What changed in this filing

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Item 1. Financial Statements

2022-08-15 compared with 2022-05-24 · 194 added, 132 removed, 865 unchanged (27% of the section changed)

5 unchanged sentences

Cash and cash equivalents

Escrow - bond

Accounts receivable, net

27 unchanged sentences

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

12,050,206 issued and outstanding as of June 30, 2022 and 11,986,873 issued and outstanding as of December 31, 2021

Additional paid-in capital

11 unchanged sentences

Three Months Ended

Six Months Ended

Construction services

10 unchanged sentences

Pre-project expenses

Operating profit/(loss)

Operating income (loss)

Other income (expense):

18 unchanged sentences

Stockholders’

Balance at March 31, 2022

Stock-based compensation

I ssuance of restricted stock units

N oncontrolling interest distribution

Net income (loss)

Balance at June 30, 2022

Balance at December 31, 2021

Stock-based compensation

Conversion of warrants to common stock

Issuance of restricted stock units

Noncontrolling interest distribution

Net income (loss)

Balance at June 30, 2022

$ 0.01 Par Value

SG Blocks Stockholders'

Noncontrolling

Stockholders’

Balance at March 31, 2021

Stock-based compensation

Conversion of warrants to common stock

Noncontrolling interest distribution

Net income (loss)

Balance at June 30, 2021

Balance at December 31, 2020

Stock-based compensation

Conversion of warrants to common stock

Noncontrolling interest distribution

Net income (loss)

Balance at March 31, 2022

Balance at June 30, 2021

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

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended

March 31, 2022

Three Months Ended

March 31, 2021

Six Months Ended

June 30, 2022

Six Months Ended

June 30, 2021

Cash flows from operating activities:

Net income (loss)

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

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation expense

8 unchanged sentences

Accounts receivable

Escrow - bond

Contract assets

5 unchanged sentences

Lease liability

Net cash provided by (used in) operating activities

Net cash used in operating activities

Cash flows from investing activities:

4 unchanged sentences

Payment on assumed liability of acquired assets

Project Development Costs

Project development costs and other non-current assets

Investment in and advances to equity affiliates

Investment in non-marketable securities

2 unchanged sentences

Proceeds from conversion of warrants to common stock

Distribution paid to NCI

Net cash (used in) provided by financing activities

Net increase (decrease) in cash and cash equivalents

Distribution paid to non-controlling interest

Net cash used in financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents - beginning of period

Cash and cash equivalents - end of period

Supplemental disclosure of non-cash investing and financing activities:

Initial value of lease liability

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

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Description of Business

33 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six months ended June 30, 2022 and 2021 (Unaudited)

Reverse Stock Split

1 unchanged sentence

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.

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.

As of June 30, 2022, the Compa ny had 12,050,026 share s of common stock issued and outstanding .

As of June 30, 2022, the Company had cash and cash equivalents of $ 2,428,211 and a backlog of approximately $ 4,183,116 .

See Note 11 for a discussion of constructi on backlog.

Based on our conversations with key customers, the Company anticipates its backlog to convert to revenue over the following period:

23 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Summary of Significant Accounting Policies

3 unchanged sentences

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.

Results for the six months ended June 30, 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.

23 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Summary of Significant Accounting Policies (continued)

16 unchanged sentences

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.

No revenue has been recognized under the Agreement during the six months ended June 30, 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 .

2 unchanged sentences

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.

For the six months ended June 30, 2022 and 2021, the Company recognized approximately $ 10,200,000 and $ 15,600,000 related to activities through these two joint ventures, which is included in medical revenue on the accompanying consolidated statements of operations.

Disaggregation of Revenues

1 unchanged sentence

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.

Revenue recognized at a point in time and recognized over time were $ 10,203,215 and $ 5,956,354 , respectively, for the six months ending June 30, 2022.

Revenue recognized at a point in time and recognized over time were $ 15,750,903 and $ 5,290,711 , respectively, for the six months ending June 30, 2021 .

Revenue recognized at a point in time and recognized over time were $ 3,317,387 and $ 4,237,584 , respectively, for the three months ending June 30, 2022 .

Revenue recognized at a point in time and recognized over time were $ 9,785,490 and $ 2,068,497 , respectively, for the three months ending June 30, 2021 .

