802,041


(388,810 )

 

(1,665,204 )

 

(1,017,596 )

Net income attributable to non-controlling interest

 


 



397,764








397,764

Net income (loss) attributable to common stockholders of Safe & Green Holdings Corp.
$ 234,377
$ 404,277

$ (388,810 )
$ (1,665,204 )
$ (1,415,360 )























Depreciation and amortization
$ 143,320

$ 13,410

$ 12,941

$

$ 169,671

Capital expenditures
$ 797,300

$ 28,621

$

$ 3,213

$ 829,134

Inter-segment revenue elimination
$

$

$

$

$

27


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)


14.

Warrants  

In conjunction with the June 2017 Public Offering, the Company issued to certain affiliates of the underwriters, as compensation, warrants to purchase an aggregate of 4,313 shares of common stock at an exercise price of $125.00 per share. The warrants are exercisable at the option of the holder on or after June 21, 2018 and expire June 21, 2023.The fair value of warrants was calculated utilizing a Black-Scholes model and amounted to $63,796. The fair market value of the warrants as of the date of issuance has been included in issuance costs in additional paid-in capital.

In conjunction with the Purchase Agreement in April 2019, the Company also sold warrants to purchase up to an aggregate of 42,388 shares of common stock at an initial exercise price of $27.50 per share. The warrants are exercisable at the option of the holder on or after October 29, 2019 and expire October 29, 2024. The Company issued to certain affiliates of the underwriters, as compensation, warrants to purchase an aggregate of 4,239 shares of common stock at an initial exercise price of $27.50 per share. The warrants are exercisable at the option of the holder on or after October 29, 2019 and expire April 24, 2024.

In conjunction with the Underwriting Agreement in August 2019, the Company issued to the underwriter, as compensation, warrants to purchase an aggregate of 2,250 shares of common stock at an initial exercise price of $21.25 per share. The warrants are exercisable at the option of the holder on or after February 1, 2020 and expire August 29, 2024

In conjunction with the Underwriting Agreement in May 2020, the Company issued to the underwriter, as compensation, warrants to purchase an aggregate of 300,000 shares of common stock at an initial exercise price of $3.14 per share. The warrants are exercisable at the option of the holder on or after November 6, 2021 and expire May 5, 2025. As of June 30, 2023 and December 31, 2022, 73,700 of such warrants are outstanding.

In conjunction with the Purchase Agreement in October 2021, the Company also issued Series A warrants to purchase up to 1,898,630 shares of Common Stock in a concurrent private placement. The warrants have an exercise price of $4.80 per share, exercisable at the option of the holder on or after October 26, 2021 and will expire five years from the date of issuance.

In conjunction with the issuance of the Debenture in February 2023, the Company issued the Peak Warrant to purchase 500,000 shares of Common Stock. The Peak Warrant expires five years from its date of issuance. The Peak Warrant is exercisable, at the option of the holder, at any time, for up to 500,000 of shares of common stock of the Company at an exercise price equal to $2.25 (the “Exercise Price”), subject to adjustment for any stock splits, stock dividends, recapitalizations and similar events and in the event the Company, at any time while the Peak Warrant is outstanding, issues, sells or grants any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues common stock or other securities convertible into, exercisable for, or otherwise entitle any person the right to acquire, shares of common stock, other than with respect to an Exempt Issuance, at an effective price per share that is lower than the then Exercise Price. In the event of any such anti-dilutive event, the Exercise Price will be reduced at the option of the holder to such lower effective price of the dilutive event, subject to a floor price of $0.40 per share, unless and until the Company obtains shareholder approval for any issuance below such floor price. The initial fair value of the Peak Warrant amounted to $278,239 and was recorded as a debt discount at the time of issuance of the Debenture.


15.

Share-based Compensation


On October 26, 2016, the Company’s Board of Directors approved the issuance of up to 25,000 shares of the Company’s common stock in the form of restricted stock or options (“2016 Stock Plan”). Effective January 20, 2017, the 2016 Stock Plan was amended and restated as the SG Blocks, Inc. Stock Incentive Plan, as further amended effective June 1, 2018 and as further amended on July 30, 2020 and as further amended on August 18, 2021, (the “Incentive Plan”). The Incentive Plan authorizes the issuance of up to 3,625,000 shares of common stock.  It authorizes the issuance of equity-based awards in the form of stock options, stock appreciation rights, restricted shares, restricted share units, other share-based awards and cash-based awards to non-employee directors and to officers, employees and consultants of the Company and its subsidiary, except that incentive stock options may only be granted to the Company’s employees and its subsidiary’s employees. The Incentive Plan expires on October 26, 2026, and is administered by the Company’s Compensation Committee of the Board of Directors. Each of the Company’s employees, directors, and consultants are eligible to participate in the Incentive Plan. As of June 30, 2023, there were 11,696 shares of common stock available for issuance under the Incentive Plan.


28


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)

 

15.

Share-based Compensation (continued)

Stock-Based Compensation Expense


Stock-based compensation expense is included in the condensed consolidated statements of operations as follows:





Six Months Ended
June 30,





2023


2022


Payroll and related expenses


$ 3,210,631

$ 1,280,162

 

       Total


$ 3,210,631

$ 1,280,162





Three Months Ended
June 30,





2023

2022


Payroll and related expenses


$ 2,554,362

$ 631,076

 

       Total


$ 2,554,362

$ 631,076


The following table presents total stock-based compensation expense by security type included in the condensed consolidated statements of operations:  





Six Months Ended
June 30,




 2023

2022

Stock options


$

  

  

$

   


Restricted Stock Units   


$

3,210,631

  

  

$

631,076

   


Total
$ 3,210,631

$ 631,076





Three Months Ended
June 30,




 2023

2022

Stock options


$

  

  

$

   


Restricted Stock Units   


$

2,554,362

  

  

$

631,076

   


Total
$ 2,554,362

$ 631,076


Stock-Based Option Awards 


The Company has issued no stock-based options during the six months ended June 30, 2023 or 2022.   


Because the Company does not have significant historical data on employee exercise behavior, the Company uses the “Simplified Method” to calculate the expected life of the stock-based option awards granted to employees. The simplified method is calculated by averaging the vesting period and contractual term of the options. 

 

29


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)


15.

Share-based Compensation (continued)


The following table summarizes stock-based option activities and changes during the six months ended June 30, 2023 as described below:

 


 

 

 Shares

 

 

Weighted Average Fair Value Per Share

 

 

Weighted
Average Exercise Price Per Share

 

 

Weighted Average Remaining Terms (in years)

 

 

Aggregate Intrinsic Value

 


Outstanding – December 31, 2022

 

36,436

 

 

24.80

 

 

78.71

 

 

4.34

 

 

 


Granted

 

 

 

 

 

 

 

 

 

 


Exercised 

 

 

 

 

 

 

 

 

 


Cancelled

 

 

 

 

 

 

 

 

 


Outstanding – June 30, 2023

 

36,436

 

 

24.80

 

 

78.71

 

 

3.84

 

 

 


Exercisable – December 31, 2022

 

36,436

 

 

24.80

 

 

78.71

 

 

4.34

 

 

 


Exercisable – June 30, 2023

 

36,436

 

 

24.80

 

 

78.71

 

 

3.84

 

 

 

  

For the three months ended June 30, 2023 and 2022, the Company recognized stock-based compensation expense of $0 and $0, respectively, related to stock options. For the six months ended June 30, 2023 and 2022, the Company recognized stock-based compensation expense of $0 and $0, respectively, related to stock options. This expense is included in payroll and related expenses in the accompanying condensed consolidated statements of operations.

 

As of June 30, 2023, there was no unrecognized compensation costs related to non-vested stock options and all options have been expensed. The intrinsic value is calculated as the difference between the fair value of the stock price at year end and the exercise price of each of the outstanding stock options. The fair value of the stock price at June 30, 2023 was $0.95 per share.


Restricted Stock Units 

During 2022, a total of 1,045,000 of restricted stock units were granted to Mr. Galvin and seven employees of the Company, under the Company’s stock-based compensation plan, at the fair value ranging from $1.30 to $2.24 per share, which represents the closing price of the Company’s common stock at the date of grant. The restricted stock units granted vest quarterly over two years from the anniversary of the grant date. The fair value of these units upon issuance amounted to $1,843,000.

On November 18, 2022, a total of 80,000 of restricted stock units were granted to four of the Company's non-employee directors, under the Company's stock-based compensation plan, at the fair value of $1.30 per share, which represents the closing price of the Company's common stock on November 18, 2022. The restricted stock units granted vest in equal quarterly installments over a two-year period.


During the three months ended June 30, 2023, a total of 316,834 of restricted stock units were granted to Mr. Galvin and six employees of the Company under the Company's stock-based compensation plan, at the fair value of $0.85 to $1.01 per share, which represents the closing price of the Company's common stock at the grant date.. The restricted stock units granted vest in equal quarterly installments over a two-year period.

On April 4, 2023, a total of 268,166 of restricted stock units were granted to five of the Company's non-employee directors, under the Company's stock-based compensation plan, at the fair value of $1.01 per share, which represents the closing price of the Company's common stock on April 4, 2023. The restricted stock units granted vest in equal quarterly installments over a two-year period

 

30


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)

 

15.

Share-based Compensation (continued)

 

As of June 30, 2023, all outstanding restricted stock vesting has been accelerated and there are no unvested restricted stock units.

For the three months ended June 30, 2023 and 2022, the Company recognized stock-based compensation of $2,554,262 and $631,076 related to restricted stock units. For the six months ended June 30, 2023 and 2022, the Company recognized stock-based compensation of $3,210,631 and $1,280,162 related to restricted stock units. This expense is included in the payroll and related expenses, general and administrative expenses, and marketing and business development expense in the accompanying condensed consolidated statement of operations. As of June 30, 2023, there was no unrecognized compensation costs related to non-vested restricted stock units.

The following table summarized restricted stock unit activities during the six months ended June 30, 2023:




Number of Shares

Non-vested balance at January 1, 2023



1,190,935

 

Granted



585,000

Vested
(1,775,935 )

Forfeited/Expired

Non-vested balance at June 30, 2023

  

16.

