What changed in this filing

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Item 1A. Risk Factors

2021-04-15 compared with 2020-03-30 · 138 added, 60 removed, 350 unchanged (36% of the section changed)

RISK FACTORS.

Risks Relating to the Company

Our auditor’s report on our consolidated financial statements contains an explanatory paragraph regarding our ability to continue as a going concern.

Our consolidated financial statements as of December 31, 2019 have been prepared under the assumption that we will continue as a going concern.

In addition, our independent registered public accounting firm has issued a report that includes an explanatory paragraph referring to our recurring losses from operations and negative operating cash flows that raise substantial doubt in our ability to continue as a going concern.

Our consolidated financial statements as of December 31, 2019 did not include any adjustments that might result from the outcome of this uncertainty.

Investing in our common stock involves a high degree of risk.

You should consider carefully the following risks, together with all the other information in this Annual Report on Form 10-K, including the section titled “Forward-Looking Statements,” and Part II, Item 7.“Management’s Discussion and Analysis of Financial Condition and Results of Operation” and our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K.

The risks described below are not the only ones we face.

Any of the following risks could materially and adversely affect our business.

If any of the following risks actually materializes, our operating results, financial condition and liquidity could be materially adversely affected.

As a result, the trading price of our common stock could decline and you could lose part or all of your investment.

Our business, financial condition and results of operations could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.

Risks Related to our Financial Position and Capital Requirements.

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

On December 31, 2019 and 2018, we had cash and cash equivalents and a short-term investment, collectively, of $1,625,671 and $1,368,395, respectively.

At December 31, 2020 and 2019, we had cash and cash equivalents and a short-term investment, collectively, of $13,010,356 and $1,625,671, respectively.

However, during the fiscal years ended December 31, 2020 and 2019, we reported a net loss of $4,508,162 and $6,920,540, respectively, and used $2,887,950 and $2,815,621 of cash for operations, respectively.

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In addition, we may be unable to successfully achieve or maintain our growth strategy, including our ability to expand into new geographic markets.

Our residential construction business model depends upon a third-party licensee who is outside our control.

We entered into an exclusive license agreement with CPF, pursuant to which we granted CPF an exclusive license solely within the United States and its legal territories to commercialize our 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, without limitation, single-family residences and multi-family residences, but specifically excluding military housing.

An impairment of goodwill could have a material adverse effect on our financial condition and results of operations.

As December 31, 2020, we had $1,309,330 of goodwill.

We perform an impairment test of our goodwill annually during the fourth quarter of our fiscal year or when events occur or circumstances change that would more-likely-than-not indicate that goodwill might be impaired.

Factors that may be considered a change in circumstances, indicating that the carrying value of our goodwill may not be recoverable, include a decline in stock price and market capitalization, reduced future cash flow estimates and slower growth rates in our industry.

Our annual impairment tests resulted in no impairment of goodwill during fiscal 2020.

The annual impairment test during fiscal 2019 resulted in $2,938,653 of impairment.

Deterioration in estimated future cash flows in our reporting unit could result in further future goodwill impairment.

Changes to our business strategy, changes in industry or market conditions, changes in operating performance or other indicators of impairment could cause us to record a significant impairment charge during the period in which the impairment is determined, negatively impacting our results of operations and financial position.

Risks Relating to the Company

Our residential construction business model using our GreenSteel technology depends upon the support of an independent third-party licensee.

We entered into an exclusive license agreement with CPF, pursuant to which we granted CPF an exclusive license solely within the United States and its legal territories to commercialize our GreenSteel 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, without limitation, single-family residences and multi-family residences, but specifically excluding military housing.

Under the terms of the License Agreement, CPF is to provide us with royalties based upon its sale of products that utilize the licensed technology.

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We are subject to the risks inherent to the operation of a new business enterprise, and cannot assure you that we will be able to successfully address these risks.

In addition, it is still too early to evaluate the impact of our recent acquisition of Echo.

Although we expect to control have better control of cost of goods and efficiency from this acquisition, it is too early to determine the full benefits, if any to be experienced as a result of the acquisition.

In December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China.

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Our use of third-party suppliers for production and shipping of certain products could be negatively impacted by the regional or global outbreak of illnesses, including the COVID-19 coronavirus outbreak.

In addition, any outbreak of COVID at our Echo facility could result in closures of the facility and negatively impact our ability to meet timelines.