SG BLOCKS, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Summary of Significant Accounting Policies (continued)

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

Three Months Ended March 31,

Three Months Ended June 30,

Revenue by Customer Type

5 unchanged sentences

Total revenue by customer type

Six Months Ended June 30,

Revenue by Customer Type

Construction and Engineering Services:

Medical - C onstruction

Multi-Family (includes Single Family)

Medical Revenue:

Medical (lab testing, kit sales and equipment)

Total revenue by customer type

Contract Assets and Contract Liabilities

10 unchanged sentences

Contract liabilities are generally classified as current within the condensed consolidated balance sheet.

A lthough 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.

SG BLOCKS, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Summary of Significant Accounting Policies (continued)

The Company periodically evaluates and revises its estimates and makes adjustments when they are considered necessary.

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.

5 unchanged sentences

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 of June 30, 2022, accumulated amortization related to deferred contract costs amounted to $ 112,159 .

During the six months ended June 30, 2022 and 2021, amortization expense relating to the deferred contract costs amounted to $ 20,393 and $ 20,392 , 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.

10 unchanged sentences

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.

SG BLOCKS, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Summary of Significant Accounting Policies (continued)

Bu siness 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.

3 unchanged sentences

Costs that the Company incurs to complete the business combination are charged to general and administrative expenses as they are incurred.

SG BLOCKS, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Summary of Significant Accounting Policies (continued)

Variable Interest Entities – The Company accounts for certain legal entities as variable interest entities (“VIE").

27 unchanged sentences

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.

SG BLOCKS, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Summary of Significant Accounting Policies (continued)

On February 24, 2022 the Company made a $ 500,000 capital investment for a 1.2 % ownership in Moliving, a nomadic hospitality solution company, which included in investment in non-marketable securities on the accompanying condensed consolidated balance sheets.

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.

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.

Cash and cash equivalents totaled $ 2,428,211 and $ 13,024,381 as of June 30, 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.

The Company had no short-term investment as of June 30, 2022 or December 31, 2021 , respectively.

Escrow - bond – Escrow – bond represents monies held by a third party surety for the performance of a project which will be remitted to the Company upon criteria as described in the underlying agreements.

$ 2,000,000 was returned to the Company during July 2022 and the remaining amount is expected to be returned during the three months ending September 30, 2022.

Accounts receivable and allowance for credit losses – Accounts receivable are receivables generated from sales to customers and progress billings on performance type contracts.

9 unchanged sentences

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 June 30, 2022 there was inventory of $ 352,905 for construction materials, and $ 575,215 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.

2 unchanged sentences

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.

There were no impairments during the six months ended June 30, 2022 or 2021.

The Company has taken the recent COVID-19 pandemic into consideration when determining impairment.

2 unchanged sentences

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.

There was no impairment during the six months ended June 30, 2022.

The accumulated amortization as of June 30, 2022 and 2021 was $ 897,937 and $ 732,085 , respectively.

The amortization expense for the six months ended June 30, 2022 and 2021 was $ 82,204 and $ 82,230 , respectively.

The amortization expense for the three months ended June 30, 2022 and 2021 was $ 40,382 and $ 41,823 , respectively.

The estimated amortization expense for the successive five years is as follows:

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Summary of Significant Accounting Policies (continued)

19 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Summary of Significant Accounting Policies (continued)

10 unchanged sentences

Stock-based compensation expense to non-employees is reported within marketing and business development expense in the condensed consolidated statements of operations.

Other income – Included in other income for the three and six months ended June 30, 2022 is amounts in escrow resulting from the SG Echo acquisition which were remitted to the Company.

At the time of acquisition and previously, the Company did not believe such amount was recognizable.

Income taxes – The Company accounts for income taxes utilizing the asset and liability approach.

12 unchanged sentences

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.

At June 30, 2022 and December 31, 2021, 79 % and 78 %, respectively, of the Company’s gross accounts receivable were due from two and four customers.

Revenue relating to two and one customers represented approximately 97 % and 77 % of the Company's total revenue for the three months ended June 30, 2022 and 2021 , respectively.

Revenue relating to two and one customers represented approximately 90 % and 71 % of the Company's total revenue for the six months ended June 30, 2022 and 2021, respectively.

Cost of revenue relating to one and two vendors represented approximately 12 % and 52 % of the Company’s total cost of revenue for the three months ended June 30, 2022 and 2021 , respectively Cost of revenue relating to one and three vendors represented approximately 10 % and 48 % of the Company’s total cost of revenue for the six months ended June 30, 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.

