10-Q 1 sgbx-20220331.htm QUARTERLY REPORT sgbx-20220331.htm
0 false 0 false 0001023994 false --12-31 Q1 2022 Non-accelerated Filer true NASDAQ DE true false 10-Q P5Y P5Y P12M P12M P6M 2 Construction fee of $300,000 with no cost of revenue during 2020. 0001023994 us-gaap:SubsequentEventMember us-gaap:SupplyCommitmentMember 2022-03-25 2022-04-01 0001023994 us-gaap:SubsequentEventMember us-gaap:SupplyCommitmentMember srt:MinimumMember 2022-04-01 0001023994 us-gaap:StockOptionMember sgbx:StockBasedCompensationPlanMember 2021-01-01 2021-03-31 0001023994 us-gaap:StockOptionMember sgbx:StockBasedCompensationPlanMember 2022-01-01 2022-03-31 0001023994 sgbx:RogersMember us-gaap:RestrictedStockMember 2021-09-29 2021-10-01 0001023994 us-gaap:RestrictedStockUnitsRSUMember sgbx:StockBasedCompensationPlanMember 2022-01-01 2022-03-31 0001023994 sgbx:SalesRevenueGoodNetMember sgbx:CustomerFourMember 2021-01-01 2021-03-31 0001023994 sgbx:SalesRevenueGoodNetMember sgbx:CustomerOneMember 2022-01-01 2022-03-31 0001023994 us-gaap:VehiclesMember srt:MinimumMember 2022-01-01 2022-03-31 0001023994 srt:MinimumMember us-gaap:FurnitureAndFixturesMember 2022-01-01 2022-03-31 0001023994 srt:MaximumMember us-gaap:FurnitureAndFixturesMember 2022-01-01 2022-03-31 0001023994 srt:MinimumMember us-gaap:BuildingMember 2022-01-01 2022-03-31 0001023994 2019-01-15 2019-01-15 0001023994 sgbx:CustomerTwoMember us-gaap:AccountsReceivableMember 2022-01-01 2022-03-31 0001023994 2019-06-04 0001023994 us-gaap:EmployeeStockOptionMember 2022-01-01 2022-03-31 0001023994 us-gaap:RestrictedStockMember 2021-09-29 2021-10-01 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:NormanBerryIIOwnerLLCMember 2021-10-02 2021-12-31 0001023994 sgbx:NonEmployeeDirectorMember 2020-11-01 2020-11-11 0001023994 srt:ChiefExecutiveOfficerMember 2020-12-01 2020-12-09 0001023994 sgbx:NonEmployeeAdvisoryDirectorsMember 2021-12-07 0001023994 sgbx:NonEmployeeAdvisoryDirectorsMember 2021-12-07 2021-12-07 0001023994 sgbx:NonEmployeeDirectorMember 2021-10-01 0001023994 sgbx:NonEmployeeDirectorMember 2021-09-29 2021-10-01 0001023994 sgbx:ConsultantMember 2021-09-29 2021-10-01 0001023994 sgbx:RogersMember 2021-09-29 2021-10-01 0001023994 sgbx:GeraldSheeranMember 2021-09-29 2021-10-01 0001023994 srt:ChiefOperatingOfficerMember 2021-09-29 2021-10-01 0001023994 srt:ChiefExecutiveOfficerMember 2021-09-29 2021-10-01 0001023994 2021-10-02 2021-10-29 0001023994 2021-10-02 2021-10-31 0001023994 2018-12-30 2019-01-01 0001023994 2021-04-14 2021-04-14 0001023994 us-gaap:SupplierConcentrationRiskMember 2021-01-01 2021-03-31 0001023994 2021-04-01 2021-04-30 0001023994 sgbx:MedicalEquipmentMember 2022-03-31 0001023994 sgbx:MedicalEquipmentMember 2021-12-31 0001023994 sgbx:ConstructionMaterialsMember 2021-12-31 0001023994 sgbx:ConstructionMaterialsMember 2022-03-31 0001023994 sgbx:OsangHealthcareCompanyLtdMember 2021-04-14 2021-04-14 0001023994 2021-09-29 2021-10-01 0001023994 us-gaap:StockOptionMember 2021-01-01 2021-03-31 0001023994 sgbx:PurchaseAgreementMember 2019-04-19 0001023994 sgbx:PurchaseAgreementMember 2019-04-19 2019-04-19 0001023994 sgbx:GalvinNoteMember 2022-03-31 0001023994 us-gaap:RestrictedStockUnitsRSUMember 2021-01-01 2021-03-31 0001023994 2021-10-01 0001023994 2021-10-31 0001023994 sgbx:NonDirectorsMember 2021-01-01 2021-03-31 0001023994 sgbx:NonEmployeesMember 2021-01-01 2021-03-31 0001023994 sgbx:NormanBerryIIOwnerLLCMember 2021-07-01 2021-09-30 0001023994 sgbx:NormanBerryIIOwnerLLCMember 2021-05-01 2021-05-31 0001023994 sgbx:StockBasedCompensationPlanMember 2021-01-01 2021-03-31 0001023994 sgbx:ConstructionAndEngineeringServicesMember 2021-01-01 2021-03-31 0001023994 us-gaap:RestrictedStockMember 2021-01-01 2021-03-31 0001023994 us-gaap:RetainedEarningsMember 2021-12-31 0001023994 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001023994 us-gaap:CommonStockMember 2021-12-31 0001023994 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001023994 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001023994 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001023994 us-gaap:ParentMember 2021-01-01 2021-03-31 0001023994 us-gaap:NoncontrollingInterestMember 2021-01-01 2021-03-31 0001023994 sgbx:OtherReceivableMember 2021-12-31 0001023994 us-gaap:BuildingMember srt:MaximumMember 2022-01-01 2022-03-31 0001023994 sgbx:EngineeringServicesMember 2021-01-01 2021-03-31 0001023994 us-gaap:ConstructionMember 2021-01-01 2021-03-31 0001023994 us-gaap:NoncontrollingInterestMember 2022-03-31 0001023994 us-gaap:ParentMember 2022-03-31 0001023994 us-gaap:RetainedEarningsMember 2022-03-31 0001023994 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001023994 us-gaap:CommonStockMember 2022-03-31 0001023994 us-gaap:NoncontrollingInterestMember 2021-12-31 0001023994 2019-08-31 0001023994 2019-08-01 2019-08-31 0001023994 2019-06-05 0001023994 us-gaap:ParentMember 2021-12-31 0001023994 us-gaap:NoncontrollingInterestMember 2021-03-31 0001023994 us-gaap:ParentMember 2021-03-31 0001023994 us-gaap:RetainedEarningsMember 2021-03-31 0001023994 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001023994 us-gaap:CommonStockMember 2021-03-31 0001023994 us-gaap:RetainedEarningsMember 2020-12-31 0001023994 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001023994 us-gaap:ComputerEquipmentMember