To date, we have experienced some delays in projects due to COVID-19 .

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Accordingly, we are considering alternative product sourcing in the event that product supply becomes problematic.

W e expect this global pandemic to have an impact on our revenue and our results of operations, the size and duration of which we are currently unable to predict.

We expect this global pandemic to have an impact on our revenue and our results of operations, the size and duration of which we are currently unable to predict.

In addition, the outbreak of the COVID- 19 coronavirus could disrupt our operations due to absenteeism by infected or ill members of management or other employees, or absenteeism by members of management and other employees who elect not to come to work due to the illness affecting others in our office or other workplace, or due to quarantines.

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The extent to which the COVID- 19 coronavirus may impact our business and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

We may be unable to successfully integrate the Echo business with its current management and structure and the acquisition of Echo may not result in the benefits anticipated.

Our failure to successfully complete the integration of Echo could have an adverse effect on our prospects, business activities, cash flow, financial condition, results of operations and stock price.

Integration challenges may include the following:

assimilating Echo’s technology and retaining personnel;

estimating the capital, personnel and equipment required for Echo based on the historical experience of management with the businesses they are familiar with;

minimizing potential adverse effects on existing business relationships;

successfully developing the new products and services.

We believe the acquisition of Echo will provide certain strategic benefits which would enable us to accelerate our business plan through an increased access to capital in the public equity markets.

However, our employee number has experienced significant growth from the acquisition as has our expenses.

There can be no assurance that these anticipated benefits of the acquisition will materialize or that if they materialize will result in increased stockholder value or revenue stream to the combined company.

Our ability to meet our workforce needs is crucial to our results of operations and future sales and profitability.

We rely on the existence of an available hourly workforce to manufacture our products.

We cannot assure you that we will be able to attract and retain qualified employees to meet current or future manufacturing needs at a reasonable cost, or at all.

For instance, the demand for skilled employees has increased recently with the low unemployment rates in Oklahoma where we have manufacturing facilities.

Also, although none of our employees are currently covered by collective bargaining agreements, we cannot assure you that our employees will not elect to be represented by labor unions in the future.

Additionally, competition for qualified employees could require us to pay higher wages to attract a sufficient number of employees.

Significant increases in manufacturing workforce costs could materially adversely affect our business, financial condition or results of operations.

We have a fixed cost base that will affect our profitability if our sales decrease.

The fixed cost levels of operating Echo can put pressure on profit margins when sales and production decline.

Our profitability depends, in part, on our ability to spread fixed costs over a sufficiently large number of products sold and shipped, and if we make a decision to reduce our rate of production, gross or net margins could be negatively affected.

Consequently, decreased demand or the need to reduce production can lower our ability to absorb fixed costs and materially impact our financial condition or results of operations.

A material disruption at one of our suppliers’ facilities or Echo’s facilities could prevent us from meeting customer demand, reduce our sales and negatively affect our overall financial results.

Any of the following events could cease or limit operations unexpectedly:

fires, floods, earthquakes, hurricanes, on-site or off-site environmental incidents or other catastrophes;

global pandemic;

utility and transportation infrastructure disruptions;

labor difficulties;

other operational problems;

or war, acts of terrorism or other unexpected events.

Any downtime or damage at our suppliers’ facilities or Echo’s facilities could prevent us from meeting customer demand for our products or require us to make more expensive purchases from a competing supplier.

If our suppliers were to incur significant downtime, our ability to satisfy customer requirements could be impaired, resulting in customers seeking products from other distributors, as well as decreased customer satisfaction and lower sales and operating income.

A natural disaster, the effects of climate change, or other disruptions at our Echo facility could adversely affect our business, financial condition, and results of operations .

We rely on the continuous operation of our Echo facility in Durant, Oklahoma for the production of our Modules .

Any natural disaster or other serious disruption to our facility due to fire, flood, earthquake, or any other unforeseen circumstance would adversely affect our business, financial condition, and results of operations.

In addition, adverse weather conditions, such as increased frequency and/or severity of storms, or floods could impair our ability to operate by damaging our facilities and equipment or restricting product delivery to customers.

The occurrence of any disruption at our manufacturing facility, even for a short period of time, may have an adverse effect on our productivity and profitability, during and after the period of the disruption.

These disruptions may also cause personal injury and loss of life, severe damage to or destruction of property and equipment, and environmental damage.