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Accounts Receivable

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

At June 30, 2022 and December 31, 2021 , the Company’s accounts receivable consisted of the following:

Construction services

7 unchanged sentences

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.

The allowance for credit losses was $ 963,116 as of June 30, 2022 and December 31, 2021.

There was a provision for credit losses of $ 7,024 in during the six months ended June 30, 2022.

There was a provision of $ 167,202 for credit losses, no recoveries collected for credit losses and no write offs during the year ended December 31, 2021.

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 :

Costs and estimated earnings on uncompleted contracts, which represent contract assets and contract liabilities, consisted of the following at June 30, 2022 and December 31, 2021 :

Costs incurred on uncompleted contracts

3 unchanged sentences

billings to date

Net contract assets (liabilities) on uncompleted contracts

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

Net contract liabilities on uncompleted contracts

The above amounts are included in the accompanying condensed consolidated balance sheets under the f ollowing captions at June 30, 2022 and December 31, 2021 .

Contract assets

Contract liabilities

Net contract assets (liabilities)

Net contract liabilities

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.

3 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

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:

At June 30, 2022 and December 31, 2021, the Company’s property, plant and equipment, net consisted of the following:

Computer equipment and software

8 unchanged sentences

Property, plant and equipment, net

Depreciation expense for the three months ended March 31, 2022 and 2021 amounted to $ 104,825 and $ 91,190 respectively.

Depreciation expense for the three months ended June 30, 2022 and 2021 amounted to $ 106,152 and $ 107,208 respectively.

Depreciation expense for the six months ended June 30, 2022 and 2021 amounted to $ 210,977 and $ 198,398 respectively.

Notes Receivable

8 unchanged sentences

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.

During the six-month period ended June 30, 2022, the Galvin Note was assigned to the Company and the principal amount of $ 100,000 was returned to Mr.

The Company has a promissory note in the principal amount of $ 100,000 (the "Company Note 3") and the assignment occurred in January 2022.

4 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Notes Payable

2 unchanged sentences

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 $ 0 in interest charges and $ 0 in debt issuance costs during the three months ended June 30, 2022 related to the Lago Vista project in accordance with ASC 835-20.

The Company capitalized $ 20,000 in interest charges and $ 4,314 in debt issuance costs during the six months ended June 30, 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.

6 unchanged sentences

Balance Sheet Location

March 31, 2022

June 30, 2022

Operating Leases

21 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Leases (continued)

12 unchanged sentences

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.

At June 30, 2022, there were restricted stock units, options and warrants of 757,450 , 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 June 30, 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.

At June 30, 2021 , there were options , including options 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.

SG BLOCKS, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021(Unaudited)

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:

The following represents the backlog of signed construction and engineering contracts in existence at June 30, 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 June 30, 2022 and December 31, 2021, respectively, on which work has not yet begun:

Balance - beginning of period

1 unchanged sentence

Adjustments and cancellations, net

( 18,297,197 )

contract revenue earned during the period

4 unchanged sentences

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.

for $ 5,954,950 that is reflected in the June 30, 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:

The Company’s remaining backlog as of June 30, 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 June 30, 2022 over the following period:

Within 1 year

5 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021(Unaudited)

Stockholders’ Equity

19 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Segments and Disaggregated Revenue

Corporate and

Fiscal Quarter Ended March 31, 2022

Corporate and support

Six Months Ended June 30, 2022

Cost of revenue

Operating expenses

Operating gain/loss

Operating income (loss)

Other income (expense)

Income before income taxes

Income (loss) before income taxes

Net income attributable to non-controlling interest

Net loss attributable to common stockholders of SG Blocks, Inc.

Net income (loss) attributable to common stockholders of SG Blocks, Inc.

Depreciation and amortization

1 unchanged sentence

Inter-segment revenue elimination

Corporate and

Fiscal Quarter Ended March 31, 2021

Corporate and support

Six Months Ended June 30, 2021

Cost of revenue

Operating expenses

Operating gain/loss

Operating income (loss)

Other income (expense)

Income before income taxes

Income (loss) before income taxes

Net income attributable to non-controlling interest

Net loss attributable to common stockholders of SG Blocks, Inc.

Net income (loss) attributable to common stockholders of SG Blocks, Inc.

