What changed in this filing

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Item 1. Financial Statements

2023-05-11 compared with 2022-11-16 · 323 added, 459 removed, 628 unchanged (55% of the section changed)

Financial Statements

SG BLOCKS, INC.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

September 30,

Current assets:

Cash and cash equivalents

Escrow - bond

Accounts receivable, net

16 unchanged sentences

Lease liability, current maturities

Due to affiliates

Assumed liability

8 unchanged sentences

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

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

14,302,587 issued and 14,225,788 outstanding as of March 31, 2023 and 12,613,978 issued and 12,590,863 outstanding as of December 31, 2022

Additional paid-in capital

1 unchanged sentence

Accumulated deficit

Total SG Blocks, Inc.

Total Safe & Green Holdings Corp.

stockholders’ equity

3 unchanged sentences

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

SG BLOCKS, INC.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

1 unchanged sentence

Three Months Ended

September 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Construction services

10 unchanged sentences

Marketing and business development expense

Pre-project expenses

Operating loss

Operating income (loss)

Other income (expense):

Loss on asset disposal

Interest expense

4 unchanged sentences

net income (loss) attributable to noncontrolling interests

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

Net loss per share attributable to SG Blocks, Inc.

Net loss attributable to common stockholders of Safe & Green Holdings Corp.

Net loss per share attributable to Safe & Green Holdings Corp.

Basic and diluted

2 unchanged sentences

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

SG BLOCKS, INC.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

1 unchanged sentence

$ 0.01 Par Value

SG Blocks Stockholders'

Safe & Green Holdings Corp.

Stockholders'

Noncontrolling

Stockholders’

Balance at June 30, 2022

Balance at December 31, 2021

Stock-based compensation

N oncontrolling interest distribution

Repurchase of common stock

Balance at September 30, 2022

Balance at March 31, 2022

Balance at December 31, 2022

( 33,109,220 )

Stock-based compensation

Issuance of restricted common stock

Issuance of restricted stock units

Noncontrolling interest distribution

Repurchase of common stock

Net income (loss)

Balance at September 30, 2022

$ 0.01 Par Value

SG Blocks Stockholders'

Noncontrolling

Stockholders’

Balance at June 30, 2021

Stock-based compensation

Noncontrolling interest distribution

Net income (loss)

Balance at September 30, 2021

Balance at December 31, 2020

Stock-based compensation

Conversion of warrants to common stock

Issuance of warrants and restricted common stock

Noncontrolling interest distribution

Net income (loss)

Balance at September 30, 2021

Balance at March 31, 2023

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

SG BLOCKS, INC.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

Nine Months Ended

September 30, 2022

Nine Months Ended

September 30, 2021

Three Months Ended

March 31, 2023

Three Months Ended

March 31, 2022

Cash flows from operating activities:

Net income (loss)

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

2 unchanged sentences

Amortization of deferred license costs

Amortization of debt issuance costs

Amortization of debt issuance costs and debt discount

Amortization of right of use asset

Common stock issued for services

Bad debt expense

4 unchanged sentences

Accounts receivable

Escrow - bond

Contract assets

Prepaid expenses and other current assets

Right of use asset

Intangible assets

Accounts payable and accrued expenses

5 unchanged sentences

Purchase of property, plant and equipment

Purchase of intangible asset

Proceeds from sale of equipment

Repayment of promissory note

Payment on assumed liability of acquired assets

Project development costs and other non-current assets

Project Development Costs

Investment in and advances to equity affiliates

2 unchanged sentences

Cash flows from financing activities:

Proceeds from conversion of warrants to common stock

Repurchase of common stock

Proceeds from short-term note payable

Repayment of short term notes payable

Proceeds from short-term notes payable and warrants

Distribution paid to non-controlling interest

Net cash used in financing activities

Net decrease in cash and cash equivalents

Net cash provided by (used in) financing activities

Net increase 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.

SG BLOCKS, INC.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Description of Business

SG Blocks, Inc.

(collectively with its subsidiaries, the “Company,” “we”, “us” or “our”) was previously known as CDSI Holdings, Inc., a Delaware corporation incorporated on December 29, 1993.

Safe & Green Holdings Corp.

(collectively with its subsidiaries, the “Company,” “we”, “us” or “our”) was previously known as SG Blocks, Inc.

as well as CDSI Holdings, Inc., a Delaware corporation incorporated on December 29, 1993.

On November 4, 2011, CDSI Merger Sub, Inc., the Company’s wholly-owned subsidiary, was merged with and into SG Building Blocks, Inc.

3 unchanged sentences

The Company operates in the following four segments:

(i) manufacturing;

(i) construction;

(ii) medical;

1 unchanged sentence

and (iv) environmental.

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

The construction 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.

13 unchanged sentences

During 2020, the Company formed, SG Echo, LLC, a wholly owned subsidiary of the Company.

SG Echo, LLC was formed to complete the business acquisition.

The Company acquired substantially all the assets of Echo DCL, a Texas limited liability company, except for Echo's real estate holdings for which the Company obtained a right of first refusal.

3 unchanged sentences

T he Company also entered into a joint venture with Clarity Lab Solutions LLC., to provide clinical lab testing related to COVID- 19 .

As of January 2021 through the fourth quarter of 2021, the Company’s consolidated financial statements include the accounts of Chicago Airport Testing LLC (“CAT”).

As of January 2021 and through the fourth quarter of 2021 , the Company’s consolidated financial statements include the accounts of Chicago Airport Testing LLC (“CAT”).

The Company had a variable interest in CAT as described further below.

CAT is in the business of marketing, selling, distributing, leasing and otherwise commercially exploiting certain products and services in the COVID- 19 testing and other medical industry.

In addition, during 2021, the Company formed SGB Development Corp.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Description of Business (continued)

Real Estate Development

In addition, during 2021, the Company formed Safe and Green Development Corporation, formerly, SGB Development Corp.

(“SG DevCorp”), which is wholly-owned by the Company.

1 unchanged sentence

SG DevCorp has a minority interest in Norman Berry II Owners LLC and JDI-Cumberland Inlet LLC as described further below.

SG BLOCKS, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Reverse Stock Split

On February 5, 2020, the Company effected a 1-for-20 reverse stock split of its then-outstanding common stock, which has since been converted.

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 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 .

Environmental

During 2022, SG Environmental Solutions Corp.

(“SG Environmental”) was formed and is focused on biomedical waste removal and will utilize a patented technology that it licenses to shred and disinfect biomedical waste, rendering the waste disinfected, unrecognizable, and of no greater risk to the public health than residential household waste.

As of March 31, 2023, the Company had cash and cash equivalents of $ 1,452,501 and a backlog of $ 1,306,849 .

See Note 11 for a discussion of constructi on backlog.

2 unchanged sentences

Total Backlog

The Company has incurred losses since its inception and has negative operating cash flows.

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

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.

Management believes that these actions will enable the Company to continue as a going concern.

The Company completed a public and concurrent private offering in October 2021, which resulted in net proceeds of approximately $ 10,488,000 .

See Note 12 for a discussion on the public and concurrent private offering.

The Company believes that it has adequate cash balances to meet obligations coming due in the next twelve months and further intends to meet its capital needs from revenue generated from operations and by containing costs, entering into strategic alliances, as well as exploring other options, including the possibility of raising additional debt or equity capital as necessary.

The Company has incurred losses since its inception, has negative working capital of approximately $ 3,515,000 and has negative operating cash flows, which has raised substantial doubt about its ability to continue as a going concern.

The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty concerning the Company’s ability to continue as a going concern.

The Company intends to meet its capital needs from revenue generated from operations and by containing costs, entering into strategic alliances, as well as exploring other options, including the possibility of raising additional debt or equity capital as necessary.

There is, however, no assurance the Company will be successful in meeting its capital requirements prior to becoming cash flow positive.

The Company does not have any additional sources secured for future funding, and if it is unable to raise the necessary capital at the times it requires such funding, it may need to materially change its business plan, including delaying implementation of aspects of such business plan or curtailing or abandoning such business plan altogether.

With the global spread of the ongoing novel coronavirus ("COVID-19") pandemic during 2020, the Company implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its employees and business.

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 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.

Accordingly, the Company is considering alternative product sourcing in the event that product supply becomes problematic.

The Company expects this global pandemic to have an impact on the Company's revenue and results of operations, the size and duration of which the Company is currently unable to predict.

In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company's business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties which the Company faces.

The Company has been impacted by COVID-19 with supply chain distributions, absenteeism by infected workers and skilled labor shortages which has caused delays in projects and the Company could be further impacted if the COVID-19 pandemic continues.

SG BLOCKS, INC.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Summary of Significant Accounting Policies

Basis of presentation and principals of consolidation – The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to the Current Report on Form 10-Q and Article 8 Regulation S-X.

Basis of presentation and principals of consolidation – The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 8 Regulation S-X.

Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements.

The condensed financial statements and notes should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2021 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on April 18, 2022.

The condensed financial statements and notes should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2022 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission on March 31, 2023.

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 nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Recently adopted accounting pronouncements - New accounting pronouncements implemented by the Company are discussed below or in the related notes, where appropriate.

Accounting estimates – The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period.

Significant areas that require the Company to make estimates include revenue recognition, stock-based compensation, stock warrants liabilities and allowance for credit losses.

Actual results could differ from those estimates.

Accounting estimates – The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgements and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period, together with amounts disclosed in the related notes to the financial statements.

The Company's estimates used in these financial statements include, but are not limited to, revenue recognition, stock-based compensation, accounts receivable reserves, inventory valuations, goodwill, the valuation allowance related to the Company’s deferred tax assets, the carrying amount of intangible assets, right of use assets and the recoverability and useful lives of long-lived assets.

Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions.

It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.

Operating cycle – The length of the Company’s contracts varies, but is typically between six to twelve months .

1 unchanged sentence

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 reclassified to conform to current period presentation.

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

Revenue recognition – The Company determines, at contract inception, whether it will transfer control of a promised good or service over time or at a point in time, regardless of the length of contract or other factors.

11 unchanged sentences

When the current estimate of total costs for a performance obligation indicate a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident.

SG BLOCKS, INC.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Summary of Significant Accounting Policies (continued)

For product or equipment sales, the Company applies recognition of revenue when the customer obtains control over such goods, which is at a point in time.

On October 3, 2019, the Company entered into an Exclusive License Agreement (“ELA” ) pursuant to which it granted an exclusive license for its technology as outlined in the ELA.

The ELA is described below.

Under the ELA, the Company was to receive royalty payments based upon gross revenues earned by the licensee for commercialized 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 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.

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 was 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.

The Agreement also provided for customary indemnification and confidentiality obligations between the parties.

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 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.

The planning stage of the project was initially delayed due to COVID-19.

The Company is no longer participating on Ridge Avenue as CMC has decided to proceed with this project as a traditional construction build.

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 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 2021 .

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 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.

For the three months ended March 31, 2023 and 2022, the Company recognized $ 0 and $ 6,885,828 , respectively related to activities through these two joint ventures, which is included in medical revenue on the accompanying consolidated statements of operations.

Due to the ongoing lower affects of COVID-19 restrictions, the JV began to wind down during the fourth quarter of 2022.

Disaggregation of Revenues

The Company’s revenues are principally derived from construction and engineering contracts related to Modules, and medical revenue derived from lab testing and test kit sales .

The Company's contracts are with customers in various industries.

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.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Summary of Significant Accounting Policies (continued)

The Company’s revenues for the three, months ended March 31, 2022 wase principally derived from construction and engineering contracts related to Modules, and medical revenue derived from lab testing and test kit sales .

The Company’s revenues for the three, months ended March 31, 2023 was principally derived from construction and engineering contracts related to Modules The Company's contracts are with customers in various industries.

Revenue recognized at a point in time and recognized over time were $ 0 and $ 5,503,935 , respectively, for the three months ending March 31, 2023.

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 .

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

Three Months Ended September 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

Nine Months Ended September 30,

Three Months Ended March 31,

Revenue by Customer Type

Construction and Engineering Services:

Medical - C onstruction

Multi-Family (includes Single Family)

10 unchanged sentences

Contract assets are generally classified as current within the condensed consolidated balance sheets.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Summary of Significant Accounting Policies (continued)

Contract liabilities from construction and engineering contracts occur when amounts invoiced to customers exceed revenues recognized under the cost-to-cost measure of progress.

2 unchanged sentences

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

SG BLOCKS, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Summary of Significant Accounting Policies (continued)

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.

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 was no longer obliged to its Original Agreement.

Deferred Contract Costs - Prior to entering into the Exclusive License Agreement (“ELA”) in 2019, the Company was subject to an agreement to construct and develop a certain property (“Original Agreement”), which now was subject to the ELA.

Because of this, the Company is 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.

1 unchanged sentence

The Company incurred total deferred contract costs of $ 203,926 .

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 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 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:

$ 500,000 in year 1, $ 750,000 in year 2, $ 1,500,000 in year 3, $ 2,000,000 in year 4, and $ 2,500,000 in year 5.

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 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.

In connection with the termination, the Company entered into a Settlement and Mutual Release Agreement (the “Settlement Agreement”) with CPF, the general partner (the “Licensee”) of CPF MF 2019-1 LLC (“CPF MF”), and Capital Plus Financial, LLC, a limited partner of the Licensee (“Capital Plus”) and an Assignment of Limited Rights Under Membership Interest Redemption Agreement, dated June 15, 2021, with Capital Plus and the Licensee.

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

Summary of Significant Accounting Policies (continued)

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

The Company initially planned 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, 2023, accumulated amortization related to deferred contract costs amounted to $ 142,747 .

During the three months ended March 31, 2023 and 2022, 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 consolidated statements of operations.

T he 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.

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.

10 unchanged sentences

This determination is evaluated periodically as facts and circumstances change.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Summary of Significant Accounting Policies (continued)

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 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.

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 the Company’s common stock over a defined vesting period starting in December 1, 2020.

The restricted shares of the Company 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.

Clarity Labs is also engaged in the business of manufacturing, importing and distributing various medical tests.

Under the JV, the Company and Clarity Labs will jointly market, sell, and distribute certain products and services (“Clarity Mobile Venture”).

As of December 31, 2021, $ 502,958 was due to Clarity Labs for expenses paid on behalf of Clarity Mobile Venture, and is included in Due to Affiliates, Accounts Payable and Accrued Expenses on the accompanying consolidated balance sheets.

In addition, during the year ended December 31, 2021 , the Company recognized revenue of $ 60,110 and other income of $ 60,000 to Clarity Labs, of which none is included in accounts receivable as of December 31, 2021.

Under the JV, the Company and Clarity Labs were to jointly market, sell, and distribute certain products and services (“Clarity Mobile Venture”).

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.

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

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

The purpose of CAT was to market , sell, distribute, lease and otherwise commercially exploit certain products and services in the COVID- 19 testing industry.

The purpose of CAT is to market , sell, distribute, lease and otherwise commercially exploit certain products and services in the COVID- 19 testing industry.

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

Investment Entities – On May 31, 2021, the Company's subsidiary SG DevCorp agreed to contribute $ 600,000 to acquire a 50 % membership interest in Norman Berry II Owner LLC.

Investment Entities – On May 31, 2021, the Company's subsidiary SG DevCorp agreed to contribute $ 600,000 to acquire a 50 % membership interest in Norman Berry II Owner LLC (“Norman Berry”).

The Company contributed $ 350,329 and $ 114,433 of the initial $ 600,000 in the second quarter and third quarter of 2021 respectively, with the remaining $ 135,238 funded in the fourth quarter of 2021.

2 unchanged sentences

The Company will use the equity method to report the activities as an investment in its consolidated financial statements.

On June 24, 2021, the Company's subsidiary, SG DevCorp, entered into an operating agreement with Jacoby Development for a 10 % non-dilutable equity interest for JDI-Cumberland Inlet, LLC.

On June 24, 2021, the Company's subsidiary, SG DevCorp, entered into an operating agreement with Jacoby Development for a 10 % non-dilutable equity interest for JDI-Cumberland Inlet, LLC (“Cumberland”).

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 .

During the three months ended March 31, 2023, the Company contributed an additional $ 25,000 .

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

1 unchanged sentence

The Company will use the equity method to report the activities as an investment in its consolidated financial statements.

SG BLOCKS, INC.

During the three months ended March 31, 2023, Norman Berry and Cumberland did not have any material earnings or losses as the investments are in development.

In addition, management believes there was no impairment as of March 31, 2023.

The approximate combined financial position of the Company’s equity affiliates are summarized below as of March 31, 2023 and December 31, 2022:

Condensed balance sheet information:

March 31,2023

December 31,2022

Total liabilities

Members’ equity

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and 2022 (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 $ 2,118,169 and $ 13,024,381 as of September 30, 2022, and December 31, 2021, respectively.

Cash and cash equivalents totaled $ 1,452,501 and $ 582,776 as of March 31, 2023, and December 31, 2022, 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 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 December 31, 2022.

The Company had no short-term investment as of March 31, 2023 or December 31, 2022 , respectively.

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

1 unchanged sentence

The Company recognizes accounts receivable at invoiced amounts.

The Company adopted ASC 326, Current Expected Credit Losses, on January 1, 2023, which requires the measurement and recognition of expected credit losses using a current expected credit loss model.

The allowance for credit losses on expected future uncollectible accounts receivable is estimated considering forecasts of future economic conditions in addition to information about past events and current conditions.

The allowance for credit losses reflects the Company's best estimate of expected losses inherent in the accounts receivable balances.

6 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 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.

As of March 31, 2023 and December 31, 2022 there was inventory of $ 12,989 and $ 465,560 , respectively, for construction materials.

Goodwill – The Company performs its impairment test of goodwill at the reporting unit level each fiscal year, or more frequently if events or circumstances change that would more likely tha n not reduce the fair value of its reporting unit below its carrying values.

1 unchanged sentence

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 nine months ended September 30, 2022 or 2021.

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

There were no impairments during the three months ended March 31, 2023 or 2022.

Intangible assets – Intangible assets consist of $ 2,766,000 of proprietary knowledge and technology, which is being amortized over 20 years.

In addition, $ 97,164 of trademarks, and $ 47,800 of website costs are being amortized over 5 years.

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 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.

In addition, included in intangible assets is $ 97,164 of trademarks, and $ 196,812 of website costs that are being amortized over 5 years.

The Company evaluated intangible assets for impairment during the three months ended March 31, 2023 and 2022 and determined that there are no impairment losses.

The accumulated amortization as of March 31, 2023 and 2022 was $ 1,027,082 and $ 857,554 , respectively.

The amortization expense for the three months ended March 31, 2023 and 2022 was $ 46,119 and $ 41,823 , respectively.

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

SG BLOCKS, INC.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Summary of Significant Accounting Policies (continued)

For the year ending December 31,:

2023 (remaining)

Property, plant and equipment – Property, plant and equipment is stated at cost.

3 unchanged sentences

Repairs and maintenance are charged to expense when incurred.

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

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

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.

8 unchanged sentences

The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

SG BLOCKS, INC.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and 2022 (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 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.

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 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.

At March 31, 2023 and December 31, 2022, 80 % and 80 %, respectively, of the Company’s gross accounts receivable were due from two and three customers.

Revenue relating to one and two customers represented approximately 95 % and 90 % of the Company's total revenue for the three months ended March 31, 2023 and 2022 , respectively.

Cost of revenue relating to two vendors represented approximately 28 % of the Company’s total cost of revenue for the three months ended March 31, 2022.

For the three months ended March 31 , 2023 there were no vendors that represented 10 % or more of our cost of revenue.

The Company believes it has access to alternative suppliers, with limited disruption to the business, should circumstances change with its existing suppliers.

SG BLOCKS, INC.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Accounts Receivable

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

At March 31, 2023 and December 31, 2022 , the Company’s accounts receivable consisted of the following:

Construction services

Engineering services

Medical revenue

Retainage receivable

Other receivable

3 unchanged sentences

Receivables are evaluated for collectability and allowances for potential losses are established or maintained on applicable receivables.

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 September 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 March 31, 2023 and December 31, 2022 :

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 September 30, 2022 and December 31, 2021 .

The above amounts are included in the accompanying condensed consolidated balance sheets under the f ollowing captions at March 31, 2023 and December 31, 2022 .

Contract assets

3 unchanged sentences

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

SG BLOCKS, INC.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and2022(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 September 30, 2022 and December 31, 2021, the Company’s property, plant and equipment, net consisted of the following:

At March 31, 2023 and December 31, 2022, 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 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.

Depreciation expense for the three months ended March 31, 2023 and 2022 amounted to $ 92,193 and $ 104,825 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 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.

During the year ended December 31, 2022, the Galvin Note was assigned to the Company and the principal amount of $ 100,000 was paid 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.

The promissory notes are unaffected by the Settlement and Mutual Release Agreement and remain in effect and outstanding in accordance with the terms of the notes evidencing such loans.

See Note 3 for a discussion on the Settlement and Mutual Release Agreement and termination of the ELA with CPF.

SG BLOCKS, INC.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and 2022 (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 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.

The Company capitalized $ 20,000 in interest charges and $ 4,134 in debt issuance costs during the year ended December 31, 2022 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 September 8,2022, 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 had a maturity date of January 14, 2023.

During January 2023, the Short-Term Note and Second Short-Term Note were extended with a maturity date of February 1, 2024.

On March 31, 2023, LV Peninsula Holding LLC (“LV Peninsula”), a Texas limited liability company and wholly owned subsidiary of SG DevCorp, pursuant to a Loan Agreement, dated March 30, 2023 (the “Loan Agreement”), issued a promissory note, in the principal amount of $ 5,000,000 (the “LV Note”), secured by a Deed of Trust and Security Agreement, dated March 30, 2023 (the “Deed of Trust”) on the Lake Travis project site in Lago Vista, Texas, a related Assignment of Contract Rights, dated March 30, 2023 (“Assignment of Rights”), on our project site in Lago Vista, Texas and McLean site in Durant, Oklahoma and a Mortgage, dated March 30, 2023 (“Mortgage”), on our site in Durant, Oklahoma .

The proceeds of the LV Note were used to pay off the Short-Term Note and Second Short-Term Note.

The LV Note requires monthly installments of interest only, is due on April 1, 2024 and bears interest at the prime rate as published in the Wall Street Journal (currently 8.0 %) plus five and 50/100 percent (5.50%), currently equaling 13.5%;

provided that in no event will the interest rate be less than a floor rate of 13.5%.

The LV Peninsula obligations under the LV Note have been guaranteed by SG DevCorp pursuant to a Guaranty, dated March 30, 2023 (the “Guaranty”), and may be prepaid by LV Peninsula at any time without interest or penalty.

The Company incurred $ 406,825 of debt issuance costs and remitted $ 675,000 in prepaid interest in connection with the LV Note.

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”).

1 unchanged sentence

The Loan Agreement includes a covenant by SG Echo to employ a minimum of 75 full-time employees in Durant Oklahoma and pay them no less than 1.5 times the federal minimum wage, and provides SG Echo 24 months to comply with the provision.

In August 2022, SG DevCorp entered into a $ 148,300 promissory note (“2022 Note”) to purchase property.

The 2022 Note bears annual interest at the rate of 9.75 %, with interest payments due monthly until its maturity on September 1, 2023 .The 2022 Note is secured by the underlying property.

On February 7, 2023, the Company closed a private placement offering (the “Offering”) of One Million One Hundred Thousand Dollars ($ 1,100,000.00 ) in principal amount of the Company’s 8 % convertible debenture (the “Debenture”) and a warrant (the “Peak Warrant”) to purchase up to Five Hundred Thousand ( 500,000 ) shares of the Company’s common stock, to Peak One Opportunity Fund, L.P.

(“Peak One”).

Pursuant to a Securities Purchase Agreement, dated February 7, 2023 (the “Purchase Agreement”), the Debenture was sold to Peak One for a purchase price of $ 1,000,000 , representing an original issue discount of ten percent ( 10 %).

In connection with the Offering the Company paid $ 15,000 as a non-accountable fee to Peak One to cover its accounting fees, legal fees and other transactional costs incurred in connection with the transactions contemplated by the Purchase Agreement and issued 50,000 shares of its restricted common stock (the “Commitment Shares”) to Peak One Investments, LLC (“Investments”), the general partner of Peak One.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Notes Payable (continued)

The Debenture matures twelve months from its date of issuance and bears interest at a rate of 8 % per annum payable on the maturity date.

The Debenture is convertible, at the option of the holder, at any time, into such number of shares of common stock of the Company equal to the principal amount of the Debenture plus all accrued and unpaid interest at a conversion price equal to $ 1.50 (the “Conversion Price”), subject to adjustment for any stock splits, stock dividends, recapitalizations and similar events and in the event the Company, at any time while the Debenture is outstanding, issues, sells or grants any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues common stock or other securities convertible into, exercisable for, or otherwise entitle any person the right to acquire, shares of common stock, other than with respect to an Exempt Issuance (as defined in the Debenture), at an effective price per share that is lower than the then Conversion Price.

In the event of any such anti-dilutive event, the Conversion Price will be reduced at the option of the holder to such lower effective price of the dilutive event, subject to a floor price of $ 0.40 per share, unless and until the Company obtains shareholder approval for any issuance below such floor price.

The Debenture is redeemable by the Company at a redemption price equal to 110 % of the sum of the principal amount to be redeemed plus accrued interest, if any.

So long as the Debenture is outstanding, upon any issuance by the Company of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the holder of the Debenture, then the Company shall notify the holder of such additional or more favorable term and such term, at holder’s option, will become a part of the transaction documents with the holder.

In no event will the holder be entitled to convert any portion of the Debenture in excess of that portion which would result in beneficial ownership by the holder and its affiliates of more than 4.99 % of the outstanding shares of common stock, unless the holder delivers to the Company written notice at least sixty-one ( 61 ) days prior to the effective date of such notice that the provision be adjusted to 9.99 %.

While the Debenture is outstanding, if the Company receives cash proceeds of more than $ 1,000,000 (“Minimum Threshold”) in the aggregate from any source or series of related or unrelated sources, the Company shall, within two ( 2 ) business days of Company’s receipt of such proceeds, inform the holder of such receipt, following which the holder shall have the right in its sole discretion to require the Company to immediately apply up to 50 % of all proceeds received by the Company (from any source except with respect to proceeds from the issuance of equity or debt to officers and directors of the Company) after the Minimum Threshold is reached to repay the outstanding amounts owed under the Debenture.

Upon the occurrence of certain events of default specified in the Debenture, such as a failure to honor a conversion request, failure to maintain the Company’s listing, the Company’s failure to comply with its obligations under Securities Exchange Act of 1934, as amended, a breach of the Company’s representations or covenants, or the failure obtain shareholder approval within 60 days after the Exchange Cap (as defined) is reached, as amended, 110 % of all amounts owed to holder under the Debenture, together with default interest at 18 % per annum if any, shall then become due and payable.

The Peak Warrant expires five years from its date of issuance.

The Peak Warrant is exercisable, at the option of the holder, at any time, for up to 500,000 of shares of common stock of the Company at an exercise price equal to $ 2.25 (the “Exercise Price”), subject to adjustment for any stock splits, stock dividends, recapitalizations and similar events and in the event the Company, at any time while the Peak Warrant is outstanding, issues, sells or grants any option to purchase, or sells or grants any right to reprice, or otherwise disposes of, or issues common stock or other securities convertible into, exercisable for, or otherwise entitle any person the right to acquire, shares of common stock, other than with respect to an Exempt Issuance, at an effective price per share that is lower than the then Exercise Price.

In the event of any such anti-dilutive event, the Exercise Price will be reduced at the option of the holder to such lower effective price of the dilutive event, subject to a floor price of $ 0.40 per share, unless and until the Company obtains shareholder approval for any issuance below such floor price.

The number of shares of the Company’s common stock that may be issued upon conversion of the Debenture and exercise of the Peak Warrant, and inclusive of the Commitment Shares and any shares issuable under and in respect of the equity purchase agreement, dated February 7, 2023 between the Company and Peak One described below, is subject to an exchange cap (the “Exchange Cap”) of 19.99 % of the outstanding number of shares of the Corporation’s common stock on the closing date, 2,760,675 shares, unless shareholder approval to exceed the Exchange Cap is approved.

The Company incurred $ 80,000 in debt issuance costs in connection with the Debenture.

In addition, the initial fair value of the Peak Warrant amounted to $ 278,239 and the fair value of the restricted shares amounted to $ 76,000 , both of which have been recorded as a debt discount and will be amortized over the effective rate method.

For the three months ended March 31, 2023, the Company recognized amortization of debt issuance costs and debt discount of $ 13,333 and $ 75,706 , respectively.

As of March 31, 2023 the unamortized debt issuance costs and debt discount amounted to $ 66,667 and $ 704,167 , respectively.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

The Company leases an office, a manufacturing plant and certain equipment under non-cancelable operating lease agreements.

2 unchanged sentences

Balance Sheet Location

September 30, 2022

March 31, 2023

Operating Leases

18 unchanged sentences

Finance leases

SG BLOCKS, INC.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and2022 (Unaudited)

Leases (continued)

2 unchanged sentences

Year Ending December 31:

2023 (remaining)

Total lease payments

1 unchanged sentence

Present value of lease liabilities

Chicago Airport Testing has subleased its leased vacant area for a period of one year , the sublessee has the option to terminate at any time after the first six months.

The sublessee elected to terminate the Agreement, effective as of July 31, 2021 and the Company has no remaining lease revenue from the sublessee.

Net Income (Loss) Per Share

3 unchanged sentences

Potentially dilutive common shares are excluded from the calculation if their effect is antidilutive.

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.

At March 31, 2023, there were restricted stock units, options and warrants of 1,190,935 , 36,436 and 2,525,020 respectively, outstanding that could potentially dilute future net income per share .

Because the Company had a net loss as of March 31, 2023, 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 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.

At March 31, 2022 , there were restricted stock units, options and warrants of 2,245,186 , 36,436 and 2,025,520 shares of common stock, respectively, outstanding that could potentially dilute future net income per share.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and 2022Unaudited)

Construction Backlog

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:

The following represents the backlog of signed construction and engineering contracts in existence at March 31, 2023 and December 31, 2022, 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, 2023 and December 31, 2022, respectively, on which work has not yet begun:

Balance - beginning of period

3 unchanged sentences

Balance - end of period

Backlog at December 31, 2021 included two contracts entered into during the third quarter of 2020 in the amount of approximately $4 million and approximately $2.95 million along with three contracts during the fourth quarter of 2020 in the amount of approximately $ 2.7 million, $ 0.80 million, and $ 0.70 million.

The Company executed one large contract in the first quarter of 2021 in the amount of approximately $ 1.3 million, one large contract in the third quarter of 2021 of approximately of $ 0.87 million and had one large partial contract cancellation to an existing contract of approximately ($ 1.3 ) million.

The Company executed one large contract in the fourth quarter of 2021 in the amount of approximately $ 0.78 million and had one contract cancellation in the amount of approximately $ 16.9 million.

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 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 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:

The Company’s remaining backlog as of March 31, 2023 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, 2023 over the following period:

Within 1 year

2 unchanged sentences

Backlog is adjusted to reflect any known project cancellations, revisions to project scope and cost and project deferrals, as appropriate.

SG BLOCKS, INC.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and2022Unaudited)

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.

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, 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.

The Common Stock Warrants have an exercise price of $ 4.80 per share, are exercisable upon issuance and will expire five years from the date of issuance.

6 unchanged sentences

The warrants are further discussed in Note 14.

Decrease in Authorized Shares – On June 5, 2019, at the Company’s annual meeting of stockholders, the stockholders approved an amendment to the Company’s amended and restated certificate of incorporation to decrease the number of authorized shares of common stock from 300,000,000 to 25,000,000 shares.

Following the meeting, on June 5, 2019, the Company filed a certificate of amendment to the amended and restated certificate of incorporation to decrease its authorized shares of common stock accordingly.

There was no change to the number of authorized shares of preferred stock.

Underwriting Agreement – In August 2019, the Company issued 45,000 shares of its common stock at $ 17.00 per share pursuant to the terms of an Underwriting Agreement (the “Underwriting Agreement”) to the public.

1 unchanged sentence

The warrants are further discussed in Note 14.

SG BLOCKS, INC.

Equity Purchase Agreement - On February 7, 2023, the Company also entered into an Equity Purchase Agreement (the “EP Agreement”) and related Registration Rights Agreement (the “Rights Agreement”) with Peak One, pursuant to which the Company shall have the right, but not the obligation, to direct Peak One to purchase up to $ 10,000,000.00 (the “Maximum Commitment Amount”) in shares of the Company’s common stock in multiple tranches upon satisfaction of certain terms and conditions contained in the EP Agreement and Rights Agreement which includes but is not limited to filing a registration statement with the SEC and registering the resale of any shares sold to Peak One.

Further, under the EP Agreement and subject to the Maximum Commitment Amount, the Company has the right, but not the obligation, to submit a Put Notice (as defined in the EP Agreement) from time to time to Peak One (i) in a minimum amount not less than $ 25,000.00 and (ii) in a maximum amount up to the lesser of ( (a) $ 750,000.00 or (b) 200 % of the Average Daily Trading Value (as defined in the EP Agreement).

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Segments and Disaggregated Revenue

Corporate and support

Nine Months Ended September 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

Corporate and support

Nine Months Ended September 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

SG BLOCKS, INC.

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Stockholders’ Equity (continued)

In connection with the EP Agreement, the Company issued to Peak One Investments, LLC (“Investments”), the general partner of Peak One , 75,000 shares of its common stock, and file a registration statement registering the common stock issued or issuable to Peak One and Investments under the Agreement for resale with the Securities and Exchange Commission within 60 calendar days of the Agreement, as more specifically set forth in the Rights Agreement.

The registration statement was declared effective on April 14, 2023

The obligation of Peak One to purchase the Company’s common stock under the EP Agreement begins on the date of the EP Agreement, and ending on the earlier of (i) the date on which Peak One shall have purchased common stock pursuant to the EP Agreement equal to the Maximum Commitment Amount, (ii) thirty six ( 36 ) months after the date of the EP Agreement, (iii) written notice of termination by the Company or (iv) the Company’s bankruptcy or similar event (the “Commitment Period”).

During the Commitment Period, the purchase price to be paid by Peak One for the common stock under the EP Agreement will be 97 % of the Market Price, which is defined as the lesser of the (i) closing bid price of the common stock on its principal market on the trading day immediately preceding the respective Put Date (as defined in the Agreement), or (ii) lowest closing bid price of the common stock during the Valuation Period (as defined in the Agreement), in each case as reported by Bloomberg Finance L.P or other reputable source designated by Peak One.

The EP Agreement and the Rights Agreement contain customary representations, warranties, agreements and conditions to completing future sale transactions, indemnification rights and obligations of the parties.

Among other things, Peak One represented to the Company, that it is an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act, and the Company sold the securities in reliance upon an exemption from registration contained in Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder.

Common Stock Issued for Services – During the three months ended March 31, 2023, the Company issued 287,512 shares of common stock for services provided.

The value of the shares amounted to $ 437,325 .

Restricted Stock Units – During the three months ended March 31, 2023, the Company issued 1,351,097 shares of common stock for previously vested restricted stock units.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Segments and Disaggregated Revenue (continued)

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Segments and Disaggregated Revenue

Corporate and support

Three Month Ended September 30, 2022

Fiscal Quarter Ended March 31, 2023

Cost of revenue

Operating expenses

Operating income (loss)

Operating loss

Other income (expense)

1 unchanged sentence

Net income attributable to non-controlling interest

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

Net income (loss) attributable to common stockholders of Safe & Green Holdings Corp.

Depreciation and amortization

1 unchanged sentence

Corporate and support

Three Months Ended September 30, 2021

Fiscal Quarter Ended March 31, 2022

Cost of revenue

4 unchanged sentences

Net income attributable to non-controlling interest

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

Net income (loss) attributable to common stockholders of Safe & Green Holdings Corp.

Depreciation and amortization

SG BLOCKS, INC.

Capital expenditures

Inter-segment revenue elimination

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and 2022 (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.

12 unchanged sentences

The warrants have an exercise price of $ 4.80 per share, exercisable at the option of the holder on or after October 26, 2021 and will expire five years from the date of issuance.

In conjunction with the issuance of the Debenture in February 2023, the Company issued the Peak Warrant to purchase 500,000 shares of Common Stock.

The Peak Warrant expires five years from its date of issuance.

The initial fair value of the Peak Warrant amounted to $ 278,239 and was recorded as a debt discount at the time of issuance of the Debenture.

Share-based Compensation

6 unchanged sentences

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

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

As of March 31, 2023, there were 376,060 shares of common stock available for issuance under the Incentive Plan .

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Share-based Compensation (continued)

Stock-Based Compensation Expense

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

Nine Months Ended

September 30,

Payroll and related expenses

Three Months Ended

September 30,

Payroll and related expenses

SG BLOCKS, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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:

Nine Months Ended

September 30,

Stock options

Restricted Stock Units

Three Months Ended

September 30,

Stock options

1 unchanged sentence

Stock-Based Option Awards

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

The Company has issued no stock-based options during the three months ended March 31, 2023 or 2022.

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 nine months ended September 30, 2022 as described below:

The following table summarizes stock-based option activities and changes during the three months ended March 31, 2023 as described below:

Weighted Average Fair Value Per Share

3 unchanged sentences

Outstanding – December 31, 2022

Outstanding – September 30, 2022

Outstanding – March 31, 2023

Exercisable – December 31, 2022

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.

Exercisable – March 31, 2023

For the three months ended March 31, 2023 and 2022, the Company recognized stock-based compensation expense of $ 0 and $ 0 , respectively , related to stock options.

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

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

As of March 31, 2023, 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 September 30, 2022 was $ 1.77 per share.

SG BLOCKS, INC.

The fair value of the stock price at March 31, 2023 was $ 0.00 per share.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Share-based Compensation (continued)

Restricted Stock Units

On March 22, 2019, a total of 15,703 of restricted stock units were granted to Mr.

Armstrong, Mr.

Shetty, six employees and one consultant of the Company, under the Company's stock-based compensation plan, at the fair value of $ 54.00 per share, which represents the closing price of the Company's common stock on February 26, 2019 as adjusted for stock splits .

Restricted stock units granted to Mr.

Armstrong, Mr.

Shetty, and an aggregate of six employees and one consultant of 6,139, 772, 5,729 and an aggregate of 3,063, respectively, vest in installments over either a one-year, two-year, three-year and four-year period and will fully vest by the end of December 31, 2022.

The fair value of these units upon issuance amounted to $847,957.

On January 15, 2019 and February 26, 2019, a total of 526 of restricted stock units were granted to two of the Company’s non-employee directors, under the Incentive Plan, at the calculated fair value of $58.80 and $55.20 per share, respectively, which represents the average closing price of the Company’s common stock for the ten trading days immediately preceding and including the grant date as adjusted for stock splits.

The restricted stock units granted on January 15, 2019 vested on January 15, 2020, subject to each individual’s continued service as a director of the Company through such date, and are payable six months after the termination of the director from the Company’s Board of Directors or death or disability.

The restricted stock units granted on February 26, 2019 vested on the earlier of (A) the first anniversary of the date of the grant or (B) the date of the 2019 annual meeting of the Company’s stockholders subject to each individual’s continued service as a director of the Company through such date, and are payable six months after the termination of the director from the Board of Directors or death or disability.

Effective June 5, 2019, a total of 9,189 of restricted stock units were granted to the Company’s non-employee directors, under the Company’s stock-based compensation plan, at the calculated fair value of $ 16.40 per share, which represents the average closing price of the Company’s common stock for the ten trading days immediately preceding and including the grant date.

Restricted stock units granted to directors on June 5, 2019 vest on the earlier of (A) the first anniversary of the date of the grant or (B) the date of the annual meeting of the Company’s stockholders that occurs in the year immediately following the date of the grant;

and are payable six months after the termination of the director from the Board or death or disability.

On April 14, 2020, a total of 35,331 of restricted stock units were granted to Mr.

Armstrong, Mr.

Sheeran, five employees and two consultants of the Company, under the Company's stock-based compensation plan, at the fair value of $4.76 per share, which represents the closing price of the Company's common stock on April 14, 2020.

Restricted stock units granted to Mr.

Armstrong, Mr.

Sheeran, and an aggregate of five employees and one consultant of 11,331, 1,000, 3,000 and an aggregate of 8,000, respectively, will vest in full on the first anniversary of the vesting commencement date and one consultant received 12,000 restricted stock units that vested immediately on April 15, 2020.

The fair value of these units upon issuance amounted to $168,176.

On April 14, 2020, a total of 12,000 of restricted stock units were granted to three of the Company’s non-employee directors, under the Incentive Plan, at the calculated fair value of $4.76 per share, which represents the closing price of the Company’s common stock on April 14, 2020.

The restricted stock units granted on April 14, 2020 will fully vest on April 14, 2021, subject to each individual’s continued service as a director of the Company through such date, and are payable six months after the termination of the director from the Company’s Board of Directors or death or disability.

The fair value of these units upon issuance amounted to $57,120.

On September 23, 2020, a total of 425,000 of restricted stock units were granted to Mr.

Armstrong, Mr.

Sheeran, seven employees and one consultant of the Company, under the Company's stock-based compensation plan, at the fair value of $ 1.81 per share, which represents the closing price of the Company's common stock on September 23, 2020.

Restricted stock units granted to Mr.

Armstrong, Mr.

Sheeran, and an aggregate of seven employees and one consultant of 50,000, 75,000 and an aggregate of 300,000, respectively, and 1/3 will vest on September 23, 2020, 1/3 on the one year anniversary of the grant date and 1/3 on the two year anniversary of the grant date.

The fair value of these units upon issuance amounted to $769,250.

SG BLOCKS, INC.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Share-based Compensation (continued)

On November 11, 2020, a total of 46,826 of restricted stock units were granted to three of the Company’s non-employee directors, under the Incentive Plan, at the calculated fair value of $ 2.39 per share, which represents the closing price of the Company’s common stock on November 11, 2020.

The restricted stock units granted on November 11, 2020 will vest 1/2 on November 11, 2020 and 1/2 on the one year anniversary of the grant date, subject to each individual’s continued service as a director of the Company through such date, and are payable six months after the termination of the director from the Company’s Board of Directors or death or disability.

The fair value of these units upon issuance amounted to $111,920.

On December 9, 2020, a total of 372,000 of restricted stock units were granted to Mr.

Galvin, under the Company's stock-based compensation plan, at the fair value of $ 3.28 per share, which represents the closing price of the Company's common stock on December 9, 2020.

Restricted stock units granted to Mr.

Galvin will vest 1/2 on December 9, 2020 and 1/2 on the first year anniversary of the grant date.

The fair value of these units upon issuance amounted to $1,220,160.

On October 1, 2021, a total of 1,214,500 of restricted stock units were granted to Mr.

Armstrong, Mr.

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 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.

Rogers and one consultant of 37,500 and 12,000 vest upon issuance date.

Restricted stock units granted to Mr.

Rogers of 200,000 vest monthly over a two -year period.

During 2022, a total of 1,045,000 of restricted stock units were granted to Mr.

Galvin and seven employees of the Company, under the Company’s stock-based compensation plan, at the fair value ranging from $ 1.30 to $ 2.24 per share, which represents the closing price of the Company’s common stock at the date of grant.

The restricted stock units granted vest quarterly over two years from the anniversary of the grant date.

The fair value of these units upon issuance amounted to $ 1,843,000 .

On October 1, 2021, a total of 59,170 of restricted stock units were granted to five of the Company's non-employee directors, 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.

The restricted stock units granted October 1, 2021 vesting monthly over one year - and, if earlier, in full on the date of the Company’s 2022 Annual Meeting of Stockholders.

On December 7, 2021, a total of 62,500 of restricted stock units were granted to five of the Company's non-employee advisory directors, under the Company's stock-based compensation plan, at the fair value of $ 2.36 per share, which represents the closing price of the Company's common stock on December 7, 2021.

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

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.

On November 18, 2022, a total of 80,000 of restricted stock units were granted to four of the Company's non-employee directors, under the Company's stock-based compensation plan, at the fair value of $ 1.30 per share, which represents the closing price of the Company's common stock on November 18, 2022.

The restricted stock units granted vest in equal quarterly installments over a two -year period.

For the three months ended March 31, 2023 and 2022 , the Company recognized stock-based compensation of $ 656,369 and $ 649,090 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.

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:

As of March 31, 2023, there was unrecognized compensation costs of $ 1,602,133 related to non-vested restricted stock units.

The following table summarized restricted stock unit activities during the three months ended March 31, 2023:

Number of Shares

1 unchanged sentence

Forfeited/Expired

Non-vested balance at September 30, 2022

SG BLOCKS, INC.

Non-vested balance at March 31, 2023

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Commitm ents and Contingencies

14 unchanged sentences

Shetty asserting claims for indemnification, contribution, fraud, negligence, negligent misrepresentation, and breach of contract.

SG Blocks has likewise cross claimed against Phipps for indemnification and contribution, claiming that any damages to the Plaintiff were the result of the acts or omissions of Phipps and its principals.

The Company has likewise cross claimed against Phipps for indemnification and contribution, claiming that any damages to the Plaintiff were the result of the acts or omissions of Phipps and its principals.

Pizzarotti’s suit arose from a contract dated April 3, 2018 that it executed with Phipps whereby Pizzarotti, a construction manager, engaged Phipps to perform stone procuring and tile work at a construction project located at 161 Maiden Lane, New York 10038.

17 unchanged sentences

On May 10, 2021, the parties jointly filed with the court a proposed order providing the completion of depositions of all parties and nonparties by September 30, 2021.

The court has not entered the proposed discovery order and no action has been taken by the plaintiff Pizzarotti nor the defendant-cross claimant Phipps since the proposed order was submitted.

The court has not entered the proposed discovery order and no formal action has been taken by the plaintiff Pizzarotti nor the defendant-cross claimant Phipps since the proposed order was submitted.

There are no scheduled hearings or conferences before the court at this time.

1 unchanged sentence

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.

SG BLOCKS, INC.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Commitments and Contingencies (continued)

Vendor Litigation

1.) Teton Buildings, LLC

(i) On January 1, 2019, SG Blocks commenced an action against Teton Buildings, LLC (“Teton”) in Harris County, Texas (“ Teton Texas Action ”) to recover approximately $ 2,100,000 arising from defendant’s breach of the operative contract related to Heart of Los Angeles construction project in Los Angeles (the “HOLA Project”) entered into on or about June 2, 2017.

The Petition brought claims of breach of contract, negligence, and breach of express warranty.

In or about February 2022 SG Blocks dismissed without prejudice the Teton Texas Action.

(ii) On or about September 12, 2018, the Company entered into a Firm Price Quote and Purchase (the “GVL Contract”) with Teton to govern the manufacture and provision of 23 shipping containers and modular units (the “Teton GVL Modules”) for the Four Oaks Gather GVL project in South Carolina (the “GVL Project.”).

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 $ 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:

Teton Buildings, LLC and bearing the case number 19-35811.

On February 11, 2020, the Company filed a proof of claim again Teton in the amount of $ 2,861,401.66 arising from the HOLA Project and the GVL Contract.

On or about March 16, 2020, the Bankruptcy Court converted Teton’s Chapter 11 reorganization case to a Chapter 7 liquidation case.

On July 18, 2019, Ronald Sommers, the Chapter 7 Trustee, filed a Report of No Distribution stating that there is no property available for distribution to creditors.

On August 20, 2019, the Bankruptcy Court closed the Teton bankruptcy case.

As such, there is no prospect of any recovery against Teton.

On January 22, 2021, the Company filed a third-party complaint against Teton in the United States District Court for the Central District of California, Case No.

2:20−cv−03432 in the HOLA Action (described below), seeking to determine Teton’s liability in its capacity as a bankruptcy debtor in order to collect any damages payable from Teton’s liability insurance carrier or carriers.

On July 23, 2021, the Company filed a First Amended Third-Party Complaint against Teton and other named third party defendants (see #2 below).

Teton has been served with the First Amended Third-Party Complaint and on or about February 11, 2022, Teton filed an answer and affirmative defenses.

The parties in the HOLA Action are currently conducting discovery.

1.) SG Blocks, Inc.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Commitm ents and Contingencies (continued)

2.) SG Blocks, Inc.

v HOLA Community Partners, et.

On April 13, 2020, Plaintiff SG Blocks, Inc.

(“SG Blocks” or the “Company”) filed a Complaint against HOLA Community Partners (“HCP”), Heart of Los Angeles Youth, Inc.

(the “Company”) filed a Complaint against HOLA Community Partners (“HCP”), Heart of Los Angeles Youth, Inc.

(“HOLA”) (HCP and HOLA are collectively referred to as the “HOLA Defendants”), and the City of Los Angeles (“City”) in the United States District Court for the Central District of California, Case No.

33 unchanged sentences

(“Broadway”), Marne Construction, Inc.

(“Marne”), The McIntyre Company (“McIntrye”), Dowell & Bradley Construction, Inc.

(“Marne”), The McIntyre Company (“McIntyre”), Dowell & Bradley Construction, Inc.

dba J R Construction (“JR Construction”) Junior Steel Co.

18 unchanged sentences

The parties that have answered and appeared in the case are currently engaged in discovery.

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.

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.

SG BLOCKS, INC.

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

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Commitments and Contingencies (continued)

2 .) SG Blocks, Inc.

EDI International, PC .-

On June 21, 2019, SG Blocks filed a lawsuit against EDI International, PC, a New Jersey corporation, in the Superior Court of the State of California, County of Los Angeles, Central District, in connection with the parties' consulting agreement, dated June 29, 2016, pursuant to which EDI International, PC, was to provide, for a fee, certain architectural and design services for the HOLA Project.

v HOLA Community Partners, et.

On or about December 31, 2022, the parties who appeared in the HOLA Action executed a Settlement Agreement and Release.

On February 28, 2023 the court “so ordered” the parties’ stipulation dismissing all causes of action against the parties to the Settlement Agreement and Release.

3.) Teton Buildings, LLC

(i) On January 1, 2019, the Company commenced an action against Teton Buildings, LLC (“Teton”) in Harris County, Texas (“Teton Texas Action”) to recover approximately $ 2,100,000 arising from defendant’s breach of the operative contract related to Heart of Los Angeles construction project in Los Angeles (the “HOLA Project”) entered into on or about June 2, 2017.

The Petition brought claims of breach of contract, negligence, and breach of express warranty.

In or about February 2022 the Company dismissed without prejudice the Teton Texas Action.

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:

Teton Buildings, LLC and bearing the case number 19-35811.

On February 11, 2020, the Company filed a proof of claim again Teton in the amount of $ 2,861,401.66 arising from the HOLA Project and the GVL Contract.

On or about March 16, 2020, the Bankruptcy Court converted Teton’s Chapter 11 reorganization case to a Chapter 7 liquidation case.

On July 18, 2019, Ronald Sommers, the Chapter 7 Trustee, filed a Report of No Distribution stating that there is no property available for distribution to creditors.

On August 20, 2019, the Bankruptcy Court closed the Teton bankruptcy case.

As such, there is no prospect of any recovery against Teton.

On January 22, 2021, the Company filed a third-party complaint against Teton in the United States District Court for the Central District of California, Case No.

2:20−cv−03432 in the HOLA Action (described above), seeking to determine Teton’s liability in its capacity as a bankruptcy debtor in order to collect any damages payable from Teton’s liability insurance carrier or carriers.

On July 23, 2021, the Company filed a First Amended Third-Party Complaint against Teton and other named third party defendants (see #2 below).

Teton has been served with the First Amended Third-Party Complaint and on or about February 11, 2022, Teton filed an answer and affirmative defenses.

On or about December 31, 2022, the parties who appeared in the HOLA Action, including Teton by and through its insurance carrier, executed a Settlement Agreement and Release.

On February 28, 2023 the court “so ordered” the parties’ stipulation dismissing all causes of action against the parties to the Settlement Agreement and Release.

4.) SG Blocks, Inc.

claims that EDI International, PC, tortiously interfered with SG Blocks, Inc's economic relationship with HOLA Community Partners and Heart of Los Angeles Youth, Inc.

EDI International, PC .-

On June 21, 2019, the Company filed a lawsuit against EDI International, PC, a New Jersey corporation, in the Superior Court of the State of California, County of Los Angeles, Central District, in connection with the parties ’ consulting agreement, dated June 29, 2016, pursuant to which EDI International, PC, was to provide, for a fee, certain architectural and design services for the HOLA Project.

The Company claims that EDI International, PC, tortiously interfered with the Company ’ s economic relationship with HOLA Community Partners and Heart of Los Angeles Youth, Inc.

EDI International, PC, filed a cross-complaint for alleged unpaid fees and tortious interference with EDI International, PC's contractual relationship with HOLA Community Partners and Heart of Los Angeles Youth, Inc.

EDI International, PC's cross-complaint seeks in excess of $ 30,428.71 in damages.

On July 8, 2020, SG Blocks, Inc.

added PVE LLC as a defendant in the lawsuit, claiming PVE LLC is liable to the same extent as EDI International, PC.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Commitments and Contingencies (continued)

On July 8, 2020, the Company added PVE LLC as a defendant in the lawsuit, claiming PVE LLC is liable to the same extent as EDI International, PC.