Commitments and Contingencies  

 

Legal Proceedings


The Company is subject to certain claims and lawsuits arising in the normal course of business. The Company assesses liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in our consolidated financial statements. These legal accruals may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, the Company does not record an accrual, consistent with applicable accounting guidance. Based on information currently available, advice of counsel, and available insurance coverage, the Company believes that the established accruals are adequate and the liabilities arising from the legal proceedings will not have a material adverse effect on the consolidated financial condition. However, that in light of the inherent uncertainty in legal proceedings there can be no assurance that the ultimate resolution of a matter will not exceed established accruals. As a result, the outcome of a particular matter or a combination of matters may be material to the results of operations for a particular period, depending upon the size of the loss or the income for that particular period.

 

1.) Pizzarotti Litigation - On or about August 10, 2018 Pizzarotti, LLC filed a complaint against the Company and Mahesh Shetty, the Company’s former President and CFO, and others, seeking unspecified damages for an alleged breach of contract by the Company and another entity named Phipps & Co. (“Phipps”). The lawsuit was filed as Pizzarotti, LLC. v. Phipps & Co., et al., Index No. 653996/2018 and commenced in the Supreme Court of the State of New York for the County of New York. On or about April 1, 2019, Phipps filed cross-claims against the Company and Mr. Shetty asserting claims for indemnification, contribution, fraud, negligence, negligent misrepresentation, and breach of contract. The Company has likewise cross claimed against Phipps for indemnification and contribution, claiming that any damages to the Plaintiff were the result of the acts or omissions of Phipps and its principals.


Pizzarotti’s suit arose from a contract dated April 3, 2018 that it executed with Phipps whereby Pizzarotti, a construction manager, engaged Phipps to perform stone procuring and tile work at a construction project located at 161 Maiden Lane, New York 10038. Pizzarotti’s claims against the Company arise from a purported assignment agreement dated August 10, 2018, whereby Pizzarotti claims that the Company agreed to assume certain obligations of Phipps under a certain trade contract between Pizzarotti and Phipps & Co. Phipps’ claims against the Company arise from a purported Assignment Agreement, dated as of May 30, 2018, between Pizzarotti, Phipps and the Company (the “Assignment Agreement”), pursuant to which, it is alleged, that the Company agreed to provide a letter of credit in connection with the sub-contracted work to be provided by Phipps to Pizzarotti.


31


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)


16.

Commitments and Contingencies (continued)

 

The Company believes that the Assignment Agreement was void for lack of consideration and moved to dismiss the case on those and other grounds. On June 17, 2020, the New York Supreme Court entered an order dismissing certain claims against the Company brought by cross claimant Phipps & Co. Specifically, the court dismissed Phipps’ claims for indemnification, contribution, fraud, negligence and negligent misrepresentation. The court did not dismiss Phipps’ claim for breach of the Assignment Agreement. The issue of the validity of the Assignment Agreement, and the Company’s defenses to the claims brought by the plaintiff Pizzarotti, and cross claimant Phipps, are being litigated. The Company maintains that the Assignment Agreement, to the extent valid and enforceable, was properly terminated and/or there are no damages, and, consequently, that the claims brought against the Company are without merit. The Company intends to continue to vigorously defend the litigation. The parties have engaged in written discovery but no depositions have been conducted as of yet. By motion dated February 24, 2021, Pizzarotti moved to stay the entire action pending the outcome of a separate litigation captioned Pizzarotti, LLC v. FPG Maiden Lane, LLCet. al., Index No. 651697/2019, involving some of the same parties (but excluding the Company). Phipps cross moved to consolidate the two actions. The Company opposed both motions. On April 26, 2021, the court denied both motions and directed the parties to meet and confer concerning the scheduling of depositions. On May 10, 2021, the parties jointly filed with the court a proposed order providing the completion of depositions of all parties and nonparties by September 30, 2021. The court has not entered the proposed discovery order and no formal action has been taken by the plaintiff Pizzarotti nor the defendant-cross claimant Phipps since the proposed order was submitted. There are no scheduled hearings or conferences before the court at this time. 

Litigation is subject to many uncertainties, and the outcome of this action is not predicted with assurance. The Company is currently unable to predict the possible loss or range of loss, if any, associated with the resolution of this litigation, and, accordingly, the Company has made no provision related to this matter in the consolidated financial statements.

 

Vendor Litigation

1.) SG Blocks, Inc. v HOLA Community Partners, et. al. 

 

On April 13, 2020, Plaintiff SG Blocks, Inc. (the “Company”) filed a Complaint against HOLA Community Partners (“HCP”), Heart of Los Angeles Youth, Inc. (“HOLA”) (HCP and HOLA are collectively referred to as the “HOLA Defendants”), and the City of Los Angeles (“City”) in the United States District Court for the Central District of California, Case No. 2:20-cv-03432-ODW (“HOLA Action”). The Company asserted seven claims against HOLA Defendants arising out of and related to the HOLA Project, to wit, for: (1) breach of contract; (2) conversion; (3) default and judicial foreclosure under the Agreement as a security agreement; (4) misappropriation of trade secrets under California Civil Code section 3426; (5) misappropriation of trade secrets under 18 U.S.C. § 1836; and (6) intentional interference with contractual relations. On April 20, 2020, HOLA filed a separate action against the Company in the Los Angeles Superior Court arising out of the HOLA Project, asserting claims of (1) negligence; (2) strict products liability; (3) strict products liability, (4) breach of contract; (5) breach of express warranty; (6) violation of Business and Professions Code § 7031(b); and (7) violation of California’s unfair competition law, Business and Professions Code section 17200 (“UCL”) (“HOLA State Court Action”). The HOLA State Court Action was removed to the Central District of California and consolidated with the HOLA Action.

 

On January 22, 2021, the Company filed a Third-Party Complaint in the HOLA Action against Third-Party Defendants Teton Buildings, LLC, Avesi Construction, LLC, and American Home Building and Masonry Corp (“AHB”) for indemnity and contribution with respect to HOLA’s claims. The Company has also notified its general liability carrier Sompo International regarding coverage concerning HOLA’s claims On February 25, 2021, the Court entered an order dismissing the Company’s claims for (1) breach of contract; (2) conversion; (3) default and judicial foreclosure under the Agreement as a security agreement; (4) misappropriation of trade secrets under California Civil Code section 3426; (5) misappropriation of trade secrets under 18 U.S.C. § 1836; but denied dismissal of the Company’s claims for intentional interference with contractual relations. The Court also denied the Company’s motion to dismiss HOLA’s claims.

 

On March 12, 2021, the HOLA Defendants filed an answer to the Company’s complaint against it denying liability and asserting affirmative defenses. On March 12, 2021, the Company filed an answer to the HOLA Defendants’ First Amended Consolidated Complaint against it, denying liability and asserting affirmative defenses. 

 

32


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)


16.

Commitments and Contingencies (continued)


On April 26, 2021, the Company and the HOLA Defendants filed a Joint Stipulation to Dismiss HOLA Community Partners’ Sixth Claim for Relief (violation of California Business and Professions Code §7031(b)), with prejudice, pursuant to Fed. R. Civ. P. 41(a)(1)(A)(ii).


On July 23, 2021, the Company filed a First Amended Third-Party Complaint adding the following additional third party defendants seeking, inter alia, contractual indemnity, equitable indemnity; and contribution: American Home Building and Masonry Corp. (“American Home”), Anderson Air Conditioning, L.P. (“Anderson”). Broadway Glass and Mirror, Inc. (“Broadway”), Marne Construction, Inc. (“Marne”), The McIntyre Company (“McIntyre”), Dowell & Bradley Construction, Inc. dba J R Construction (“JR Construction”) Junior Steel Co. (“Junior Steel”) Saddleback Roofing, Inc. (“Saddleback”) Schindler Elevator Corporation (“Schindler”) U.S. Smoke & Fire Corp. (“U.S. Smoke”) and FirstForm, Inc. (“FirstForm”) (collectively the “Additional Third Party Defendants”). 

 

On September 2, 2021, Schindler Elevator Corp. filed its answer to the First Amended Third-Party Complaint. On September 3, 2021, Junior Steel Co. filed its answer to the First Amended Third-Party Complaint. On September 7, 2021, Anderson Air Conditioning, L.P. filed its answer to the First Amended Third-Party Complaint. On October 6, 2021, the McIntyre Group filed its answer to the First Amended Third-Party Complaint.

 

On February 7, 2022, the Company filed a request for entry of a Clerk’s default against the following defendants: American Home Building and Masonry Corp., Avesi Construction, Marne Construction, Inc., FirstForm, Inc., Dowell & Bradley Construction, Inc, Saddleback Roofing, Inc., and US Smoke and Fire Corp. On February 9, 2022, the court entered a clerk’s default pursuant to Federal Rule 55 against the following defendants: American Home Building and Masonry Corp. Avesi Construction, Dowel & Bradley Construction, Inc., Saddleback Roofing Inc. and US smoke and Fire Corp. The parties that have answered and appeared in the case are currently engaged in discovery. The cut-off for fact discovery has been extended to September 12, 2022, and a trial was set for January 31, 2023.


2.) SG Blocks, Inc. v HOLA Community Partners, et. al

 

On or about December 31, 2022, the parties who appeared in the HOLA Action executed a Settlement Agreement and Release. On February 28, 2023 the court “so ordered” the parties’ stipulation dismissing all causes of action against the parties to the Settlement Agreement and Release.


3.) Teton Buildings, LLC


(i) On January 1, 2019, the Company commenced an action against Teton Buildings, LLC (“Teton”) in Harris County, Texas (“Teton Texas Action”) to recover approximately $2,100,000 arising from defendant’s breach of the operative contract related to Heart of Los Angeles construction project in Los Angeles (the “HOLA Project”) entered into on or about June 2, 2017. The Petition brought claims of breach of contract, negligence, and breach of express warranty. In or about February 2022 the Company dismissed without prejudice the Teton Texas Action.