Depreciation and amortization

3 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Segments and Disaggregated Revenue (continued)

Corporate and support

Three Month Ended June 30, 2022

Cost of revenue

Operating expenses

Operating income (loss)

Other income (expense)

Income (loss) before income taxes

Net income attributable to non-controlling interest

Net income (loss) attributable to common stockholders of SG Blocks, Inc.

Depreciation and amortization

Capital expenditures

Inter-segment revenue elimination

Corporate and support

Three Months Ended June 30, 2021

Cost of revenue

Operating expenses

Operating income (loss)

Other income (expense)

Income (loss) before income taxes

Net income attributable to non-controlling interest

Net income (loss) attributable to common stockholders of SG Blocks, Inc.

Depreciation and amortization

Capital expenditures

SG BLOCKS, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

In conjunction with the June 2017 Public Offering, the Company issued to certain affiliates of the underwriters, as compensation, warrants to purchase an aggregate of 4,313 shares of common stock at an exercise price of $ 125.00 per share.

20 unchanged sentences

Each of the Company’s employees, directors, and consultants are eligible to participate in the Incentive Plan.

As of March 31, 2022, there were 1,343,377 shares of common stock available for issuance under the Incentive Plan .

As of June 30, 2022, there were 1,343,377 shares of common stock available for issuance under the Incentive Plan .

Stock-Based Compensation Expense

Stock-based compensation expense is included in the condensed consolidated statements of operations as follows:

Six Months Ended

Payroll and related expenses

Three Months Ended

3 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Share-based Compensation (continued)

The following table presents total stock-based compensation expense by security type included in the condensed consolidated statements of operations:

Six Months Ended

Stock options

Restricted Stock Units

Three Months Ended

2 unchanged sentences

Stock-Based Option Awards

The Company has issued no stock-based options during the three months ended March 31, 2022 and 2021.

The Company has issued no stock-based options during the six months ended June 30, 2022 and 2021.

Because the Company does not have significant historical data on employee exercise behavior, the Company uses the “Simplified Method” to calculate the expected life of the stock-based option awards granted to employees.

The simplified method is calculated by averaging the vesting period and contractual term of the options.

The following table summarizes stock-based option activities and changes during the three months ended March 31, 2022 as described below:

The following table summarizes stock-based option activities and changes during the six months ended June 30, 2022 as described below:

Weighted Average Fair Value Per Share

3 unchanged sentences

Outstanding – December 31, 2021

Outstanding – March 31, 2022

Outstanding – June 30, 2022

Exercisable – December 31, 2021

Exercisable – March 31, 2022

For the three months ended March 31, 2022 and 2021, the Company recognized stock-based compensation expense of $ 0 and $ 2,666 , respectively , related to stock options.

Exercisable – June 30, 2022

For the three months ended June 30, 2022 and 2021, the Company recognized stock-based compensation expense of $ 0 and $ 0 , respectively , related to stock options.

For the six months ended June 30, 2022 and 2021 , the Company recognized stock-based compensation expense of $ 0 and $ 2,666 , respectively, related to stock options.

This expense is included in payroll and related expenses in the accompanying condensed consolidated statements of operations.

As of March 31, 2022, there was no unrecognized compensation costs related to non-vested stock options and all options have been expensed.

As of June 30, 2022, there was no unrecognized compensation costs related to non-vested stock options and all options have been expensed.

The intrinsic value is calculated as the difference between the fair value of the stock price at year end and the exercise price of each of the outstanding stock options.

The fair value of the stock price at March 31, 2022 was $ 1.95 per share.

The fair value of the stock price at June 30, 2022 was $ 1.66 per share.

SG BLOCKS, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Share-based Compensation (continued)

33 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Share-based Compensation (continued)

9 unchanged sentences

Armstrong, Mr.

Sheeran, thirteen employees and three consultant of the Company, under the Company's stock-based compensation plan, at the fair value of $ 3.38 per share, which represents the closing price of the Company's common stock on October 1, 2021.

Sheeran, thirteen employees and three consultants of the Company, under the Company's stock-based compensation plan, at the fair value of $ 3.38 per share, which represents the closing price of the Company's common stock on October 1, 2021.

Restricted stock units granted to Mr.

Armstrong, Mr.