Although we maintain property, casualty, and business interruption insurance of the types and in the amounts that we believe are customary for the industry, we are not fully insured against all potential natural disasters or other disruptions to our manufacturing facility.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

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If such claims are successful, our business, financial condition, results of operations and prospects could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business, financial condition, results of operations and prospects.

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

As of December 31, 2019, there are outstanding options and warrants to purchase 53,170 and 53,189 shares of common stock, respectively, in addition to 8,939 unvested restricted stock units .

The exercise of such options and warrants and the vesting of restricted stock units would dilute the then-existing stockholders’ percentage ownership of our stock, and any sales in the public market of common stock underlying such securities could adversely affect prevailing market prices for the common stock.

Moreover, the terms upon which we would be able to obtain additional equity capital could be adversely affected because the holders of our options and warrants can be expected to exercise them at a time when we would, in all likelihood, be able to obtain any needed capital on terms more favorable to us than those provided by such securities.

We are dependent on the services of key personnel, and the unexpected loss of their services may adversely affect our operations.

Our success depends highly upon the personal efforts and abilities of our senior management team, specifically the efforts of Paul M.

Galvin, our Chief Executive Officer, Gerald Sheeran , our Acting Chief Financial Officer, Stevan Armstrong, our Chief Technology Officer, and Rockey Butler, our Vice President of Operations.

Galvin, our Chief Executive Officer, Gerald Sheeran , our Acting Chief Financial Officer, Stevan Armstrong, our Chief Technology Officer, William Rogers, our Chief of Operations and Rockey Butler, our Vice President of Operations.

The Company has entered into employment agreements with Messrs.

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A few customers have in the past, and may in the future, account for a significant portion of our revenues in any one year or over a period of several consecutive years.

For example, for the year ended December 31, 2019, approximately 78% of our revenue was generated from two customers.

For example, for the year ended December 31, 2020 , approximately 61% of our revenue was generated from three customers.

Although we have contractual relationships with many of our significant customers, our customers may unilaterally reduce or discontinue their contracts with us at any time.

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Any negative impacts to our business or liquidity could adversely impact our ability to establish or maintain these relationships.

For the years ended December 31, 2019 and 2018, 74% and 55%, respectively of our cost of revenue related to three and two vendors.

An impairment of goodwill could have a material adverse effect on our financial condition and results of operations.

As December 31, 2019, we had $1,223,520 of goodwill.

Our annual impairment tests resulted in an impairment of goodwill during fiscal 2019 in the amount of $2,938,653.

The annual impairment test during fiscal 2018 resulted in no impairment being recorded.

Deterioration in estimated future cash flows in our reporting unit could result in further future goodwill impairment.

For the year ended December 31, 2020, there were no vendors which represented 10% or more of our cost of revenue.

For the year ended December 31, 2019, 74% of our cost of revenue related to three vendors.

We currently are, and may in the future be, subject to legal proceedings or investigations, the resolution of which could negatively affect our profitability and cash flows in a particular period.

The nature of our operations exposes us to possible litigation claims, including disputes relating to our operations and commercial and contractual arrangements.

Although we make every effort to avoid litigation, these matters are not totally within our control.

Often the litigation matters are not totally within our control.

We will contest these matters vigorously and will make insurance claims where appropriate, but because of the uncertain nature of litigation and coverage decisions, we cannot predict the outcome of these matters.

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In addition, our profitability or cash flow in a particular period could be affected by an adverse ruling in any litigation currently pending in the courts or by litigation that may be filed against us in the future.

We are also subject to environmental and other government regulation, which could result in administrative proceedings in the future.

We are also subject to government regulation, which could result in administrative proceedings in the future.

For additional information, see “Item 3.

Legal Proceedings .”

We have identified weaknesses in our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated or that additional material weaknesses will not occur in the future.

We do not yet have effective disclosure controls and procedures, or internal controls over all aspects of our financial reporting.

We are continuing to develop and refine our internal controls over financial reporting .

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.

We will be required to expend time and resources to further improve our internal controls over financial reporting, including by expanding our staff.

However, we cannot assure you that our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.

We have identified material weaknesses in our internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

The material weaknesses identified to date include (i)insufficient internal controls related to the timely closing of our accounting records, caused by insufficient accounting resources and a lack of formal review procedures and (ii) insufficient internal controls related to the application of technical accounting guidance to complex and/or new transactions.