(ii) On or about September 12, 2018, the Company entered into a Firm Price Quote and Purchase (the “GVL Contract”) with Teton to govern the manufacture and provision of 23 shipping containers and modular units (the “Teton GVL Modules”) for the Four Oaks Gather GVL project in South Carolina (the “GVL Project.”). The Company maintains that Teton breached the GVL Contract by (i) failing to timely deliver the Teton GVL Modules, (ii) delivering Teton GVL Modules that were defective in their design and manufacture, (iii) otherwise failed to meet South Carolina Building Code regulations and (iv) breached applicable warranties. As a result of the breach and defects in performance, design and manufacture by Teton, Company asserts that it has sustained $761,401.66 in actual and consequential damages, excluding attorney’s fees. On October 16, 2019, Teton filed for Chapter 11 in the United States Bankruptcy Court for Southern District of Texas, Houston Division styled In re: Teton Buildings, LLC and bearing the case number 19-35811. On February 11, 2020, the Company filed a proof of claim again Teton in the amount of $2,861,401.66 arising from the HOLA Project and the GVL Contract.


On or about March 16, 2020, the Bankruptcy Court converted Teton’s Chapter 11 reorganization case to a Chapter 7 liquidation case. On July 18, 2019, Ronald Sommers, the Chapter 7 Trustee, filed a Report of No Distribution stating that there is no property available for distribution to creditors. On August 20, 2019, the Bankruptcy Court closed the Teton bankruptcy case. As such, there is no prospect of any recovery against Teton.


33


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)

 

16.

Commitments and Contingencies (continued)


On January 22, 2021, the Company filed a third-party complaint against Teton in the United States District Court for the Central District of California, Case No. 2:20−cv−03432 in the HOLA Action (described above), seeking to determine Teton’s liability in its capacity as a bankruptcy debtor in order to collect any damages payable from Teton’s liability insurance carrier or carriers. On July 23, 2021, the Company filed a First Amended Third-Party Complaint against Teton and other named third party defendants (see #2 below). Teton has been served with the First Amended Third-Party Complaint and on or about February 11, 2022, Teton filed an answer and affirmative defenses.


On or about December 31, 2022, the parties who appeared in the HOLA Action, including Teton by and through its insurance carrier, executed a Settlement Agreement and Release. On February 28, 2023 the court “so ordered” the parties’ stipulation dismissing all causes of action against the parties to the Settlement Agreement and Release.


 4.) SG Blocks, Inc. v. EDI International, PC.-

 

On June 21, 2019, the Company filed a lawsuit against EDI International, PC, a New Jersey corporation, in the Superior Court of the State of California, County of Los Angeles, Central District, in connection with the parties consulting agreement, dated June 29, 2016, pursuant to which EDI International, PC, was to provide, for a fee, certain architectural and design services for the HOLA Project. The Company claims that EDI International, PC, tortiously interfered with the Companys economic relationship with HOLA Community Partners and Heart of Los Angeles Youth, Inc. EDI International, PC, filed a cross-complaint for alleged unpaid fees and tortious interference with EDI International, PC's contractual relationship with HOLA Community Partners and Heart of Los Angeles Youth, Inc. EDI International, PC's cross-complaint seeks in excess of $30,429 in damages.


On July 8, 2020, the Company added PVE LLC as a defendant in the lawsuit, claiming PVE LLC is liable to the same extent as EDI International, PC. The case is currently in the discovery stage and a trial date has been set for May 2, 2022.


On May 14, 2021, EDI accepted the Company’s Statutory Offer of Compromise, pursuant to California Code of Civil Procedures §998, to settle EDI’s cross-claims. On July 26, 2021, the Company and EDI entered into a certain General Release agreement whereby in exchange for payment by the Company in the amount of $67,125.83 EDI released the Company from all liabilities and damages related to EDI’s cross-claims. The Company continues to prosecute its claim against EDI for tortious interference with the Company’s economic relationship with HOLA Community Partners and Heart of Los Angeles Youth, Inc. The discovery period has concluded and a trial date has been set for October 2023.


Litigation is subject to many uncertainties, and the outcome of this action is not predicted with assurance. The Company is currently unable to predict the outcome or possible recovery or loss or range of loss, if any, associated with the resolution of this litigation, and, accordingly, the Company has made no provision related to this matter in the consolidated financial statements.


Other Litigation


SG Blocks, Inc. v. Osang Healthcare Company, Ltd.,

 

On April 14, 2021, the Company commenced an action against Osang Healthcare Company, Ltd. (“Osang”) in the United States District Court, Eastern District of New York, Case No. 21-01990 (“Osang Action”). The Company has asserted that Osang materially breached a certain Managed Supply Agreement (“MSA”) entered into between the parties on October 12, 2020, pursuant to which the Company received on consignment two million (2,000,000) units of Osang’s “Genefinder Plus RealAmp Covid-19 PCR Test” (the “Covid-19 Test”) for domestic and international distribution. The Company has also asserted that Osang breached the covenant of good faith and fair dealing, fraudulently induced it to enter into the MSA, and violated §349 of the New York General Business Law’s prohibition of deceptive business practices.


On June 18, 2021, Osang served a motion to dismiss the Osang Action pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. On July 30, 2021, the Company served its opposition to the motion to dismiss. On September 22, 2022, the court entered an order granting in part and denying in part Osang’s motion to dismiss. The court denied that part of Osang’s motion that sought dismissal of the Company’s causes of action for breach of contract (but denied recovery of lost profits) and fraud, but dismissed the Company’s causes of action for breach of implied covenant of good faith and fair dealing, indemnification, accounting, and violation of the New York Unlawful and Deceptive Trade Practices Act (GBL §349).


34


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2023 and 2022 (Unaudited)


16.

Commitments and Contingencies (continued)

 

A status conference was held on November 16, 2022 at which time the Court entered a scheduling order for the conducting of discovery. After mediation before the Court on March 14, 2023, the parties entered into a settlement agreement and mutual release on May 4, 2023. 

 

2.) Safe & Green Holdings Corp. v. Shaw et al.,


On March 15, 2023, the Company commenced an action against two shareholders, John William Shaw and Leo Patrick Shaw, in the United States District Court for the Southern District of New York, captioned Safe and Green Holdings Corp. v. Shaw et al., 1:23-cv-02244, for violations of the short swing profit rule pursuant to Section 16(b) of the Securities and Exchange Act of 1934. 


Commitments


In April 2020, the Company entered into an amendment to its employment agreement, dated January 1, 2017, with Paul Gavin (the "Amendment"), to extend the term of employment to December 31, 2021, provide for an annual base salary of $400,000 provide for a performance bonus structure for a bonus of up to 50% of base salary upon the Company’s achievement of $2,000,000 EBITDA and additional performance bonus payments for the achievement of EBITDA in excess of $2,000,000 based on a percentage of the incremental increase in EBITDA (ranging from 10% of the incremental increase in EBITDA if the Company achieves over $2,000,000 and up to $7,000,000 in EBITDA, 8% of the incremental increase in EBITDA if the Company achieves over $7,000,000 and up to $12,000,000 in EBITDA and 3% of the incremental increase in EBITDA over $12,000,000), provide for a profits-based additional bonus of up to $250,000 in certain limited circumstances, and provide for one (1) year severance, plus a pro-rated amount of any unpaid bonus earned by him during the year as verified by the Company’s principal financial officer, if Mr. Galvin is terminated without cause. At the Company’s option, up to fifty (50%) percent of the EBITDA performance bonuses may be paid in restricted stock units if then available for grant under the Company’s Incentive Plan.


On July 5, 2022, the Company entered into an amendment to its employment agreement, dated January 1, 2017, as amended, with Paul Galvin, to provide for the payment of an annual base salary of $500,000. All other terms of the employment agreement remain in full force and effect.

On May 1, 2023, the Company appointed Patricia Kaelin as the Company’s Chief Financial Officer and entered into an employment agreement with Patricia Kaelin (the “Kaelin Employment Agreement”) to employ Ms. Kaelin in such capacity for an initial term of two (2) years, which provides for an annual base salary of $250,000, a discretionary bonus of up to 20% of her base salary upon achievement of objectives as may be determined by the Company’s board of directors and severance in the event of a termination without cause on or after September 30, 2023 in amount equal to equal to one year’s annual base salary and benefits. The Kaelin Employment Agreement also provides for the grant to Ms. Kaelin of a restricted stock grant under the Company’s Stock Incentive Plan, as amended and as available for grant, of 60,000 shares of the Company’s common stock, vesting quarterly on a pro-rata basis over the next eighteen (18) months of continuous service. Ms. Kaelin is subject to a one-year post-termination non-compete and non-solicit of employees and clients. She is also bound by confidentiality provisions.

 

17.

Subsequent Events

The Company has evaluated all events or transactions that occurred after June 30, 2023 through August xx, 2023, which is the date that the condensed financial statements were available to be issued. During this period, there were no material subsequent events requiring recognition or disclosure besides below.

The Company has notified William Rogers, our Chief Operating Officer, that his employment agreement with us will not be renewed for a full one-year term upon its expiration on September 26, 2023; however, the Company has offered Mr. Rogers a two-month extension of his agreement.  Mr. Rogers continues to serve as our Chief Operating Officer and upon the expiration of his employment agreement will serve as an employee-at-will.

During July 2023, Ms. Kaelin’s annual base salary was adjusted to $300,000, retroactive to May 1, 2023.

 

35



ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 
 

Introduction and Certain Cautionary Statements

 

As used in this Quarterly Report on Form 10-Q, unless the context requires otherwise, references to the "Company," "we," "us," and "our" refer to Safe & Green Holdings Corp. and its subsidiaries. The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and schedules included elsewhere in this Quarterly Report on Form 10-Q and with our audited condensed consolidated financial statements and notes for the year ended December 31, 2022, which were included in our Annual Report on Form 10-K for the year then ended December 31, 2022, as filed with the Securities and Exchange Commission (the "SEC") on March 31, 2023 (the "2022 Form 10-K"). This discussion, particularly information with respect to our future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading "Special note regarding forward-looking statements" in this Quarterly Report on Form10-Q. You should review the disclosure under the heading "Risk Factors" in this Quarterly Report on Form 10-Q for a discussion for important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.  

