What changed in this filing

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Item 1. Financial Statements

2022-11-16 compared with 2022-08-15 · 168 added, 140 removed, 919 unchanged (25% of the section changed)

3 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

Current assets:

30 unchanged sentences

Common stock, $ 0.01 par value, 25,000,000 shares authorized;

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

12,050,206 issued and 12,027,091 outstanding as of September 30, 2022 and 11,986,873 issued and outstanding as of December 31, 2021

Additional paid-in capital

Treasury stock, at cost - 23,115 shares

Accumulated deficit

9 unchanged sentences

Three Months Ended

September 30,

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Construction services

5 unchanged sentences

Medical revenue

Gross profit (loss)

Operating expenses:

3 unchanged sentences

Pre-project expenses

Operating income (loss)

Operating loss

Other income (expense):

Loss on asset disposal

Interest expense

Interest income

Income (loss) before income taxes

Other income (expense)

Loss before income taxes

Income tax expense

Net income (loss)

net income attributable to noncontrolling interests

net income (loss) attributable to noncontrolling interests

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

11 unchanged sentences

Stockholders’

Balance at March 31, 2022

Balance at June 30, 2022

Stock-based compensation

I ssuance of restricted stock units

N oncontrolling interest distribution

Net income (loss)

Balance at June 30, 2022

Repurchase of common stock

Balance at September 30, 2022

Balance at December 31, 2021

( 33,109,220 )

Stock-based compensation

1 unchanged sentence

Noncontrolling interest distribution

Repurchase of common stock

Net income (loss)

Balance at June 30, 2022

Balance at September 30, 2022

$ 0.01 Par Value

2 unchanged sentences

Stockholders’

Balance at March 31, 2021

Balance at June 30, 2021

Stock-based compensation

Conversion of warrants to common stock

Noncontrolling interest distribution

Net income (loss)

Balance at June 30, 2021

Balance at September 30, 2021

Balance at December 31, 2020

3 unchanged sentences

Net income (loss)

Balance at June 30, 2021

Balance at September 30, 2021

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

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Six Months Ended

June 30, 2022

Six Months Ended

June 30, 2021

Nine Months Ended

September 30, 2022

Nine Months Ended

September 30, 2021

Cash flows from operating activities:

31 unchanged sentences

Proceeds from conversion of warrants to common stock

Repurchase of common stock

Proceeds from short-term note payable

Distribution paid to non-controlling interest

9 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 30, 2022 and 2021 (Unaudited)

Description of Business

5 unchanged sentences

Accordingly, the historical financial statements presented are the financial statements of SG Building.

The Company operates in the following four segments:

(i) manufacturing;

(ii) medical;

(ii) real estate development;

and (iv) environmental.

The manufacturing segment designs and constructs modular structures built in the Company’s factories.

In the medical segment the Company uses its modular technology to provide turnkey solutions to medical testing and treatment and generates revenue from the medical testing.

The Company’s real estate development segment builds innovative and green single or multifamily projects in underserved regions nationally using modules built in one of the Company’s vertically integrated factories.

The environmental segment, the newest segment, is a sustainable medical and waste management solution that collects waste and treats waste for safe disposal.

The building products developed with the Company's proprietary technology and design and engineering expertise are generally stronger, more durable, environmentally sensitive, and erected in less time than traditional construction methods.

26 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 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 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 .

As of September 30, 2022, the Compa ny had 12,050,206 share s of common stock issued and 12,027,091 shares of common stock outstanding .

As of September 30, 2022, the Company had cash and cash equivalents of $ 2,118,169 and a backlog of $ 2,585,012 .

See Note 11 for a discussion of constructi on backlog.

4 unchanged sentences

Management has taken several actions to ensure that the Company will continue as a going concern.

As described below, the Company has recently been able to raise substantial cash through equity offerings.

As described below, the Company has in the past been able to raise substantial cash through equity offerings.

In addition, as further described in these consolidated financial statements, the Company has begun to recognize revenue from new revenue streams.

7 unchanged sentences

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

In addition, the pandemic could result in an economic downturn that could affect the demand for the Company's products.

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

In addition, the pandemic has negatively affected the economy and has affected the demand for the Company's products.