As such, our internal controls over financial reporting were not designed or operating effectively.

We will be required to expend time and resources to further improve our internal controls over financial reporting, including by expanding our staff .

However, we cannot assure you that our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business, including increased complexity resulting from our international expansion.

Further, weaknesses in our disclosure controls or our internal control over financial reporting may be discovered in the future.

Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.

Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of management reports and independent registered public accounting firm audits of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC.

Ineffective disclosure controls and procedures, and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the market price of our common stock.

Risks Relating to our Business and Industry

We and CPF are dependent on the availability and skill of subcontractors, their willingness to work with us, and their selection of, and ability to obtain, suitable and quality building materials.

We, in particular Echo, and CPF are dependent on the availability and skill of subcontractors, their willingness to work with us, and their selection of, and ability to obtain, suitable and quality building materials.

We and CPF will rely on subcontractors to perform the actual construction of our building projects and, in many cases, to select and obtain raw materials.

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As of December 31, 2019, our backlog totaled approximately $ 17.6 million and as of December 31, 2020 , our backlog totaled approximately $25.1 million.

The decrease in backlog at December 31, 2019 from December 31, 2018 is primarily attributable to us moving a contract of approximately $25 million out of backlog after receiving a cancellation notice from the customer and moving two contracts of approximately $70 million out of backlog due to the exclusive License Agreement.

Our backlog includes one large contract entered into by us during the third quarter of 2019 in the amount of approximately $17 million as described in more detail in “Note 10—Construction Backlog” of the notes to our consolidated financial statements included elsewhere in this Annual Report.

The increase in backlog at December 31, 2020 from December 31, 2019 is primarily attributable to executing two contracts during the third quarter of 2020 in the amount of approximately $4 million and approximately $2.95 million and three contracts during the fourth quarter of 2020 in the amount of approximately $2.7 million, $0.80 million and $0.70 million.

Our backlog is described more in detail in “Note 14 —Construction Backlog” of the notes to our consolidated financial statements included elsewhere in this Annual Report.

We cannot provide assurance that our backlog will be realized as revenues in the amounts reported or, if realized, will result in profits.

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If the economy slows, or if housing starts and nonresidential projects do not increase, sales of our products directly by us to consumers or by CPF and related services may decline, and our financial position, results of operations and liquidity could be materially adversely affected.

A material disruption at one of our suppliers’ facilities could prevent us from meeting customer demand, reduce our sales and negatively affect our overall financial results.

A material disruption at one of our suppliers’ facilities or Echo's facilities could prevent us from meeting customer demand, reduce our sales and negatively affect our overall financial results.

Any of the following events could cease or limit operations unexpectedly:

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or war, acts of terrorism or other unexpected events.

Any downtime or damage at our suppliers’ facilities could prevent us from meeting customer demand for our products or require us to make more expensive purchases from a competing supplier.

Any downtime or damage at our suppliers’ facilities or Echo's facilities could prevent us from meeting customer demand for our products or require us to make more expensive purchases from a competing supplier.

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Our operating results will be subject to fluctuations and are inherently unpredictable.

In order to return to profitability, we will need to generate and sustain higher revenue while maintaining reasonable cost and expense levels.

In order to achieve profitability, we will need to generate and sustain higher revenue while maintaining reasonable cost and expense levels.

In our most recent quarter, we experienced a loss.

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We could suffer adverse tax and other financial consequences if we are unable to utilize our net operating loss carryforwards.

At December 31, 2019, we had tax net operating loss carryforwards totaling approximately $12.9 million.

At December 31, 2020, we had tax net operating loss carry forwards totaling approximately $16.6 million.

The net operating loss expires beginning 2030 through 2037 for those losses generated in 2017 and prior years.

Approximately $5.5 million of such net operating losses will carryforward indefinitely and be available to offset up to 80% of future taxable income each year.

Subsequent to December 31, 2019, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was passed, which temporarily removes such 80% limitation for years 2019 and 2020 .

At December 31, 2019 , we had a valuation allowance of $3.1 million, primarily related to net operating loss carryforwards that are not more likely than not to be utilized due to an inability to carry back these losses in most states and short carryforward periods that exist in certain states.

Approximately $5.5 million of such net operating losses will carry forward indefinitely and be available to offset up to 80% of future taxable income each year.

During 2020 , the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was passed, which temporarily removes such 80% limitation for years 2020 and 2019 .

