OLENOX INDUSTRIES INC. 10-Q

ITEM 1 . Financial Statements SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Condensed Consolidated Balance Sheets September 30, 2023 December 31, 2022 (Unaudited) Assets Current assets: Cash and cash equivalents $ 712,906 $ 582,776 Accounts receivable, net 741,299 1,280,456 Contract assets 18,391 36,384 Held for sale assets 4,400,361 4,396,826 Inventories 402,186 465,560 Prepaid expenses and other current assets 826,917 744,211 Total current assets 7,102,060 7,506,213 Property, plant and equipment, net 6,901,417 5,608,903 Project development costs and other non-current assets 603,431 483,546 Goodwill 1,309,330 1,309,330 Right-of-use asset 2,203,659 4,421,002 Long-term note receivable 879,418 857,534 Intangible assets, net 1,951,367 1,997,833 Deferred contract costs, net 40,785 71,374 Investment in non-marketable securities 700,000 700,000 Investment in and advances to equity affiliates 3,642,607 3,599,945 Total Assets $ 25,334,074 $ 26,555,680 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable and accrued expenses $ 6,193,349 $ 4,009,522 Contract liabilities 1,311,002 437,271 Lease liability, current maturities 1,001,138 1,225,394 Assumed liability 20,795 5,795 Short term notes payable, net 7,156,737 2,648,300 Total current liabilities 15,683,021 8,326,282 Long-term note payable 2,500,000 750,000 Lease liability, net of current maturities 734,027 3,039,836 Total liabilities 18,917,048 12,116,118 Stockholders’ equity: Preferred stock, $ 1.00 par value, 5,405,010 shares authorized; none issued or outstanding — — Common stock, $ 0.01 par value, 25,000,000 shares authorized; 16,482,771 issued and 15,948,789 outstanding as of September 30, 2023 and 12,613,978 issued and 12,590,863 outstanding as of December 31, 2022 164,828 126,140 Additional paid-in capital 67,760,551 56,173,977 Treasury stock, at cost – 67,318 shares as of September 30, 2023 and 23,115 shares as of December 31, 2022 ( 92,396 ) ( 49,680 ) Accumulated deficit ( 62,331,370 ) ( 41,428,268 ) Total Safe & Green Holdings Corp. stockholders’ equity 5,501,613 14,822,169 Non-controlling interest 915,413 ( 382,607 ) Total stockholders’ equity 6,417,026 14,439,562 Total Liabilities and Stockholders’ Equity $ 25,334,074 $ 26,555,680 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Condensed Consolidated Statements of Operations For the Three Months Ended September 30, For the Three Months Ended September 30, For the Nine Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenue: Construction services $ 3,965,361 $ 2,685,920 $ 14,566,351 $ 8,567,568 Engineering services — 6,599 — 81,305 Medical revenue — 1,437,738 — 11,640,953 Total 3,965,361 4,130,257 14,566,351 20,289,826 Cost of revenue: Construction services 4,501,393 2,688,450 15,138,225 8,631,031 Engineering services — 5,001 — 58,893 Medical revenue — 1,601,980 — 8,506,681 Total 4,501,393 4,295,431 15,138,225 17,196,605 Gross profit (loss) ( 536,032 ) ( 165,174 ) ( 571,874 ) 3,093,221 Operating expenses: Payroll and related expenses 819,909 1,294,857 6,318,728 3,650,553 General and administrative expenses 1,353,866 939,044 4,499,982 2,515,877 Marketing and business development expenses 265,313 103,111 455,463 337,941 Total 2,439,088 2,337,012 11,274,173 6,504,371 Operating loss ( 2,975,120 ) ( 2,502,186 ) ( 11,846,047 ) ( 3,411,150 ) Other income (expense): Interest expense ( 738,649 ) ( 52,758 ) ( 1,549,992 ) ( 174,733 ) Interest income 3,186 9,756 22,002 33,518 Other income (expense) 102,449 ( 2,963 ) 690,939 488,346 Total ( 633,014 ) ( 45,965 ) ( 837,051 ) 347,131 Loss before income taxes ( 3,608,134 ) ( 2,548,151 ) ( 12,683,098 ) ( 3,064,019 ) Income tax expense — — — — Net loss ( 3,608,134 ) ( 2,548,151 ) ( 12,683,098 ) ( 3,064,019 ) Add: net income (loss) attributable to noncontrolling interests — ( 94,568 ) — 1,522,101 Net loss attributable to common stockholders of Safe & Green Holdings Corp. $ ( 3,608,134 ) $ ( 2,453,583 ) $ ( 12,683,098 ) $ ( 4,586,120 ) Net loss per share attributable to Safe & Green Holdings Corp. Basic and diluted $ ( 0.22 ) $ ( 0.18 ) $ ( 0.86 ) $ ( 0.35 ) Weighted average shares outstanding: Basic and diluted 16,057,132 13,459,713 14,761,502 13,228,828 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaud ited) $ 0.01 Par Value Common Stock Additional Paid-in Treasury Accumulated Safe & Green Holdings Corp. Stockholders' Noncontrolling Total Stockholders’ Shares Amount Capital Stock Deficit Equity Interests Equity Balance at June 30, 2023 16,016,107 $ 160,161 $ 60,189,651 $ ( 92,396 ) $ ( 50,503,232 ) $ 9,754,184 $ ( 429,024 ) $ 9,325,160 D istribution of SG DevCorp — — 6,875,567 — ( 8,220,004 ) ( 1,344,437 ) 1,344,437 — Conversion of short-term notes payable 466,664 4,667 695,333 — — 700,000 — 700,000 Net loss — — — — ( 3,608,134 ) ( 3,608,134 ) — ( 3,608,134 ) Balance at September 30, 2023 16,482,771 $ 164,828 $ 67,760,551 $ ( 92,396 ) $ ( 62,331,370 ) $ 5,501,613 $ 915,413 $ 6,417,026 Balance at December 31, 2022 12,613,978 $ 126,140 $ 56,173,977 $ ( 49,680 ) $ ( 41,428,268 ) $ 14,822,169 $ ( 382,607 ) $ 14,439,562 Stock-based compensation — — 3,210,631 — — 3,210,631 — 3,210,631 Issuance of restricted common stock 287,512 2,875 434,450 — — 437,325 — 437,325 Issuance of restricted stock units 3,014,617 30,146 ( 30,146 ) — — — — — Common stock issued for services 50,000 500 47,000 — — 47,500 — 47,500 Issuance of warrants and restricted common stock 50,000 500 353,739 — — 354,239 — 354,239 Noncontrolling interest distribution — — — — — — ( 46,417 ) ( 46,417 ) Treasury stock — — — ( 42,716 ) — ( 42,716 ) — ( 42,716 ) Distribution of SG DevCorp — — 6,875,567 — ( 8,220,004 ) ( 1,344,437 ) 1,344,437 — Conversion of short-term notes payable 466,664 4,667 695,333 — — 700,000 — 700,000 Net loss — — — — ( 12,683,098 ) ( 12,683,098 ) — ( 12,683,098 ) Balance at September 30, 2023 16,482,771 $ 164,828 $ 67,760,551 $ ( 92,396 ) $ ( 62,331,370 ) $ 5,501,613 $ 915,413 $ 6,417,026 4 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaud ited) $ 0.01 Par Value Common Stock Additional Paid-in Treasury Accumulated Safe & Green Holdings Corp. Stockholders' Noncontrolling Total Stockholders’ Shares Amount Capital Stock Deficit Equity Interests Equity Balance at June 30, 2022 12,050,206 $ 120,502 $ 54,660,934 $ — $ ( 35,241,757 ) $ 19,539,679 $ 824,404 $ 20,364,083 Stock-based compensation — — 594,694 — — 594,694 — 594,694 N oncontrolling interest distribution — — — — — — ( 98,000 ) ( 98,000 ) Repurchase of common stock ( 23,115 ) — — ( 49,680 ) — ( 49,680 ) — ( 49,680 ) Net income (loss) — — — — ( 2,453,583 ) ( 2,453,583 ) ( 94,568 ) ( 2,548,151 ) Balance at September 30, 2022 12,027,091 $ 120,502 $ 55,255,628 $ ( 49,680 ) $ ( 37,695,340 ) $ 17,631,110 $ 631,836 $ 18,262,946 Balance at December 31, 2021 11,986,873 $ 119,869 $ 53,341,405 $ — $ ( 33,109,220 ) $ 20,352,054 $ 1,363,735 $ 21,715,789 Stock-based compensation 20,000 200 1,914,656 — — 1,914,856 — 1,914,856 Issuance of restricted stock units 43,333 433 ( 433 ) — — — — — Noncontrolling interest distribution — — — — — — ( 2,254,000 ) ( 2,254,000 ) Repurchase of common stock ( 23,115 ) — — ( 49,680 ) — ( 49,680 ) — ( 49,680 ) Net income (loss) — — — — ( 4,586,120 ) ( 4,586,120 ) 1,522,101 ( 3,064,019 ) Balance at September 30, 2022 12,027,091 $ 120,502 $ 55,255,628 $ ( 49,680 ) $ ( 37,695,340 ) $ 17,631,110 $ 631,836 $ 18,262,946 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 S AFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2023 For the Nine Months Ended September 30, 2022 (Unaudited) (Unaudited) Cash flows from operating activities: Net loss $ ( 12,683,098 ) $ ( 3,064,019 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 277,648 317,249 Amortization of intangible assets 140,437 122,587 Amortization of deferred license costs 30,589 30,589 Amortization of debt issuance costs and debt discount 685,308 23,726 Amortization of right of use asset 613,092 — Common stock issued for services 484,825 — Bad debt expense — 7,024 Interest income on long-term note receivable ( 21,884 ) ( 28,048 ) Stock-based compensation 3,210,631 1,874,857 Loss on asset disposal — 241 Changes in operating assets and liabilities: Accounts receivable 539,157 1,197,149 Escrow - bond — ( 2,000,000 ) Contract assets 17,993 41,916 Inventories 63,374 378,863 Prepaid expenses and other current assets ( 82,710 ) ( 35,845 ) Intangible assets ( 93,971 ) — Right of use asset — 356,350 Accounts payable and accrued expenses 2,183,831 ( 4,006,868 ) Contract liabilities 873,731 ( 163,161 ) Due to affiliates — ( 264,451 ) Lease liability ( 925,815 ) ( 341,319 ) Assumed liability 15,000 — Net cash used in operating activities ( 4,671,862 ) ( 5,553,160 ) Cash flows from investing activities: Purchase of property, plant and equipment ( 530,057 ) ( 1,996,200 ) Proceeds from sale of equipment — 760 Repayment of promissory note — ( 100,000 ) Project development costs ( 119,885 ) ( 805,362 ) Investment in and advances to equity affiliates ( 42,662 ) ( 148,570 ) Investment in non-marketable securities — ( 500,000 ) Net cash used in investing activities ( 692,604 ) ( 3,549,372 ) Cash flows from financing activities: Repurchase of common stock ( 42,716 ) ( 49,680 ) Repayment of short term notes payable ( 2,732,144 ) — Proceeds from short-term notes payable and warrants, net of debt issuance costs 7,609,514 500,000 Proceeds from long-term notes payable 706,359 — Distribution paid to non-controlling interest ( 46,417 ) ( 2,254,000 ) Net cash provided by (used in) financing activities 5,494,596 ( 1,803,680 ) Net increase/(decrease) in cash and cash equivalents 130,130 ( 10,906,212 ) Cash and cash equivalents - beginning of period 582,776 13,024,381 Cash and cash equivalents - end of period $ 712,906 $ 2,118,169 Supplemental disclosure of non-cash investing and financing activities: Initial value of lease liability $ — $ 1,801,584 Conversion of short-term notes payable to common stock $ 700,000 $ — The accompanying notes are an integral part of these condensed consolidated financial statements. 6 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 1 . Description of Business 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. (“SG Building,” formerly SG Blocks Inc.) (the “Merger”), with SG Building surviving the Merger and becoming a wholly-owned subsidiary of the Company. The Merger was a reverse merger that was accounted for as a recapitalization of SG Building, as SG Building was the accounting acquirer. The Company operates in the following four segments: (i) manufacturing & construction services ; (ii) medical; (ii) real estate development; and (iv) environmental. 