Special note regarding forward-looking statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Statements contained in this Quarterly Report on Form 10-Q may use forward-looking terminology, such as "anticipates," "believes," "could," "would," "estimates," "may," "might," "plan," "expect," "intend," "should," "will," or other variations on these terms or their negatives. All statements other than statements of historical facts are statements that could potentially be forward-looking. The Company cautions that forward-looking statements involve risks and uncertainties and actual results could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate or prediction is realized. Factors that could cause or contribute to such differences include, but are not limited to: general economic, political and financial conditions, including inflation, both in the United States and internationally; our ability to obtain additional financing on acceptable terms, if at all, or to obtain additional capital in other ways; our ability to increase sales, generate income, effectively manage our growth and realize our backlog; competition in the markets in which we operate, including the consolidation of our industry, our ability to expand into and compete in new geographic markets and our ability to compete by protecting our proprietary manufacturing process; a disruption or cybersecurity breach in our or third-party suppliers' information technology systems; our ability to adapt our products and services to industry standards and consumer preferences and obtain general market acceptance of our products; product shortages and the availability of raw materials, and potential loss of relationships with key vendors, suppliers or subcontractors; the seasonality of the construction industry in general, and the commercial and residential construction markets in particular; a disruption or limited availability with our third party transportation vendors; the loss or potential loss of any significant customers; exposure to product liability, including the possibility that our liability for estimated warranties may be inadequate, and various other claims and litigation; our ability to attract and retain key employees; our ability to attract private investment for sales of product; the credit risk from our customers and our customers' ability to obtaining third-party financing if and as needed; an impairment of goodwill; the impact of federal, state and local regulations, including changes to international trade and tariff policies, and the impact of any failure of any person acting on our behalf to comply with applicable regulations and guidelines; costs incurred relating to current and future legal proceedings or investigations; the cost of compliance with environmental, health and safety laws and other local building regulations; our ability to utilize our net operating loss carryforwards and the impact of changes in the United States' tax rules and regulations; dangers inherent in our operations, such as natural or man-made disruptions to our facilities and project sites, the impact of COVID-19, and related government “shelter-in-place” mandates and other restrictions on business and commercial activity and the adequacy of our insurance coverage; our ability to comply with the requirements of being a public company; fluctuations in the price of our common stock, including decreases in price due to sales of significant amounts of stock; potential dilution of the ownership of our current stockholders due to, among other things, public offerings or private placements by the Company or issuances upon the exercise of outstanding options or warrants and the vesting of restricted stock units; the ability of our principal stockholders, management and directors to potentially exert control due to their ownership interest; any ability to pay dividends in the future; potential negative reports by securities or industry analysts regarding our business or the construction industry in general; Delaware law provisions discouraging, delaying or preventing a merger or acquisition at a premium price; our ability to remain listed on the Nasdaq Capital Market and the possibility that our stock will be subject to penny stock rules; our classification as a smaller reporting company resulting in, among other things, a potential reduction in active trading of our common stock or increased volatility in our stock price; and any factors discussed in "Part II - Item 1A. Risk Factors" to this Quarterly Report on Form 10-Q as well as our 2022 Form 10-K, and other filings with the SEC. In addition, certain information presented below is based on unaudited financial information. There can be no assurance that there will be no changes to this information once audited financial information is available. As a result, readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of this report. The Company will not undertake to update any forward-looking statement herein or that may be made from time to time on behalf of the Company. 

36



Overview

 

We operate in the following four segments: (i) construction; (ii) medical; (ii) real estate development; and (iv) environmental.  The construction segment designs and constructs modular structures built in our factories using raw materials that are Made-in-America.  In the medical segment we use our modular technology to offer turnkey solutions to medical testing and treatment and generating revenue from  medical testing. Our real estate development segment builds innovative and green single or multifamily projects in underserved regions nationally using modules built in one of our vertically integrated factories. The environmental segment, the newest segment, is a sustainable medical and waste management solution that has a patented technology to collect waste and treat waste for safe disposal.


We are a provider of modular facilities (“Modules”). We currently provide Modules made out of both code-engineered cargo shipping containers and wood for use as both permanent or temporary structures for residential housing use and commercial use, including for health care facilities. Prior to the COVID-19 pandemic, the Modules we supplied were primarily for retail, restaurant and military use and were manufactured by third party suppliers using our proprietary technology and design and engineering expertise, which modifies code-engineered cargo shipping containers and purpose-built modules for use for safe and sustainable commercial, industrial and residential building. Since our acquisition in September 2020 of Echo DCL, LLC (“Echo”), one of our key supply chain providers, we now have more control over the manufacturing process and have increased our product offerings to add Modules made out of wood.  In March 2020, in response to the COVID-19 pandemic we began increasing our focus on providing our Modules as health care facilities for deployable medical response solutions. In February 2023, we entered into an agreement with The Peoples Health Care, in Glendale, California, working in conjunction with Teamsters Local 848, to deliver four Modules to provide medical services to union members. In March 2023, we formed Safe & Green Medical Corporation, in Delaware, focused on our medical segment with an objective to establish a national presence with various clinics and labs that cater to the specific needs of local communities. During 2021, through our subsidiary, Safe and Green Development Corporation. (“SG DevCorp”), we also began to focus on acquiring property to build multi-family housing communities that allows us to utilize the manufacturing services of SG Echo. SG Environmental Solutions Corp. (“SG Environmental”), formed in Delaware is focused on biomedical waste removal and will utilize a patented technology that it licenses to shred and disinfect biomedical waste, rendering the waste disinfected, unrecognizable, and of no greater risk to the public health than residential household waste.

 

Prior to October 2019, our business model was solely a project-based construction model pursuant to which we were responsible for the design and construction of finished products that incorporated our technology primarily to customers in the retail, restaurant, military and education industries throughout the United States. In October 2019, we changed our business model for our residential building construction to a royalty fee model and entered into a five-year exclusive license with CPF GP 2019-1 LLC (“CPF”) under which CPF licensed on an exclusive basis our proprietary technology and intellectual property to develop and commercialize products in the United States (and its territories) for residential use, including, without limitation, single-family residences and multi-family residences, but excluding military housing. On June 15, 2021, we terminated the exclusive license by mutual agreement and ceased our royalty fee model.‌

 

Prior to the COVID-19 pandemic, our core customer base was comprised of architects, landowners, builders and developers who use our Modules in commercial and residential structures. Our cargo modified Modules allow for the redesign, repurpose and conversion of heavy-gauge steel cargo shipping containers into SGBlocks™, which are safe green building blocks for commercial, industrial, and residential building construction, rather than consuming new steel and lumber. Our technology and expertise is also used to purpose-build modules, or prefabricated steel modular units customized for use in modular construction (“SGPBMs” and, together with Safe & Green™, “Modules”), primarily to augment or complement an Safe & Green™ structure.

 

In March 2020, we began increasing our focus on providing our Modules as health care facilities for deployable medical response solutions. In May, we entered into a joint development agreement with Grimshaw Design to assist with the deployment of our D-Tec suite of prefabricated health facilities for on-site immediate COVID-19 testing. In September 2020, we entered the U.S. test lab market by forming a joint venture with Clarity Labs, a manufacturer and market leader of rapid diagnostic tests, to launch CLIA-certified laboratories. Our joint venture with Clarity Labs has allowed us to not only supply our D-Tec suite of prefabricated health facilities but also allows us to provide testing services at such facilities. We have supplied our building modular coronavirus testing centers and provide testing services for Los Angeles International Airport (LAX), Memorial in Wayne County, Michigan and have been selected as a Trusted Testing Partner (TTP) for Hawaii’s COVID-19 travel testing program. Due to the ongoing lower affects of COVID-19 restrictions, our joint venture with Clarity Labs was wound down during the fourth quarter of 2022. In February 2023, we entered into an agreement with The Peoples Health Care, in Glendale, California, working in conjunction with Teamsters Local 848, to deliver four Modules to provide medical services to union members.


In September 2020, we acquired substantially all the assets of Echo, a Texas limited liability company, except for Echo's real estate holdings for which we obtained a right of first refusal. Echo is a container/modular manufacturer based in Durant, Oklahoma specializing in the design and construction of permanent modular and temporary modular buildings and was one of our key supply chain partners.  Echo catered to the military, education, administration facilities, healthcare, government, commercial and residential customers. This acquisition has allowed us to expand our reach for our Modules and has offered us an opportunity to vertically integrate a large portion of our cost of goods sold, as well as increase margins, productivity and efficiency in the areas of design, estimating, manufacturing and delivery.


37



In addition, during 2021, we formed SGB Development Corp. (“SG DevCorp”), which is our wholly-owned subsidiary and has since been renamed to Safe and Green Development Corporation. SG DevCorp was formed with the purpose of real property development utilizing our technologies.  SG DevCorp develops, co-develops builds and finances single and multi-family homes in underserved regions nationally using modules built in one of our vertically integrated factories. SG DevCorp has a minority interest in Norman Berry II Owners LLC and JDI-Cumberland Inlet LLC. We intend to spin-out SG DevCorp as its own independent company.

  

Results of Operations


Six Months Ended June 30, 2023 and 2022:





For the Six Months Ended June 30, 2023




For the Six Months Ended June 30, 2022


Total revenue
$ 10,600,990

$ 16,159,569
Total cost of revenue
(10,636,832
)
(12,901,174
)
Total payroll and related expenses
(5,498,819 )
(2,355,696 )
Total operating expenses
(3,336,266
)
(1,811,663
)
Total operating loss
(8,870,927
)
(908,964 )
Total other income (expense)
(204,037
)
393,096

Total loss before income tax
(9,074,964 )
(515,868 )
Add: Net income attributable non-controlling interest


1,616,669

Net loss attributable to common stockholders of Safe & Green Holdings Corp.
$ (9,074,964 )
$ (2,132,537 )

Revenue


During the six months ended June 30, 2023, we derived revenue solely from our construction segment. Total revenue for the six months ended June 30, 2023 was $10,600,990 compared to $16,159,569 for the six months ended June 30, 2022. This decrease of $5,558,579 or approximately 34.4% was mainly driven by a decrease in medical revenue of $10,203,215, offset by an increase in construction services of $4,719,342 primarily driven by one contract.


Cost of Revenue and Gross Profit 


Cost of revenue was $10,636,832 for the six months ended June 30, 2023, compared to $12,901,174 for the six months ended June 30, 2022. The decrease of $2,264,342 or a decrease of approximately 18%, is primarily related to no medical revenue being generated during the six months ended June 30, 2023.


Gross profit (loss) was $(35,842) and $3,258,395 for the six months ended June 30, 2023 and 2022, respectively.   


Gross profit (loss) margin percentage decreased to 0% for the  six months ended June 30, 2023 compared to 20% for the six months ended June 30, 2022 primarily due to no medical revenue being generated during the six months ended June 30, 2023.