srt:MinimumMember 2022-01-01 2022-03-31 0001023994 srt:MaximumMember us-gaap:EquipmentMember 2022-01-01 2022-03-31 0001023994 us-gaap:EquipmentMember srt:MinimumMember 2022-01-01 2022-03-31 0001023994 us-gaap:CommonStockMember 2020-12-31 0001023994 us-gaap:StockOptionMember 2022-01-01 2022-03-31 0001023994 sgbx:OneToTwoYearMember 2022-03-31 0001023994 sgbx:WithinOneYearMember 2022-03-31 0001023994 us-gaap:ConstructionInProgressMember 2022-03-31 0001023994 sgbx:LaboratoryAndTemporaryUnitsMember 2022-03-31 0001023994 sgbx:BuildingHeldForLeasesMember 2022-03-31 0001023994 us-gaap:AutomobilesMember 2022-03-31 0001023994 us-gaap:MachineryAndEquipmentMember 2022-03-31 0001023994 us-gaap:LeaseholdImprovementsMember 2022-03-31 0001023994 sgbx:FurnitureAndOtherEquipmentMember 2022-03-31 0001023994 us-gaap:ComputerEquipmentMember 2022-03-31 0001023994 us-gaap:LeaseholdImprovementsMember 2021-12-31 0001023994 sgbx:MedicalMember 2021-12-31 0001023994 sgbx:OtherReceivableMember 2022-03-31 0001023994 sgbx:RetainageReceivableMember 2022-03-31 0001023994 sgbx:MedicalMember 2022-03-31 0001023994 sgbx:BilledEngineeringServicesMember 2022-03-31 0001023994 sgbx:ConstructionRevenueMember 2022-03-31 0001023994 us-gaap:CostOfGoodsTotalMember 2021-01-01 2021-03-31 0001023994 sgbx:SpecialUseMember 2021-01-01 2021-03-31 0001023994 us-gaap:RetailMember 2021-01-01 2021-03-31 0001023994 us-gaap:ComputerEquipmentMember srt:MaximumMember 2022-01-01 2022-03-31 0001023994 sgbx:OfficeMember 2021-01-01 2021-03-31 0001023994 sgbx:MultiFamiliesMember 2021-01-01 2021-03-31 0001023994 sgbx:MedicalConstructionMember 2021-01-01 2021-03-31 0001023994 srt:HotelMember 2021-01-01 2021-03-31 0001023994 us-gaap:GovernmentContractMember 2021-01-01 2021-03-31 0001023994 2021-07-21 0001023994 us-gaap:WarrantMember 2022-01-01 2022-03-31 0001023994 2021-07-01 2021-09-30 0001023994 2021-07-14 0001023994 2017-06-30 0001023994 2017-06-01 2017-06-30 0001023994 sgbx:ConstructionAndEngineeringServicesMember 2022-01-01 2022-03-31 0001023994 2021-03-31 0001023994 sgbx:MedicalConstructionMember 2022-01-01 2022-03-31 0001023994 srt:HotelMember 2022-01-01 2022-03-31 0001023994 us-gaap:GovernmentContractMember 2022-01-01 2022-03-31 0001023994 sgbx:MedicalRevenueMember 2022-01-01 2022-03-31 0001023994 us-gaap:NoncontrollingInterestMember 2022-01-01 2022-03-31 0001023994 us-gaap:ParentMember 2022-01-01 2022-03-31 0001023994 sgbx:PayrollMember sgbx:StockBasedCompensationPlanMember 2022-01-01 2022-03-31 0001023994 us-gaap:NoncontrollingInterestMember 2020-12-31 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:ParentMember 2020-12-31 0001023994 2021-10-25 0001023994 2016-10-01 2016-10-26 0001023994 2019-02-01 2019-02-26 0001023994 sgbx:EmployeeMember 2020-04-01 2020-04-14 0001023994 sgbx:NonEmployeeDirectorMember 2020-04-01 2020-04-14 0001023994 2020-09-01 2020-09-23 0001023994 2020-09-23 0001023994 sgbx:OriginalAgreementMember 2022-01-01 2022-03-31 0001023994 srt:ChiefExecutiveOfficerMember 2019-02-01 2019-02-26 0001023994 srt:ChiefExecutiveOfficerMember 2019-03-01 2019-03-22 0001023994 2019-05-01 2019-06-05 0001023994 2019-03-22 0001023994 us-gaap:CostOfGoodsTotalMember 2022-01-01 2022-03-31 0001023994 2021-06-01 2021-06-24 0001023994 sgbx:ConstructionBacklogMember 2022-01-01 2022-03-31 0001023994 sgbx:LiquidityMember 2022-01-01 2022-03-31 0001023994 us-gaap:SupplierConcentrationRiskMember 2022-01-01 2022-03-31 0001023994 2021-06-24 0001023994 2021-05-31 0001023994 2021-05-01 2021-05-31 0001023994 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001023994 us-gaap:CommonStockMember 2022-01-01 2022-03-31 0001023994 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-03-31 0001023994 2020-08-01 2020-08-27 0001023994 sgbx:SpecialUseMember 2022-01-01 2022-03-31 0001023994 us-gaap:RetailMember 2022-01-01 2022-03-31 0001023994 sgbx:OfficeMember 2022-01-01 2022-03-31 0001023994 sgbx:MultiFamiliesMember 2022-01-01 2022-03-31 0001023994 2021-06-01 2021-06-15 0001023994 2021-01-01 2021-03-31 0001023994 2022-03-31 0001023994 2022-01-01 2022-03-31 0001023994 2021-07-01 2021-07-14 0001023994 sgbx:EngineeringServicesMember 2022-01-01 2022-03-31 0001023994 us-gaap:ConstructionMember 2022-01-01 2022-03-31 0001023994 us-gaap:RestrictedStockMember 2022-01-01 2022-03-31 0001023994 2020-06-15 0001023994 2020-01-31 0001023994 2019-06-20 2019-06-21 0001023994 2020-02-10 2020-02-11 0001023994 2018-09-11 2018-09-12 0001023994 sgbx:StockBasedCompensationPlanMember 2022-01-01 2022-03-31 0001023994 us-gaap:RestrictedStockUnitsRSUMember 2022-01-01 2022-03-31 0001023994 2021-09-30 0001023994 us-gaap:NotesReceivableMember 2020-01-21 0001023994 us-gaap:NotesReceivableMember 2020-01-01 2020-01-21 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 2020-05-01 2020-05-31 0001023994 2020-05-31 0001023994 2020-01-01 2020-01-31 0001023994 2020-02-01 2020-02-05 0001023994 2020-12-31 0001023994 sgbx:MedicalRevenueMember 2021-01-01 2021-03-31 0001023994 us-gaap:ComputerEquipmentMember 2021-12-31 0001023994 us-gaap:MachineryAndEquipmentMember 2021-12-31 0001023994 us-gaap:LandMember 2021-12-31 0001023994 sgbx:LaboratoryAndTemporaryUnitsMember 2021-12-31 0001023994 us-gaap:ConstructionInProgressMember 2021-12-31 0001023994 us-gaap:AutomobilesMember 2021-12-31 0001023994 sgbx:BuildingHeldForLeasesMember 