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 (i) provide turnkey solutions to medical testing and treatment and generate revenue from the medical testing and point of care treatment in our medical suites and (ii) sell and lease medical suites and privacy pods . The Company’s real estate development segment, SG Development Corp., our majority owned subsidiary, builds innovative and green single or multifamily projects in underserved regions nationally using modules (“Modules”) built in one of the Company’s vertically integrated factories. The environmental segment, the newest segment, is a sustainable medical and waste management solution that collects waste and treats waste for safe disposal. The building products developed with the Company's proprietary technology and design and engineering expertise are generally stronger, more durable, environmentally sensitive, and erected in less time than traditional construction methods. The use of the Company's Modules typically provides between four to six points towards the Leadership in Energy and Environmental Design (“LEED”) certification levels, including reduced site disturbance, resource reuse, recycled content, innovation in design and use of local and regional materials. Due to the ability of the Modules to satisfy such requirements, the Company believes the products produced utilizing its technology and expertise is a leader in environmentally sustainable construction. There are three core product offerings that utilize the Company's technology and engineering expertise. The first product offering involves GreenSteel™ modules, which are the structural core and shell of an SGBlocks building. The Company procures the containers, engineer required openings with structural steel enforcements, paint the SGBlocks and then deliver them on-site, where the customer or a customer’s general contractor will complete the entire finish out and installation. The second product offering involves replicating the process to create the GreenSteel product and, in addition, installing selected materials, finishes and systems (including, but not limited to floors, windows, doors, interior painting, electrical wiring and fixtures, plumbing outlets and bathrooms, roofing system) and delivering SGBlocks pre-fabricated containers to the site for a third party licensed general contractor to complete the final finish out and installation. Finally, the third product offering is the completely fabricated and finished SGBlocks building (including but not limited to floors, windows, doors, interior painting, electrical wiring and fixtures, plumbing outlets and bathrooms, roofing systems), including erecting the final unit on site and completing any other final steps. The building is ready for occupancy and/or use as soon as installation is completed. Construction administration and/or project management services are typically included in the Company's product offerings. The Company also provides engineering and project management services related to the use and modification of Modules in construction. Construction During 2020 , the Company formed, SG Echo, LLC ("SG Echo"), a wholly owned subsidiary of the Company. The Company acquired substantially all the assets of Echo DCL (“Echo”), a Texas limited liability company, except for Echo's real estate holdings for which the Company 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 the Company's key supply chain partners. Echo caters to the military, education, administration facilities, healthcare, government, commercial and residential customers. This acquisition has allowed the Company to expand its reach for the Modules and offer an opportunity to vertically integrate a large portion of the Company's cost of goods sold, as well as increase margins, productivity and efficiency in the areas of design, estimating, manufacturing and delivery and to become the manufacturer of the Company's core container and modular product offerings. 7 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 1 . Description of Business (continued) Medical 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 March 2023, the Company formed Safe and Green Medical Corporation. (“SG Medical”). The Company also entered into a joint venture with Clarity Lab Solutions LLC., to provide clinical lab testing related to COVID-19. Real Estate Development During 2021 , the Company formed Safe and Green Development Corporation, formerly, SGB Development Corp. (“SG DevCorp”), as a wholly-owned by the Company. SG DevCorp was formed with the purpose of real property development utilizing the Company's technologies. SG DevCorp has a minority interest in Norman Berry II Owners LLC and JDI-Cumberland Inlet LLC as described further below. In December 2022, the Company and then owner of 100 % of the issued and outstanding securities of SG DevCorp , announced its plan to separate the Company and SG DevCorp into two separate publicly traded companies (the “Separation”). To implement the Separation, on September 27, 2023 (the “Distribution Date”), the Company, effected a pro rata distribution to its stockholders of approximately 30 % of the outstanding shares of SG DevCorp’s common stock (the “Distribution”). In connection with the Distribution, each Company stockholder received 0.930886 shares of SG DevCorp’s common stock for every five ( 5 ) shares of Company 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 the Company and the Company held 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, SG DevCorp entered into a separation and distribution agreement and several other agreements with the Company. These agreements provide for the allocation between SG DevCorp and the Company of the assets, employees, liabilities and obligations (including, among others, investments, property, employee benefits and tax-related assets and liabilities) of the Company and its subsidiaries attributable to periods prior to, at and after the Separation and will govern the relationship between the Company 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 the Company included a tax matters agreement and a shared services agreement. 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. 2. Liquidity As of September 30, 2023 , the Company had cash and cash equivalents of $ 712,906 and a backlog of $ 4,000,771 . See Note 11 for a discussion of constructi on backlog. Based on its conversations with key customers, the Company anticipates its backlog to convert to revenue over the following period: 2023 Within 1 year $ 4,000,771 Total Backlog $ 4,000,771 The Company has incurred losses since its inception, has negative working capital of $( 9,280,961 ) 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. 8 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 2. Liquidity 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. 3. 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 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, 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, 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, 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 . In some instances, the length of the contract may exceed twelve months . 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 . 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. The recognition of revenue aligns with the timing of when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. To achieve this core principle, the Company applies the following five steps in accordance with its revenue policy: ( 1 ) Identify the contract with a customer ( 2 ) Identify the performance obligations in the contract ( 3 ) Determine the transaction price ( 4 ) Allocate the transaction price to performance obligations in the contract ( 5 ) Recognize revenue as performance obligations are satisfied 9 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 3 . Summary of Significant Accounting Policies (continued) On certain contracts, the Company applies recognition of revenue over time, which is similar to the method the Company applied under previous guidance (i.e. percentage of completion). Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress toward complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. 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. 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. The Company entered into a joint venture agreement with Clarity Lab Solutions, LLC (“Clarity Labs”) (the “JV”) in the fourth quarter of 2021 . Revenue from the activities of the JV is related to clinical testing services and was recognized when services have been rendered, which was at a point in time. Included in the consideration the Company expected to be entitled to receive, the Company estimated its contractual allowances, payer denials and price concessions. 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, 2023 and 2022 , the Company recognized $ 0 and $ 10,200,000 , 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 revenue for the three and nine months ended September 30, 2022 was principally derived from construction and engineering contracts related to the manufacturing of modular units used for construction , and medical revenue derived from lab testing and test kit sales . The Company’s revenues for the three and nine months ended September 30, 2023 was principally derived from construction contracts related to the manufacturing of modular units The Company's contracts are with customers in various industries. Revenue recognized at a point in time and recognized over time were $ 0 and $ 14,566,351 , respectively, for the nine months ended September 30, 2023 . Revenue recognized at a point in time and recognized over time were $ 11,640,953 and $ 8,648,873 , respectively, for the nine months ended September 30, 2022 . Revenue recognized at a point in time and recognized over time were $ 0 and $ 3,965,361 , respectively, for the three months ended September 30, 2023 . Revenue recognized at a point in time and recognized over time were $ 1,437,738 and $ 2,692,519 , respectively, for the three months ended September 30, 2022 . The following tables provide further disaggregation of the Company’s revenues by categories: Three Months Ended September 30, Revenue by Customer Type 2023 2022 Construction and Engineering Services: Hotel $ — — % $ 1,224,181 30 % Office 3,965,361 100 % 1,468,338 35 % Subtotal 3,965,361 100 % 2,692,519 65 % Medical Revenue: Medical (lab testing, kit sales and equipment) — — % 1,437,738 35 % Total revenue by customer type $ 3,965,361 100 % $ 4,130,257 100 % 10 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 3 . Summary of Significant Accounting Policies (continued) Nine Months Ended September 30, Revenue by Customer Type 2023 2022 Construction and Engineering Services: Government $ — — % $ 39 — % Hotel 44,201 — % 2,368,960 13 % Multi-Family (includes Single Family) — — % 86,034 — % Office 14,522,150 100 % 6,178,856 30 % Retail — — % 5,344 — % Special Use — — % 9,640 — % Subtotal 14,566,351 100 % 8,648,873 