What changed in this filing

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Item 1A. Risk Factors

2021-08-16 compared with 2021-05-20 · 53 added, 11 removed, 53 unchanged (55% of the section changed)

8 unchanged sentences

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

At March 31, 2021 and December 31, 2020, we had cash and cash equivalents and a short-term investment, collectively, of $10,540,290 and $13,010,356, respectively.

However, during the three months ended March 31, 2021 and year ended December 31, 2020, we reported a net loss of $1,144,350 and $4,508,162, respectively, and used $2,183,116 and $2,887,950 of cash for operations, respectively.

At June 30, 2021 and December 31, 2020, we had cash and cash equivalents, collectively, of $2,323,599 and $13,010,356, respectively.

However, during the six months ended June 30, 2021 and year ended December 31, 2020, we reported a net loss of $993,925 and $4,508,162, respectively, and used $1,307,944 and $2,887,950 of cash for operations, respectively.

If we are not successful with our efforts to increase revenue, we could experience a shortfall in cash over the next twelve months.

10 unchanged sentences

Our consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

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

Since then, the COVID-19 coronavirus has spread to multiple countries, including the United States.

The impact of the COVID-19 coronavirus outbreak, or similar global health concerns, has negatively impacted our ability to source certain materials and product pricing, could impact our customers’ ability or that of our licensee to obtain financing and may continue to have a negative impact on our business.

In March 2020, the World Health Organization declared COVID-19 a global pandemic.

This contagious disease outbreak, which has continued to spread, and the related adverse public health developments, have adversely affected work forces, economies and financial markets globally .

Our ability to obtain and source certain materials, especially lumber, from third-party suppliers has been negatively impacted by 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 and cost-overruns in projects due to COVID-19.

Any quarantines, the timing and length of containment and eradication solutions, travel restrictions, absenteeism by infected workers, labor shortages or other disruptions to our suppliers and their contract manufacturers or our customers would likely adversely impact our sales and operating results and result in further project delays.

In addition, the pandemic could result in an economic downturn that could affect the ability of our customers and licensees to obtain financing and therefore impact demand for our products.

Order lead times could be extended or delayed and pricing could continue to increase.

Some products or services may become unavailable if the regional or global spread were significant enough to prevent alternative sourcing.

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

We expect this global pandemic to have a negative 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.

COVID-19 illness could also impact members of our Board of Directors resulting in absenteeism from meetings of the directors or committees of directors, and making it more difficult to convene the quorums of the full Board of Directors or its committees needed to conduct meetings for the management of our affairs.

The global outbreak of the COVID-19 coronavirus continues to rapidly evolve.

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;

managing cost overruns on fixed-price legacy Echo projects as a result of delays in deliveries of, and increased costs for, materials for projects, especially lumber, due to COVID-19;

minimizing potential adverse effects on existing business relationships;

successfully developing new products and services.

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

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

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

For example, for the three months ended March 31, 2021 approximately 80% of our revenue was generated from two customers and for the year ended December 31, 2020, approximately 61% of our revenue was generated from three customers.

For example, for the six months ended June 30, 2021 approximately 71% of our revenue was generated from one customers and 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.

The loss of business from a significant customer could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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

The inability to secure materials and products from our suppliers in a timely manner or at competitive prices could adversely affect our business.

We have relationships with key materials vendors, and we rely on suppliers for our purchases of products from them.

The worldwide spread of the COVID-19 has, among other things resulted in delays in deliveries of, and increased costs for, materials, especially lumber, in projects which we expect to continue to have an impact on our revenue and our results of operations.

Any inability to obtain materials or services in the volumes required and at competitive prices from our major trading partners, the loss of any major trading partner or the discontinuation of vendor financing (if any) may seriously harm our business because we may not be able to meet the demands of our customers on a timely basis in sufficient quantities or at all.

In addition, we have experienced cost overruns on fixed-price legacy Echo projects as a result of delays in deliveries of, and increased costs for, materials for projects, especially lumber.

Other factors, including reduced access to credit by our vendors resulting from economic conditions, may impair our vendors’ ability to provide products in a timely manner or at competitive prices.

