What changed in this filing

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Item 1A. Risk Factors

2021-11-15 compared with 2021-08-16 · 45 added, 10 removed, 96 unchanged (36% 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 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.

At September 30, 2021 and December 31, 2020, we had cash and cash equivalents, collectively, of $3,290,702 and $13,010,356, respectively.

However, during the nine months ended September 30, 2021 and year ended December 31, 2020, we reported a net loss of $3,744,582 and $4,508,162, respectively, and used $1,032,417 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.

If there is a shortfall, we may be forced to reduce operating expenses, among other steps, all of which would have a material adverse effect on our operations going forward.

Subsequent to the end of the third quarter 2021, we had a private placement offering that provided net proceeds of approximately $10,520,000 in additional cash, see Note 17 for additional information on this private placement.

We may also seek to obtain debt or additional equity financing to meet any cash shortfalls.

26 unchanged sentences

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.

Our failure to have the registration statement that we filed to register the resale of the shares of Common Stock within certain time limits could result in a breach of the Purchase Agreement.

The Purchase Agreement provides that we are required within 30 days of the closing of the Offering to file a registration statement providing for the resale of the shares of Common Stock issued and issuable upon the exercise of the Common Stock Warrants, which registration statement was filed on November 12, 2021.

We are required to use commercially reasonable efforts to cause such registration to become effective within 45 days of the closing of the Offering (or 60 days in the event of a full review by the Commission) and to keep such registration statement effective at all times until no investor owns any Common Stock Warrants or Common Stock Warrant Shares.

Our failure to comply with such requirements would result in a breach of the Purchase Agreement and subject us to liquidated damages of equal to the product of 2.0% multiplied by the aggregate subscription amount paid by each purchaser under the Purchase Agreement.

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.

7 unchanged sentences

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.

An unsuccessful determination in the litigation related to Echo DCL, could result in incurrence of significant liabilities or loss of assets .

ICON Construction Inc.

(“ICON”) is alleging that Echo DCL breached the terms of the asset purchase agreement Echo DCL entered into with ICON pursuant to which Echo DCL had acquired the assets of ICON.

ICON claims that we have agreed to assume certain liabilities of Echo DCL under the asset purchase agreement and accept a security interest in the assets conveyed to us by Echo DCL.

If we should be unsuccessful in the litigation we could incur significant liabilities and/or loss of the assets we acquired from Echo DCL.

Litigation is subject to many uncertainties, and the outcome of this action is not predicted with assurance.

We are unable to predict the possible loss or range of loss, if any, associated with the resolution of this litigation, and, accordingly, we have made no provision related to this matter in the condensed consolidated financial statements.

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

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

For example, for the six months ended June 30, 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.

For example, for the nine months ended September 30, 2021 approximately 90% of our revenue was generated from one customer 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.

8 unchanged sentences

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

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

For the nine months ended September 30, 2021 68 % 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 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.

As of December 31, 2020, our backlog totaled approximately $25.1 million and as of September 30, 2021, our backlog totaled approximately $20.1 million.

The decrease in backlog at September 30, 2021 from December 31, 2020 is primarily attributable to work in progress or completed contracts during the first nine months of 2021 for approximately $6 million and executing one contract during the first quarter of 2021 in the amount of approximately $1.3 million, an one contract during the third quarter of 2021 in the amount of approximately $857,000 and one partial contract cancellation to an existing contract 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 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.

At September 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 September 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 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.

At September 30, 2020 , there were options , including options to non-employees and non-directors, restricted stock units and warrants to purchase 52,337 , 465,518 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.

From October 2019 until September 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.

10 unchanged sentences

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

The failure to comply with the terms of SG DevCorp’s Note could result in a default under the terms of the Short-Term Note and, if uncured, it could potentially result in action against our pledged assets.

SG DevCorp’s Note in the principal amount of $2,000,000 is secured by a deed of trust on our Lake Travis project site in Lago Vista, Texas and a related assignment of leases and rents to the holder of the Note.

The Short-Term Note is due in July 2022 and provides for payments of interest only at a rate of twelve percent (12%) per annum.

If SG DevCorp were to fail to comply with the terms of the Short-Term Note, the holder of the Short-Term Note could declare a default and if the default were to remain uncured would have the right to proceed against any or all of the collateral securing the Short-Term Note.

SG DevCorp’s failure to make such payments when due could result in our loss of its interest in the Lake Travis project site in Lago Vista, Texas.

Any action to proceed against SG DevCorp’s assets would likely have a serious disruptive effect on its business operations, especially if the Lake Travis project site were foreclosed upon.

The Short-Term Note requires that SG DevCorp pay a significant amount of cash to the lender.

SG DevCorp’s ability to generate sufficient cash to make all required payments under the Note depends on many factors beyond its control.

SG DevCorp’s ability to make payments on and to refinance the Short-Term Note, to fund planned capital expenditures and to maintain sufficient working capital depends on its and our ability to generate cash in the future.

This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

We cannot assure you that our business will generate sufficient cash flow from operations or from other sources in an amount sufficient to enable us to service our debt, SG DevCorp’s debt or to fund our other liquidity needs.

To date, we have continued to generate losses from operations and have financed a significant portion our capital needs from sales of our equity.

There can be no assurance that financing options will be available to us when needed to make payments under the Short-Term Note or if available, that they will be on favorable terms.

If our cash flow and capital resources are insufficient to allow us to make payments due under the Short-Term Note, we may need to seek additional capital or restructure or refinance all or a portion of the Short-Term Note on or before the maturity thereof, any of which could have a material adverse effect on our business, financial condition or results of operations.

We cannot assure you that we will be able to refinance the Short-Term Note on commercially reasonable terms or at all.

If we are unable to generate sufficient cash flow to repay or refinance our debt on favorable terms, it could significantly adversely affect our financial condition.

Our ability to restructure or refinance the Short-Term Note will depend on the condition of the capital markets and our financial condition.

Any refinancing of the Short-Term Note could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.

There can be no assurance that we will be able to obtain any financing when needed.

Our real estate investments may not maintain their value or appreciate in value .

There can be no assurance that our investments in various real estate assets, such as SG DevCorp’s $3,500,000 investment in the 50+ acre Lake Travis project site in Lago Vista, Texas, will appreciate in value, maintain their present value, or be sold at a profit.

If the real estate assets we have acquired decline in value or if we are unable to make any payments under any related indebtedness, including but not limited to any payments under SG DevCorp’s $2,000,000 secured Short-Term Note, as and when they become due, or otherwise fail to perform our obligations under such indebtedness, our financial condition and results of operations may be adversely affected.

The marketability and value of the Lake Travis project site will depend upon many factors beyond our control.

Unregistered Sales of Equity Securities and Use of Proceeds

3 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