During COVID-19, order lead times were extended and delayed and pricing has increased.

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

6 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 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 six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Results for the nine months ended September 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.

5 unchanged sentences

Assets and liabilities relating to contracts are included in current assets and current liabilities, respectively, in the accompanying balance sheets as they will be liquidated in the normal course of contract completion, which at times could exceed one year .

Reclassification – Certain prior year balances were reclassed to conform to current period presentation.

Reclassification – Certain prior year balances were reclassified to conform to current period presentation.

There was no impact to income (loss) or cash flows as a result of these reclassifications .

15 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 30, 2022 and 2021 (Unaudited)

Summary of Significant Accounting Policies (continued)

4 unchanged sentences

The Company has determined that the ELA granted the licensee a right to access the Company’s intellectual property throughout the license period (or its remaining economic life, if shorter), and thus recognizes revenue over time as the licensee recognized revenue and the Company has the right to payment of royalties.

On June 15, 2021, the Company terminated the ELA that was executed on October 3, 2019 which is discussed below.

On June 15, 2021, the Company terminated the ELA that was executed on October 3, 2019.

CMC Right of First Refusal Agreement – On October 9, 2019, the Company entered into a Right of First Refusal Agreement (the “ Agreement ”) with CMC Development LLC (“ CMC ”), which had a term of two ( 2 ) years.

Under the Agreement, the Company had a right of first refusal with respect to being engaged as a designer and builder of any real estate projects for which CMC has secured the rights to develop and in which CMC has a greater than fifty percent ( 50 %) interest in the owner or developer entity and has the right to select the builder for such real estate project (the “ROFR Rights”).

In exchange for such ROFR Rights, the Company agreed to issue to CMC 2,500 shares of restricted stock of the Company’s common stock, of which 1,250 shares vested on March 31, 2021 and the remaining 1,250 shares was to vest and be issued on September 30, 2021 unless the Agreement is earlier terminated.

In the event that the Agreement was earlier terminated, CMC was entitled to receive the entire amount of such restricted stock that had vested as of such earlier termination date, but in no event less than 1,250 shares of such restricted stock.

1 unchanged sentence

The 2,500 shares of restricted stock of the Company's common stock has yet to be issued to CMC.

The Agreement also provided that CMC has engaged the Company to build and design, in the aggregate, approximately 100 residential and commercial units at 1100 Ridge Avenue, Atlanta, Georgia, which is known as the “Ridge Avenue, Atlanta Project.” The total expected gross revenue to the Company for the project to be derived by CMC is approximately $ 16,900,000 .

The Agreement also provided that CMC had engaged the Company to build and design, in the aggregate, approximately 100 residential and commercial units at 1100 Ridge Avenue, Atlanta, Georgia, which is known as the “Ridge Avenue, Atlanta Project.” The total expected gross revenue to the Company for the project to be derived by CMC is approximately $ 16,900,000 .

The project is a residential project but it was not subject to the recently terminated ELA.

2 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 six months ended June 30, 2022 and 2021.

No revenue has been recognized under the Agreement during the nine months ended September 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 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.

For the nine months ended September 30, 2022 and 2021, the Company recognized approximately $ 11,640,000 and $ 22,950,000 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 $ 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 .

Revenue recognized at a point in time and recognized over time were $ 11,640,953 and $ 8,648,873 , respectively, for the nine months ending September 30, 2022.

Revenue recognized at a point in time and recognized over time were $ 23,906,077 and $ 5,983,027 , respectively, for the nine months ending September 30, 2021 .

Revenue recognized at a point in time and recognized over time were $ 1,437,738 and $ 2,692,519 , respectively, for the three months ending September 30, 2022 .

Revenue recognized at a point in time and recognized over time were $ 8,164,624 and $ 682,866 , respectively, for the three months ending September 30, 2021 .

SG BLOCKS, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 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 June 30,

Three Months Ended September 30,

Revenue by Customer Type

5 unchanged sentences

Total revenue by customer type

Six Months Ended June 30,

Nine Months Ended September 30,

Revenue by Customer Type

20 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 30, 2022 and 2021 (Unaudited)

Summary of Significant Accounting Policies (continued)

2 unchanged sentences

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.