Operating Expenses


Payroll and related expenses for the six months ended June 30, 2023 were $5,498,819 compared to $2,355,696 for the six months ended June 30, 2022. This increase was primarily caused by an increase in headcount and salary expenses during the six months ended June 30, 2023, as well as the vesting of additional restricted stock units during 2023.


Other operating expenses (general and administrative expenses, marketing and business development expenses, pre-project expenses) for the six months ended June 30, 2023 were $3,336,266 compared to $1,811,663 for the six months ended June 30, 2022.


Other Income (Expense)


Interest income for the six months ended June 30, 2023 was $18,816 mainly derived from bank interest and interest associated with an outstanding note receivable. There was $23,762 of interest income for the six months ended June 30, 2022. There was $588,490 and $491,309 of other income for the six months ended June 30, 2023 and 2022. Interest expense for the six months ended June 30, 2023 and 2022 was $811,343 and $121,975, respectively. The increase in interest expense resulted from an increase in notes payable balances during 2023.


38



Three Months Ended June 30, 2023 and 2022:





For the Three Months Ended June 30, 2023




For the Three Months Ended June 30, 2022


Total revenue
$ 5,097,055


$ 7,554,971
Total cost of revenue
(5,063,425 )
(6,783,011
)
Total payroll and related expenses
(4,184,429 )
(1,211,509 )
Total operating expenses
(1,460,059 )
(888,307
)
Total operating loss
(5,610,858 )
(1,327,856 )
Total other income (expense)
55,334
310,260
Total loss before income tax
(5,555,524 )
(1,017,596 )
Add: Net income attributable non-controlling interest

397,764
Net loss attributable to common stockholders of Safe & Green Holdings Corp.
$ (5,555,524 )
$ (1,415,360 )


Revenue


During the three months ended June 30, 2023, we derived revenue solely from our construction segment. Total revenue for the three months ended June 30, 2023 was $5,097,055 compared to $7,554,971 for the three months ended June 30, 2022. This decrease of $2,457,916 or approximately 33% was mainly driven by a decrease in medical revenue of $3,317,387 offset by an increase in construction services of $883,791 primarily driven by one contract.

 

Cost of Revenue and Gross Profit


Cost of revenue was $5,063,425 for the three months ended June 30, 2023, compared to $6,783,011 for the three months ended June 30, 2022. The decrease of $1,719,586 or a decrease of approximately 25%, is primarily related to no medical revenue being generated during the three months ended June 30, 2023.


Gross profit was $33,630 and $771,960 for the three months ended June 30, 2023 and 2022, respectively.


Gross profit margin percentage decreased to 1% for the three months ended June 30, 2023 compared to 10% for the three months ended June 30, 2022 primarily due to no medical revenue being generated during the three months ended June 30, 2023.


Operating Expenses


Payroll and related expenses for the three months ended June 30, 2023 were $4,184,429 compared to $1,211,509 for the three months ended June 30, 2022. This increase was primarily caused by an increase in headcount and salary expenses during the three months ended June 30, 2023, as well as the vesting of additional restricted stock units during 2023.


Other operating expenses (general and administrative expenses, marketing and business development expenses, pre-project expenses) for the three months ended June 30, 2023 were $1,460,059 compared to $888,307 for the three months ended June 30, 2022.


Other Income (Expense)


Interest income for the three months ended June 30, 2023 was $9,454 mainly derived from bank interest and interest associated with an outstanding note receivable. There was $10,979 of interest income for the three months ended June 30, 2022. There was $569,851 and $372,407 of other income for the three months ended June 30, 2023 and 2022. Interest expense for the three months ended June 30, 2023 and 2022 was $523,971 and $73,126, respectively. The increase in interest expense resulted from an increase in notes payable balances during 2023.


Income Tax Provision

 

A 100% valuation allowance was provided against the deferred tax asset consisting of available net operating loss carry forwards and, accordingly, no income tax benefit was provided.  

 

39



Impact of Inflation

 

Inflation has caused increases on some of the Company's estimated costs for construction projects in progress and completed during the past two fiscal years, which has affected the Company's revenue and income (loss) from continuing operations.


Our operations for the three months ended June 30, 2023 and 2022 may not be indicative of our future operations. 


Impact of Coronavirus (COVID-19)


With the global spread of the ongoing novel coronavirus ("COVID-19") pandemic beginning in 2020, we have implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on our employees and business. The worldwide spread of the COVID-19 virus has resulted in a global slowdown of economic activity, which is likely to decrease demand for a broad variety of goods and services, including from our customers, while also resulting in delays in projects due to labor shortages and supplier disruptions for an unknown period of time until the disease is contained. To date, we have experienced some delays in projects due to COVID-19, which we expect to have an impact on our revenue and our results of operations, the size and duration of which we are currently unable to predict. Any quarantines, the timing and length of containment and eradication solutions, travel restrictions, absenteeism by infected workers, labor shortages or other disruptions to the suppliers and contract manufacturers or customers would likely adversely impact our sales, and operating results and result in further project delays. In addition, the pandemic could result in an economic downturn that could affect the ability of our customers and licensees to obtain financing and therefore impact demand for our products. Order lead times could be extended or delayed and increases we have experienced in pricing could continue to increase. Some products or services may become unavailable if the regional or global spread were significant enough to prevent alternative sourcing. Accordingly, we are considering alternative product sourcing in the event that product supply becomes problematic. We expect this global pandemic to have an impact on our revenue and results of operations, the size and duration of which we are currently unable to predict. In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties which we face.


Liquidity and Capital Resources


As of June 30, 2023 and December 31, 2022 we had an aggregate of $1,601,331 and $582,776, respectively, of cash and cash equivalents and short-term investments.


Historically, our operations have primarily been funded through proceeds from equity and debt financings, as well as revenue from operations.


We have negative operating cash flows, which has raised substantial doubt about our ability to continue as a going concern.


We intend to meet our capital needs from revenue generated from operations and by containing costs, entering into strategic alliances, as well as exploring other options, including the possibility of raising additional debt or equity capital as necessary. There is, however, no assurance we will be successful in meeting our capital requirements prior to becoming cash flow positive. We do not have any additional sources secured for future funding, and if we are unable to raise the necessary capital at the times we require such funding, we may need to materially change our business plan, including delaying implementation of aspects of such business plan or curtailing or abandoning such business plan altogether.

 

On February 7, 2023, we closed a private placement offering (the “Offering”) of One Million One Hundred Thousand Dollars ($1,100,000.00) in principal amount of the Company’s 8% convertible debenture (the “Debenture”) and a warrant (the “Warrant”) to purchase up to Five Hundred Thousand (500,000) shares of our common stock, to Peak One Opportunity Fund, L.P. (“Peak One”). Pursuant to a Securities Purchase Agreement, dated February 7, 2023 (the “Purchase Agreement”), the Debenture was sold to Peak One for a purchase price of $1,000,000, representing an original issue discount of ten percent (10%). In connection with the Offering we paid $15,000 as a non-accountable fee to Peak One to cover its accounting fees, legal fees and other transactional costs incurred in connection with the transactions contemplated by the Purchase Agreement and issued 50,000 shares of our restricted common stock (the “Commitment Shares”) to Peak One Investments, LLC (“Investments”), the general partner of Peak One.


The Debenture matures twelve months from its date of issuance and bear interest at a rate of 8% per annum payable on the maturity date. The Debenture is convertible, at the option of the holder, at any time, into such number of shares of common stock of the Company equal to the principal amount of the Debenture plus all accrued and unpaid interest at a conversion price equal to $1.50 (the “Conversion Price”), subject to adjustment for any stock splits, stock dividends, recapitalizations and similar events and in the event the Company, at any time while the Debenture is outstanding, issues, sells or grants any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues common stock or other securities convertible into, exercisable for, or otherwise entitle any person the right to acquire, shares of common stock, other than with respect to an Exempt Issuance (as defined in the Debenture), at an effective price per share that is lower than the then Conversion Price. In the event of any such anti-dilutive event, the Conversion Price will be reduced at the option of the holder to such lower effective price of the dilutive event, subject to a floor price of $0.40 per share, unless and until the Company obtains shareholder approval for any issuance below such floor price.


40



Liquidity and Capital Resources (continued)


On May 16, 2023, SG Building, entered into a Cash Advance Agreement (“Cash Advance Agreement”) with Cedar Advance LLC (“Cedar” pursuant to which SG Building sold to Cedar $710,500 of its future receivables for a purchase price of $500,000. Cedar is expected to withdraw $25,375 a week directly from SG Building, until the $710,500 due to Cedar is paid in full. In the event of a default (as defined in the Cash Advance Agreement), Cedar, among other remedies, can demand payment in full of all amounts remaining due under the Cash Advance Agreement. SG Building’s obligations under the Cash Advance Agreement have been guaranteed by SG Echo.  


In connection with the exercise of its option to acquire 19 acres of land and the approximately 56,775 square foot facility located at 101 Waldron Road in Durant Oklahoma (the “Premises”), on June 8, 2023, SG Echo issued a secured commercial promissory note, dated June 1, 2023 (the “Secured Note”), in the principal amount of $1,750,000 with SouthStar Financial, LLC, a South Carolina limited liability company (“SouthStar”), and entered into a Non-Recourse Factoring and Security Agreement, dated June 1, 2023 (the “Factoring Agreement”), with SouthStar providing for its purchase from SG Echo of up to $1,500,000 of accounts receivable, subject to reduction by South Star (the “Facility Amount”).


The Secured Note bears interest at 23% per annum and is due and payable on June 1, 2025. The Secured Note is secured by a mortgage (the “Mortgage”) on the Premises and secured by a Security Agreement, dated June 1, 2023 (the “Security Agreement”), pursuant to which SG Echo granted to SouthStar a first priority security interest in all of SG Echo’s presently-owned and hereafter-acquired personal and fixture property, wherever located, including, without limitation, all accounts, goods, chattel paper, inventory, equipment, instruments, investment property, documents, deposit accounts, commercial tort claims, letters-of-credit rights, general intangibles including payment intangibles, patents, software trademarks, trade names, customer lists, supporting obligations, all proceeds and products of the foregoing. SG Echo paid to SouthStar an origination fee in the amount of 3% of the face amount of the Secured Note. Upon the occurrence of an Event of Default (as defined in the Secured Promissory Note), the default interest rate will be 28% per annum, or the maximum legal amount provided by law, whichever is greater. 