1 unchanged sentence

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

For the three months ended March 31, 2021 28 % of our costs of revenue related to two vendors.

For the six months ended June 30, 2021 48 % of our costs of revenue related to three vendors.

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

5 unchanged sentences

We include in backlog only those contracts for which we have reasonable assurance that the customer can obtain the permits for construction and can fund the construction.

As of December 31, 2020, our backlog totaled approximately $25.1 million and as of March 31, 2021, our backlog totaled approximately $22.9 million.

The decrease in backlog at March 31, 2021 from December 31, 2020 is primarily attributable to work in progress or completed contracts during the first three months of 2021 for approximately $3.3 million and executing one contract during the first quarter of 2021 in the amount of approximately $1.3 million.

As of December 31, 2020, our backlog totaled approximately $25.1 million and as of June 30, 2021, our backlog totaled approximately $21 million.

The decrease in backlog at June 30, 2021 from December 31, 2020 is primarily attributable to work in progress or completed contracts during the first six months of 2021 for approximately $5.3 million and executing one contract during the first quarter of 2021 in the amount of approximately $1.3 million.

Our backlog is described more in detail in “Note 12—Construction Backlog” of the notes to our consolidated financial statements included elsewhere in this Quarterly Report.

9 unchanged sentences

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

At March 31, 2021, there were options, including options granted 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.

Because we had a net loss as of March 31, 2021, it is prohibited from including potential common shares in the computation of diluted per share amounts.

At June 30, 2021, there were options, including options granted to non-employees and non-directors, restricted stock units and warrants to purchase 36,436 , 884,344 and 126,890 shares of common stock, respectively, outstanding that could potentially dilute future net income per share.

Because we had a net loss as of June 30, 2021, it is prohibited from including potential common shares in the computation of diluted per share amounts.

Accordingly, we used the same number of shares outstanding to calculate both the basic and diluted loss per share.

At March 31, 2020 , there were options , including options to non-employees and non-directors, restricted stock units and warrants to purchase 52,337 , 9,187 and 53,190 shares of common stock, respectively, outstanding that could potentially dilute future net income per share.

At June 30, 2020 , there were options , including options to non-employees and non-directors, restricted stock units and warrants to purchase 52,337 , 44,518 and 353,190 shares of common stock, respectively, outstanding that could potentially dilute future net income per share.

Our residential construction business is difficult to evaluate because we recently changed our business model.

From October 2019 until June 2021, our residential construction business was operated under a licensing model.

We recently terminated the licensing business model for our residential construction business in the United States.

There is a risk that we will be unable to successfully generate revenue from this new business model or generate profit as we will not be responsible for supplying the capital, personnel and equipment for our residential construction projects.

There can be no assurance that we will generate the income that we anticipate.

We are subject to many risks associated with this business model such as our dependence upon suppliers and contractors to perform services.

There is no assurance that our activities will be successful or will result in any revenues or profit.

Even if we generate revenue, there can be no assurance that we will be profitable.

Our projections of the number of units we anticipate building for each project and the timelines although based upon assumptions that we believe are reasonable, may not be realized .

We have provided projections of our development plans that include the number of units we plan to develop for certain projects and the timelines for commencement and completion of such development activities which are based upon current contracts that we have entered into, anticipated timelines to complete such projections and current estimates of costs and expenses associated with such projects.

For certain projects such as the JDI-Cumberland project, we must submit budgets that require approval in order for SG Echo to be awarded the fabrication and installation work anticipated to be awarded to SG Echo .

Although we have based our projections upon assumptions that we believe are reasonable, our projections may not be realized.

The projected and actual results will vary, and those variations may be material and likely to increase over time, and the inclusion of the projections in this Quarterly Report on Form 10-Q should not be regarded as a representation or guarantee by us that the projections will be achieved.

These projections are only predictions and actual events or results may differ from those in the projections .

Unregistered Sales of Equity Securities and Use of Proceeds

None that have not been previously disclosed in our filings with the SEC.

Defaults Upon Senior Securities

2 unchanged sentences

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-Q

Item 1A. Risk Factors