At December 31, 2020 , we had a valuation allowance of $4.6 million, primarily related to net operating loss carry forwards that are not more likely than not to be utilized due to an inability to carry back these losses in most states and short carry forward periods that exist in certain states.

If we are unable to use our net operating losses, we may be required to record charges or reduce our deferred tax assets, which could have an adverse effect on our results of operations.

Risks Relating to the Construction Sector

We and CPF may be dependent upon third-party financing, and our financial condition and results of operations could be negatively affected if additional third-party financing for our customers does not become available

We and CPF are dependent upon third-party financing, and our financial condition and results of operations could be negatively affected if additional third-party financing for our customers does not become available

Our business and earnings depend substantially on our ability and the ability of CPF to obtain financing for the development of their construction projects , which may be adversely impacted by the recent COVID-19 coronavirus outbreak.

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The availability of insurance that covers risks we and our competitors typically insure against may decrease, and the insurance that we are able to obtain may have higher deductibles, higher premiums and more restrictive policy terms.

Risks Relating to the Clarity Mobile Venture Sector

There can be no assurance that the velocity of COVID-19 tests being conducted by Clarity Mobile Venture will continue at current rates or be effective for new variants of the COVID-19 virus.

There can be no assurance that the demand for Clarity Mobile Venture’s COVID-19 testing and related laboratory services will continue to grow at the current pace.

While we expect that the coronavirus will be a part of our lives for the foreseeable future, viruses constantly change through mutation, and new variants of the COVID-19 virus are expected to occur over time.

Our business may be disrupted by the emergence and spread of new variants of the COVID-19 virus that may require different types of tests that may or may not be readily available to us at the time.

Currently, we are deploying several COVID-19 tests including the GeneFinder™ test for COVID-19 produced by Osang Healthcare Co., Ltd.

and which is effective for the B.1.1.7 (UK) variant, B.1.351 (South Africa) variant and P.1 (Brazil) variant.

No assurance can be given that the COVID-19 tests currently deployed by us it will be effective for any future variants.

We may be adversely affected by actions of our competitors.

The market for COVID-19 testing facilities is highly competitive.

Many of our competitors have substantially greater financial, technical and other resources than we have.

Our ability to compete effectively depends in part on market acceptance of our testing solutions and our ability to service customers in a timely manner.

There can be no assurance that we will be able to compete effectively or that we will respond appropriately to industry trends or to activities of competitors.

We rely on third-party vendors to supply us with the COVID-19 tests that Clarity Mobile Venture uses that, if we were unable to obtain, could adversely affect our business.

Clarity Mobile Venture relies on third-party vendors to supply it with COVID-19 tests.

Any inability to obtain COVID-19 tests in the volumes required and at competitive prices from our vendors, the loss of any major vendor may seriously harm our business because we may not be able to meet the demands of our customers on a timely basis in sufficient quantities or at all.

Risks Relating to our Common Stock

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On February 21, 2020, we received written notice from the Listing Qualifications department of the Nasdaq notifying us that we had regained compliance with the minimum bid price and stockholder’s equity rules.

Although we have been able to regain compliance with the continued listing requirements of the Nasdaq Capital Market and are currently in compliance, there can be no assurance that we will be able to maintain compliance in the future.

The delisting of our common stock from Nasdaq may make it more difficult for us to raise capital on favorable terms in the future, or at all.

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Our stock price has been subject to fluctuations in the past, has recently been volatile, and will likely continue to be subject to fluctuations and decline, due to factors beyond our control, and investors in our common stock may lose all or part of their investment in our company.

Prior to the public offering of our stock in June 2017, there was no market for shares of our common stock.

Shares of our common stock were sold in our June 2017 public offering at a price of $100.00 per share and in our December 2019 public offering at a price of $3.00 per share.

Although our common stock is listed on the Nasdaq Capital Market, the market price of our common stock may be subject to wide fluctuations in response to various factors, some of which are beyond our control, including, but not limited to:

The trading price of our common stock has been and is expected to continue to be volatile and has been and may continue to be subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume.

On March 24, 2021, the reported low sale price of our common stock was $4.38, the reported high sale price was $5.19 and closing price of our common stock was $4.48 while on January 19, 2021, the closing price of our common stock was $8.42.

We may incur rapid and substantial decreases in our stock price in the foreseeable future that are unrelated to our operating performance for prospects.