Upon entering into the ELA, the Company is no longer obliged to its Original Agreement.

Upon entering into the ELA, the Company was no longer obliged to its Original Agreement.

Upon entering the ELA, the Company had an outstanding accounts receivable balance of $ 306,143 , which was forfeited and recognized this amount as deferred contract costs.

2 unchanged sentences

The Company considered this amount an incremental cost of obtaining that ELA, because the Company expects to recover those costs through future royalty payments.

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 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.

The Company planed to amortize the asset over sixty months , which was the initial term of the ELA because the asset relates to the services transferred to the customer during the contract term.

As of September 30, 2022, accumulated amortization related to deferred contract costs amounted to $ 122,355 .

During the nine months ended September 30, 2022 and 2021, amortization expense relating to the deferred contract costs amounted to $ 30,589 and $ 30,589 , 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.

Exclusive License Agreement – On Oc tober 3, 2019, as amen ded on October 17, 2019, the Company entered into the ELA with CPF GP 2019-1 LLC (the “Licensee”), pursuant to which the Company granted the Licensee an exclusive license (the “License”) solely within the United States and its legal territories to the Company’s 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 single-family residences and multi-family residences, but excluding military housing.

The Ridge Avenue Project has also been excluded from the License.

The License Agreement has an initial term of five (5) years and will automatically renew for subsequent five (5) year periods.

The License Agreement provides for customary terminating provisions, including the right by the Company to terminate if the Licensee fails to make minimum royalty payments (as described below).

The Ridge Avenue Project was also been excluded from the License.

The License Agreement has an initial term of five (5) years and provided for automatic renew for subsequent five (5) year periods.

The License Agreement provided for customary terminating provisions, including the right by the Company to terminate if the Licensee fails to make minimum royalty payments (as described below).

In consideration for the License, during the initial term, the Licensee agreed to pay the Company a royalty of (x) five percent (5%) on the first $20,000,000 of gross revenues derived from the Licensee’s commercialization of the License (net of customary discounts, sales taxes, delivery charges, and amounts for returns) (the “Gross Revenues”), (y) four and one-half percent (4.5%) on the next $30,000,000 of Gross Revenues, and (z) five percent (5%) on all Gross Revenues thereafter (collectively, the “Royalty”) , subject to the following minimum royalty payments determined on a cumulative basis during the initial term:

1 unchanged sentence

In addition, to the extent the Licensee sublicensed any aspect of the License to a sub-licensee, the Licensee was obligated to pay to the Company fifty percent ( 50 %) of all payments received by the Licensee from such sublicensee.

The ELA provided for customary indemnification obligations between the parties and further provides that the Licensee will indemnify the Company for any claims arising out of the commercialization of the License by the Licensee or any of its subsidiaries, contractors, or sublicensees.

The ELA provided for customary indemnification obligations between the parties and further provided that the Licensee indemnify the Company for any claims arising out of the commercialization of the License by the Licensee or any of its subsidiaries, contractors, or sublicensees.

On June 15, 2021, the Company terminated the ELA.

4 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 30, 2022 and 2021 (Unaudited)

Summary of Significant Accounting Policies (continued)

12 unchanged sentences

On August 27, 2020 the Company entered into a joint venture agreement with Clarity Lab Solutions, LLC (“Clarity Labs”) (the “JV”).

In consideration and subject to Clarity Lab’s services and commitments and provided the agreement remains valid and in force, and is not terminated, the Company agreed to issue 200,000 restricted shares of SGB common stock over a defined vesting period starting in December 1, 2020.

The restricted shares of SGB common stock were not issued to Clarity Labs as certain capital commitments were not met.

In consideration and subject to Clarity Lab’s services and commitments and provided the agreement remains valid and in force, and is not terminated, the Company agreed to issue 200,000 restricted shares of common stock over a defined vesting period starting in December 1, 2020.

The restricted shares of common stock were not issued to Clarity Labs as certain capital commitments were not met.

Clarity Labs is a licensed clinical laboratory that uses specialized molecular testing equipment and that focuses on the diagnosis and treatment of critical diseases, including COVID-19.

4 unchanged sentences

The Company has determined it is the primary beneficiary of Clarity Mobile Venture and has thus consolidated the activities in its consolidated financial statements.

Due to the ongoing lower affects of COVID-19 restrictions, the JV is being wound down during the fourth quarter of 2022.

On January 18, 2021 the Company entered into an operating agreement to form CAT.

8 unchanged sentences

The Company contributed $ 3,000,000 for its 10 % equity interest.

During the nine months ended September 30, 2022, the Company contributed an additional $ 148,570 .

The purpose of JDI-Cumberland Inlet, LLC is to develop a waterfront parcel in a mixed-use destination community.

4 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 30, 2022 and 2021 (Unaudited)

Summary of Significant Accounting Policies (continued)

2 unchanged sentences

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 $ 2,428,211 and $ 13,024,381 as of June 30, 2022 and December 31, 2021, respectively.

Cash and cash equivalents totaled $ 2,118,169 and $ 13,024,381 as of September 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 June 30, 2022 or December 31, 2021 , respectively.

The Company had no short-term investment as of September 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.

$ 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 December 31, 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 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 September 30, 2022 there was inventory of $ 406,084 for construction materials, and $ 488,878 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 six months ended June 30, 2022 or 2021.

There were no impairments during the nine months ended September 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 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.

There was no impairment during the nine months ended September 30, 2022.

The accumulated amortization as of September 30, 2022 and 2021 was $ 938,319 and $ 773,908 , respectively.

The amortization expense for the nine months ended September 30, 2022 and 2021 was $ 122,587 and $ 124,053 , respectively.

The amortization expense for the three months ended September 30, 2022 and 2021 was $ 39,243 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 Six Months Ended June 30, 2022 and 2021 (Unaudited)

For the Nine Months Ended September 30, 2022 and 2021 (Unaudited)

Summary of Significant Accounting Policies (continued)

6 unchanged sentences

Held For Sale Assets – On May 10, 2021 the Company's subsidiary, SG DevCo acquired the Lago Vista, Texas property for $ 3,576,130 .

Management has implemented a plan to sell this property, which meets all of the criteria required to classify it as Held for Sale.

Management has implemented a plan to sell this property during 2022, which meets all of the criteria required to classify it as Held for Sale.

Including the project development costs associated with Lago Vista of $ 877,584 , the book value is now $ 4,453,714 .

10 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 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.

Other income – Included in other income for the three and nine months ended September 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.

13 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 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.

At September 30, 2022 and December 31, 2021, 83 % and 78 %, respectively, of the Company’s gross accounts receivable were due from two and four customers.

Revenue relating to three and one customers represented approximately 93 % and 90 % of the Company's total revenue for the three months ended September 30, 2022 and 2021 , respectively.

Revenue relating to two and one customers represented approximately 88 % and 77 % of the Company's total revenue for the nine months ended September 30, 2022 and 2021, respectively.

Cost of revenue relating to two vendors represented approximately 68 % of the Company’s total cost of revenue for the three months ended September 30, 2021.

Cost of revenue relating to three vendors represented approximately 54 % of the Company’s total cost of revenue for the nine months ended September 30, 2021.

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

For the Nine Months Ended September 30, 2022 and 2021 (Unaudited)

Accounts Receivable

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

At September 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 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.

There was a provision for credit losses of $ 7,024 and $ 161,202 during the nine months ended September 30, 2022.

and 2021, respectively .

Contract Assets and Contract Liabilities

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

Costs incurred on uncompleted contracts

4 unchanged sentences

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 .

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

Contract assets

6 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 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 June 30, 2022 and December 31, 2021, the Company’s property, plant and equipment, net consisted of the following:

At September 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 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.

Depreciation expense for the three months ended September 30, 2022 and 2021 amounted to $ 106,271 and $ 96,462 respectively.

Depreciation expense for the nine months ended September 30, 2022 and 2021 amounted to $ 317,249 and $ 294,860 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 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.

During the nine-month period ended September 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 Six Months Ended June 30, 2022 and 2021 (Unaudited)

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

The Company capitalized $ 20,000 in interest charges and $ 4,134 in debt issuance costs during the nine months ended September 30, 2022 related to the Lago Vista project in accordance with ASC 835-20.