2021-12-31 0001023994 sgbx:FurnitureAndOtherEquipmentMember 2021-12-31 0001023994 us-gaap:LandMember 2022-03-31 0001023994 sgbx:ConstructionRevenueMember 2021-12-31 0001023994 sgbx:BilledEngineeringServicesMember 2021-12-31 0001023994 sgbx:RetainageReceivableMember 2021-12-31 0001023994 2021-09-28 2021-10-01 0001023994 sgbx:CompanyNoteMember 2022-03-31 0001023994 sgbx:SalesRevenueGoodNetMember 2021-01-01 2021-12-31 0001023994 srt:MinimumMember 2022-03-31 0001023994 srt:MaximumMember 2022-03-31 0001023994 sgbx:JDICumberlandInletLLCMember 2021-06-24 0001023994 2021-12-31 0001023994 us-gaap:IntellectualPropertyMember 2022-03-31 0001023994 us-gaap:IntellectualPropertyMember 2022-01-01 2022-03-31 0001023994 us-gaap:InternetDomainNamesMember 2022-03-31 0001023994 us-gaap:InternetDomainNamesMember 2022-01-01 2022-03-31 0001023994 sgbx:SGBDevelopmentCorpMember 2021-05-10 0001023994 us-gaap:AccountsReceivableMember sgbx:CustomerThreeMember 2021-01-01 2021-03-31 0001023994 us-gaap:CommonStockMember 2021-10-25 0001023994 sgbx:PreFundedWarrantSharesMember 2021-10-25 0001023994 2021-01-01 2021-12-31 0001023994 2022-05-20 0001023994 sgbx:CommonStockWarrantsMember 2021-10-25 0001023994 us-gaap:PrivatePlacementMember 2021-10-25 0001023994 sgbx:CompanyNoteMember 2020-04-01 2020-04-30 0001023994 2019-10-09 0001023994 2019-10-01 2019-10-09 0001023994 2021-09-01 2021-09-30 0001023994 2021-05-10 0001023994 sgbx:CompanyNoteMember 2020-04-30 0001023994 sgbx:StockBasedCompensationPlanMember sgbx:PayrollMember 2021-01-01 2021-03-31 0001023994 sgbx:StockBasedCompensationPlanMember us-gaap:RestrictedStockUnitsRSUMember 2021-01-01 2021-03-31 0001023994 srt:MaximumMember us-gaap:VehiclesMember 2022-01-01 2022-03-31 0001023994 us-gaap:NotesReceivableMember sgbx:CompanyNoteMember 2020-01-21 0001023994 us-gaap:NotesReceivableMember sgbx:GalvinNoteMember 2020-01-21 0001023994 us-gaap:NotesReceivableMember 2020-04-01 2020-04-30 0001023994 us-gaap:AccountsReceivableMember sgbx:CustomerFourMember 2021-01-01 2021-12-31 0001023994 us-gaap:OperatingSegmentsMember 2022-01-01 2022-03-31 0001023994 us-gaap:OperatingSegmentsMember 2022-03-31 0001023994 us-gaap:OperatingSegmentsMember 2021-01-01 2021-03-31 0001023994 us-gaap:OperatingSegmentsMember 2021-03-31 0001023994 us-gaap:IntersegmentEliminationMember 2022-01-01 2022-03-31 0001023994 sgbx:MedicalMember us-gaap:OperatingSegmentsMember 2022-01-01 2022-03-31 0001023994 sgbx:MedicalMember us-gaap:OperatingSegmentsMember 2022-03-31 0001023994 sgbx:MedicalMember us-gaap:OperatingSegmentsMember 2021-01-01 2021-03-31 0001023994 sgbx:MedicalMember us-gaap:OperatingSegmentsMember 2021-03-31 0001023994 sgbx:DevelopmentMember us-gaap:OperatingSegmentsMember 2022-01-01 2022-03-31 0001023994 sgbx:DevelopmentMember us-gaap:OperatingSegmentsMember 2022-03-31 0001023994 sgbx:DevelopmentMember us-gaap:OperatingSegmentsMember 2021-01-01 2021-03-31 0001023994 sgbx:DevelopmentMember us-gaap:OperatingSegmentsMember 2021-03-31 0001023994 us-gaap:CorporateAndOtherMember us-gaap:OperatingSegmentsMember 2022-01-01 2022-03-31 0001023994 us-gaap:CorporateAndOtherMember us-gaap:OperatingSegmentsMember 2022-03-31 0001023994 us-gaap:CorporateAndOtherMember us-gaap:OperatingSegmentsMember 2021-01-01 2021-03-31 0001023994 us-gaap:CorporateAndOtherMember us-gaap:OperatingSegmentsMember 2021-03-31 0001023994 sgbx:MedicalMember us-gaap:IntersegmentEliminationMember 2022-01-01 2022-03-31 0001023994 sgbx:DevelopmentMember us-gaap:IntersegmentEliminationMember 2022-01-01 2022-03-31 0001023994 us-gaap:CorporateAndOtherMember us-gaap:IntersegmentEliminationMember 2022-01-01 2022-03-31 0001023994 us-gaap:OperatingSegmentsMember sgbx:ConstructionSegmentsMember 2022-01-01 2022-03-31 0001023994 us-gaap:OperatingSegmentsMember sgbx:ConstructionSegmentsMember 2022-03-31 0001023994 us-gaap:IntersegmentEliminationMember sgbx:ConstructionSegmentsMember 2022-01-01 2022-03-31 0001023994 us-gaap:OperatingSegmentsMember sgbx:ConstructionSegmentsMember 2021-01-01 2021-03-31 0001023994 us-gaap:OperatingSegmentsMember sgbx:ConstructionSegmentsMember 2021-03-31 0001023994 sgbx:ExclusiveLicenseAgreementMember 2021-01-01 2021-12-31 0001023994 sgbx:ContractOneMember sgbx:ExclusiveLicenseAgreementMember 2021-01-01 2021-12-31 0001023994 sgbx:ContractTwoMember sgbx:ExclusiveLicenseAgreementMember 2021-01-01 2021-12-31 0001023994 sgbx:ContractThreeMember sgbx:ExclusiveLicenseAgreementMember 2021-01-01 2021-12-31 0001023994 2021-10-05 2021-12-31 0001023994 sgbx:MolivingMember 2022-02-23 2022-02-24 0001023994 sgbx:MolivingMember 2022-02-24 0001023994 sgbx:HolaDefendantsMember 2020-04-12 2020-04-13 0001023994 us-gaap:RestrictedStockMember 2020-09-01 2020-09-23 0001023994 us-gaap:RestrictedStockMember 2021-09-28 2021-10-01 0001023994 us-gaap:RestrictedStockMember 2021-10-01 0001023994 us-gaap:RestrictedStockMember sgbx:ConsultantMember 2021-10-01 0001023994 sgbx:NonEmployeeAdvisoryDirectorsMember us-gaap:RestrictedStockMember 2021-09-29 2021-10-01 0001023994 sgbx:NonEmployeeAdvisoryDirectorsMember us-gaap:RestrictedStockMember 2021-12-07 2021-12-07 0001023994 us-gaap:RestrictedStockMember 2022-03-31 xbrli:shares xbrli:pure iso4217:USD iso4217:USD xbrli:shares sgbx:Director sgbx:Employee sgbx:Customer sgbx:Number sgbx:Item sgbx:Consultants
 