43 % Medical Revenue: Medical (lab testing, kit sales and equipment) — — % 11,640,953 57 % Total revenue by customer type $ 14,566,351 100 % $ 20,289,826 100 % Contract Assets and Contract Liabilities Accounts receivable are recognized in the period when the Company’s right to consideration is unconditional. Accounts receivable are recognized net of an allowance for credit losses. A considerable amount of judgment is required in assessing the likelihood of realization of receivables. The timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets include unbilled amounts from long-term construction services when revenue recognized under the cost-to-cost measure of progress exceeds the amounts invoiced to customers, as the amounts cannot be billed under the terms of the Company’s contracts. Such amounts are recoverable from customers based upon various measures of performance, including achievement of certain milestones, completion of specified units or completion of a contract. Contract assets are generally classified as current within the condensed consolidated balance sheets. Contract liabilities from construction and engineering contracts occur when amounts invoiced to customers exceed revenues recognized under the cost-to-cost measure of progress. Contract liabilities additionally include advanced payments from customers on certain contracts. Contract liabilities decrease as the Company recognizes revenue from the satisfaction of the related performance obligation. Contract liabilities are generally classified as current within the condensed consolidated balance sheet. A lthough the Company believes it has established adequate procedures for estimating costs to complete on open contracts, it is at least reasonably possible that additional significant costs could occur on contracts prior to completion. The Company periodically evaluates and revises its estimates and makes adjustments when they are considered necessary. 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”). A s a result of entering into the ELA in 2019 the property became subject to the ELA and the Company was no longer obliged to its Original Agreement. Upon entering the ELA, the Company had an outstanding accounts receivable balance of $ 306,143 which was forfeited and recognized this amount as deferred contract costs. This amount was offset by $ 102,217 , which was reimbursement from the licensee for project costs on this project. 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 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 September 30, 2023 , accumulated amortization related to deferred contract costs amounted to $ 163,140 . During the nine months ended September 30, 2023 and 2022 , 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 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. 11 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 3 . Summary of Significant Accounting Policies (continued) Bu siness Combinations - The Company accounts for business acquisitions using the acquisition method of accounting in accordance with ASC 805 “Business Combinations”, which requires recognition and measurement of all identifiable assets acquired and liabilities assumed at their fair value as of the date control is obtained. The Company determines the fair value of assets acquired and liabilities assumed based upon its best estimates of the acquisition-date fair value of assets acquired and liabilities assumed in the acquisition. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired. Subsequent adjustments to fair value of any contingent consideration are recorded to the Company’s consolidated statements of operations. Costs that the Company incurs to complete the business combination are charged to general and administrative expenses as they are incurred. Variable Interest Entities – The Company accounts for certain legal entities as variable interest entities (“VIE"). When evaluating a VIE for consolidation, the Company must determine whether or not there is a variable interest in the entity. Variable interests are investments or other interests that absorb portions of an entity’s expected losses or receive portions of the entity’s expected returns. If it is determined that the Company does not have a variable interest in the VIE, no further analysis is required and the VIE is not consolidated. If the Company holds a variable interest in a VIE, the Company consolidates the VIE when there is a controlling financial interest in the VIE and therefore are deemed to be the primary beneficiary. The Company is determined to have a controlling financial interest in a VIE when it has both the power to direct the activities of the VIE that most significantly impact the VIE economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to that VIE. This determination is evaluated periodically as facts and circumstances change. 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 the Company’s common stock over a defined vesting period starting in December 1, 2020. The restricted shares of the Company's 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 was also engaged in the business of manufacturing, importing and distributing various medical tests. 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 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 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 (“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 . The purpose of Norman Berry II Owner LLC is to develop and provide affordable housing in the Atlanta, Georgia metropolitan area. The Company has determined it is not the primary beneficiary of "Norman Berry" and thus will not consolidate the activities in its consolidated financial statements. 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 (“Cumberland”). The Company contributed $ 3,000,000 for its 10 % equity interest. During the nine months ended September 30, 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. The Company has determined it is not the primary beneficiary of JDI-Cumberland Inlet, LLC and thus will not consolidate the activities in its consolidated financial statements. The Company will use the equity method to report the activities as an investment in its consolidated financial statements. During the nine months ended September 30, 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 September 30, 2023 . 12 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 3 . Summary of Significant Accounting Policies (continued) The approximate combined financial position of the Company’s equity affiliates are summarized below as of September 30, 2023 and December 31, 2022 : Condensed balance sheet information: September 30, 2023 December 31, 2022 (Unaudited) (Unaudited) Total assets $ 37,500,000 $ 37,500,000 Total liabilities $ 7,100,000 $ 7,100,000 Members’ equity $ 30,400,000 $ 30,400,000 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 $ 712,906 and $ 582,776 as of September 30, 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, 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. Amounts included in accounts receivable are deemed to be collectible within the Company’s operating cycle. 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. Management provides an allowance for credit losses based on the Company’s historical losses, specific customer circumstances, and general economic conditions. Periodically, management reviews accounts receivable and adjusts the allowance based on current circumstances and charges off uncollectible receivables when all attempts to collect have been exhausted and the prospects for recovery are remote. Recoveries are recognized when they are received. Actual collection losses may differ from the Company’s estimates and could be material to its consolidated financial position, results of operations, and cash flows. Inventory – Raw construction materials (primarily shipping containers and fabrication materials) are valued at the lower of cost (first-in, first-out method) or net realizable value. Finished goods and work-in-process inventories are valued at the lower of cost or net realizable value, using the specific identification method. 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, 2023 and December 31, 2022 there was inventory of $ 402,186 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. The Company performs a goodwill impairment test by comparing the fair value of the reporting unit with its carrying value and recognizes an impairment charge for the amount by which the carrying value exceeds the fair value, not to exceed the total amount of goodwill . 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, 2023 or 2022 . Intangible assets – Intangible assets consist of $ 2,766,000 of proprietary knowledge and technology, which is being amortized over 20 years. Included in intangible assets is $ 68,344 of trademarks, and $ 238,422 of website costs that are being amortized over 5 years. The Company evaluated intangible assets for impairment during the nine months ended September 30, 2023 and 2022 and determined that there are no impairment losses. The accumulated amortization for intangible assets as of September 30, 2023 and 2022 was $ 1,121,399 and $ 938,319 , respectively. The amortization expense for the nine months ended September 30, 2023 and 2022 was $ 140,437 and $ 122,587 , respectively. The amortization expense for the three months ended September 30, 2023 and 2022 was $ 47,027 and $ 39,243 , respectively. The estimated amortization expense for the successive five years is as follows: 13 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 3 . Summary of Significant Accounting Policies (continued) For the year ending December 31: 2023 (remaining) $ 49,370 2024 192,436 2025 189,019 2026 171,684 2027 168,006 Thereafter 1,180,852 $ 1,951,367 Property, plant and equipment – Property, plant and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated lives of each asset. Estimated useful lives for significant classes of assets are as follows: computer and software 3 to 5 years, furniture and other equipment 5 to 7 years, automobiles 2 to 5 years, buildings held for lease 5 to 7 years, and equipment 5 t o 29 years. Repairs and maintenance are charged to expense when incurred. 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. Including the project development costs associated with Lago Vista of $ 824,231 , the book value is now $ 4,400,361 . Convertible instruments – The Company bifurcates conversion options from their host instruments and accounts for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Common stock purchase warrants and other derivative financial instruments – The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provides a choice of net-cash settlement or settlement in the Company’s own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company’s own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if any event occurs and if that event is outside the Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement shares (physical settlement or net-cash settlement). The Company assesses classification of common stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities or equity is required. Fair value measurements – Financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are carried at cost, which the Company believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. 