The Company capitalized $ 112,348 in interest charges and $ 23,726 in debt issuance costs as of December 31, 2021 related to the Lago Vista project in accordance with ASC 835-20.

On July 14, 2022, the Company entered into a renewal and extension of the Short-Term Note, with a maturity date of January 14, 2023 and all other terms remaining the same.

The Company entered into a Second Real Estate Lien Note, in the principal amount of $ 500,000 , with similar terms to the Short-Term Note (“Second Short-Term Note”).

The Second Short-Term Note has a maturity date of January 14, 2023.

On October 29, 2021, SG Echo, a subsidiary of the Company, entered into a Loan Agreement (“Loan Agreement”) with the Durant Industrial Authority (the “Authority”) pursuant to which it received $ 750,000 to be used for renovation improvements related to the Company's second manufacturing facility and issued to the Authority a non-interest bearing Forgivable Promissory Note in the principal amount of $ 750,000 (the “Forgivable Note”).

5 unchanged sentences

Balance Sheet Location

June 30, 2022

September 30, 2022

Operating Leases

21 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 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 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.

At September 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 September 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 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.

At September 30, 2021 , there were restricted stock units, options and warrants of 884,344 , 36,436 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 Six Months Ended June 30, 2022 and 2021(Unaudited)

For the Nine Months Ended September 30, 2022 and 2021(Unaudited)

Construction Backlog

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:

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

Balance - beginning of period

7 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 June 30, 2022 backlog.

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

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

Within 1 year

5 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 30, 2022 and 2021(Unaudited)

Stockholders’ Equity

Public Offerings –

In October 2021, the Company closed a registered direct offering and concurrent private placement of its common stock (the "October Offering") that the Company effected pursuant to the Securities Purchase Agreement that it entered into on October 25, 2021 with an institutional investor and received gross proceeds of $ 11.55 million.

Pursuant to the terms of the Purchase Agreement, the Company issued to the investor (A) in a registered direct offering (i) 975,000 shares (the “Public Shares”) of its Common Stock, par value $ 0.01 per share (the “Common Stock”), and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 2,189,384 shares (the “Pre-Funded Warrant Shares”) of Common Stock and (B) in a concurrent private placement, Series A warrants to purchase up to 1,898,630 shares (the “Common Stock Warrant Shares”) of Common Stock (the “Common Stock Warrants,” and together with the Public Shares and the Pre-Funded Warrants, the “Securities”) (the “Offering The Pre-Funded Warrants were immediately exercisable at a nominal exercise price of $ 0.001 and all Pre-Funded Warrants sold have been exercised.

16 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 30, 2022 and 2021 (Unaudited)

Segments and Disaggregated Revenue

Corporate and support

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Cost of revenue

7 unchanged sentences

Capital expenditures

Inter-segment revenue elimination

Corporate and support

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Cost of revenue

6 unchanged sentences

Depreciation and amortization

Capital expenditures

SG BLOCKS, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September30, 2022 and 2021 (Unaudited)

Segments and Disaggregated Revenue (continued)

Corporate and support

Three Month Ended June 30, 2022

Three Month Ended September 30, 2022

Cost of revenue

7 unchanged sentences

Capital expenditures

Inter-segment revenue elimination

Corporate and support

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Cost of revenue

6 unchanged sentences

Depreciation and amortization

Capital expenditures

SG BLOCKS, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 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 June 30, 2022, there were 1,343,377 shares of common stock available for issuance under the Incentive Plan .

As of September 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

Nine Months Ended

September 30,

Payroll and related expenses

Three Months Ended

September 30,

Payroll and related expenses

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 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

Nine Months Ended

September 30,

Stock options

1 unchanged sentence

Three Months Ended

September 30,

Stock options

1 unchanged sentence

Stock-Based Option Awards

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

The Company has issued no stock-based options during the nine months ended September 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 six months ended June 30, 2022 as described below:

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

Weighted Average Fair Value Per Share

3 unchanged sentences

Outstanding – December 31, 2021

Outstanding – June 30, 2022

Outstanding – September 30, 2022

Exercisable – December 31, 2021

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.