The Factoring Agreement provides that upon acceptance of an account receivable for purchase SouthStar will pay to SG Echo eighty percent (80%) of the face amount of the account receivable, or such lesser percentage as agreed by the parties. SG Echo will also pay to SouthStar one and 95/100 percent (1.95%) of the face amount of the accounts receivable for the first twenty-five (25) day period after payment for the accounts receivable is transmitted to SouthStar plus one and 25/100 percent (1.25%) for each additional fifteen (15) day period or part thereof, calculated from the date of purchase until payments received by SouthStar in collected funds on the purchased accounts receivable equals the purchase price of the accounts receivable, plus all charges due SouthStar from SG Echo at the time. An additional one and 50/100 percent (1.50%) per fifteen (15) day period will be charged for invoices exceeding sixty (60) days from advance date. The Factoring Agreement provides that SG Echo may require additional funding from SouthStar (an “Overadvance”) and SouthStar may provide the Overadvance in its sole discretion. In the event of an Overadvance, SG Echo will pay SouthStar an amount equal to three and 90/100 percent (3.90%) of the amount of the Overadvance for the first twenty-five (25) day period after the Overadvance is transmitted to SouthStar plus two and 50/100 percent (2.50%) for each additional fifteen (15) day period or part thereof until payments received by SouthStar in collected funds equals the amount of the Overadvance, plus all charges due SouthStar from SG Echo at the time.


The Factoring Agreement provides that SG Echo will also pay a transactional administrative fee of $50.00 for each new account debtor submitted to it and an fee equal to 0.25% of the face amount of all purchased accounts receivable for the handling, collecting, mailing, quality assuring, insuring the risk, transmitting, and performing certain data processing services with respect to the maintenance and servicing of the purchased accounts.


As security for the payment and performance of SG Echo’s present and future obligations to SouthStar under the Factoring Agreement, SG Echo granted to SouthStar a first priority security interest in all of SG Echo’s presently-owned and hereafter-acquired personal and fixture property, wherever located, including, without limitation, all accounts, goods, chattel paper, inventory, equipment, instruments, investment property, documents, deposit accounts, commercial tort claims, letters-of-credit rights, general intangibles including payment intangibles, patents, software trademarks, trade names, customer lists, supporting obligations, all proceeds and products of the foregoing. 


The Factoring Agreement has an initial term of thirty-six (36) months from the first day of the month following the date the first purchased accounts receivable is purchased. Unless terminated by SG Echo, not less than sixty (60) but not more than ninety (90) days before the end of the initial term, the Factoring Agreement will automatically extend for an additional thirty-six (36) months. SG Echo shall be required to provide the same not less than sixty (60) but not more than ninety (90) days notice during any and all renewal terms in order to terminate the Factoring Agreement, and if no notice is provided, the renewal term will extend for an additional thirty-six (36) month period.


If SouthStar has not purchased accounts receivable in a quarterly period during any initial or renewal term which exceed fifty percent (50%) of the Facility Amount per calendar quarter, in which $250,000.00 of the purchased accounts each month must be with ATCO Structures & Logistics (USA) Inc. (“Minimum Amount”), the Factoring Agreement provides that SG Echo will pay to SouthStar, on demand, an additional amount equal to what the charges provided for elsewhere in the Factoring Agreement would have been on the Minimum Amount assuming the number of days from the date of purchase of the Minimum Amount until receipt of payment of the Minimum Amount is thirty one (31) days, less the actual charges paid by SG Echo to SouthStar during such period. 


41


Pursuant to a Secured Continuing Corporate Guaranty, dated June 8, 2023 (the “Corporate Guaranty”), the Company has guaranteed SG Echo’s obligations to SouthStar under the Secured Note and Factoring Agreement.


Pursuant to a Cross-Default and Cross Collateralization Agreement (the “Cross Default Agreement”), effective June 8, 2023, between SouthStar, SG Echo and the Company, SG Echo’s obligations under the Secured Note and Factoring Agreement are cross-defaulted and cross-collateralized such that any event of default under the Secured Note shall constitute an event of default under the Factoring Agreement at SouthStar’s election (and vice versa, any event of default under the Factoring Agreement shall constitute an event of default under the Secured Note at SouthStar’s election) and any collateral pledged to secure SG Echo’s obligations under the Secured Note shall also secure SG Echo’s obligations under the Factoring Agreement (and vice versa).


On June 23 2023, SG DevCorp, entered into a Loan Agreement (the “BCV Loan Agreement”) with a Luxembourg-based specialized investment fund, BCV S&G DevCorp (“BCV S&G”), for up to $2,000,000 in proceeds, of which it has raised $1,250,000 to date. The Loan Agreement provides that the loan provided thereunder will bear interest at 14% per annum and mature on December 1, 2024. The loan may be repaid by SG DevCo at any anytime following the twelve-month anniversary of its issue date. The loan is secured by 1,999,999 shares of SG DevCorp’s common stock (the “Pledged Shares”), which were pledged by SG DevCorp pursuant to an escrow agreement (the “Escrow Agreement”) with American Stock Transfer & Trust Company, LLC, SG DevCorp’s transfer agent, and which represent 19.99% of SG DevCorp’s outstanding shares. The fees associated with the issuance include $70,000 paid to BCV S&G for the creation of the BCV Loan Agreement and $27,500 payable to BCV S&G per annum for maintaining the BCV Loan Agreement. Additionally, $37,500 in broker fees has been paid to Bridgeline Capital Partners S.A. on the principal amount raised of $1,250,000 raised to date. The BCV Loan Agreement further provides that if SG DevCorp’s shares of common stock are not listed on The Nasdaq Stock Market on before August 30, 2023 or if following such listing the total market value of the Pledged Shares falls below twice the face value of the loan, the loan will be further secured by SG DevCorp’s St. Mary’s industrial site, consisting of 29.66 acres and a proposed manufacturing facility in St. Mary’s, Georgia. 


We continue to generate losses from operations. At June 30, 2023 and December 31, 2022 we had a cash balance $1,601,331 and $582,776, respectively. As of June 30, 2023, our stockholders’ equity was $9,325,160 compared to $14,439,562 as of December 31, 2022 and an accumulated deficit of $50,503,232. Our net loss attributable to our common stockholders for the six months ended June 30, 2023 was $(9,074,964) and net cash used in operating activities was $(3,039,177).

 

We may need to generate additional revenues or secure additional financing sources, such as debt or equity capital, to fund future growth, which financing may not be available on favorable terms or at all. We do not have any additional sources secured for future funding, and if we are unable to raise the necessary capital at the times we require such funding, we may need to materially change our business plan, including delaying implementation of aspects of such business plan or curtailing or abandoning such business plan altogether.


Cash Flow Summary


Six Months Ended

June 30,




2023

2022


Net cash provided by (used in):

Operating activities


$

(3,039,177

)

$

(5,362,545

)

Investing activities

(669,006

)

(3,077,625

)

Financing activities 


4,726,738


(2,156,000

)

Net increase/(decrease) in cash and cash equivalents

$

1,018,555

$

(10,596,170

)

 

Operating activities used net cash of $3,039,177 during the six months ended June 30, 2023, and used net cash of  $5,362,545 during the six months ended June 30, 2022. Generally, our net operating cash flows fluctuate primarily based on changes in our profitability and working capital. Cash used in operating activities decreased by approximately $2,323,368.


42



Investing activities used net cash of $669,006 during the six months ended June 30, 2023, and $3,077,625 net cash during the six months ended June 30, 2022 a decrease in cash used of $2,408,619This change results primarily from a decrease of $ 526,324 of the purchase of property and equipment during the six months ended June 30, 2023 and $500,000 of an investment in non-marketable securities during the six months ended June 30, 2022 as well as $726,386 in project development costs during the six months ended June 30, 2022. 


Financing activities provided net cash of $4,726,738 during the six months ended June 30, 2023. Financing activities used $2,156,000 net cash during the six months ended June 30, 2022. This change of $6,882,738 results from the proceeds from short term notes payable of $6,609,512 and $706,359 from long term notes payable offset by repayments of short term notes payable of $2,500,000. In addition, there were $46,417 and $2,156,000 of distributions paid to non-controlling interest during the six months ended June 30, 2023 and 2022, respectively.


We provide services to our construction and engineering customers in three separate phases: the design phase, the architectural and engineering phase and the construction phase. Each phase is independent of the other, but builds through a progression of concept through delivery of a completed structure. These phases may be embodied in a single contract or in separate contracts, which is typical of a design build process model. As of June 30, 2023, we had eleven projects totaling $1,306,849 under contract. Of these contracts, all eleven projects combine all three phases or parts thereof and including construction. We expect that all of this revenue will be realized by December 31, 2023.


Backlog may fluctuate significantly due to the timing of orders or awards for large projects and is not necessarily indicative of future backlog levels or the rate at which backlog will be recognized as revenue. Our backlog decreased by approximately $4,600,000 from December 31, 2022 to June 30, 2023. We expect that all of this revenue will be realized by December 31, 2023. Backlog does not include COVID tests or testing services provided through our joint venture, Clarity Mobile Venture.


There can be no assurance that our customers will decide to and/or be able to proceed with these construction projects, or that we will ultimately recognize revenue from these projects in a timely manner or at all.  


Off-Balance Sheet Arrangements

 

As of June 30, 2023 and December 31, 2022, we had no material off-balance sheet arrangements to which we are a party.

 

In the ordinary course of business, we enter into agreements with third parties that include indemnification provisions which, in our judgment, are normal and customary for companies in our industry sector. These agreements are typically with consultants and certain vendors. Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or incurred by the indemnified parties with respect to actions taken or omitted by us. The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited. We have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of liabilities relating to these provisions is minimal. Accordingly, we have no liabilities recorded for these provisions as of June 30, 2023.

 

43



Critical Accounting Estimates

 

Our condensed consolidated financial statements have been prepared using generally accepted accounting principles in the United States of America (“GAAP”). In connection with the preparation of the financial statements, we are required to make assumptions and estimates and apply judgments that affect the reported amounts of assets, liabilities, revenue, and expenses, and the related disclosures. We base our assumptions, estimates, and judgments on historical experience, current trends, and other factors that we believe to be relevant at the time the consolidated financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates, and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

 

Our significant accounting policies are discussed in “Note 3— Summary of Significant Accounting Policies” of the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. We believe that the following accounting policies are the most critical in fully understanding and evaluating our reported financial results.