14 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 3 . Summary of Significant Accounting Policies (continued) The Company uses three levels of inputs that may be used to measure fair value: Level 1 Quoted prices in active markets for identical assets or liabilities. Level 2 Quoted prices for similar assets and liabilities in active markets or inputs that are observable. Level 3 Inputs that are unobservable (for example, cash flow modeling inputs based on assumptions). Transfer into and transfers out of the hierarchy levels are recognized as if they had taken place at the end of the reporting period. Share-based payments – The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, including non-employee directors, the fair value of a stock option award is measured on the grant date. The fair value amount is then recognized over the period services are required to be provided in exchange for the award, usually the vesting period. The Company recognizes stock-based compensation expense on a graded-vesting basis over the requisite service period for each separately vesting tranche of each award. Stock-based compensation expense to employees and all directors are reported within payroll and related expenses in the consolidated statements of operations. Stock-based compensation expense to non-employees is reported within marketing and business development expense in the condensed consolidated statements of operations. Income taxes – The Company accounts for income taxes utilizing the asset and liability approach. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes generally represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from the differences between the financial and tax bases of the Company’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for anticipated tax audit issues based on the Company’s estimate of whether, and the extent to which, additional taxes will be due. If payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the liabilities are no longer determined to be necessary. If the estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result. Concentrations of credit risk – Financial instruments, that potentially subject the Company to concentration of credit risk, consist principally of cash and cash equivalents. The Company places its cash with high credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limits. The Company has not experienced any losses in such account and believes that it is not exposed to any significant credit risk on the account. With respect to receivables, concentrations of credit risk are limited to a few customers in the construction industry. 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, 2023 and December 31, 2022 , 87 % and 80 %, respectively, of the Company’s gross accounts receivable were due from three and three customers. Revenue relating to one and two customers represented approximately 100 % and 93 % of the Company's total revenue for the three months ended September 30, 2023 and 2022 , respectively. Revenue relating to one and one customers represented approximately 97 % and 88 % of the Company's total revenue for the nine months ended September 30, 2023 and 2022 , respectively. There were no vendors representing 10 % or more of the Company’s total cost of revenue for the three and nine months ended September 30, 2023 and 2022. The Company believes it has access to alternative suppliers, with limited disruption to the business, should circumstances change with its existing suppliers. 15 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 4. Accounts Receivable At September 30, 2023 and December 31, 2022 , the Company’s accounts receivable consisted of the following: 2023 2022 Billed: Construction services $ 887,045 $ 1,310,456 Other receivable — 115,746 Total gross receivables 887,045 1,426,202 Less: allowance for credit losses ( 145,746 ) ( 145,746 ) Total net receivables $ 741,299 $ 1,280,456 Receivables are evaluated for collectability and allowances for potential losses are established or maintained on applicable receivables. 5. 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, 2023 and December 31, 2022 : 2023 2022 Costs incurred on uncompleted contracts $ 17,242,167 $ 13,730,177 Provision for loss on uncompleted contracts — — Estimated earnings to date on uncompleted contracts 103,251 ( 2,160,085 ) Gross contract assets 17,345,418 11,570,092 Less: billings to date ( 18,638,029 ) ( 11,970,979 ) Net contract assets/(liabilities) on uncompleted contracts $ ( 1,292,611 ) $ ( 400,887 ) The above amounts are included in the accompanying condensed consolidated balance sheets under the f ollowing captions at September 30, 2023 and December 31, 2022 . 2023 2022 Contract assets $ 18,391 $ 36,384 Contract liabilities ( 1,311,002 ) ( 437,271 ) Net contract assets (liabilities) $ ( 1,292,611 ) $ ( 400,887 ) Although management believes it has established adequate procedures for estimating costs to complete on open contracts, it is at least reasonably possible that additional significant costs could occur on contracts prior to completion. The Company peri odically evaluates and revises its estimates and makes adjustments when they are considered necessary. 16 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 6. 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, 2023 and December 31, 2022 , the Company’s property, plant and equipment, net consisted of the following: 2023 2022 Computer equipment and software $ 99,505 $ 94,530 Furniture and other equipment 271,798 271,798 Leasehold improvements 17,280 17,280 Equipment and machinery 943,464 943,464 Automobiles 4,638 4,638 Building held for leases 196,416 196,416 Laboratory and temporary units 1,364,748 1,364,748 Land 1,190,655 1,190,655 Building 969,113 — Construction in progress 2,840,174 2,244,100 Property, plant and equipment 7,897,791 6,327,629 Less: accumulated depreciation ( 996,374 ) ( 718,726 ) Property, plant and equipment, net $ 6,901,417 $ 5,608,903 Depreciation expense for the three months ended September 30, 2023 and 2022 amounted to $ 92,984 and $ 106,271 respectively. Depreciation expense for the nine months ended September 30, 2023 and 2022 amounted to $ 277,648 and $ 317,249 respectively. 7. Notes Receivable On January 21, 2020, CPF GP 2019 - 1 LLC (“CPF GP”) issued to the Company a promissory note in the principal amount of $ 400,000 (the “Company Note”) and issued to Paul Galvin, the Company’s Chairman and CEO, a promissory note in the principal amount of $ 100,000 (the “Galvin Note”). The transaction closed on January 22, 2021, on which date the Company loaned CPF GP 2019 - 1 LLC $ 400,000 and Mr. Galvin personally loaned CPF GP $ 100,000 on behalf of the Company. The Company Note and Galvin Note were issued pursuant to that certain Loan Agreement and Promissory Note, dated October 3, 2019 (the “Loan Agreement”), as amended on October 15, 2019 and November 7, 2019 by and between 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; provided, that the terms of the Galvin Note provide that all interest payments due to Mr. Galvin under the Galvin Note shall be paid directly to, and for the benefit of, the Company. In April 2020, CPF GP issued to the Company a promissory note in the principal amount of $ 250,000 (the “Company Note 2 ”). The transaction closed on April 15, 2021, on which date the Company loaned CPF GP 2019 - 1 LLC $ 250,000 . 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 year ended December 31, 2022 , the Galvin Note was assigned to the Company and the principal amount of $ 100,000 was paid to Mr. Galvin. The Company has a promissory note in the principal amount of $ 100,000 (the "Company Note 3 ") and the assignment occurred in January 2022. 17 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 8. Notes Payable On July 14, 2021, SG DevCorp, a subsidiary of the Company, issued a Real Estate Lien Note, in the principal amount of $ 2,000,000 (the “Short-Term Note”), secured by a Deed of Trust, dated July 14, 2021 (the “Deed of Trust”), on the Company's 50 + acre Lake Travis project site in Lago Vista, Texas and a related Assignment of Leases and Rents, dated July 8, 2021 (“Assignment of Rents”), for net loan proceeds of approximately $ 1,948,234 after fees. The Short-Term Note has a term of one ( 1 ) year, provides for payments of interest only at a rate of twelve percent ( 12 %) per annum and may be prepaid without penalty commencing nine ( 9 ) months after its issuance date. If the Short-Term Note is prepaid prior to nine ( 9 ) months after its issuance date, a 0.5 % prepayment penalty is due. The Company capitalized $ 20,000 in interest charges and $ 4,134 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. On September 8,2022, SG DevCorp 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 the project site in Lago Vista, Texas and McLean site in Durant, Oklahoma and a Mortgage, dated March 30, 2023 (“Mortgage”), on its 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”). The Forgivable Note is due on April 29, 2029 and guaranteed by the Company, provided, if no event of default has occurred under the Forgivable Note or Loan Agreement, one -third ( 1 / 3 ) of the balance of the Forgivable Note will be forgiven on April 29, 2027, one -half ( 1 / 2 ) of the balance of the Forgivable Note will be forgiven on April 29, 2028, and the remainder of the balance of the Forgivable Note will be forgiven on April 29, 2029. 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. During September 2023, such note was extended for a period of one year . 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 %). 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. 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 . 18 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 8 . 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. 19 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 8 . Notes Payable (continued) 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 September 30, 2023 , the Company recognized amortization of debt issuance costs and debt discount of $ 20,000 and $ 113,560 , respectively. For the nine months ended September 30, 2023 , the Company recognized amortization of debt issuance costs and debt discount of $ 53,333 and $ 302,826 , respectively. As of September 30, 2023 , the unamortized debt issuance costs and debt discount amounted to $ 26,667 and $ 151,413 , respectively. 