Safe & Green(SGBX) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements SG Blocks reported a significant revenue increase to $9.2 million, primarily from new medical services, despite a widened net loss of $2.0 million Condensed Consolidated Balance Sheets Total assets slightly increased to $27.2 million, with cash decreasing to $10.5 million, while total liabilities rose to $9.0 million Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | March 31, 2021 ($) | December 31, 2020 ($) | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | 10,540,290 | 13,010,356 | | Accounts receivable, net | 3,216,907 | 2,635,608 | | Total current assets | 17,844,168 | 18,298,019 | | Total Assets | 27,248,284 | 26,882,098 | | Current Liabilities | | | | Accounts payable and accrued expenses | 6,024,738 | 3,961,961 | | Total current liabilities | 7,812,586 | 7,234,681 | | Total Liabilities | 8,965,187 | 8,444,275 | | Total Stockholders' Equity | 18,283,097 | 18,437,823 | Condensed Consolidated Statements of Operations Total revenue surged to $9.2 million, driven by medical services, but increased operating expenses led to a widened net loss of $2.0 million Condensed Consolidated Statements of Operations (Unaudited) | Line Item | Three Months Ended Mar 31, 2021 ($) | Three Months Ended Mar 31, 2020 ($) | | :--- | :--- | :--- | | Total Revenue | 9,187,627 | 198,756 | | Construction services | 3,137,715 | 89,341 | | Medical revenue | 5,955,963 | — | | Gross Profit | 1,208,181 | 45,981 | | Total Operating Expenses | 2,369,638 | 795,460 | | Operating Loss | (1,161,457) | (749,479) | | Net Loss | (1,144,350) | (747,427) | | Net loss attributable to common stockholders | (2,033,877) | (747,427) | | Net Loss Per Share (Basic & Diluted) | (0.23) | (0.64) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $2.2 million, leading to a $2.5 million decrease in cash, ending at $10.5 million Condensed Consolidated Statements of Cash Flows Summary (Unaudited) | Cash Flow Activity | Three Months Ended Mar 31, 2021 ($) | Three Months Ended Mar 31, 2020 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | (2,183,116) | (1,026,812) | | Net cash used in investing activities | (990,388) | (400,000) | | Net cash provided by financing activities | 703,438 | 199,878 | | Net decrease in cash and cash equivalents | (2,470,066) | (1,226,934) | | Cash and cash equivalents - end of period | 10,540,290 | 398,737 | Notes to Condensed Consolidated Financial Statements Notes detail business expansion into medical services and modular manufacturing, a $22.9 million construction backlog, ongoing legal proceedings, and a subsequent land acquisition - The company has diversified its business, adding a significant medical revenue stream through a joint venture with Clarity Lab Solutions for COVID-19 testing and forming Chicago Airport Testing LLC (CAT)[24][25][48] - The company's construction backlog was approximately $22.9 million as of March 31, 2021, with $10.0 million expected to convert to revenue within one year and $12.9 million within one to two years[31][115][118] Revenue by Customer Type (Q1 2021 vs Q1 2020) | Revenue Category | Q1 2021 ($) | Q1 2020 ($) | | :--- | :--- | :--- | | Construction and Engineering Services | 3,231,664 | 198,756 | | Medical Revenue (lab testing, kit sales) | 5,955,963 | — | | Total Revenue | 9,187,627 | 198,756 | - The company is involved in several legal proceedings, including litigation with Pizzarotti, Teton Buildings, HOLA Community Partners, and a former employee. The company is unable to predict the outcome or potential loss and has not recorded any provisions for these matters[151][158][164] - Subsequent to the quarter's end, the company acquired a 50-acre site in Lago Vista, Texas for $3.5 million in cash, planning to develop a condominium project[181] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes a 4,523% revenue increase to the new medical segment, despite a gross profit margin decline to 13.2% and an Adjusted EBITDA loss of $1.5 million - The company's business model has evolved to include a royalty fee model for residential construction, direct project-based construction, and a new, rapidly growing medical segment focused on COVID-19 diagnostic services[186][187] - Total revenue for Q1 2021 was $9,187,627, an increase of $8,988,871 (4523%) from Q1 2020, primarily driven by approximately $5.9 million in new medical revenue[195] - Gross profit margin decreased to 13.2% in Q1 2021 from 23.1% in Q1 2020, primarily due to a $1.0 million loss on a legacy contract from the SG Echo acquisition[198] - The company had a cash balance of $10,540,290 as of March 31, 2021, and management anticipates this is sufficient to fund operations for at least the next twelve months[214] Non-GAAP Reconciliation: Net Loss to Adjusted EBITDA | Metric | Three Months Ended Mar 31, 2021 ($) | Three Months Ended Mar 31, 2020 ($) | | :--- | :--- | :--- | | Net loss | (2,033,877) | (747,427) | | EBITDA (non-GAAP) | (1,909,191) | (702,078) | | Adjusted EBITDA (non-GAAP) | (1,541,786) | (526,576) | Quantitative and Qualitative Disclosures About Market Risk This section is not applicable to the company - Not applicable[244] Controls and Procedures Disclosure controls and procedures were deemed ineffective due to a material weakness in financial reporting, with remediation efforts underway including hiring senior accounting personnel - Management concluded that disclosure controls and procedures were not effective as of the end of the period[245] - A material weakness was identified related to the timely closing of accounting records and technical accounting for complex transactions[247] - Remediation steps include hiring two additional senior accounting personnel to strengthen the financial closing process and oversight[249] PART II. OTHER INFORMATION Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 16 of the financial statements - Information regarding legal proceedings is incorporated by reference from "Note 16 - Commitments and Contingencies" in the financial statements section of the report[253] Risk Factors Key risks include a going concern doubt due to historical losses, significant customer concentration, the non-guaranteed nature of the $22.9 million backlog, and potential stockholder dilution - The company's history of losses and cash usage raises substantial doubt about its ability to continue as a going concern if it cannot increase sales or raise additional capital[255][256] - Significant customer concentration risk exists, as two customers generated approximately 80% of total revenue for the three months ended March 31, 2021[257] - The construction backlog of $22.9 million as of March 31, 2021 is not necessarily indicative of future revenues, as contracts can be canceled, terminated, or suspended at the customer's discretion[259] - There is a risk of dilution for existing stockholders due to a significant number of outstanding options, warrants, and restricted stock units[261] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities have been reported that were not previously disclosed - None that have not been previously disclosed[263] Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[264] Mine Safety Disclosures This section is not applicable to the company - Not applicable[265] Other Information No information was provided under this item Exhibits This section provides an index of exhibits filed with the Form 10-Q, including corporate governance documents and officer certifications - The report includes certifications by the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[268]