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 March 31, 2022

 

OR

 

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

 

For the transition period from ____________ to ____________ 

 

Commission file number: 001-38037

 

SG BLOCKS, INC.

(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.)

 

 

 

5011 Gate Parkway, Building 100, Suite 100Jacksonville, FL

 

32256

(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 May 20, 2022 the issuer had a total of 12,006,873 shares of the registrant’s common stock, $0.01 par value, outstanding.  


 




SG BLOCKS, INC.

FORM 10-​Q

 

TABLE OF CONTENTS​​​

​​


Page

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

Condensed Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021 2

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021 (Unaudited) 3

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021 (Unaudited)

4

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (Unaudited) 5

Notes to Condensed Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Result of Operations 32
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 43
ITEM 4. Controls and Procedures 43
PART II. OTHER INFORMATION 
44
ITEM 1. Legal Proceedings 44
ITEM 1A. Risk Factors 44
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 46
ITEM 3. Defaults Upon Senior Securities 46
ITEM 4. Mine Safety Disclosures 46
ITEM 5. Other Information 46
ITEM 6. Exhibits 47
SIGNATURES

​​​​​​
1


SG BLOCKS, INC. AND SUBSIDIARIES


 

 

March 31,

2022

 

 

December 31,
 
2021

 

 

 

 (Unaudited)

 

 


 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

13,146,418

 

 

$

13,024,381

 

Accounts receivable, net

 

 

2,424,501

 

 

 

2,917,646

 

Contract assets 

 

 

133,395

 

 

 

41,916

 

Held for sale assets

4,392,541



Inventories

1,054,342


1,273,825

Prepaid expenses and other current assets

 

 

784,871

 

 

 

656,279

 

Total current assets

 

 

21,936,068

 

 

 

17,914,047

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

4,080,852

 

 

 

6,839,943

 

Project development costs and other non-current assets

449,961


923,172

Goodwill

 

 

1,309,330

 

 

 

1,309,330

 

Right-of-use asset

2,902,284


1,210,053
Long-term note receivable

829,384




720,137

Intangible assets, net

 

 

2,053,410

 

 

 

2,095,232

 

Deferred contract costs, net

101,963


112,159
Investment in non-marketable securities

700,000


200,000
Investment in and advances to equity affiliates 

3,599,945


3,599,945

Total Assets 

 

$

37,963,197

 

 

$

34,924,018

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

5,475,882

 

 

$

7,568,851

 

Contract liabilities

 

 

5,205,712

 

 

 

1,437,579

 

    Lease liability, current maturities

481,223


337,469
    Due to affiliates




264,451
    Assumed liability

5,795


5,795
    Short term note payable, net

1,984,902


1,971,960

Total current liabilities

 

 

13,153,514

 

 

 

11,586,105

 










Long-term note payable

750,000


750,000
Lease liability, net of current maturities

2,427,080


872,124
Total liabilities


16,330,594


13,208,229









 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Common stock, $0.01 par value, 25,000,000 shares authorized; 12,006,873 issued and outstanding as of March 31, 2022 and 11,986,873 issued and outstanding as of December 31, 2021

 

 

120,069

 

 

 

119,869

 

Additional paid-in capital

 

 

54,030,291

 

 

 

53,341,405

 

Accumulated deficit

 

 

(33,826,397

)

 

 

(33,109,220

)
Total SG Blocks, Inc. stockholders’ equity

20,323,963


20,352,054

Non-controlling interest

 

 

1,308,640

 

 

 

1,363,735

 

Total stockholders’ equity

21,632,603


21,715,789

Total Liabilities and Stockholders’ Equity

 

$

37,963,197

 

 

$

34,924,018

 

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

2


SG BLOCKS, INC. AND SUBSIDIARIES



 

For the

Three Months Ended

March 31,


For the

Three Months Ended

March 31,


 

2022
2021

 

(Unaudited)

Revenue:





Construction services $ 1,668,384
$ 3,137,715

Engineering services  


50,386

93,949

Medical revenue


6,885,828

5,955,963

Total  


8,604,598

9,187,627

 







Cost of revenue:







Construction services


1,677,560

4,093,540

Engineering services


43,153

9,770
Medical revenue 
4,397,450

4,527,692

Total   


6,118,163

8,631,002

 







Gross profit 


2,486,435

556,625

 







Operating expenses:







Payroll and related expenses


1,144,187

827,522

General and administrative expenses


780,021

809,800

Marketing and business development expense


143,335

70,627

Pre-project expenses




10,133

Total


2,067,543

1,718,082

 







Operating profit/(loss)


418,892
(1,161,457 )

 







Other income (expense):







Interest expense


(48,849 )
(363 )

Interest income


12,783

17,470
Other income
118,902


Total


82,836
17,107

 







Income (loss) before income taxes  


501,728
(1,144,350 )

Income tax expense   





 







Net income (loss) 


501,728
(1,144,350 )

 







Add: net income attributable to noncontrolling interests  
1,218,905

889,527
Net loss attributable to common stockholders of SG Blocks, Inc.  $ (717,177 ) $ (2,033,877 )







Net loss per share attributable to SG Blocks, Inc.







Basic and diluted

$ (0.06 ) $ (0.23 )

 







Weighted average shares outstanding:







Basic and diluted


11,998,334

8,744,469

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

3


SG BLOCKS, INC. AND SUBSIDIARIES 

 




 

 

$0.01 Par Value
Common Stock

 


Additional
Paid-in

 


Accumulated

 



SG Blocks Stockholders' 

Noncontrolling


Total
Stockholders’

 

 

 

Shares

 


Amount

 


Capital

 


Deficit

 


Equity


Interests


Equity

 

Balance at December 31, 2020

 


8,596,189

 


$

85,962

 


$

40,443,840

 


$

(22,276,546

)
$ 18,253,256

$ 184,567

$ 18,437,823

 

Stock-based compensation 

 


 



 


 

286,186

 


 

 



286,186





286,186

 

Conversion of warrants to common stock


225,100


2,251


701,187





703,438





703,438

Net loss

 


 



 


 

 


 

(2,033,877

)

(2,033,877 )

889,527


(1,144,350 )
Balance at March 31, 2021

8,821,289

$ 88,213

$ 41,431,213

$ (24,310,423 )
$ 17,209,003

$ 1,074,094

$ 18,283,097





























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


688,886





689,086





689,086
Noncontrolling interest distribution
















(1,274,000 )

(1,274,000 )

Net income (loss)

 


 



 


 

 


 

(717,177

)

(717,177 )

1,218,905


501,728

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


  

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


4


SG BLOCKS, INC. AND SUBSIDIARIES


 

 

For the

Three Months Ended 
March 31, 2022

 


For the

Three Months Ended 
March 31, 2021

 

 

 

(Unaudited)

 


(Unaudited)

 

Cash flows from operating activities: 

 

 

 


 

 

Net income (loss)

 

$

501,728


$

(1,144,350

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: 

 

 

 

 


 

 

 

Depreciation expense

 

 

104,825

 


 

91,190

 

Amortization of intangible assets

 

 

41,823

 


 

40,407

 

Amortization of deferred license costs

10,196


10,196
Amortization of Debt Issuance Costs

8,628




Bad Debt Expense

 

 

7,024


 

Interest income on long-term note receivable

 

 

(9,247

)

 

(9,247

)

Stock-based compensation

 

 

649,090

 


 

286,186

 

Loss on asset disposal

241



Changes in operating assets and liabilities:

 

 

 

 


 

 

 

Accounts receivable

 

 

486,117


 

(581,299

)

Contract assets 

 

 

(91,479)


 

(599,441

)
Inventories

219,483

(155,935 )

Prepaid expenses and other current assets

 

 

(128,592

)

 

(679,540

)
Right of use asset

109,308

97,846

Accounts payable and accrued expenses

 

 

(2,052,971

)

 

2,062,776

Contract liabilities



3,768,133


 

(641,412

)
     Due to affiliates

(264,451 )

(863,151 )
     Lease liability

(102,829 )

(97,342 )

Net cash provided by (used in) operating activities 

 

 

3,257,027


 

(2,183,116

)

 

 

 

 

 


 

 

 

Cash flows from investing activities:

 

 

 

 


 

 

 

     Purchase of property, plant and equipment

(922,865 )

(862,090 )
     Purchase of intangible asset



(42,500 )
     Proceeds from sale of equipment

760



     Repayment of promissory note

(100,000 )


     Payment on assumed liability of acquired assets



(85,798 )
     Project Development Costs

(338,885 )


     Investment in non-marketable securities

(500,000 )


Net cash (used in) investing activities

 

 

(1,860,990

)

 

(990,388

)

 

 

 

 

 


 

 

 

Cash flows from financing activities:

 

 

 

 


 

 

 

    Proceeds from conversion of warrants to common stock




703,438
    Distribution paid to NCI 

(1,274,000
)


Net cash (used in) provided by financing activities

 

 

(1,274,000

)

 

703,438

 

 

 


 
Net increase (decrease) in cash and cash equivalents

122,037

(2,470,066 )









Cash and cash equivalents - beginning of period

13,024,381


13,010,356









Cash and cash equivalents - end of period
$ 13,146,418

$ 10,540,290

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

5


SG BLOCKS, INC. AND SUBSIDIARIES

 

For the Three Months Ended March 31, 2022 and 2021 (Unaudited)

 

1.

Description of Business 

 

SG Blocks, Inc. (collectively with its subsidiaries, the “Company,” “we”, “us” or “our”) was previously known 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 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.  

 

During 2020, the Company formed, SG Echo, LLC, a wholly owned subsidiary of the Company. SG Echo, LLC was formed to complete the business acquisition. The Company acquired substantially all the assets of Echo DCL, 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.

 

As of January 2021 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 2021, the Company formed 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.   


6


 

SG BLOCKS, INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Three months ended March 31, 2022 and 2021 (Unaudited)


Reverse Stock Split

 

On February 5, 2020, the Company effected a 1-for-20 reverse stock split of its then-outstanding common stock, which has since been converted. All share and per share amounts set forth in the condensed consolidated financial statements of the Company have been retroactively restated to reflect the 1-for-20 reverse stock split as if it had occurred as of the earliest period presented and unless otherwise stated, all other share and per share amounts for all periods presented in these condensed consolidated financial statements have been adjusted to reflect the reverse stock split effected in February 2020.

 

As of March 31, 2022, the Company had 12,006,873 shares of common stock issued and outstanding.


2.

Liquidity 


As of March 31, 2022, the Company had cash and cash equivalents of $13,146,418 and a backlog of approximately $7,591,863. 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: 



   
2022


Within 1 year
$ 7,591,863

Total Backlog
$ 7,591,863


The Company has incurred losses since its inception and has negative operating cash flows. Management has taken several actions to ensure that the Company will continue as a going concern. As described below, the Company has recently been able to raise substantial cash through equity offerings. In addition, as further described in these consolidated financial statements, the Company has begun to recognize revenue from new revenue streams. Management believes that these actions will enable the Company to continue as a going concern.    


The Company completed a public and concurrent private offering in October 2021, which resulted in net proceeds of approximately $10,488,000. See Note 12 for a discussion on the public and concurrent private offering. The Company believes that it has adequate cash balances to meet obligations coming due in the next twelve months and further 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.  


With the global spread of the ongoing novel coronavirus ("COVID-19") pandemic during 2020, the Company implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its employees and business. Any quarantines, the timing and length of containment and eradication solutions, travel restrictions, absenteeism by infected workers, labor shortages or other disruptions to the Company's suppliers and contract manufacturers or customers would likely adversely impact the Company's sales and operating results and result in further project delays. In addition, the pandemic could result in an economic downturn that could affect the demand for the Company's products. Order lead times could be extended or delayed and pricing could increase. Some products or services may become unavailable if the regional or global spread were significant enough to prevent alternative sourcing. Accordingly, the Company is considering alternative product sourcing in the event that product supply becomes problematic. The Company expects this global pandemic to have an impact on the Company's revenue and results of operations, the size and duration of which the Company is currently unable to predict. In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company's business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties which the Company faces. The Company has been impacted by COVID-19 with supply chain distributions, absenteeism by infected workers and skilled labor shortages which has caused delays in projects and the Company could be further impacted if the COVID-19 pandemic continues. 


7



SG BLOCKS, INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 (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 Current 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, 2021 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on April 18, 2022. 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 three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

   

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 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. Significant areas that require the Company to make estimates include revenue recognition, stock-based compensation, stock warrants liabilities and allowance for credit losses. Actual results could 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.


Reclassification – Certain prior year balances were reclassed to conform to current period presentation. There was no impact to income (loss) or cash flows as a result of these reclassifications.    


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. 


8


SG BLOCKS, INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 (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.


On October 3, 2019, the Company entered into an Exclusive License Agreement (“ELA” ) pursuant to which it granted an exclusive license for its technology as outlined in the ELA. The ELA is described below. Under the ELA, the Company was to receive royalty payments based upon gross revenues earned by the licensee for commercialized products within the field of design and project management platforms for residential use, including single-family residences and multi-family residences, but excluding military housing. The Company has determined that the ELA granted the licensee a right to access the Company’s intellectual property throughout the license period (or its remaining economic life, if shorter), and thus recognizes revenue over time as the licensee recognized revenue and the Company has the right to payment of royalties. On June 15, 2021, the Company terminated the ELA that was executed on October 3, 2019 which is discussed below.   


CMC Right of First Refusal Agreement – On October 9, 2019, the Company entered into a Right of First Refusal Agreement (the “Agreement”) with CMC Development LLC (“CMC”), which had a term of two (2) years. Under the Agreement, the Company had a right of first refusal with respect to being engaged as a designer and builder of any real estate projects for which CMC has secured the rights to develop and in which CMC has a greater than fifty percent (50%) interest in the owner or developer entity and has the right to select the builder for such real estate project (the “ROFR Rights”). In exchange for such ROFR Rights, the Company agreed to issue to CMC 2,500 shares of restricted stock of the Company’s common stock, of which 1,250 shares vested on March 31, 2021 and the remaining 1,250 shares was to vest and be issued on September 30, 2021 unless the Agreement is earlier terminated. In the event that the Agreement was earlier terminated, CMC was entitled to receive the entire amount of such restricted stock that had vested as of such earlier termination date, but in no event less than 1,250 shares of such restricted stock. The Agreement also provided for customary indemnification and confidentiality obligations between the parties. The 2,500 shares of restricted stock of the Company's common stock has yet to be issued to CMC.

 

The Agreement also provided that CMC has engaged the Company to build and design, in the aggregate, approximately 100 residential and commercial units at 1100 Ridge Avenue, Atlanta, Georgia, which is known as the “Ridge Avenue, Atlanta Project.” The total expected gross revenue to the Company for the project to be derived by CMC is approximately $16,900,000. The project is a residential project but it was not subject to the recently terminated ELA. The planning stage of the project was initially delayed due to COVID-19. The Company is no longer participating on Ridge Avenue as CMC has decided to proceed with this project as a traditional construction build. The Company previously reported this as a cancellation within the Company's backlog footnote, see Note 11 on this discussion. No revenue has been recognized under the Agreement during the three months ended March 31, 2022 and 2021.


The Company entered into a joint venture agreement with Clarity Lab Solutions, LLC (“Clarity Labs”) (the “JV”) in the fourth quarter of 2020. 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 three months ended March 31, 2022 and 2021, the Company recognized approximately $6,885,828 and $5,863,358 related to activities through these two joint ventures, which is included in medical revenue on the accompanying consolidated statements of operations.


Disaggregation of Revenues


The Company’s revenues are principally derived from construction and engineering contracts related to Modules, and medical revenue derived from lab testing and test kit sales. The Company's contracts are with customers in various industries. Revenue recognized at a point in time and recognized over time were $6,885,828 and $1,718,770, respectively, for the three months ending March 31, 2022. Revenue recognized at a point in time and recognized over time were $5,965,413 and $3,222,214, respectively, for the three months ending March 31, 2021.


9


SG BLOCKS, INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 (Unaudited)

 

3.

Summary of Significant Accounting Policies (continued)

   

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




Three Months Ended March 31,

Revenue by Customer Type

2022

2021


Construction and Engineering Services:















    Government

$ 39

%
$ 1,085,480

12 %

    Hotel

897,244

10 %

170,426

2 %

    Medical - Construction



%



251,560

3

%

    Multi-Family (includes Single Family)

77,626


1

%


44,746


    Office

728,875


8

%


177,392

1


    Retail



5,344

1 %

42,015

1 %

    Special Use

9,642

%

1,460,045

16 %

Subtotal

1,718,770

20 %

3,231,664

35 %

Medical Revenue:














Medical (lab testing, kit sales and equipment)

6,885,828


80

%

5,955,963


65

%


Total revenue by customer type

$

8,604,598


100

%  


$

9,187,627

100

 

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.

  

10


SG BLOCKS, INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 (Unaudited)

 

3.

Summary of Significant Accounting Policies (continued)


Deferred Contract Costs - Prior to entering into the ELA, the Company was subject to an agreement to construct and develop a certain property (“Original Agreement”), which now is subject to the ELA. Upon entering into the ELA, the Company is no longer obliged to its Original Agreement. Upon entering the ELA, the Company had an outstanding accounts receivable balance of $306,143which 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 expects to recover those costs through future royalty payments. The Company plans 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 March 31, 2022, accumulated amortization related to deferred contract costs amounted to $101,963. During the three months ended March 31, 2022 and 2021, amortization expense relating to the deferred contract costs amounted to $10,196 and $10,196, respectively, and is included in general and administrative expenses on the accompanying condensed consolidated statement of operations. As previously mentioned, 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 as described below.

 

Exclusive License Agreement – On October 3, 2019, as amended on October 17, 2019, the Company entered into the ELA with CPF GP 2019-1 LLC (the “Licensee”), pursuant to which the Company granted the Licensee an exclusive license (the “License”) solely within the United States and its legal territories to the Company’s technology, intellectual property, any improvements thereto, and any related permits, in order to develop and commercialize products within the field of design and project management platforms for residential use, including single-family residences and multi-family residences, but excluding military housing. The Ridge Avenue Project has also been excluded from the License. The License Agreement has an initial term of five (5) years and will automatically renew for subsequent five (5) year periods. The License Agreement provides for customary terminating provisions, including the right by the Company to terminate if the Licensee fails to make minimum royalty payments (as described below).

 

In consideration for the License, during the initial term, the Licensee agreed to pay the Company a royalty of (x) five percent (5%) on the first $20,000,000 of gross revenues derived from the Licensee’s commercialization of the License (net of customary discounts, sales taxes, delivery charges, and amounts for returns) (the “Gross Revenues”), (y) four and one-half percent (4.5%) on the next $30,000,000 of Gross Revenues, and (z) five percent (5%) on all Gross Revenues thereafter (collectively, the “Royalty”), subject to the following minimum royalty payments determined on a cumulative basis during the initial term: $500,000 in year 1, $750,000 in year 2, $1,500,000 in year 3, $2,000,000 in year 4, and $2,500,000 in year 5. In addition, to the extent the Licensee sublicensed any aspect of the License to a sub-licensee, the Licensee was obligated to pay to the Company fifty percent (50%) of all payments received by the Licensee from such sublicensee.  


The ELA provided for customary indemnification obligations between the parties and further provides that the Licensee will indemnify the Company for any claims arising out of the commercialization of the License by the Licensee or any of its subsidiaries, contractors, or sublicensees. 


On June 15, 2021, the Company terminated the ELA. In connection with the termination, the Company entered into a Settlement and Mutual Release Agreement (the “Settlement Agreement”) with CPF, the general partner (the “Licensee”) of CPF MF 2019-1 LLC (“CPF MF”), and Capital Plus Financial, LLC, a limited partner of the Licensee (“Capital Plus”) and an Assignment of Limited Rights Under Membership Interest Redemption Agreement, dated June 15, 2021, with Capital Plus and the Licensee. Pursuant to the Settlement Agreement with CPF and Capital Plus, the ELA was terminated, the Company released CPF and CPF MF for any claims in exchange for releases from CPF and Capital Plus and the Company received an assignment of CPF’s right under certain circumstances to a $1.25 million redemption distribution from CPF MF under its Operating Agreement.

 

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.

 

11


SG BLOCKS, INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 (Unaudited)

 

3.

Summary of Significant Accounting Policies (continued)

 

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.

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 SGB common stock over a defined vesting period starting in December 1, 2020. The restricted shares of SGB 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 is also engaged in the business of manufacturing, importing and distributing various medical tests. Under the JV, the Company and Clarity Labs will jointly market, sell, and distribute certain products and services (“Clarity Mobile Venture”). As of December 31, 2021, $502,958 was due to Clarity Labs for expenses paid on behalf of Clarity Mobile Venture, and is included in Due to Affiliates, Accounts Payable and Accrued Expenses on the accompanying consolidated balance sheets. In addition, during the year ended December 31, 2021, the Company recognized revenue of $60,110 and other income of $60,000 to Clarity Labs, of which none is included in accounts receivable as of December 31, 2021. The Company has determined it is the primary beneficiary of Clarity Mobile Venture and has thus consolidated the activities in its consolidated financial statements.

 

On January 18, 2021 the Company entered into an operating agreement to form CAT. The purpose of CAT was 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.  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.  The Company contributed $3,000,000 for its 10% equity interest.  The 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.


On February 24, 2022 the Company made a $500,000 capital investment for a 1.2% ownership in Moliving, a nomadic hospitality solution company.
The Company also executed a side agreement to build the first sixty Moliving units and an additional ninety units after the first sixty units are manufactured. 

 


12


SG BLOCKS, INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 (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 $13,146,418 and $13,024,381 as of March 31, 2022 and December 31, 2021, 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 March 31, 2022 or 2021, 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 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 March 31, 2022 there was inventory of $336,586 for construction materials, and $717,756 of medical equipment and COVID-19 test and testing supplies. As of December 31, 2021 there was inventory of $516,731 for construction materials, and $757,094 of medical equipment and COVID-19 test and testing supplies. 


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  three months ended March 31, 2022 or 2021. The Company has taken the recent COVID-19 pandemic into consideration when determining impairment. 


Intangible assets Intangible assets consist of $2,766,000 of proprietary knowledge and technology, which is being amortized over 20 years. In addition, $97,164 of trademarks, and $47,800 of website costs are being amortized over 5 years.  The Company evaluated intangible assets for impairment during the year ended December 31, 2021, and determined that there were no impairment losses. There was no impairment during the three months ended March 31, 2022. The accumulated amortization as of March 31, 2022 and 2021 was $857,554 and $690,262, respectively. The amortization expense for the three months ended March 31, 2022 and 2021 was $41,823 and $40,407, respectively. The estimated amortization expense for the successive five years is as follows:


13


SG BLOCKS, INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 (Unaudited)


3.

Summary of Significant Accounting Policies (continued)

  


For the year ending December 31,:

 

 

 


2022 

 

$

121,147

 


2023 

 

 

161,176

 


2024

 

 

160,469

 


2025 

 

 

157,052

 


2026

 

 

139,716

 


Thereafter 

 

 

1,313,850

 


 

 

$

2,053,410

 


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 DevCo acquired the Lago Vista, Texas property for $3,576,130. Management has implemented a plan to sell this property, which meets all of the criteria required to classify it as Held for Sale. Including the project development costs associated with Lago Vista of $816,410, the book value is now $4,392,541.


 

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


SG BLOCKS, INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 (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 March 31, 2022 and December 31, 2021, 75% and 78%, respectively, of the Company’s gross accounts receivable were due from two and four customers. 

 

Revenue relating to two and two customers represented approximately 90% and 80% of the Company's total revenue for the three months ended March 31, 2022 and 2021, respectively. 

 

Cost of revenue relating to two and two vendors represented approximately 28% and 28% of the Company’s total cost of revenue for the three months ended March 31, 2022 and 2021, respectively. The Company believes it has access to alternative suppliers, with limited disruption to the business, should circumstances change with its existing suppliers.


15


SG BLOCKS, INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 (Unaudited)

 

4.

Accounts Receivable

 

At March 31, 2022 and December 31, 2021, the Company’s accounts receivable consisted of the following:



 

 

 2022

 

 

2021

 


Billed: 

 

 

 

 

 

 


   Construction services

$ 2,370,435

$ 2,293,187

   Engineering services

 

 

11,795

 

 

 

86,388

 


   Medical revenue

122,939


679,446

   Retainage receivable

 

 

686,560

 

 

 

635,049

 


   Other receivable


195,888


186,692

      Total gross receivables

 

 

3,387,617

 

 

 

3,880,762

 


Less: allowance for credit losses  

 

 

(963,116

)

 

 

(963,116

)


      Total net receivables 

 

$

2,424,501

 

 

$

2,917,646

 


Receivables are evaluated for collectability and allowances for potential losses are established or maintained on applicable receivables. The allowance of doubtful accounts was $963,116 as of March 31, 2022 and December 31, 2021. There was $7,024 in bad debt expense during the three months ended March 31, 2022. There were no write offs for the year ended December 31, 2021. 


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 March 31, 2022 and December 31, 2021:

 


 

 

2022

 

 

2021

 

 

Costs incurred on uncompleted contracts  

 

$

7,004,438

 

 

$

4,272,425

 


Provision for loss on uncompleted contracts

391,703


2,238,578

Estimated earnings to date on uncompleted contracts

 

 

(3,731,057

)

 

 

(3,156,377

)

Gross contract assets

 

 

3,665,084

 

 

 

3,354,626

 


Less: billings to date

 

 

(8,737,401

)

 

 

(4,750,289

)


    Net contract assets (liabilities) on uncompleted contracts

 

$

(5,072,317

)

 

$

(1,395,663

)
             

The above amounts are included in the accompanying condensed consolidated balance sheets under the following captions at March 31, 2022 and December 31, 2021. 