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 . 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.SG Building incurred $ 25,000 in debt issuance costs in connection with the Cash Advance Agreement. As of September 30, 2023 , the unamortized debt issuance costs amounted to $ 14,286 . 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. In connection with the exercise of its option to acquire 19 acres of land and the approximately 56,775 square foot facility located at 101 Waldron Road in Durant Oklahoma (the “Premises”), on June 8, 2023, SG Echo issued a secured commercial promissory note, dated June 1, 2023 (the “Secured Note”), in the principal amount of $ 1,750,000 with SouthStar Financial, LLC, a South Carolina limited liability company (“SouthStar”), and entered into a Non-Recourse Factoring and Security Agreement, dated June 1, 2023 (the “Factoring Agreement”), with SouthStar providing for its purchase from SG Echo of up to $ 1,500,000 of accounts receivable, subject to reduction by South Star (the “Facility Amount”). The Secured Note bears interest at 23 % per annum and is due and payable on June 1, 2025 . The Secured Note is secured by a mortgage (the “Mortgage”) on the Premises and secured by a Security Agreement, dated June 1, 2023 (the “Security Agreement”), pursuant to which SG Echo granted to SouthStar first priority security interest in all of SG Echo’s presently-owned and hereafter-acquired personal and fixture property, wherever located, including, without limitation, all accounts, goods, chattel paper, inventory, equipment, instruments, investment property, documents, deposit accounts, commercial tort claims, letters-of-credit rights, general intangibles including payment intangibles, patents, software trademarks, trade names, customer lists, supporting obligations, all proceeds and products of the foregoing. SG Echo paid to SouthStar an origination fee in the amount of 3 % of the face amount of the Secured Note. Upon the occurrence of an Event of Default (as defined in the Secured Promissory Note), the default interest rate will be 28 % per annum, or the maximum legal amount provided by law, whichever is greater. 20 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 8 . Notes Payable (continued) The Factoring Agreement provides that upon acceptance of an account receivable for purchase SouthStar will pay to SG Echo eighty percent ( 80 %) of the face amount of the account receivable, or such lesser percentage as agreed by the parties. SG Echo will also pay to SouthStar one and 95 / 100 percent ( 1.95 %) of the face amount of the accounts receivable for the first twenty-five ( 25 ) day period after payment for the accounts receivable is transmitted to SouthStar plus one and 25 / 100 percent ( 1.25 %) for each additional fifteen ( 15 ) day period or part thereof, calculated from the date of purchase until payments received by SouthStar in collected funds on the purchased accounts receivable equals the purchase price of the accounts receivable, plus all charges due SouthStar from SG Echo at the time. An additional one and 50 / 100 percent ( 1.50 %) per fifteen ( 15 ) day period will be charged for invoices exceeding sixty ( 60 ) days from advance date. The Factoring Agreement provides that SG Echo may require additional funding from SouthStar (an “Overadvance”) and SouthStar may provide the Overadvance in its sole discretion. In the event of an Overadvance, SG Echo will pay SouthStar an amount equal to three and 90 / 100 percent ( 3.90 %) of the amount of the Overadvance for the first twenty-five ( 25 ) day period after the Overadvance is transmitted to SouthStar plus two and 50 / 100 percent ( 2.50 %) for each additional fifteen ( 15 ) day period or part thereof until payments received by SouthStar in collected funds equals the amount of the Overadvance, plus all charges due SouthStar from SG Echo at the time. The Factoring Agreement provides that SG Echo will also pay a transactional administrative fee of $ 50.00 for each new account debtor submitted to it and an fee equal to 0.25 % of the face amount of all purchased accounts receivable for the handling, collecting, mailing, quality assuring, insuring the risk, transmitting, and performing certain data processing services with respect to the maintenance and servicing of the purchased accounts. As security for the payment and performance of SG Echo’s present and future obligations to SouthStar under the Factoring Agreement, SG Echo granted to SouthStar a first priority security interest in all of SG Echo’s presently-owned and hereafter-acquired personal and fixture property, wherever located, including, without limitation, all accounts, goods, chattel paper, inventory, equipment, instruments, investment property, documents, deposit accounts, commercial tort claims, letters-of-credit rights, general intangibles including payment intangibles, patents, software trademarks, trade names, customer lists, supporting obligations, all proceeds and products of the foregoing. The Factoring Agreement has an initial term of thirty-six ( 36 ) months from the first day of the month following the date the first purchased accounts receivable is purchased. 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. 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 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). 21 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 8 . Notes Payable (continued) SG Echo incurred $ 60,120 in debt issuance costs in connection with the Secured Note. For the three months ended September 30, 2023 , the Company recognized amortization of debt issuance costs of $ 10,020 . As of September 30, 2023 , the unamortized debt issuance costs amounted to $ 60,100 . 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 originally received $ 1,250,000 . 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 of our shares of SG DevCorp’s common stock (the “Pledged Shares”), which were pledged pursuant to an escrow agreement (the “Escrow Agreement”) with 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. Additionally, $ 37,500 in broker fees has been paid to Bridgeline Capital Partners S.A. on the principal amount raised of $ 1,250,000 raised to date. As of September 30, 2023 , the Company has paid $ 35,000 in debt issuance costs. The BCV Loan Agreement provided that if SG DevCorp’s shares of common stock were not listed on The Nasdaq Stock Market on before August 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 would be further secured by SG DevCorp’s St. Mary’s industrial site, consisting of 29.66 acres and a proposed manufacturing facility in St. Mary’s, Georgia. For the three months ended September 30, 2023 , the Company recognized amortization of debt issuance costs of $ 410,118 . As of September 30, 2023 , the unamortized debt issuance costs amounted to $ 233,412 . 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. Mary’s Site. 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. Mary’s Site. 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. 22 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 9. Leases The Company leases an office, a manufacturing plant and certain equipment under non-cancellable operating lease agreements. The leases have remaining lease terms ranging from one year to ten years . Supplemental balance sheet information related to leases is as follows: Balance Sheet Location September 30, 2023 � Operating Leases Right-of-use assets, net $ 628,181 Current liabilities Lease liability, current maturities 227,753 Non-current liabilities Lease liability, net of current maturities 397,067 Total operating lease liabilities $ 624,820 Finance Leases Right-of-use assets $ 1,575,478 Current liabilities Lease liability, current maturities 773,385 Non-current liabilities Lease liability, net of current maturities 336,960 Total finance lease liabilities $ 1,110,345 Weighted Average Remaining Lease Term Operating leases 2.00 years Finance leases 1.26 years Weighted Average Discount Rate Operating leases 3 % Finance leases 3 % As the leases do not provide an implicit rate, the Company used an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments, which is reflective of the specific term of the leases and economic environment of each geographic region. Anticipated future lease costs, which are based in part on certain assumptions to approximate minimum annual rental commitments under non-cancellable leases, are as follows: Year Ending December 31: Operating Financing Total 2023 (remaining) $ 81,000 $ 400,934 $ 481,934 2024 324,000 801,869 1,125,869 2025 243,000 133,645 376,645 Total lease payments 648,000 1,336,448 1,984,448 Less: Imputed interest 24,910 34,452 59,362 Present value of lease liabilities $ 623,090 $ 1,301,996 $ 1,925,086 23 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 10. Net Income (Loss) Per Share Basic net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of the common shares issuable upon the exercise of stock options and warrants. Potentially dilutive common shares are excluded from the calculation if their effect is antidilutive. At September 30, 2023 , there were options and warrants of 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 September 30, 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, 2022 , there were restricted stock units, options and warrants of 757,450 , 36,436 and 2,025,520 shares of common stock, respectively, outstanding that could potentially dilute future net income per share. 11. Construction Backlog The following represents the backlog of signed construction and engineering contracts in existence at September 30, 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 September 30, 2023 and December 31, 2022 , respectively, on which work has not yet begun: 2023 2022 Balance - beginning of period $ 6,810,762 $ 3,217,909 New contracts and change orders during the period 11,756,360 13,803,733 Adjustments and cancellations, net — 1,086,301 Subtotal 18,567,122 18,107,943 Less: contract revenue earned during the period ( 14,566,351 ) ( 11,297,181 ) Balance - end of period $ 4,000,771 $ 6,810,762 The Company’s remaining backlog as of September 30, 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 September 30, 2023 over the following period: 2023 Within 1 year $ 4,000,771 1 to 2 years — Total Backlog $ 4,000,771 Although backlog reflects business that is considered to be firm, cancellations, deferrals or scope adjustments may occur. Backlog is adjusted to reflect any known project cancellations, revisions to project scope and cost and project deferrals, as appropriate. 