In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report, these factors include:

economic and market conditions or trends in our industry or the economy as a whole and, in particular, in the construction industry;

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If we were to become involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

We are subject to the reporting and corporate governance requirements of the Exchange Act, the listing requirements of the Nasdaq Capital Market and other applicable securities rules and regulations, including the Sarbanes-Oxley Act and the Dodd-Frank Act.

Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources.

Among other things, the Exchange Act requires that we file annual, quarterly and current reports with respect to our business and results of operations and maintain effective disclosure controls and procedures and internal control over financial reporting.

In order to continue to maintain our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required.

As a result, management’s attention may be diverted from other business concerns, which could harm our business, financial condition, results of operations and prospects.

We also may need to further expand our legal and finance departments in the future, which will increase our costs and expenses.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming.

These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.

This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expense and a diversion of management’s time and attention from revenue-generating activities to compliance activities.

If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies, regulatory authorities may initiate legal proceedings against us and our business and prospects may be harmed.

As a result of disclosure of information in the filings required of a public company, our business and financial condition are more visible, which may result in threatened or actual litigation, including by competitors and other third parties.

Sales of a substantial number of shares of our common stock in the public market, or the perception that they might occur, could cause the price of our common stock to decline.

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If our existing stockholders sell substantial amounts of our common stock in the public market, or if the public perceives that such sales could occur, this could have an adverse impact on the market price of our common stock, even if there is no relationship between such sales and the performance of our business.

Pursuant to certain registration rights, we filed a registration statement in 2018 to permit a significant stockholder to sell its shares of our common stock;

we expect that, because there were a large number of shares registered pursuant to such registration statement, the selling stockholder will continue to offer shares covered by such registration statement for a significant period of time, the precise duration of which cannot be predicted, Accordingly, any adverse market or price pressures resulting from sales by the significant stockholder may continue for an extended period of time and cause continued negative pressure on the market price of our common stock, which could have a material adverse effect on our ability to raise additional equity capital.

In addition, shares subject to outstanding options under our SG Blocks, Inc.

Stock Incentive Plan (the “Incentive Plan”) will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations.

In addition, shares subject to outstanding options under our Incentive Plan are and will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations.

Substantial sales of such shares, at that time, could depress the sale price of our common stock.

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The amount of shares of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of common stock.

Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

As of March 23, 2020, our directors and executive officers beneficially own approximately 1.5% of our outstanding common stock ( not including exercisable options or unvested restricted stock units) and one of our stockholders beneficially owns approximately 12.2% of our outstanding common stock.

Accordingly, these stockholders will continue to have significant influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, merger, consolidation, or sale of all or substantially all of our assets, or any other significant corporate transaction.

The interests of these stockholders may not be the same as, or may even conflict with, investors’ interests.

For example, these stockholders could delay or prevent a change in control of us, even if such a change in control would benefit our other stockholders, which could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of us or our assets and might affect the prevailing price of our common stock.

The significant concentration of stock ownership may negatively impact the price of our common stock due to investors’ perception that conflicts of interest may exist or arise.

As of April 9, 2021, there are outstanding options and warrants to purchase 36,436 and 128,090 shares of common stock, respectively, in addition to 884,344 vested and unvested restricted stock units.

The issuance of additional securities by our Board of Directors (the “Board” or “Board of Directors”) will dilute the ownership interests of our current stockholders and could discourage the acquisition of us.

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We cannot give stockholders any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.

The trading in our stock has in the past and may continue to be very volatile.

Our stock price and the trading volume of our stock continue to be very volatile.

As such, investors may find it difficult to obtain accurate stock price quotations and holders of our stock may be unable to resell their stock at desirable prices.

Sales of substantial amounts of our common stock, or the perception that such sales might occur, could adversely affect prevailing market prices of our common stock and our stock price may decline substantially in a short period of time.

As a result, our stockholders could suffer losses or be unable to liquidate holdings.

UNRESOLVED STAFF COMMENTS.

We lease office space in Brooklyn, NY for our headquarters.

LEGAL PROCEEDINGS.

The information included in “ Note 14 – Commitments and Contingencies” of the Company’s consolidated financial statements included elsewhere in this Annual Report is incorporated by reference into this Item.

MINE SAFETY DISCLOSURES.

Not applicable.

We lease office space in Brooklyn, New York for our headquarters.

Echo also operates a manufacturing facility located in Durant, Oklahoma.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors