What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-14 compared with 2023-08-14 · 106 added, 104 removed, 250 unchanged (46% of the section changed)

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In February 2023, we entered into an agreement with The Peoples Health Care, in Glendale, California, working in conjunction with Teamsters Local 848 , to deliver four Modules to provide medical services to union members.

In March 2023, we formed Safe & Green Medical Corporation, in Delaware, focused on our medical segment with an objective to establish a national presence with various clinics and labs that cater to the specific needs of local communities.

In March 2023, we formed Safe & Green Medical Corporation to focus on our medical segment with an objective to establish a national presence with various clinics and labs that cater to the specific needs of local communities.

During 2021 , through our subsidiary, Safe and Green Development Corporation.

(“SG DevCorp”), we also began to focus on acquiring property to build multi-family housing communities that allows us to utilize the manufacturing services of SG Echo.

(“SG DevCorp”), we also began to focus on acquiring property to build multi-family housing communities that allows us to utilize the manufacturing services of Echo.

SG Environmental Solutions Corp.

(“SG Environmental”), formed in Delaware 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.

Prior to October 2019, our business model was solely a project-based construction model pursuant to which we were responsible for the design and construction of finished products that incorporated our technology primarily to customers in the retail, restaurant, military and education industries throughout the United States.

In October 2019, we changed our business model for our residential building construction to a royalty fee model and entered into a five-year exclusive license with CPF GP 2019-1 LLC (“CPF”) under which CPF licensed on an exclusive basis our proprietary technology and intellectual property to develop and commercialize products in the United States (and its territories) for residential use, including, without limitation, single-family residences and multi-family residences, but excluding military housing.

On June 15, 2021, we terminated the exclusive license by mutual agreement and ceased our royalty fee model.‌

Prior to the COVID-19 pandemic, our core customer base was comprised of architects, landowners, builders and developers who use our Modules in commercial and residential structures.

Our cargo modified Modules allow for the redesign, repurpose and conversion of heavy-gauge steel cargo shipping containers into SGBlocks™, which are safe green building blocks for commercial, industrial, and residential building construction, rather than consuming new steel and lumber.

Our technology and expertise is also used to purpose-build modules, or prefabricated steel modular units customized for use in modular construction (“SGPBMs” and, together with Safe & Green™, “Modules”), primarily to augment or complement an Safe & Green™ structure.

In March 2020, we began increasing our focus on providing our Modules as health care facilities for deployable medical response solutions.

In May, we entered into a joint development agreement with Grimshaw Design to assist with the deployment of our D-Tec suite of prefabricated health facilities for on-site immediate COVID-19 testing.

In September 2020, we entered the U.S.

test lab market by forming a joint venture with Clarity Labs, a manufacturer and market leader of rapid diagnostic tests, to launch CLIA-certified laboratories.

Our joint venture with Clarity Labs has allowed us to not only supply our D-Tec suite of prefabricated health facilities but also allows us to provide testing services at such facilities.

We have supplied our building modular coronavirus testing centers and provide testing services for Los Angeles International Airport (LAX), Memorial in Wayne County, Michigan and have been selected as a Trusted Testing Partner (TTP) for Hawaii’s COVID-19 travel testing program.

Due to the ongoing lower affects of COVID-19 restrictions, our joint venture with Clarity Labs was wound down during the fourth quarter of 2022.

In February 2023, we entered into an agreement with The Peoples Health Care, in Glendale, California, working in conjunction with Teamsters Local 848, to deliver four Modules to provide medical services to union members.

In September 2020, we acquired substantially all the assets of Echo, a Texas limited liability com pany, except for Echo's real estate holdings for which we obtained a right of first refusal.

Echo is a container/modular manufacturer based in Durant, Oklahoma specializing in the design and construction of permanent modular and temporary modular buildings and was one of our key supply chain partners.

Echo catered to the military, education, administration facilities, healthcare, government, commercial and residential customers.

This acquisition has allowed us to expand our reach for our Modules and has offered us an opportunity to vertically integrate a large portion of our cost of goods sold, as well as increase margins, productivity and efficiency in the areas of design, estimating, manufacturing and delivery.

In addition, during 2021 , we formed SGB Development Corp.

(“SG DevCorp”), which is our wholly-owned subsidiary and has since been renamed to Safe and Green Development Corporation.

SG DevCorp was formed with the purpose of real property development utilizing our technologies.

SG DevCorp develops, co-develops builds and finances single and multi-family homes in underserved regions nationally using modules built in one of our vertically integrated factories.

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

We intend to spin-out SG DevCorp as its own independent company.

Recent Developments

In December 2022, we announced our plan to separate our company and SG DevCorp into two separate publicly traded companies (the “Separation”).

To implement the Separation, on September 27, 2023 (the “Distribution Date”), we, effected a pro rata distribution to our stockholders of approximately 30 % of the outstanding shares of SG DevCorp’s common stock (the “Distribution”).

In connection with the Distribution, each of our stockholders received 0.930886 shares of SG DevCorp’s common stock for every five ( 5 ) shares of our common stock held as of the close of business on September 8, 2023, the record date for the Distribution, as well as a cash payment in lieu of any fractional shares.

Immediately after the Distribution, SG DevCorp was no longer a wholly owned subsidiary of ours and we held and continue to hold approximately 70 % of SG DevCorp’s issued and outstanding securities.

On September 28, 2023, SG DevCorp’s common stock began trading on the Nasdaq Capital Market under the symbol “SGD.”

In connection with the Separation and Distribution, we entered into a separation and distribution agreement and several other agreements with SG Devcorp.

These agreements provide for the allocation between us and SG DevCorp of the assets, employees, liabilities and obligations (including, among others, investments, property, employee benefits and tax-related assets and liabilities) of us and our subsidiaries attributable to periods prior to, at and after the Separation and will govern the relationship between us and SG DevCorp subsequent to the completion of the Separation.

In addition to the separation and distribution agreement, the other principal agreements entered into with us included a tax matters agreement and a shared services agreement.

Results of Operations

Six Months Ended June 30, 2023 and 2022:

For the Six Months Ended June 30, 2023

For the Six Months Ended June 30, 2022

Nine Months Ended September 30, 2023 and 2022 :

For the Nine Months Ended September 30, 2023

For the Nine Months Ended September 30, 2022

Total revenue

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

During the six months ended June 30, 2023, we derived revenue solely from our construction segment.

Total revenue for the six months ended June 30, 2023 was $10,600,990 compared to $16,159,569 for the six months ended June 30, 2022.

This decrease of $5,558,579 or approximately 34.4% was mainly driven by a decrease in medical revenue of $10,203,215, offset by an increase in construction services of $4,719,342 primarily driven by one contract.

During the nine months ended September 30, 2023 , we derived revenue solely from our construction segment.

Total revenue for the nine months ended September 30, 2023 was $ 14,566,351 compared to $ 20,289,826 for the nine months ended September 30, 2022 .

This decrease of $ 5,723,475 or approximately 28.21 % was mainly driven by no medical revenue during the nine months ended September 30, 2023, and by an increase in construction services of $ 5,998,783 .

Cost of Revenue and Gross Profit

Cost of revenue was $10,636,832 for the six months ended June 30, 2023, compared to $12,901,174 for the six months ended June 30, 2022.

The decrease of $2,264,342 or a decrease of approximately 18%, is primarily related to no medical revenue being generated during the six months ended June 30, 2023.

Gross profit (loss) was $(35,842) and $ 3,258,395 for the six months ended June 30, 2023 and 2022 , respectively.

Gross profit (loss) margin percentage decreased to 0% for the six months ended June 30, 2023 compared to 20% for the six months ended June 30, 2022 primarily due to no medical revenue being generated during the six months ended June 30, 2023 .

Cost of revenue was $ 15,138,225 for the nine months ended September 30, 2023 , compared to $ 17,196,605 for the nine months ended September 30, 2022 .

The decrease of $ 2,058,380 or a decrease of approximately 11.97 %, is primarily related to no services being provided for the medical segment during the nine months ended September 30, 2023 .

Gross profit (loss) was $( 571,874 ) and $ 3,093,221 for the nine months ended September 30, 2023 and 2022 , respectively.

Gross profit (loss) margin percentage decreased to ( 4 )% for the nine months ended September 30, 2023 compared to 15.25 % for the nine months ended September 30, 2022 primarily due to no engineering services and medical revenue being generated during the nine months ended September 30, 2023 .

Operating Expenses

Payroll and related expenses for the six months ended June 30, 2023 were $5,498,819 compared to $2,355,696 for the six months ended June 30, 2022.

This increase was primarily caused by an increase in headcount and salary expenses during the six months ended June 30, 2023 , as well as the vesting of additional restricted stock units during 2023.

Other operating expenses (general and administrative expenses, marketing and business development expenses, pre-project expenses) for the six months ended June 30, 2023 were $ 3,336,266 compared to $ 1,811,663 for the six months ended June 30, 2022 .

Payroll and related expenses for the nine months ended September 30, 2023 were $ 6,318,728 compared to $ 3,650,553 for the nine months ended September 30, 2022 .

This increase was primarily caused by an increase in headcount and salary expenses during the nine months ended September 30, 2023 , as well as the vesting of additional restricted stock units during 2023 .

Other operating expenses (general and administrative expenses, marketing and business development expenses, pre-project expenses) for the nine months ended September 30, 2023 were $ 4,955,445 compared to $ 2,853,818 for the nine months ended September 30, 2022 .

Other Income (Expense)

Interest income for the six months ended June 30, 2023 was $18,816 mainly derived from bank interest and interest associated with an outstanding note receivable.

There was $23,762 of interest income for the six months ended June 30, 2022.

T here was $588,490 and $491,309 of other income for the six months ended June 30, 2023 and 2022.

Interest expense for the six months ended June 30, 2023 and 2022 was $811,343 and $121,975, respectively.

Interest income for the nine months ended September 30, 2023 was $ 22,002 mainly derived from bank interest and interest associated with an outstanding note receivable.

There was $ 33,518 of interest income for the nine months ended September 30, 2022 .

T here was $ 690,939 and $ 488,346 of other income for the nine months ended September 30, 2023 and 2022 .

Interest expense for the nine months ended September 30, 2023 and 2022 was $ 1,549,992 and $ 174,733 , respectively.

The increase in interest expense resulted from an increase in notes payable balances during 2023 .

Three Months Ended June 30, 2023 and 2022:

For the Three Months Ended June 30, 2023

For the Three Months Ended June 30, 2022

Three Months Ended September 30, 2023 and 2022 :

For the Three Months Ended September 30, 2023

For the Three Months Ended September 30, 2022

Total revenue

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

During the three months ended June 30, 2023, we derived revenue solely from our construction segment.

Total revenue for the three months ended June 30, 2023 was $5,097,055 compared to $7,554,971 for the three months ended June 30, 2022.

This decrease of $2,457,916 or approximately 33% was mainly driven by a decrease in medical revenue of $3,317,387 offset by an increase in construction services of $883,791 primarily driven by one contract.

During the three months ended September 30, 2023 , we derived revenue solely from our construction segment.

Total revenue for the three months ended September 30, 2023 was $ 3,965,361 compared to $ 4,130,257 for the three months ended September 30, 2022 .

This decrease of $ 164,896 or approximately 3.99 % was mainly driven by an increase in construction services, and no medical revenue for the three months ended September 30, 2023.

Cost of Revenue and Gross Profit

Cost of revenue was $5,063,425 for the three months ended June 30, 2023, compared to $6,783,011 for the three months ended June 30, 2022.

The decrease of $1,719,586 or a decrease of approximately 25%, is primarily related to no medical revenue being generated during the three months ended June 30, 2023.

Gross profit was $33,630 and $771,960 for the three months ended June 30, 2023 and 2022, respectively.

Gross profit margin percentage decreased to 1% for the three months ended June 30, 2023 compared to 10% for the three months ended June 30, 2022 primarily due to no medical revenue being generated during the three months ended June 30, 2023.

Cost of revenue was $ 4,501,393 for the three months ended September 30, 2023 , compared to $ 4,295,431 for the three months ended September 30, 2022 .

The in crease of $ 205,962 or an increase of approximately 4.79 %, is primarily related to increase in construction services during the three months ended September 30, 2023 .

Gross profit (loss) was $ ( 536,032 ) and $( 165,174 ) for the three months ended September 30, 2023 and 2022 , respectively.

Gross (loss) margin percentage decreased to ( 14 )% for the three months ended September 30, 2023 compared to ( 4 )% for the three months ended September 30, 2022 primarily due to no medical revenue being generated during the three months ended September 30, 2023 .

Operating Expenses

Payroll and related expenses for the three months ended June 30, 2023 were $4,184,429 compared to $1,211,509 for the three months ended June 30, 2022.

This increase was primarily caused by an increase in headcount and salary expenses during the three months ended June 30, 2023, as well as the vesting of additional restricted stock units during 2023.

Other operating expenses (general and administrative expenses, marketing and business development expenses, pre-project expenses) for the three months ended June 30, 2023 were $1,460,059 compared to $888,307 for the three months ended June 30, 2022.

Payroll and related expenses for the three months ended September 30, 2023 were $ 819,909 compared to $ 1,294,857 for the three months ended September 30, 2022 .

This decrease was primarily caused by a decrease in headcount and salary expenses during the three months ended September 30, 2023 .

Other operating expenses (general and administrative expenses, marketing and business development expenses, pre-project expenses) for the three months ended September 30, 2023 were $ 1,619,179 compared to $ 1,042,155 for the three months ended September 30, 2022 .

Other Income (Expense)

Interest income for the three months ended June 30, 2023 was $9,454 mainly derived from bank interest and interest associated with an outstanding note receivable.

There was $10,979 of interest income for the three months ended June 30, 2022.

There was $569,851 and $372,407 of other income for the three months ended June 30, 2023 and 2022.

Interest expense for the three months ended June 30, 2023 and 2022 was $523,971 and $73,126, respectively.

Interest income for the three months ended September 30, 2023 was $ 3,186 mainly derived from bank interest and interest associated with an outstanding note receivable.

There was $ 9,756 of interest income for the three months ended September 30, 2022 .

There was $ 102,449 and $( 2,963 ) of other income for the three months ended September 30, 2023 and 2022 .

Interest expense for the three months ended September 30, 2023 and 2022 was $ 738,649 and $ 52,758 respectively.

The increase in interest expense resulted from an increase in notes payable balances during 2023 .

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Inflation has caused increases on some of the Company's estimated costs for construction projects in progress and completed during the past two fiscal years, which has affected the Company's revenue and income (loss) from continuing operations.

Our operations for the three months ended June 30, 2023 and 2022 may not be indicative of our future operations.

Our operations for the three months ended September 30, 2023 and 2022 may not be indicative of our future operations.

Impact of Coronavirus (COVID- 19 )

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Liquidity and Capital Resources

As of June 30, 2023 and December 31, 2022 we had an aggregate of $ 1,601,331 and $582,776, respectively, of cash and cash equivalents and short-term investments.

As of September 30, 2023 and December 31, 2022 we had an aggregate of $ 712,906 and $ 582,776 , respectively, of cash and cash equivalents and short-term investments.

Historically, our operations have primarily been funded through proceeds from equity and debt financings, as well as revenue from operations.

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In connection with the Offering we 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 our restricted common stock (the “Commitment Shares”) to Peak One Investments, LLC (“Investments”), the general partner of Peak One .

During the nine months ended September 30, 2023, Peak One converted $ 700,000 of its principal balance into 466,664 shares of common stock of the Company.

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

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Liquidity and Capital Resources (continued)

On May 16, 2023, SG Building, entered into a Cash Advance Agreement (“Cash Advance Agreement”) with Cedar Advance LLC (“Cedar” pursuant to which SG Building sold to Cedar $710,500 of its future receivables for a purchase price of $500,000.

On May 16, 2023, SG Building Blocks, Inc.

(“ SG Building”), entered into a Cash Advance Agreement (“Cash Advance Agreement”) with Cedar Advance LLC (“Cedar” pursuant to which SG Building sold to Cedar $ 710,500 of its future receivables for a purchase price of $ 500,000 .

Cedar is expected to withdraw $ 25,375 a week directly from SG Building, until the $ 710,500 due to Cedar is paid in full.

In the event of a default (as defined in the Cash Advance Agreement), Cedar, among other remedies, can demand payment in full of all amounts remaining due under the Cash Advance Agreement.

SG Building’s obligations under the Cash Advance Agreement have been guaranteed by SG Echo LLC (“SG Echo”).

On September 26, 2023, SG Building and Cedar entered into a second Cash Advance Agreement pursuant to which SG Building sold to Cedar $1,171,500 of its future receivables for a purchase price of $825,000.

Cedar is expected to withdraw $41,800 a week directly from SG building, until the $1,171,500 due to Cedar is paid in full.

In the event of a default (as defined in the Cash Advance Agreement), Cedar, among other remedies, can demand payment in full of all amounts remaining due under the Cash Advance Agreement.

SG Building’s obligations under the Cash Advance Agreement have been guaranteed by SG Echo.

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Unless terminated by SG Echo, not less than sixty ( 60 ) but not more than ninety ( 90 ) days before the end of the initial term, the Factoring Agreement will automatically extend for an additional thirty-six ( 36 ) months.

SG Echo shall be required to provide the same not less than sixty (60) but not more than ninety (90) days notice during any and all renewal terms in order to terminate the Factoring Agreement, and if no notice is provided, the renewal term will extend for an additional thirty-six (36) month period.

SG Echo is required to provide the same not less than sixty ( 60 ) but not more than ninety ( 90 ) days notice during any and all renewal terms in order to terminate the Factoring Agreement, and if no notice is provided, the renewal term will extend for an additional thirty-six ( 36 ) month period.

If SouthStar has not purchased accounts receivable in a quarterly period during any initial or renewal term which exceed fifty percent ( 50 %) of the Facility Amount per calendar quarter, in which $ 250,000.00 of the purchased accounts each month must be with ATCO Structures & Logistics (USA) Inc.

(“Minimum Amount”), the Factoring Agreement provides that SG Echo will pay to SouthStar, on demand, an additional amount equal to what the charges provided for elsewhere in the Factoring Agreement would have been on the Minimum Amount assuming the number of days from the date of purchase of the Minimum Amount until receipt of payment of the Minimum Amount is thirty one ( 31 ) days, less the actual charges paid by SG Echo to SouthStar during such period.

Pursuant to a Secured Continuing Corporate Guaranty, dated June 8, 2023 (the “Corporate Guaranty”), the Company has guaranteed SG Echo’s obligations to SouthStar under the Secured Note and Factoring Agreement.

Pursuant to a Cross-Default and Cross Collateralization Agreement (the “Cross Default Agreement”), effective June 8, 2023, between SouthStar, SG Echo and the Company, SG Echo’s obligations under the Secured Note and Factoring Agreement are cross-defaulted and cross-collateralized such that any event of default under the Secured Note shall constitute an event of default under the Factoring Agreement at SouthStar’s election (and vice versa, any event of default under the Factoring Agreement shall constitute an event of default under the Secured Note at SouthStar’s election) and any collateral pledged to secure SG Echo’s obligations under the Secured Note shall also secure SG Echo’s obligations under the Factoring Agreement (and vice versa).

Pursuant to a Secured Continuing Corporate Guaranty, dated June 8, 2023 (the “Corporate Guaranty”), we have guaranteed SG Echo’s obligations to SouthStar under the Secured Note and Factoring Agreement.

Pursuant to a Cross-Default and Cross Collateralization Agreement (the “Cross Default Agreement”), effective June 8, 2023, between SouthStar, SG Echo and us, SG Echo’s obligations under the Secured Note and Factoring Agreement are cross-defaulted and cross-collateralized such that any event of default under the Secured Note shall constitute an event of default under the Factoring Agreement at SouthStar’s election (and vice versa, any event of default under the Factoring Agreement shall constitute an event of default under the Secured Note at SouthStar’s election) and any collateral pledged to secure SG Echo’s obligations under the Secured Note shall also secure SG Echo’s obligations under the Factoring Agreement (and vice versa).

On June 23 2023, SG DevCorp, entered into a Loan Agreement (the “BCV Loan Agreement”) with a Luxembourg-based specialized investment fund, BCV S&G DevCorp (“BCV S&G”), for up to $ 2,000,000 in proceeds, of which it has raised $ 1,250,000 to date.

The Loan Agreement provides that the loan provided thereunder will bear interest at 14 % per annum and mature on December 1, 2024.

The loan may be repaid by SG DevCo at any anytime following the twelve-month anniversary of its issue date.

The loan is secured by 1,999,999 shares of SG DevCorp’s common stock (the “Pledged Shares”), which were pledged by SG DevCorp pursuant to an escrow agreement (the “Escrow Agreement”) with American Stock Transfer & Trust Company, LLC, SG DevCorp’s transfer agent, and which represent 19.99% of SG DevCorp’s outstanding shares.

The loan may be repaid by SG DevCorp at any anytime following the twelve -month anniversary of its issue date.

The loan is secured by 1,999,999 shares of our shares of SG DevCorp’s common stock (the “Pledged Shares”), which were pledged by SG DevCorp pursuant to an escrow agreement (the “Escrow Agreement”) with American Stock Transfer & Trust Company, LLC, SG DevCorp’s transfer agent, and which represent 19.99 % of SG DevCorp’s outstanding shares.

The fees associated with the issuance include $ 70,000 paid to BCV S&G for the creation of the BCV Loan Agreement and $ 27,500 payable to BCV S&G per annum for maintaining the BCV Loan Agreement.

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Mary’s, Georgia.

On August 16, 2023, SG DevCorp secured an additional $500,000 in bridge funding from BCV S&G under the BCV Loan Agreement.

On August 25, 2023, SG DevCorp and BCV S&G amended the BCV Loan Agreement (“Amendment No.

1”) to change the date upon which SG DevCorp’s shares must be listed on The Nasdaq Stock Market from August 30, 2023 to September 15, 2023.

According to Amendment No.

1, if SG DevCorp’s shares of common stock were not listed on The Nasdaq Stock Market before September 15, 2023 or if following such listing the total market value of the Pledged Shares falls below twice the face value of the loan, the loan will be further secured by a security interest in the St.

On September 11, 2023, SG DevCorp and BCV S&G amended the BCV Loan Agreement (“Amendment No.

2”) to change the date upon which SG DevCorp’s shares must be listed on The Nasdaq Stock Market from September 15, 2023 to September 30, 2023.

According to Amendment No.

2, if SG DevCorp’s shares of common stock were not listed on The Nasdaq Stock Market before September 30, 2023 or if following such listing the total market value of the Pledged Shares falls below twice the face value of the loan, the loan will be further secured by a security interest in the St.

Following the listing, the total market value of the Pledged Shares has fallen below twice the face value of the loan and SG DevCorp and BCV S&G are in discussions regarding alternatives.

We continue to generate losses from operations.

At June 30, 2023 and December 31, 2022 we had a cash balance $ 1,601,331 and $582,776, respectively.

As of June 30, 2023 , our stockholders’ equity was $ 9,325,160 compared to $ 14,439,562 as of December 31, 2022 and an accumulated deficit of $50,503,232.

Our net loss attributable to our common stockholders for the six months ended June 30, 2023 was $(9,074,964) and net cash used in operating activities was $( 3,039,177 ).

We may need to generate additional revenues or secure additional financing sources, such as debt or equity capital, to fund future growth, which financing may not be available on favorable terms or at all.

We do not have any additional sources secured for future funding, and if we are unable to raise the necessary capital at the times we require such funding, we may need to materially change our business plan, including delaying implementation of aspects of such business plan or curtailing or abandoning such business plan altogether.

At September 30, 2023 and December 31, 2022 we had a cash balance of $ 712,906 and $ 582,776 , respectively.

As of September 30, 2023 , our stockholders’ equity was $ 6,417,026 compared to $ 14,439,562 as of December 31, 2022 and an accumulated deficit of $ 62,211,370 .

Our net loss attributable to our common stockholders for the nine months ended September 30, 2023 was $ 12,683,098 and net cash used in operating activities was $ 4,671,862 .

We will need to generate additional revenues or secure additional financing sources, such as debt or equity capital, to fund future growth, which financing may not be available on favorable terms or at all.

We are in the process of securing funding, which will provide the needed working capital until we are cash flow positive, which we believe will be in the first half of 2024.

If we are unable to raise the necessary capital at the times we require such funding, we may need to materially change our business plan, including delaying implementation of aspects of such business plan or curtailing or abandoning such business plan altogether.

Cash Flow Summary

Six Months Ended

Nine Months Ended

September 30,

Net cash provided by (used in):

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Net increase/(decrease) in cash and cash equivalents

Operating activities used net cash of $ 3,039,177 during the six months ended June 30, 2023, and used net cash of $ 5,362,545 during the six months ended June 30, 2022.

Operating activities used net cash of $ 4,671,862 during the nine months ended September 30, 2023 , and used net cash of $ 5,553,160 during the nine months ended September 30, 2022 .

Generally, our net operating cash flows fluctuate primarily based on changes in our profitability and working capital.

Cash used in operating activities decreased by approximately $ 881,298 .

Investing activities used net cash of $ 669,006 during the six months ended June 30, 2023, and $ 3,077,625 net cash during th e six months ended June 30, 2022 a decrease in cash used of $ 2,408,619 .

This change results primarily from a decrease of $ 526,324 of the purchase of property and equipment during the six months ended June 30, 2023 and $ 500,000 of an investment in non-marketable securities during the six months ended June 30, 2022 as well as $726,386 in project development costs during the six months ended June 30, 2022.

Financing activities provided net cash of $4,726,738 during the six months ended June 30, 2023.

Financing activities used $2,156,000 net cash during the six months ended June 30, 2022.

This change of $6,882,738 results from the proceeds from short term notes payable of $6,609,512 and $706,359 from long term notes payable offset by repayments of short term notes payable of $2,500,000.

In addition, there were $46,417 and $2,156,000 of distributions paid to non-controlling interest during the six months ended June 30, 2023 and 2022, respectively.

Investing activities used net cash of $ 692,604 during the nine months ended September 30, 2023 , and $ 3,549,372 net cash during th e nine months ended September 30, 2022 a decrease in cash used of $ 2,856,768 .

This amount resulted from a decrease due to project development cost of $ 119,885 , decrease of $ 42,662 because of investment in and advances to equity affiliates, and a decrease of $ 530,055 due to purchase of property , plant, and equipment.

Financing activities provided net cash of $ 5,494,596 during the nine months ended September 30, 2023 .

Financing activities used $ 1,803,680 net cash during the nine months ended September 30, 2022 .

This amount resulted from a decrease of $ 7,298,276 due to repurchase of common stock, decrease of $ 2,732,144 due to repayment of short term notes payable, increase of $ 7,609,514 from the proceeds from short term notes payable and warrants, net of debt issuance costs, an increase of $ 706 , 359 due to the proceeds from long term notes payable, and a decrease of $ 46,417 due to distribution to non-controlling interest.

We provide services to our construction and engineering customers in three separate phases:

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These phases may be embodied in a single contract or in separate contracts, which is typical of a design build process model.

As of June 30, 2023, we ha d eleven projects totaling $1,306,849 under contract .

As of September 30, 2023 , we ha d eleven projects totaling $ 1,306,849 under contract .

Of these contracts, all eleven projects combine all three phases or parts thereof and including construction.

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Backlog may fluctuate significantly due to the timing of orders or awards for large projects and is not necessarily indicative of future backlog levels or the rate at which backlog will be recognized as revenue.

Our backlog decreased by approximately $4,600,000 from December 31, 2022 to June 30, 2023.

Our backlog decreased by approximately $ 3,000,000 from December 31, 2022 to September 30, 2023 .

We expect that all of this revenue will be realized by December 31, 2023 .

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Off-Balance Sheet Arrangements

As of June 30, 2023 and December 31, 2022, we had no material off-balance sheet arrangements to which we are a party.

As of September 30, 2023 and December 31, 2022 , we had no material off-balance sheet arrangements to which we are a party.

In the ordinary course of business, we enter into agreements with third parties that include indemnification provisions which, in our judgment, are normal and customary for companies in our industry sector.

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As a result, the estimated fair value of liabilities relating to these provisions is minimal.

Accordingly, we have no liabilities recorded for these provisions as of June 30, 2023 .

Accordingly, we have no liabilities recorded for these provisions as of September 30, 2023 .

Critical Accounting Estimates

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Our evaluation of goodwill completed during the year ended December 31, 2022 , resulted in no impairment loss.

There was no impairment during the June 30, 2023.

There was no impairment during the September 30, 2023 .

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

In addition, included in intangible assets is $ 68,344 of trademarks, and $ 238,422 of website costs that are being amortized over 5 years.

We evaluated intangible assets for impairment during the six months ended June 30, 2023 and 2022 and determined that there are no impairment losses.