24 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 12. Stockholders’ Equity Financings Registered Direct Offering – 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 Securities 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. A.G.P./Alliance Global Partners (the “Placement Agent”) acted as the exclusive placement agent for the transaction pursuant to that certain Placement Agency Agreement, dated as of October 25, 2021, by and between the Company and the Placement Agent (the “Placement Agency Agreement”), the Placement Agent received (i) a cash fee equal to seven percent ( 7.0 %) of the gross proceeds from the placement of the Securities sold by the Placement Agent in the Offering and (ii) a non-accountable expense allowance of one half of one percent ( 0.5 %) of the gross proceeds from the placement of the Gross Proceeds Securities sold by the Placement Agent in the Offering. The Company also reimbursed the Placement Agent’s expenses up to $ 50,000 upon closing the Offering. The net proceeds to the Company after deducting the Placement Agent’s fees and the Company’s estimated offering expenses was approximately $ 10.5 million. Securities Purchase Agreement – In April 2019, the Company issued 42,388 shares of its common stock at $ 22.00 per share through a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors and accredited investors. Concurrently with the sale of the common stock, pursuant to the Purchase Agreement, the Company also sold common stock purchase warrants to such investors to purchase up to an aggregate of 42,388 shares of common stock. The Company incurred $ 379,816 in issuance costs from the offering and issued 4,239 warrants to the underwriters. The warrants are further discussed in Note 14 . 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. The Company incurred $ 181,695 in issuance costs from the offering and issued warrants to purchase 2,250 shares of common stock to the underwriter. The warrants are further discussed in Note 14 . Equity Purchase Agreement - On February 7, 2023, the Company 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 has 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 Securities and Exchange Commission 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). 25 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 12. Stockholders’ Equity (continued) In connection with the EP Agreement, the Company issued to Investments, the general partner of Peak One , 75,000 shares of its common stock, and agreed to 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 began on the date of the EP Agreement, and ends 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”), all subject to the satisfaction of certain conditions set forth in the EP Agreement. 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 nine months ended September 30, 2023 , the Company issued 337,512 shares of common stock for services provided. The value of the shares amounted to $ 484,825 . Restricted Stock Units – During the nine months ended September 30, 2023 , the Company issued 3,014,617 shares of common stock for previously vested restricted stock units. During the nine months ended September 30, 2022 , the Company issued 43,333 shares of common stock for previously vested restricted stock units. 26 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 13. Segments and Disaggregated Revenue Construction Medical Development Corporate and support Consolidated Nine Months Ended September 30, 2023 Revenue $ 14,566,351 $ — $ — $ — $ 14,566,351 Cost of revenue 15,138,225 — — — 15,138,225 Operating expenses 68,384 139,135 1,801,364 9,265,290 11,274,173 Operating loss ( 640,258 ) ( 139,135 ) ( 1,801,364 ) ( 9,265,290 ) ( 11,846,047 ) Other income (expense) ( 56,796 ) — ( 814,601 ) 34,346 ( 837,051 ) Income (loss) before income taxes ( 697,054 ) ( 139,135 ) ( 2,615,965 ) ( 9,230,944 ) ( 12,683,098 ) Net income attributable to non-controlling interest — — — — — Net income (loss) attributable to common stockholders of Safe & Green Holdings Corp. $ ( 697,054 ) $ ( 139,135 ) $ ( 2,615,965 ) $ ( 9,230,944 ) $ ( 12,683,098 ) Total assets $ 7,111,643 $ 4,581 $ 11,652,465 $ 6,565,385 $ 25,334,074 Depreciation and amortization $ 146,917 $ — $ 208,412 $ 1,391,743 $ 1,747,072 Capital expenditures $ — $ — $ — $ 530,055 $ 530,055 Construction Medical Development Corporate and support Consolidated Nine Months Ended September 30, 2022 Revenue $ 8,648,873 $ 11,640,953 $ — $ — $ 20,289,826 Cost of revenue 8,689,924 8,506,681 — — 17,196,605 Operating expenses 399,911 52,336 1,313,196 4,738,928 6,504,371 Operating income (loss) ( 440,962 ) 3,081,936 ( 1,313,196 ) ( 4,738,928 ) ( 3,411,150 ) Other income (expense) 487,339 — ( 173,726 ) 33,518 347,131 Income (loss) before income taxes 46,377 3,081,936 ( 1,486,922 ) ( 4,705,410 ) ( 3,064,019 ) Net income attributable to non-controlling interest — 1,522,101 — — 1,522,101 Net income (loss) attributable to common stockholders of Safe & Green Holdings Corp. $ 46,377 $ 1,559,835 $ ( 1,486,922 ) $ ( 4,705,410 ) $ ( 4,586,120 ) Total assets $ 11,442,445 $ 2,191,019 $ 8,947,444 $ 6,376,008 $ 28,956,916 Depreciation and amortization $ 429,056 $ 40,230 $ — $ — $ 469,286 Capital expenditures $ 1,094,222 $ — $ 893,785 $ 8,193 $ 1,996,200 Inter-segment revenue elimination $ — $ — $ — $ — $ — 27 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 13 . Segments and Disaggregated Revenue (continued) Construction Medical Development Corporate and support Consolidated Three Months Ended September 30, 2023 Revenue $ 3,965,361 $ — $ — $ — $ 3,965,361 Cost of revenue 4,501,393 — — — 4,501,393 Operating expenses ( 108,603 ) 138,240 583,987 1,825,464 2,439,088 Operating loss ( 427,429 ) ( 138,240 ) ( 583,987 ) ( 1,825,464 ) ( 2,975,120 ) Other income (expense) ( 308,988 ) — ( 339,556 ) 15,530 ( 633,014 ) Income (loss) before income taxes ( 736,417 ) ( 138,240 ) ( 923,543 ) ( 1,809,934 ) ( 3,608,134 ) Net income attributable to non-controlling interest — — — — — Net income (loss) attributable to common stockholders of Safe & Green Holdings Corp. $ ( 736,417 ) $ ( 138,240 ) $ ( 923,543 ) $ ( 1,809,934 ) $ ( 3,608,134 ) Total assets 7,111,643 4,581 11,652,465 6,565,385 25,334,074 Depreciation and amortization $ 53,147 $ — $ 121,706 $ 432,707 $ 607,560 Capital expenditures $ — $ — $ 3,805 $ 526,252 $ 530,057 Construction Medical Development Corporate and support Consolidated Three Months Ended September 30, 2022 Revenue $ 2,692,519 $ 1,437,738 $ — $ — $ 4,130,257 Cost of revenue 2,693,451 1,601,980 — — 4,295,431 Operating expenses 192,266 25,271 436,798 1,582,677 2,237,012 Operating income (loss) ( 193,198 ) ( 189,513 ) ( 436,798 ) ( 1,582,677 ) ( 2,402,186 ) Other income (expense) ( 3,563 ) — ( 52,157 ) 9,755 ( 45,965 ) Income (loss) before income taxes ( 196,761 ) ( 189,513 ) ( 488,955 ) ( 1,572,922 ) ( 2,448,151 ) Net income attributable to non-controlling interest — ( 94,568 ) — — ( 94,568 ) Net income (loss) attributable to common stockholders of Safe & Green Holdings Corp. $ ( 196,761 ) $ ( 94,945 ) $ ( 488,955 ) $ ( 1,572,922 ) $ ( 2,353,583 ) Total assets 11,442,445 2,191,019 8,947,444 6,376,008 28,956,916 Depreciation and amortization $ 142,301 $ 13,410 $ 2,157 $ — $ 157,868 Capital expenditures $ 244,201 $ — $ — $ — $ 244,201 28 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 14. Warrants 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. The warrants were exercisable at the option of the holder on or after June 21, 2018 and expired June 21, 2023 . The fair value of the warrants was calculated utilizing a Black-Scholes model and amounted to $ 63,796 . The fair market value of the warrants as of the date of issuance has been included in issuance costs in additional paid-in capital. In conjunction with the Purchase Agreement in April 2019 , the Company also sold warrants to purchase up to an aggregate of 42,388 shares of common stock at an initial exercise price of $ 27.50 per share. The warrants are exercisable at the option of the holder on or after October 29, 2019 and expire October 29, 2024 . T he Company issued to certain affiliates of the underwriters, as compensation, warrants to purchase an aggregate of 4,239 shares of common stock at an initial exercise price of $ 27.50 per share. The warrants are exercisable at the option of the holder on or after October 29, 2019 and expire April 24, 2024 . In conjunction with the Underwriting Agreement in August 2019 , the Company issued to the underwriter, as compensation, warrants to purchase an aggregate of 2,250 shares of common stock at an initial exercise price of $ 21.25 per share. The warrants are exercisable at the option of the holder on or after February 1, 2020 and expire August 29, 2024 . In conjunction with the Underwriting Agreement in May 2020 , the Company issued to the underwriter, as compensation, warrants to purchase an aggregate of 300,000 shares of common stock at an initial exercise price of $ 3.14 per share. The warrants are exercisable at the option of the holder on or after November 6, 2021 and expire May 5, 2025 . As of September 30, 2023 and December 31, 2022, 73,700 of such warrants are outstanding. In conjunction with the Purchase Agreement in October 2021, the Company also issued Series A warrants to purchase up to 1,898,630 shares of Common Stock in a concurrent private placement. 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 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 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. 15 . Share-based Compensation On October 26, 2016, the Company’s Board of Directors approved the issuance of up to 25,000 shares of the Company’s common stock in the form of restricted stock or options (“ 2016 Stock Plan”). Effective January 20, 2017, the 2016 Stock Plan was amended and restated as the SG Blocks, Inc . Stock Incentive Plan, as further amended eff ective June 1, 2018 and as further amended on July 30, 2020 and as further amended on August 18, 2021, and as further amended on October 5, 2023, (the “Incentive Plan”). The Incentive Plan authorizes the issuance of up to 8,625,000 shares of common stock. It authorizes the issuance of equity-based awards in the form of stock options, stock appreciation rights, restricted shares, restricted share units, other share-based awards and cash-based awards to non-employee directors and to officers, employees and consultants of the Company and its subsidiary, except that incentive stock options may only be granted to the Company’s employees and its subsidiary’s employees. The Incentive Plan expires on October 26, 2026 , and is administered by the Company’s Compensation Committee of the Boa rd of Directors. Each of the Company’s employees, directors, and consultants are eligible to participate in the Incentive Plan. As of September 30, 2023 , there were 0 shares of common stock available for issuance under the Incentive Plan . 