Exercisable – September 30, 2022

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

For the nine months ended September 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 June 30, 2022, there was no unrecognized compensation costs related to non-vested stock options and all options have been expensed.

As of September 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 June 30, 2022 was $ 1.66 per share.

The fair value of the stock price at September 30, 2022 was $ 1.77 per share.

SG BLOCKS, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 30, 2022 and 2021 (Unaudited)

Share-based Compensation (continued)

33 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 30, 2022 and 2021 (Unaudited)

Share-based Compensation (continued)

22 unchanged sentences

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

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.

For the three months ended September 30, 2022 and 2021 , the Company recognized stock-based compensation of $ 594,694 and $ 246,236 related to restricted stock units.

For the nine months ended September 30, 2022 and 2021, the Company recognized stock-based compensation of $ 1,874,857 and $ 775,991 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 six months ended June 30, 2022:

As of September 30, 2022, there was unrecognized compensation costs of $ 750,430 related to non-vested restricted stock units.

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

Number of Shares

1 unchanged sentence

Forfeited/Expired

Non-vested balance at June 30, 2022

Non-vested balance at September 30, 2022

SG BLOCKS, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 30, 2022 and 2021 (Unaudited)

Commitm ents and Contingencies

41 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 30, 2022 and 2021 (Unaudited)

Commitments and Contingencies (continued)

6 unchanged sentences

The Company maintains that Teton breached the GVL Contract by (i) failing to timely deliver the Teton GVL Modules, (ii) delivering Teton GVL Modules that were defective in their design and manufacture, (iii) otherwise failed to meet South Carolina Building Code regulations and (iv) breached applicable warranties.

As a result of the breach and defects in performance, design and manufacture by Teton, Company asserts that it has sustained approximately $ 761,401.66 in actual and consequential damages, excluding attorney’s fees.

As a result of the breach and defects in performance, design and manufacture by Teton, Company asserts that it has sustained $ 761,401.66 in actual and consequential damages, excluding attorney’s fees.

On October 16, 2019, Teton filed for Chapter 11 in the United States Bankruptcy Court for Southern District of Texas, Houston Division styled In re:

14 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 30, 2022 and 2021 (Unaudited)

Commitm ents and Contingencies (continued)

60 unchanged sentences

The cut-off for fact discovery has been extended to September 12, 2022, and a trial has been set for January 31, 2023.

Subsequent to a continued mediation held on September 23, 2022, the parties in the HOLA Action reached a global settlement in principle which is in the process of being memorialized in writing.

Until the aforementioned settlement and release agreement is formally executed the Company is currently unable to predict the outcome or possible recovery or 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.

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

3 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

For the Nine Months Ended September 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 discovery period has concluded and a trial date has been set for September 6, 2022.

The discovery period has concluded and a trial date has been set for early 2023.

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

For the Nine Months Ended September 30, 2022 and 2021 (Unaudited)

Commitments and Contingencies (continued)

8 unchanged sentences

On July 30, 2021, the Company served its opposition to the motion to dismiss.

The motion has been fully briefed and submitted to the court and the parties are awaiting a ruling thereon.

On January 10, 2022 the court entered an order staying discovery pending its ruling on the defendant’s motion to dismiss.

On September 22, 2022, the court entered an order granting in part and denying in part Osang’s motion to dismiss.

The court denied that part of Osang’s motion that sought dismissal of the Company’s causes of action for breach of contract (but denied recovery of lost profits) and fraud, but dismissed the Company’s causes of action for breach of implied covenant of good faith and fair dealing, indemnification, accounting, and violation of the New York Unlawful and Deceptive Trade Practices Act (GBL §349).

A status conference update has been set for November 16, 2022.

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

2 unchanged sentences

Galvin is terminated without cause.

At the Company’s option, up to fifty (50%) percent of the EBITDA performance bonuses may be paid in restricted stock units if then available for grant under the Company’s Stock Incentive Plan.All other terms of the employment agreement remain in full force and effect.

Subsequent Events

At the Company’s option, up to fifty (50%) percent of the EBITDA performance bonuses may be paid in restricted stock units if then available for grant under the Company’s Stock Incentive Plan.

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

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 .

1 unchanged sentence

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