 

 

2022

 

 

2021

 

 

Contract assets  

 

$

133,395

 

 

$

41,916

 


Contract liabilities

 

 

(5,205,712

)

 

 

(1,437,579

)

 

    Net contract assets (liabilities)

 

$

(5,072,317

)

 

$

(1,395,663

)

 

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


SG BLOCKS, INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021(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 March 31, 2022 and December 31, 2021, the Company’s property, plant and equipment, net consisted of the following:

 

 


 

2022

 

 

2021

 

 

Computer equipment and software 

 

$

159,987

 

 

$

156,701

 

 

Furniture and other equipment 

 

 

276,703

 

 

 

275,606

 


Leasehold improvements 


15,400


15,400

Equipment and machinery

1,232,378


1,219,056

Automobiles

4,638


4,638

Building held for leases

196,416


196,416

Laboratory and temporary units 

1,364,748


1,362,760

Land

893,786



3,576,130

Construction in progress

450,381


442,515

 

      Property, plant and equipment

 

 

4,594,437

 

 

 

7,249,222

 

 

Less: accumulated depreciation

 

 

(513,585

)

 

 

(409,279

)

 

      Property, plant and equipment, net 

 

$

4,080,852

 

 

$

6,839,943

 

 

Depreciation expense for the three months ended March 31, 2022 and 2021 amounted to $104,825 and $91,190 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 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; 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 period ended March 31, 2022, the Galvin Note was assigned to the Company and the principal amount of $100,000 was returned 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. See Note 3 for a discussion on the Settlement and Mutual Release Agreement and termination of the ELA with CPF.    

 

17


SG BLOCKS, INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 (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 $4,314 in debt issuance costs as of March 31, 2022 related to the Lago Vista project in accordance with ASC 835-20. The Company capitalized $112,348 in interest charges and $23,727 in debt issuance costs as of December 31, 2021 related to the Lago Vista project in accordance with ASC 835-20.


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.

 

9.

Leases

 

The Company leases an office, a manufacturing plant and certain equipment under non-cancelable 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
March 31, 2022


Operating Leases




Right-of-use assets, net
$ 2,874,936







Current liabilities Lease liability, current maturities 

(461,584 )

Non-current liabilities  Lease liability, net of current maturities
(2,420,401 )

Total operating lease liabilities
$ (2,881,985 )







Finance Leases




Right-of-use assets
$ 27,348







Current liabilities Lease liability, current maturities
(19,639 )

Non-current liabilities Lease liability, net of current maturities 
(6,679 )

Total finance lease liabilities 
$ (26,318 )







Weighted Average Remaining Lease Term






Operating leases

7.4 years

Finance leases

1.36 years

Weighted Average Discount Rate 





Operating leases

3%

Finance leases

3%
18


SG BLOCKS, INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 (Unaudited)

 

9.

Leases (continued)


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-cancelable leases, are as follows: 

 


Year Ending December 31:

Operating

Financing

Total

2022
$ 405,825
$ 15,120
$ 420,945

2023

525,718

11,760

537,478

2024

523,722



523,722

2025

446,349



446,349

2026

207,379



207,379

Thereafter

1,119,904




1,119,904


Total lease payments

3,228,897

26,880

3,255,777

Less: Imputed interest

346,912

562

347,474

Present value of lease liabilities
$ 2,881,985
$ 26,318
$ 2,908,303

 

Chicago Airport Testing has subleased its leased vacant area for a period of one year, the sublessee has the option to terminate at any time after the first six months. The sublessee elected to terminate the Agreement, effective as of July 31, 2021 and the Company has no remaining lease revenue from the sublessee.

   

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 March 31, 2022, there were restricted stock units, options and warrants of 2,245,186, 36,436 and 2,025,520 respectively, outstanding that could potentially dilute future net income per share. Because the Company had a net loss as of March 31, 2022, 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 March 31, 2021, there were options, including options to non-employees and non-directors, restricted stock units and warrants to purchase 36,436, 884,343 and 128,090 shares of common stock, respectively, outstanding that could potentially dilute future net income per share.

 

19


SG BLOCKS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021(Unaudited)


11.

Construction Backlog

 

The following represents the backlog of signed construction and engineering contracts in existence at March 31, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021, respectively, on which work has not yet begun:


 

 

 

2022

 

 

2021

 

 

Balance - beginning of period

 

$

3,217,909

 

 

$

25,117,461

 

 

New contracts and change orders during the period

 

 

6,092,724

 

 

 

3,191,335

 


Adjustments and cancellations, net



(18,297,197)

 

Subtotal  

 

 

9,310,633

 

 

 

10,011,599

 

 

Less: contract revenue earned during the period

 

 

1,718,770

 

 

(6,793,690

)

 

Balance - end of period

 

$

7,591,863

 

 

$

3,217,909

 

 

Backlog at December 31, 2021 included two contracts entered into during the third quarter of 2020 in the amount of approximately $4 million and approximately $2.95 million along with three contracts during the fourth quarter of 2020 in the amount of approximately $2.7 million, $0.80 million, and $0.70 million. The Company executed one large contract in the first quarter of 2021 in the amount of approximately $1.3 million, one large contract in the third quarter of 2021 of approximately of $0.87 million and had one large partial contract cancellation to an existing contract of approximately ($1.3) million. The Company executed one large contract in the fourth quarter of 2021 in the amount of approximately $0.78 million and had one contract cancellation in the amount of approximately $16.9 million. On March 29, 2022, the Company entered into a contract with ATCO Structures & Logistics (USA) Inc. for $5,954,950 that is reflected in the March 31, 2022 backlog. The Company expects that all of this revenue will be realized by December 31, 2022.


The Company’s remaining backlog as of March 31, 2022 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 March 31, 2022 over the following period:  





2022


Within 1 year 
$ 7,591,863

1 to 2 years




Total Backlog
$ 7,591,863


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.


20


SG BLOCKS, INC. AND SUBSIDIARIES


Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021(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 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, par value $0.01 per share (the “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.

Decrease in Authorized Shares – On June 5, 2019, at the Company’s annual meeting of stockholders, the stockholders approved an amendment to the Company’s amended and restated certificate of incorporation to decrease the number of authorized shares of common stock from 300,000,000 to 25,000,000 shares. Following the meeting, on June 5, 2019, the Company filed a certificate of amendment to the amended and restated certificate of incorporation to decrease its authorized shares of common stock accordingly. There was no change to the number of authorized shares of preferred stock.

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.


21


SG BLOCKS, INC. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2022 and 2021 (Unaudited)


13.

Segments and Disaggregated Revenue



 

 

Construction

 


                Medical

              Development   



Corporate and

support

 


Consolidated

 


Fiscal Quarter Ended March 31, 2022





















Revenue 

$ 1,718,770

$ 6,885,829

$

$

$ 8,604,599

Cost of revenue



1,720,714


4,397,449








6,118,163

Operating expenses



109,163


18,973


281,988


1,657,419


2,067,543

Operating gain/loss

(111,107 )

2,469,407


(281,988 )

(1,657,419 )

418,892

Other income (expense)







(40,000 )

122,836

82,836

Income before income taxes

(111,107 )

2,469,407


(321,988 )

(1,534,583 )

501,728

Net income attributable to non-controlling interest




1,218,905








1,218,905

Net loss attributable to common stockholders of SG Blocks, Inc.
$ (111,107 )
$ 1,250,502

$ (321,988 )
$ (1,534,583 )
$ (717,177 )























Total assets
$ 10,464,450

$ 4,857,366

$ 8,889,271

$ 13,752,110