29 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 15 . 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, 2023 2022 Payroll and related expenses $ 3,210,631 $ 1,874,857 Total $ 3,210,631 $ 1,874,857 Three Months Ended September 30, 2023 2022 Payroll and related expenses $ — $ 594,694 Total $ — $ 594,694 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, 2023 2022 Stock options $ — $ — Restricted Stock Units $ 3,210,631 $ 1,874,857 Total $ 3,210,631 $ 1,874,857 Three Months Ended September 30, 2023 2022 Stock options $ — $ — Restricted Stock Units $ — $ 594,694 Total $ — $ 594,694 Stock-Based Option Awards The Company has issued no stock-based options during the nine months ended September 30, 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. 30 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 15 . Share-based Compensation (continued) The following table summarizes stock-based option activities and changes during the nine months ended September 30, 2023 as described below: Shares Weighted Average Fair Value Per Share Weighted Average Exercise Price Per Share Weighted Average Remaining Terms (in years) Aggregate Intrinsic Value Outstanding – December 31, 2022 36,436 24.80 78.71 4.34 — Granted — — — — — Exercised — — — — — Cancelled — — — — — Outstanding – September 30, 2023 36,436 24.80 78.71 3.84 — Exercisable – December 31, 2022 36,436 24.80 78.71 4.34 — Exercisable – September 30, 2023 36,436 24.80 78.71 3.84 — For the three months ended September 30, 2023 and 2022 , the Company recognized stock-based compensation expense of $ 0 and $ 0 , respectively , related to stock options. For the nine months ended September 30, 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, 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, 2023 was $ 0.60 per share. Restricted Stock Units 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 November 18, 2022, a total of 80,000 of restri cted 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 No vember 18 , 2022 . The restricted stock units granted vest in equal quarterly installments over a two -year period. During the three months ended June 30, 2023, a total of 316,834 of restricted stock units were granted to Mr. Galvin and six employees of the Company under the Company's stock-based compensation plan, at the fair value of $ 0.85 to $ 1.01 per share, which represents the closing price of the Company's common stock at the grant date. The restricted stock units granted vest in equal quarterly installments over a two -year period. On April 4, 2023, a total of 268,166 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 $ 1.01 per share, which represents the closing price of the Company's common stock on April 4, 2023. The restricted stock units granted vest in equal quarterly installments over a two -year period 31 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 15. Share-based Compensation (continued) As of September 30, 2023 , all outstanding restricted stock vesting has been accelerated and there are no unvested restricted stock units. For the three months ended September 30, 2023 and 2022 , the Company recognized stock-based compensation of $ 0 and $ 594,694 related to restricted stock units. For the nine months ended September 30, 2023 and 2022 , the Company recognized stock-based compensation of $ 3,210,631 and $ 1,874,857 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, 2023 , there was no unrecognized compensation costs related to non-vested restricted stock units. The following table summarized restricted stock unit activities during the nine months ended September 30, 2023 : Number of Shares Non-vested balance at January 1, 2023 1,190,935 Granted 585,000 Vested ( 1,775,935 ) Forfeited/Expired — Non-vested balance at September 30, 2023 — 16. Commitm ents and Contingencies Legal Proceedings The Company is subject to certain claims and lawsuits arising in the normal course of business. The Company assesses liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in our consolidated financial statements. These legal accruals may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, the Company does not record an accrual, consistent with applicable accounting guidance. Based on information currently available, advice of counsel, and available insurance coverage, the Company believes that the established accruals are adequate and the liabilities arising from the legal proceedings will not have a material adverse effect on the consolidated financial condition. However, that in light of the inherent uncertainty in legal proceedings there can be no assurance that the ultimate resolution of a matter will not exceed established accruals. As a result, the outcome of a particular matter or a combination of matters may be material to the results of operations for a particular period, depending upon the size of the loss or the income for that particular period. 1 .) Pizzarotti Litigation - On or about August 10, 2018 Pizzarotti, LLC filed a complaint against the Company and Mahesh Shetty, the Company’s former President and CFO, and others, seeking unspecified damages for an alleged breach of contract by the Company and another entity named Phipps & Co. (“Phipps”). The lawsuit was filed as Pizzarotti, LLC. v. Phipps & Co., et al., Index No. 653996 / 2018 and commenced in the Supreme Court of the State of New York for the County of New York. On or about April 1, 2019, Phipps filed cross-claims against the Company and Mr. Shetty asserting claims for indemnification, contribution, fraud, negligence, negligent misrepresentation, and breach of contract. 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 . Pizzarotti’s claims against the Company arise from a purported assignment agreement dated August 10, 2018, whereby Pizzarotti claims that the Company agreed to assume certain obligations of Phipps under a certain trade contract between Pizzarotti and Phipps & Co. Phipps’ claims against the Company arise from a purported Assignment Agreement, dated as of May 30, 2018, between Pizzarotti, Phipps and the Company (the “Assignment Agreement”), pursuant to which, it is alleged, that the Company agreed to provide a letter of credit in connection with the sub-contracted work to be provided by Phipps to Pizzarotti. 32 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 16. Commitm ents and Contingencies (continued) The Company believes that the Assignment Agreement was void for lack of consideration and moved to dismiss the case on those and other grounds. On June 17, 2020, the New York Supreme Court entered an order dismissing certain claims against the Company brought by cross claimant Phipps & Co. Specifically, the court dismissed Phipps’ claims for indemnification, contribution, fraud, negligence and negligent misrepresentation. The court did not dismiss Phipps’ claim for breach of the Assignment Agreement. The issue of the validity of the Assignment Agreement, and the Company’s defenses to the claims brought by the plaintiff Pizzarotti, and cross claimant Phipps, are being litigated. The Company maintains that the Assignment Agreement, to the extent valid and enforceable, was properly terminated and/or there are no damages, and, consequently, that the claims brought against the Company are without merit. The Company intends to continue to vigorously defend the litigation. The parties have engaged in written discovery but no depositions have been conducted as of yet. By motion dated February 24, 2021, Pizzarotti moved to stay the entire action pending the outcome of a separate litigation captioned Pizzarotti, LLC v. FPG Maiden Lane, LLC et. al ., Index No. 651697 / 2019 , involving some of the same parties (but excluding the Company). Phipps cross moved to consolidate the two actions. The Company opposed both motions. On April 26, 2021, the court denied both motions and directed the parties to meet and confer concerning the scheduling of depositions. 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 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. Litigation is subject to many uncertainties, and the outcome of this action is not predicted with assurance. The Company is currently unable to predict the possible loss or range of loss, if any, associated with the resolution of this litigation, and, accordingly, the Company has made no provision related to this matter in the consolidated financial statements. Vendor Litigation 1 .) SG Blocks, Inc. v HOLA Community Partners, et. al . On April 13, 2020, Plaintiff SG Blocks, 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. 2 : 20 -cv- 03432 -ODW (“HOLA Action”). The Company asserted seven claims against HOLA Defendants arising out of and related to the HOLA Project, to wit, for: ( 1 ) breach of contract; ( 2 ) conversion; ( 3 ) default and judicial foreclosure under the Agreement as a security agreement; ( 4 ) misappropriation of trade secrets under California Civil Code section 3426 ; ( 5 ) misappropriation of trade secrets under 18 U.S.C. § 1836 ; and ( 6 ) intentional interference with contractual relations. On April 20, 2020, HOLA filed a separate action against the Company in the Los Angeles Superior Court arising out of the HOLA Project, asserting claims of ( 1 ) negligence; ( 2 ) strict products liability; ( 3 ) strict products liability, ( 4 ) breach of contract; ( 5 ) breach of express warranty; ( 6 ) violation of Business and Professions Code § 7031 (b); and ( 7 ) violation of California’s unfair competition law, Business and Professions Code section 17200 (“UCL”) (“HOLA State Court Action”). The HOLA State Court Action was removed to the Central District of California and consolidated with the HOLA Action. On January 22, 2021, the Company filed a Third-Party Complaint in the HOLA Action against Third-Party Defendants Teton Buildings, LLC, Avesi Construction, LLC, and American Home Building and Masonry Corp (“AHB”) for indemnity and contribution with respect to HOLA’s claims. The Company has also notified its general liability carrier Sompo International regarding coverage concerning HOLA’s claims On February 25, 2021, the Court entered an order dismissing the Company’s claims for ( 1 ) breach of contract; ( 2 ) conversion; ( 3 ) default and judicial foreclosure under the Agreement as a security agreement; ( 4 ) misappropriation of trade secrets under California Civil Code section 3426 ; ( 5 ) misappropriation of trade secrets under 18 U.S.C. § 1836 ; but denied dismissal of the Company’s claims for intentional interference with contractual relations. The Court also denied the Company’s motion to dismiss HOLA’s claims. On March 12, 2021, the HOLA Defendants filed an answer to the Company’s complaint against it denying liability and asserting affirmative defenses. On March 12, 2021, the Company filed an answer to the HOLA Defendants’ First Amended Consolidated Complaint against it, denying liability and asserting affirmative defenses. 