 

Share-based payments. We measure the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, including non-employee directors, the fair value of the award is measured on the grant date. For non-employees, the fair value of the award is generally re-measured on interim financial reporting dates and vesting dates until the service period is complete. The fair value amount is then recognized over the period services are required to be provided in exchange for the award, usually the vesting period. We recognize stock-based compensation expense on a graded-vesting basis over the requisite service period for each separately vesting tranche of each award. Stock-based compensation expense to employees and all directors is reported within payroll and related expenses in the consolidated statements of operations. Stock-based compensation expense to non-employees is reported within marketing and business development expense in the consolidated statements of operations. 

 

Other derivative financial instruments. We classify as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide a choice of net-cash settlement or settlement in our own shares (physical settlement or net-share settlement), provided that such contracts are indexed to our own stock. We classify as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if any event occurs and if that event is outside SGB’s control) or (ii) give the counterparty a choice of net-cash settlement or settlement shares (physical settlement or net-cash settlement). SGB assesses classification of common stock purchase warrants and other free-standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities or equity is required


Convertible instruments. We bifurcate conversion options from their host instruments and accounts for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (i) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract; (ii) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable GAAP measures with changes in fair value reported in earnings as they occur; and (iii) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

 

We determined that the embedded conversion options that were included in the previously outstanding convertible debentures should be bifurcated from their host and a portion of the proceeds received upon the issuance of the hybrid contract has been allocated to the fair value of the derivative. The derivative was subsequently marked to market at each reporting date based on current fair value, with the changes in fair value reported in results of operations.


44


 

Critical Accounting Estimates (continued)


Revenue recognition – We determine, at contract inception, whether we will transfer control of a promised good or service over time or at a point in time, regardless of the length of contract or other factors. The recognition of revenue aligns with the timing of when promised goods or services are transferred to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. To achieve this core principle, we apply the following five steps in accordance with its revenue policy:

 

                (1)  Identify the contract with a customer

    

                (2)  Identify the performance obligations in the contract

 

                (3)  Determine the transaction price

 

                (4)  Allocate the transaction price to performance obligations in the contract

 

                (5)  Recognize revenue as performance obligations are satisfied

       

    On certain contracts, we apply recognition of revenue over time, which is similar to the method we applied under previous guidance (i.e. percentage of completion). Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress toward complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation indicate a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident.  


For product or equipment sales, we apply recognition of revenue when the customer obtains control over such goods, which is at a point in time.


Goodwill – Goodwill represents the excess of reorganization value over the fair value of identified net assets upon emergence from bankruptcy. In accordance with the accounting guidance on goodwill, we perform our impairment test of goodwill at the reporting unit level each fiscal year, or more frequently if events or circumstances change that would more likely than not reduce the fair value of its reporting unit below its carrying value. Our evaluation of goodwill completed during the year ended December 31, 2022, resulted in no impairment loss. There was no impairment during the June 30, 2023.


Intangible assets – Intangible assets consist of $2,766,000 of proprietary knowledge and technology, which is being amortized over 20 years. In addition, included in intangible assets is $68,344 of trademarks, and $207,636 of website costs that are being amortized over 5 years. We evaluated intangible assets for impairment during the six months ended June 30, 2023 and 2022 and determined that there are no impairment losses.

  

New Accounting Pronouncements

 

See Note 3 to the accompanying consolidated financial statements for all recently adopted and new accounting pronouncements.

  

45



Non-GAAP Financial Information

 

In addition to our results under GAAP, we also present 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. We calculate EBITDA as net income (loss) before interest expense, income tax benefit (expense), depreciation and amortization. We calculate Adjusted EBITDA as EBITDA before certain non-recurring adjustments such as loss on conversion of convertible debentures, change in fair value of financial instruments and stock 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 our financial performance. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our 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 us and our 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 our 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 our 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.

 

Other companies, including other companies in our industry, may not use such measures or may calculate one or more of the measures differently than as presented in this Quarterly Report on Form 10-Q, limiting their usefulness as a comparative measure.  

  

In evaluating EBITDA and Adjusted EBITDA, you should be aware that in the future we will incur expenses that are the same or similar to some of the adjustments made in our calculations, and our presentation of EBITDA and Adjusted EBITDA should not be construed to mean that our future results will be unaffected by such adjustment. Management compensates for these limitations by using EBITDA and Adjusted EBITDA as supplemental financial metrics and in conjunction with our results prepared in accordance with GAAP. The non-GAAP information should be read in conjunction with our consolidated financial statements and related notes.

   

Non-GAAP Financial Information (continued)


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




Three Months Ended
June 30, 2023

Three Months Ended
June 30, 2022


Six Months Ended
June 30, 2023



Six Months Ended
June 30, 2022

Net loss attributable to common stockholders of Safe & Green Holdings Corp.

  $ (5,555,524 )
$ (1,415,360 )
$ (9,074,964 )
$ (2,132,537 )
    Addback interest expense 

523,971


73,126


811,343


121,975
    Addback interest income

(9,454 )

(10,979 )

(18,816 )

(23,762 )
    Addback depreciation and amortization

160,455


156,731


298,767


313,573

EBITDA (non-GAAP)



(4,880,552 )

(1,196,482 )

(7,983,670 )

(1,720,751 )

    Addback litigation expense






53,391


17,361


167,774
Addback stock issued for services


47,500





484,825




    Addback stock compensation expense

2,554,262


631,076


3,210,631


1,280,162

Adjusted EBITDA (non-GAAP)


$ (2,278,790 )
$ (512,015 )
$ (4,270,853 )
$ (272,815 )


46



ITEM 3.      Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

ITEM 4.      Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures

 

Management of Safe & Green Holdings Corp., with the participation of our Principal Executive Officer and the Principal Financial Officer carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in the Exchange Act, Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). Based upon that evaluation, our Principal Executive Officer and our Principal Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

The Principal Executive Officer and the Principal Financial Officer believe that the condensed consolidated financial statements and other information contained in this Quarterly Report on Form 10-Q present fairly, in all material respects, our business, financial condition and results of operations.

 

Changes in Internal Control over Financial Reporting

 

Other than as described above, for the fiscal quarter ended June 30, 2023, there have been no changes in our internal control over financial reporting identified in connection with the evaluations required by Rule 13a-15(d) or Rule 15d-15(d) under the Exchange Act that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 


Inherent Limitations on Effectiveness of Controls

 

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.


47


PART II. OTHER INFORMATION 


ITEM 1.     Legal Proceedings


The information included in "Note 16 - Commitments and Contingencies" of our condensed consolidated financial statements included elsewhere in this Quarterly Report Form 10-Q is incorporated by reference into this Item.


ITEM 1A.  Risk Factors


Investing in our common stock involves a high degree of risk. You should consider carefully the following risks, together with all other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and notes thereto. If any of the following risks actually materializes, our operating results, financial condition and liquidity could be materially adversely affected. As a result, the trading price of our common stock could decline and you could lose part or all of your investment. The following information updates, and should be read in conjunction with, the information disclosed in Part I, Item 1A, "Risk Factors," contained in the Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). There have been no material changes from the risk factors disclosed in “Part I—Item 1A. Risk Factors” in our 2022 Form 10-K, except as follows: 


If we are not successful in our efforts to increase sales or raise capital, we could experience a shortfall in cash over the next twelve months, and our ability to obtain additional financing on acceptable terms, if at all, may be limited.


At June 30, 2023 and December 31, 2022, we had cash and cash equivalents and a short-term investment, collectively, of $1,601,331 and $582,776 respectively. However, during the six months ended June 30, 2023 and year ended December 31, 2022, we reported a net loss attributable to common stockholders of Safe & Green Holdings Corp. of $9,074,964 and $2,132,537, respectively, and used $3,039,177 and $5,362,545 of cash for operations, respectively. If we are not successful with our efforts to increase revenue, we could experience a shortfall in cash over the next twelve months. If there is a shortfall, we may be forced to reduce operating expenses, among other steps, all of which would have a material adverse effect on our operations going forward.


We may also seek to obtain debt or additional equity financing to meet any cash shortfalls. The type, timing and terms of any financing we may select will depend on, among other things, our cash needs, the availability of other financing sources and prevailing conditions in the financial markets. However, there can be no assurance that we will be able to secure additional funds if needed and that, if such funds are available, the terms or conditions would be acceptable to us. If we are unable to secure additional financing, further reduction in operating expenses might need to be substantial in order for us to ensure enough liquidity to sustain our operations. Any equity financing would be dilutive to our stockholders. If we incur debt, we will likely be subject to restrictive covenants that significantly limit our operating flexibility and require us to encumber our assets. If we fail to raise sufficient funds and continue to incur losses, our ability to fund our operations, take advantage of strategic opportunities, or otherwise respond to competitive pressures will be significantly limited. Any of the above limitations could force us to significantly curtail or cease our operations, and you could lose all of your investment in our common stock. These circumstances have raised substantial doubt about our ability to continue as a going concern, and continued cash losses may risk our status as a going concern. Our consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.


The loss of one or a few customers could have a material adverse effect on us.


A few customers have in the past, and may in the future, account for a significant portion of our revenues in any one year or over a period of several consecutive years. For example, for the six months ended June 30, 2023 approximately 96% of our revenue was generated from one customer and for the year ended December 31, 2022, approximately 65% of our revenue was generated from three customers. Although we have contractual relationships with many of our significant customers, our customers may unilaterally reduce or discontinue their contracts with us at any time. The loss of business from a significant customer could have a material adverse effect on our business, financial condition, results of operations and cash flows.


48


We rely on certain vendors to supply us with materials and products that, if we were unable to obtain, could adversely affect our business.

We have relationships with key materials vendors, and we rely on suppliers for our purchases of products from them. Any inability to obtain materials or services in the volumes required and at competitive prices from our major trading partners, the loss of any major trading partner or the discontinuation of vendor financing (if any) may seriously harm our business because we may not be able to meet the demands of our customers on a timely basis in sufficient quantities or at all. Other factors, including reduced access to credit by our vendors resulting from economic conditions, may impair our vendors’ ability to provide products in a timely manner or at competitive prices. We also rely on other vendors for critical services such as transportation, supply chain and professional services. Any negative impacts to our business or liquidity could adversely impact our ability to establish or maintain these relationships. Cost of revenue relating to  two vendors represented approximately  12% of the Company’s total cost of revenue for the three months ended June 30, 2022. Cost of revenue relating to  three vendors represented approximately  10% of the Company’s total cost of revenue for the six months ended June 30, 2022. There were no vendors representing 10% or more of the Company’s total cost of revenue for the three or six months ended June 30, 2023.