The case is currently in the discovery stage and a trial date has been set for May 2, 2022.

On May 14, 2021, EDI accepted the Company’s Statutory Offer of Compromise, pursuant to California Code of Civil Procedures §998, to settle EDI’s cross-claims.

On July 26, 2021, the Company and EDI entered into a certain General Release agreement whereby in exchange for payment by the Company in the amount of $ 67,125.83 EDI released SG Blocks from all liabilities and damages related to EDI’s cross-claims.

On July 26, 2021, the Company and EDI entered into a certain General Release agreement whereby in exchange for payment by the Company in the amount of $ 67,125.83 EDI released the Company from all liabilities and damages related to EDI’s cross-claims.

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 early 2023.

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

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

1 unchanged sentence

Other Litigation

1.) Shetty v.

SG Blocks, In c .

al., - Case No.

20-CV-00550, United States District Court, Eastern District of New York.

On January 31, 2020, Mahesh Shetty, the Company’s former President and Chief Financial Officer (“Former Employee”), filed suit against the Company and its Chairman and Chief Executive Officer, Paul Galvin, claiming (i) $ 372,638 in unpaid wages and bonuses and (ii) $ 300,000 due in severance (hereafter the “Action”).

On March 25, 2020, the Former Employee filed an amended complaint raising additional claims of retaliation under the Fair Labor Standards Act, 29 U.S.C.

(“FLSA”), and contractual indemnification.

On April 27, 2020, the Company filed a motion to dismiss the Action.

The Company asserted that the Former Employee agreed to accept (and did receive) restricted stock units of the Company’s common stock in full satisfaction and payment of all alleged unpaid wages and bonuses that are claimed in the Action, and/or has otherwise been paid in full for all amounts claimed.

The Company further maintained that the Former Employee’s employment agreement precludes any entitlement to or liability for severance.

On June 15, 2020, the Court entered a decision granting in part and denying in part the Company’s motion to dismiss.

Specifically, the Court dismissed the Former Employee’s claim (i) for severance (in the amount of $ 300,000 ) and unpaid wages pursuant to the FLSA, but denied dismissal of the Former Employee’s claims for retaliation under the FLSA or unpaid wages allegedly due under the New York Labor Law.

On or about September 14, 2021, the Company and Former Employee entered into a settlement and release agreement resolving their respective claims.

On September 14, 2021, the parties filed a joint motion seeking court approval of the settlement.

By order dated February 8, 2022, the court approved the settlement.

On February 9, 2022 the court closed the case.

SG Blocks, Inc.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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

Commitments and Contingencies (continued)

2.) S G Blocks, Inc.

Osang Healthcare Company, L td.

Osang Healthcare Company, Ltd.

On April 14, 2021, the Company commenced an action against Osang Healthcare Company, Ltd.

7 unchanged sentences

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.

The Company is currently unable to predict the outcome or possible recovery, 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.

A status conference was held on November 16, 2022 at which time the Court entered a scheduling order for the conducting of discovery.

Discovery is ongoing.

After mediation before the Court on March 14, 2023, the parties entered into a settlement agreement and mutual release on May 4, 2023.

SAFE & GREEN HOLDINGS CORP.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2023 and 2022 (Unaudited)

Commitments and Contingencies (continued)

2.) Safe & Green Holdings Corp.

On March 15, 2023, the Company commenced an action against two shareholders, John William Shaw and Leo Patrick Shaw, in the United States District Court for the Southern District of New York, captioned Safe and Green Holdings Corp.

Shaw et al., 1:23-cv-02244, for violations of the short swing profit rule pursuant to Section 16(b) of the Securities and Exchange Act of 1934.

In April 2020, the Company entered into an amendment to its employment agreement, dated January 1, 2017, with Paul Gavin (the "Amendment"), to extend the term of employment to December 31, 2021, provide for an annual base salary of $400,000 provide for a performance bonus structure for a bonus of up to 50% of base salary upon the Company’s achievement of $2,000,000 EBITDA and additional performance bonus payments for the achievement of EBITDA in excess of $2,000,000 based on a percentage of the incremental increase in EBITDA (ranging from 10% of the incremental increase in EBITDA if the Company achieves over $2,000,000 and up to $7,000,000 in EBITDA, 8% of the incremental increase in EBITDA if the Company achieves over $7,000,000 and up to $12,000,000 in EBITDA and 3% of the incremental increase in EBITDA over $12,000,000), provide for a profits-based additional bonus of up to $250,000 in certain limited circumstances, and provide for one (1) year severance, plus a pro-rated amount of any unpaid bonus earned by him during the year as verified by the Company’s principal financial officer, if Mr.

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.

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 Incentive Plan.

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.

Subsequent Events

On April 4, 2023, the Compensation Committee of the Board of Directors granted an award under the Company’s Incentive Plan of 125,261 restricted stock units to Paul Galvin, vesting quarterly over two years , and an award of 118,166 restricted stock units to David Villarreal, vesting quarterly over two years .

In addition, the Compensation Committee granted to each of Yaniv Blumenfeld , Shafron Hawkins, Elizabeth Cormier-May and Christopher Melton 37,500 RSUs under the Plan, vesting quarterly over two years .

On April 28, 2023, Yaniv Blumenfeld, a member of the Board of Directors (was appointed as a director of SG DevCo.

In connection with his appointment to the SGDevCo board of directors, Mr.

Blumenfeld resigned, effective as of April 28, 2023, from his position as a member of the Company’s Board.

The resignation was not related to any disagreement with the Company on any matter relating to its operations, policies or practices The Company has agreed to invite Mr.

Blumenfeld to attend all meetings of the Board of Directors as a non-voting Board observer so long as he continues to serve as a director of SG DevCo.

On May 1, 2023, the Company appointed Patricia Kaelin as the Company’s Chief Financial Officer and entered into an employment agreement with Patricia Kaelin (the “Kaelin Employment Agreement”) to employ Ms.

Kaelin in such capacity for an initial term of two (2) years, which provides for an annual base salary of $ 250,000 , a discretionary bonus of up to 20 % of her base salary upon achievement of objectives as may be determined by the Company’s board of directors and severance in the event of a termination without cause on or after September 30, 2023 in amount equal to equal to one year’s annual base salary and benefits.

The Kaelin Employment Agreement also provides for the grant to Ms.

Kaelin of a restricted stock grant under the Company’s Stock Incentive Plan, as amended and as available for grant, of 60,000 shares of the Company’s common stock, vesting quarterly on a pro-rata basis over the next eighteen ( 18 ) months of continuous service.

Kaelin is subject to a one-year post-termination non-compete and non-solicit of employees and clients.

She is also bound by confidentiality provisions.

On May 4, 2023, the Board of Directors took action to vest in full 1,627,773 restricted stock units granted under the Incentive Plan (the “Subject Awards”), which included 476,049 Restricted stock units granted to Paul Galvin, 140,105 restricted stock units granted to David Villarreal, 117,500 restricted stock units granted to Nicolai Brune, 86,960 restricted stock units granted to William Rogers, 59,439 restricted stock units granted to Christopher Melton, 37,500 restricted stock units granted to Elizabeth May-Cormier, 37,500 restricted stock units granted to Shafron Hawkins and 68,814 restricted stock units granted to Yaniv Blumenfeld.

The Company will reimburse each recipient of the Subject Awards who is an employee of the Corporation or a member of the Board of Directors, and who agrees to a 180-day lock-up on any sale or transfer of the shares of common stock to be received by them under the Subject Awards (the “Subject Shares”) and to comply with the requirements of the Company’s Corporate Trading Policy with respect to any sale or transfer of the Subject Shares by them, for the taxes to be paid by them in respect of the accelerated vesting of their Subject Awards (but not any taxes due in respect of such reimbursement).

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