33 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 16 . Commitments and Contingencies (continued) On April 26, 2021, the Company and the HOLA Defendants filed a Joint Stipulation to Dismiss HOLA Community Partners’ Sixth Claim for Relief (violation of California Business and Professions Code § 7031 (b)), with prejudice, pursuant to Fed. R. Civ. P. 41 (a)( 1 )(A)(ii). On July 23, 2021, the Company filed a First Amended Third-Party Complaint adding the following additional third party defendants seeking, inter alia , contractual indemnity, equitable indemnity; and contribution: American Home Building and Masonry Corp. (“American Home”), Anderson Air Conditioning, L.P. (“Anderson”). Broadway Glass and Mirror, Inc. (“Broadway”), Marne Construction, Inc. (“Marne”), The McIntyre Company (“McIntyre”), Dowell & Bradley Construction, Inc. dba J R Construction (“JR Construction”) Junior Steel Co. (“Junior Steel”) Saddleback Roofing, Inc. (“Saddleback”) Schindler Elevator Corporation (“Schindler”) U.S. Smoke & Fire Corp. (“U.S. Smoke”) and FirstForm, Inc. (“FirstForm”) (collectively the “Additional Third Party Defendants”). On September 2, 2021, Schindler Elevator Corp. filed its answer to the First Amended Third-Party Complaint. On September 3, 2021, Junior Steel Co. filed its answer to the First Amended Third-Party Complaint. On September 7, 2021, Anderson Air Conditioning, L.P. filed its answer to the First Amended Third-Party Complaint. On October 6, 2021, the McIntyre Group filed its answer to the First Amended Third-Party Complaint. On February 7, 2022, the Company filed a request for entry of a Clerk’s default against the following defendants: American Home Building and Masonry Corp., Avesi Construction, Marne Construction, Inc., FirstForm, Inc., Dowell & Bradley Construction, Inc, Saddleback Roofing, Inc., and US Smoke and Fire Corp. On February 9, 2022, the court entered a clerk’s default pursuant to Federal Rule 55 against the following defendants: American Home Building and Masonry Corp. Avesi Construction, Dowel & Bradley Construction, Inc., Saddleback Roofing Inc. and US smoke and Fire Corp. 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 was set for January 31, 2023. 2 .) SG Blocks, Inc. v HOLA Community Partners, et. al . 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. (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. 34 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 16 . Commitments and Contingencies (continued) 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. v. 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 $ 30,429 in damages. 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 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 October 2023. 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. Other Litigation SG Blocks, Inc. v. Osang Healthcare Company, Ltd. , On April 14, 2021, the Company commenced an action against Osang Healthcare Company, Ltd. (“Osang”) in the United States District Court, Eastern District of New York, Case No. 21 - 01990 (“Osang Action”). The Company has asserted that Osang materially breached a certain Managed Supply Agreement (“MSA”) entered into between the parties on October 12, 2020, pursuant to which the Company received on consignment two million (2,000,000) units of Osang’s “Genefinder Plus RealAmp Covid-19 PCR Test” (the “Covid-19 Test”) for domestic and international distribution. The Company has also asserted that Osang breached the covenant of good faith and fair dealing, fraudulently induced it to enter into the MSA, and violated §349 of the New York General Business Law’s prohibition of deceptive business practices. On June 18, 2021, Osang served a motion to dismiss the Osang Action pursuant to Rule 12 (b)( 6 ) of the Federal Rules of Civil Procedure. On July 30, 2021, the Company served its opposition to the motion to dismiss. On September 22, 2022, the court entered an order granting in part and denying in part Osang’s motion to dismiss. The court denied that part of Osang’s motion that sought dismissal of the Company’s causes of action for breach of contract (but denied recovery of lost profits) and fraud, but dismissed the Company’s causes of action for breach of implied covenant of good faith and fair dealing, indemnification, accounting, and violation of the New York Unlawful and Deceptive Trade Practices Act (GBL § 349 ). 35 SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 16 . Commitments and Contingencies (continued) A status conference was held on November 16, 2022 at which time the Court entered a scheduling order for the conducting of discovery. 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. v. Shaw et al., On March 15, 2023, the Company commenced an action against two shareholders, John William Shaw and Leo Patrick Shaw (the “Shaw Stockholders” ), in the United States District Court for the Southern District of New York, captioned Safe and Green Holdings Corp. v. 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 . On September 26, 2023, the Company entered into a settlement agreement with (the “Shaw Stockholders”) resolving this lawsuit pursuant to which the Company received a three-month irrevocable proxy from the Shaw Stockholders giving the Company the right to vote the shares of common stock held by them. Upon payment of $ 10,000 , the Company may extend for 45 days the expiration date of the irrevocable proxies. Commitments 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 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 and on September 19, 2023 the agreement was amended to increase the annual base salary to $ 750,000 . All other terms of the employment agreement remain in full force and effect. 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. Ms. 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. During July 2023, Ms. Kaelin’s annual base salary was adjusted to $ 300,000 , retroactive to May 1, 2023. 17. Subsequent Events The Company has evaluated all events or transactions that occurred after September 30, 2023 through November 14, 2023 , which is the date that the condensed financial statements were available to be issued. During this period, there were no material subsequent events requiring recognition or disclosure besides below. On October 5, 2023, at the Company’s Special Meeting of Stockholders (the “Special Meeting”), the Company’s stockholders approved an amendment (the “Amendment”) to the Safe & Green Holdings Corp. Stock Incentive Plan (the “Plan”). The Amendment increased the total number of shares of the Company’s common stock authorized for issuance under the Plan by 5,000,000 shares to 8,625,000 shares. The material terms and conditions of the Plan are described in the Company’s definitive proxy statement filed with the Securities and Exchange Commission on September 6, 2023 (the “Proxy Statement”). On October 16, 2023, the Company filed a Certificate of Amendment to its Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of State of Delaware that increased the number of the Company’s authorized shares of common stock, $ 0.01 par value per share, from 25,000,000 shares to 75,000,000 shares. This Certificate of Amendment was approved by the Company’s stockholders at the Company’s 2023 Special Meeting. As previously disclosed, the Company had notified William Rogers that his employment agreement (the “Employment Agreement”) with the Company would not be renewed for a full one -year term upon its expiration on September 26, 2023 ; however, the Company had offered Mr. Rogers a two -month extension of his agreement. The Company anticipated that, upon the expiration of his Employment Agreement, Mr. Rogers would continue to be employed by the Company as an employee-at-will. On October 20, 2023, the Company and Mr. Rogers entered into a mutual settlement and release agreement (the “Release Agreement”) in order to resolve any and all claims and disputes between them, including but not limited to, claims arising under the Employment Agreement. Pursuant to the terms of the Release Agreement, (i) the Company agreed to pay Mr. Rogers a settlement payment equal to $ 75,000 for his lost vacation, life insurance and related costs through December 31, 2023; (ii) the parties agreed to extend Mr. Roger’s Employment Agreement through December 31, 2023, at which point the Employment Agreement will end as a mutual termination; (iii) the parties agreed that Mr. Rogers’ title under the Employment Agreement will change from COO to Project Development Advisor and he will report to David Villarreal for the remaining term of the Employment Agreement and all other terms of the Employment Agreement will remain unchanged, including Mr. Roger’s right to receive RSU’s and right to accrue additional vacation days; (iv) Safe and Green Development Corporation, a majority-owned subsidiary of the Company (“DevCo”), and Mr. Rogers will enter into a consulting agreement that will commence on January 1, 2024 (the “Consulting Agreement”); (v) the parties acknowledged that Mr. Rogers will be eligible for grants of equity awards under DevCo’s stock incentive plan; (vi) the non-compete provisions of the Employment Agreement were extended through December 31, 2023; (vii) the parties released each other from any and all claims and potential claims relating to or arising as a result of the Employment Agreement or any issues related thereto; and (viii) the parties agreed not to disparage each other. Simultaneously with the execution of the Release Agreement, Mr. Rogers entered into the Consulting Agreement with DevCo. The term of the Consulting Agreement will commence on January 1, 2024, will continue for a period of one year and will then convert to a rollover annual contract or on a month-to-month basis, as mutually agreed to be the parties. Pursuant to the Consulting Agreement, Mr. Rogers will provide advisory and consulting services for the construction of DevCo’s operational facility projects. During the term of the Consulting Agreement, DevCo will pay Mr. Rogers a monthly consulting fee of $ 15,000 . In addition, the parties agreed that Mr. Rogers shall invoice DevCo for time spent over 60 hours per month providing such consulting services, at a rate of $ 250 per hour. In addition, during the term of the Consulting Agreement, DevCo will (i) pay to Mr. Rogers the per month costs to cover his COBRA expenses, and (ii) reimburse Mr. Rogers for his reasonable and necessary out-of-pocket expenses incurred in performing the consulting services. The Consulting Agreement also provides that Mr. Rogers will be entitled to receive and that DevCo will issue, subject to board approval, grants of restricted stock unit awards. 36