We evaluated intangible assets for impairment during the nine months ended September 30, 2023 and 2022 and determined that there are no impairment losses.

New Accounting Pronouncements

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EBITDA and Adjusted EBITDA are non-GAAP financial measures and have been presented as supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP.

We calculate EBITDA as net income (loss) before interest expense, income tax benefit (expense), depreciation and amortization.

We calculate Adjusted EBITDA as EBITDA before certain non-recurring adjustments such as loss on conversion of convertible debentures, change in fair value of financial instruments and stock compensation expense.

EBITDA and Adjusted EBITDA are presented because they are important metrics used by management as one of the means by which it assesses our financial performance.

We calculate EBITDA as net income (loss) attributable to common stockholders before interest expense, income tax benefit (expense), depreciation and amortization.

We calculate Adjusted EBITDA as EBITDA before certain non-recurring, unusual or non-operational items, such as litigation expense, stock issuance expense and stock compensation expense.

We believe that adjusting EBITDA to exclude the effects of these items that are not closely associated with ongoing corporate operations provides management and investors with a meaningful measure that increases period-to -period comparability of our operating performance.

We believe the presentation of EBITDA and Adjusted EBITDA is relevant and useful by enhancing the readers’ ability to understand the Company’s operating performance.

Our management utilizes EBITDA and Adjusted EBITDA as a means to measure performance.

EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry.

These measures, when used in conjunction with related GAAP financial measures, provide investors with an additional financial analytical framework that may be useful in assessing us and our results of operations.

EBITDA and Adjusted EBITDA have certain limitations.

EBITDA and Adjusted EBITDA should not be considered as alternatives to net income (loss), or any other measures of financial performance derived in accordance with GAAP.

These measures also should not be construed as an inference that our future results will be unaffected by unusual o r non-recurring items for which these non-GAAP measures make adjustments.

Additionally, EBITDA and Adjusted EBITDA are not intended to be liquidity measures because of certain limitations, including, but not limited to:

They do not reflect our cash outlays for capital expenditures;

They do not reflect changes in, or cash requirements for, working capital;

Although depreciation and amortization are non-cash charges, the assets are being depreciated and amortized and may have to be replaced in the future, and these non-GAAP measures do not reflect cash requirements for such replacements.

Our measurements of EBITDA and Adjusted EBITDA may not be comparable to similar titled measures reported by other companies.

Other companies, including other companies in our industry, may not use such measures or may calculate one or more of the measures differently than as presented in this Quarterly Report on Form 10-Q, limiting their usefulness as a comparative measure.

In evaluating EBITDA and Adjusted EBITDA, you should be aware that in the future we will incur expenses that are the same or similar to some of the adjustments made in our calculations, and our presentation of EBITDA and Adjusted EBITDA should not be construed to mean that our future results will be unaffected by such adjustment.

Management compensates for these limitations by using EBITDA and Adjusted EBITDA as supplemental financial metrics and in conjunction with our results prepared in accordance with GAAP.

EBITDA and Adjusted EBITDA are not measurements of financial performance under GAAP and should not be considered as an alternative to net income (loss) attributable to common stockholders, or any other measures of financial performance derived in accordance with GAAP.

We do not consider these non-GAAP measures to be substitutes for or superior to the information provided by our GAAP financial results.

The non-GAAP information should be read in conjunction with our consolidated financial statements and related notes.

These measures also should not be construed as an inference that our future results will be unaffected by the non-recurring, unusual or non-operational items for which these non-GAAP measures make adjustments.

Additionally, EBITDA and Adjusted EBITDA are not intended to be liquidity measures.

Non-GAAP Financial Information (continued)

The following is a reconciliation of EBITDA and Adjusted EBITDA to the nearest GAAP measure, net gain (loss):

The following is a reconciliation of EBITDA and Adjusted EBITDA to the nearest GAAP measure, net gain (loss) attributable to common stockholders:

Three Months Ended

June 30, 2023

September 30, 2023

Three Months Ended

June 30, 2022

Six Months Ended

June 30, 2023

Six Months Ended

June 30, 2022

September 30, 2022

Nine Months Ended

September 30, 2023

Nine Months Ended

September 30, 2022

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

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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 2. Management’s Discussion and Analysis