Sheeran, and an aggregate of thirteen employees and two consultant of 350,000 , 40,000 , 100,000 and an aggregate of 475,000 , respectively, vesting quarterly over two years from the anniversary of the grant date.

Sheeran, and an aggregate of thirteen employees and two consultants of 350,000 , 40,000 , 100,000 and an aggregate of 475,000 , respectively, vesting quarterly over two years from the anniversary of the grant date.

Restricted stock units granted to Mr.

7 unchanged sentences

The restricted stock units granted vest in equal monthly installments over one year period.

For the three months ended March 31, 2022 and 2021, the Company recognized stock-based compensation of $ 649,090 and $ 283,520 related to restricted stock units.

For the three months ended June 30, 2022 and 2021 , the Company recognized stock-based compensation of $ 631,076 and $ 246,236 related to restricted stock units.

For the six months ended June 30, 2022 and 2021, the Company recognized stock-based compensation of $ 1,280,162 and $ 529,756 related to restricted stock units.

This expense is included in the payroll and related expenses, general and administrative expenses, and marketing and business development expense in the accompanying condensed consolidated statement of operations.

The following table summarized restricted stock unit activities during the three months ended March 31, 2022:

The following table summarized restricted stock unit activities during the six months ended June 30, 2022:

Number of Shares

1 unchanged sentence

Forfeited/Expired

Non-vested balance at March 31, 2022

Non-vested balance at June 30, 2022

SG BLOCKS, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Commitm ents and Contingencies

41 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Commitments and Contingencies (continued)

2.) ICON Construction Inc.

SG Blocks, Inc, et.

- On or about June 8, 2021 ICON Construction Inc.

(“ICON”) filed a complaint against the Company and Echo DCL LLC (“Echo DCL”), seeking unspecified damages, arising out of a certain asset purchase agreement entered into between ICON and Echo DCL on or about February 20, 2020 (the “ICON-Echo Asset Agreement”) whereby, inter alia , Echo DCL acquired all of the assets of ICON.

On or about September 17, 2020, Echo DCL and SG Echo LLC entered into a certain asset purchase agreement (the “Echo Asset Agreement”) whereby, inter alia , SG Echo acquired all of the assets of Echo DCL.

In the Echo Asset Agreement Echo DCL represented and warranted to SG Echo that it had good and marketable title to the assets, had full right and power to transfer same, and that the same were free and clear of any encumbrances except for a certain permitted lien held by BTH Bank.

ICON alleges that ECHO DCL breached the terms of the ICON-Echo Asset Agreement and that the Company agreed to assume Echo DCL’s liabilities obligations under the ICON-Echo Asset Agreement .

Icon also claims a security interest in the assets conveyed to SG Echo by Echo DCL.

The Company has filed an answer to the ICON complaint denying the allegations and raised eleven affirmative defenses and that it is entitled to indemnification and/or contribution from Echo DCL and its principal Michael Ames.

The parties are currently engaged in discovery.

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

The Company is currently unable to predict the possible loss or range of loss, if any, associated with the resolution of this litigation, and, accordingly, the Company has made no provision related to this matter in the consolidated financial statements.

Vendor Litigation

22 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Commitm ents and Contingencies (continued)

65 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Commitments and Contingencies (continued)

12 unchanged sentences

The Company continues to prosecute its claim against EDI for tortious interference with the Company’s economic relationship with HOLA Community Partners and Heart of Los Angeles Youth, Inc.

The parties are in engaged in the discovery and a trial date has been set for September 6, 2022.

The parties have agreed to mediate their dispute.

Mediation has been scheduled to take place on or about May 17, 2022.

The discovery period has concluded and a trial date has been set for September 6, 2022.

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

20 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Six Months Ended June 30, 2022 and 2021 (Unaudited)

Commitments and Contingencies (continued)

16 unchanged sentences

Subsequent Events

Su bsequent to March 31, 2022, SG Echo, a subsidiary of SG Blocks, has broadened its relationship with a private client and received a purchase order for its largest contract to date.

The purchase order is for more than 100 units and the Company expects to generate approximately $ 6 million dollars of revenue from this contract.

The units are scheduled to be completed by the end of Q2 2022.

On July 5, 2022, the Company entered into an amendment to its employment agreement, dated January 1, 2017, as amended, with Paul Galvin, to provide for the payment of an annual base salary of $ 500,000 .

All other terms of the employment agreement remain in full force and effect.

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 1. Financial Statements