Our clients may adjust, cancel or suspend the contracts in our backlog; as such, our backlog is not necessarily indicative of our future revenues or earnings. In addition, even if fully performed, our backlog is not a good indicator of our future gross margins.


Backlog represents the total dollar amount of revenues we expect to record in the future as a result of performing work under contracts we have been awarded. Backlog may fluctuate significantly due to the timing of orders or awards for large projects and is not necessarily indicative of future backlog levels or the rate at which backlog will be recognized as revenue. We include in backlog only those contracts for which we have reasonable assurance that the customer can obtain the permits for construction and can fund the construction. As of December 31, 2022, our backlog totaled approximately $6.8 million and as of June 30, 2023, our backlog totaled approximately $2.2 million. Our backlog is described more in detail in “Note 11—Construction Backlog” of the notes to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. We cannot provide assurance that our backlog will be realized as revenues in the amounts reported or, if realized, will result in profits. In accordance with industry practice, substantially all of our contracts are subject to cancellation, termination or suspension at our customer’s discretion. In the event of a project cancellation, we generally would not have a contractual right to the total revenue reflected in our backlog. Projects can remain in backlog for extended periods of time because of the nature of the project and the timing of the particular services required by the project. In addition, the risk of contracts in backlog being cancelled or suspended generally increases during periods of widespread economic slowdowns or in response to changes in commodity prices.

The contracts in our backlog are subject to changes in the scope of services to be provided and adjustments to the costs relating to the contracts. The revenue for certain contracts included in backlog is based on estimates. Additionally, our performance of our individual contracts can affect greatly our gross margins and, therefore, our future profitability. We can provide no assurance that the contracts in backlog, assuming they produce revenues in the amounts currently estimated, will generate gross margins at the rates we have realized in the past.


The issuance of shares of our common stock upon the exercise of outstanding options, warrants and restricted stock units may dilute the percentage ownership of the then-existing stockholders and may make it more difficult to raise additional equity capital.


At June 30, 2023, there were options and warrants to purchase of 36,436 and 2,525,020, respectively, outstanding that could potentially dilute future net income per share. Because we had a net loss as of June 30, 2023, we are prohibited from including potential shares of common stock in the computation of diluted per share amounts. Accordingly, we used the same number of shares outstanding to calculate both the basic and diluted loss per share. At June 30, 2022, there were options, including options to non-employees and non-directors, restricted stock units and warrants to purchase 36,436, 2,245,186 and 2,025,520 shares of common stock, respectively, outstanding that could potentially dilute future net income per share.


49


We may not have an adequate number of shares of common stock authorized to enable us to complete future equity financing transactions or strategic transactions, which may adversely affect our ability to grow and develop.

We are authorized to issue 25,000,000 shares of common stock, of which approximately 16,016,107 shares of common stock were issued and outstanding as August 11, 2023. At June 30, 2023, 48,312 common shares were reserved for issuance of shares upon exercise of outstanding options, restricted stock units or reserved for future issuance of common shares under our  equity incentive plans, 2,466,667 common shares were reserved for the conversion of notes and 2,525,020  common shares were reserved for exercise of warrants. If all of these securities were exercised it would leave approximately 3,943,894 million authorized but unissued shares of common stock.

As a result of our limited number of our authorized and unissued shares of common stock, we may have insufficient shares of common stock available to issue in connection with any future equity financing transactions or strategic transactions we may seek to undertake. Accordingly, we will likely take steps in the near future to increase our number of available shares; however there can be no assurance that we will be able to obtain the requisite stockholder approval to do so.

Changes in general economic conditions, geopolitical conditions, domestic and foreign trade policies, monetary policies and other factors beyond our control may adversely impact our business and operating results.

The uncertain financial markets, disruptions in supply chains, mobility restraints, and changing priorities as well as volatile asset values also affect our business operations and our ability to enter into collaborations and joint ventures. To date, inflation has caused increases on some of our estimated costs for construction projects in progress and completed during the past two fiscal years, which has affected our revenue and income(loss) from continuing operations. It is difficult to predict the impact on increasing inflation on our operations. We are actively monitoring the effects these disruptions and increasing inflation could have on our operations. 

A number of other economic and geopolitical factors both in the U.S. and abroad, could ultimately have material adverse effects on our business, financial condition, results of operations or cash flows, including the following:

        effects of significant changes in economic, monetary and fiscal policies in the U.S. and abroad including currency fluctuations, inflationary pressures and significant income tax changes;

        supply chain disruptions;

        a global or regional economic slowdown in any of our market segments;

        changes in government policies and regulations affecting the Company or its significant customers;

        postponement of spending, in response to tighter credit, financial market volatility and other factors;

        rapid material escalation of the cost of regulatory compliance and litigation;

        difficulties protecting intellectual property;

        longer payment cycles;

        credit risks and other challenges in collecting accounts receivable; and

        the impact of each of the foregoing on outsourcing and procurement arrangements.


50


ITEM 2.     Unregistered Sales of Equity Securities and Use of Proceeds


None other than as set forth in our previous filings with the Securities and Exchange Commission.  

 

ITEM 3.     Defaults Upon Senior Securities


None. 

  

ITEM 4.     Mine Safety Disclosures


Not applicable.  

  

ITEM 5.     Other Information

The Company has notified William Rogers, our Chief Operating Officer, that his employment agreement with us will not be renewed for a full one-year term upon its expiration on September 26, 2023; however, the Company has offered Mr. Rogers a two-month extension of his agreement.  Mr. Rogers continues to serve as our Chief Operating Officer and upon the expiration of his employment agreement will serve as an employee-at-will.

51


ITEM 6.      Exhibits


EXHIBIT INDEX
Exhibit Number   Description
3.1
Amended and Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K as filed by the Registrant with the Securities and Exchange Commission on July 7, 2016 (File No. 000-22563)).
3.2
Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.2 to the Current Report on Form 8-K as filed by the Registrant with the Securities and Exchange Commission on July 7, 2016 (File No. 000-22563)).
3.3
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K as filed by the Registrant with the Securities and Exchange Commission on February 28, 2017 (File No. 000-22563)).
3.4
Certificate of Amendment to Certificate of Designation, dated May 11, 2017 (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K as filed by the Company with the Securities and Exchange Commission on May 12, 2017 (File No. 001-38037)).
3.5
Certificate of Elimination of Series A Convertible Preferred Stock, dated December 13, 2018 (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K as filed by the Registrant with the Securities and Exchange Commission on December 17, 2018 (File No. 001-38037)).
3.6
Certificate of Amendment to the Amended and Restated Certificate of Incorporation dated June 5, 2019 (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K as filed by the Reigstrant with the Securities and Exchange Commission on June 5, 2019 (File No. 001-38037)).
3.7
Form of Certificate of Designation of the Series B Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.7 to the Registration Statement on Form S-1/A (File No. 333-235295) as filed by the Registrant with the Securities and Exchange Commission on December 9, 2019).
3.8
Certificate of Amendment to the Amended and Restated Certificate of Incorporation, as amended, of the Company (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K as filed by the Registrant with the Securities and Exchange Commission on February 5, 2020 (File No. 001-38037)).
3.9
Amended and Restated Bylaws of the Company dated June 4, 2021 (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K as filed by the Registrant with the Securities and Exchange Commission on June 7, 2021 (File No. 001-38037)).
10.1
Secured Commercial Promissory Note, dated June 8, 2023, executed by SG Echo LLC (incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K as filed by the Registrant with the Securities and Exchange Commission on June 14, 2023 (File No. 001-38037))
10.2
Mortgage, dated June 8, 2023, in favor of SouthStar Financial, LLC (incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K as filed by the Registrant with the Securities and Exchange Commission on June 14, 2023 (File No. 001-38037))
10.3
Non-Recourse Factoring and Security Agreement, dated June 8, 2023, by and between SG Echo LLC and SouthStar Financial, LLC (incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K as filed by the Registrant with the Securities and Exchange Commission on June 14, 2023 (File No. 001-38037))
10.4
Secured Continuing Corporate Guaranty, dated June 8, 2023, by Safe & Green Holdings Corp. in favor of SouthStar Financial, LLC (incorporated herein by reference to Exhibit 10.5 to the Current Report on Form 8-K as filed by the Registrant with the Securities and Exchange Commission on June 14, 2023 (File No. 001-38037))
10.5
Cross-Default and Cross Collateralization Agreement, dated June 8, 2023, by and between SouthStar Financial, LLC, SG Echo LLC and Safe & Green Holdings Corp. (incorporated herein by reference to Exhibit 10.6 to the Current Report on Form 8-K as filed by the Registrant with the Securities and Exchange Commission on June 14, 2023 (File No. 001-38037))
10.6
Loan Agreement, dated as of June 16, 2023, between Registrant and BCV S&G DevCorp. (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K as filed by the Registrant with the Securities and Exchange Commission on June 29, 2023 (File No. 001-38037))
10.7
Escrow Agreement, dated as of June 21, 2023, among Registrant, Bridgeline Capital Partners S.A, acting on behalf BCV S&G DevCorp, and American Stock Transfer & Trust Company, LLC, as Escrow Agent (incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K as filed by the Registrant with the Securities and Exchange Commission on June 29, 2023 (File No. 001-38037))
31.1+   Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

52



31.2+
Certification by Interim Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1+   Certification by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2+
Certification by Chief Financial Officer 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 as the 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 (embedded within the Inline XBRL document)
+   Filed herewith.

 

*   This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.


53


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.  

 

  SAFE & GREEN HOLDINGS CORP.
  (Registrant)
     

By: /s/ Paul M. Galvin
   

Paul M. Galvin

Chairman of the Board and Chief Executive Officer

(Principal Executive Officer)





By: /s/ Patricia Kaelin


Patricia Kaelin

Chief Financial Officer



(Principal Financial Officer and Principal Accounting Officer)
Date: August 14, 2023



54