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Item 2. Management’s Discussion and Analysis

2024-05-17 compared with 2023-11-14 · 309 added, 176 removed, 180 unchanged (73% of the section changed)

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Introduction and Certain Cautionary Statements

As used in this Quarterly Report on Form 10-Q, unless the context requires otherwise, references to the "Company," "we," "us," and "our" refer to Safe & Green Holdings Corp.

As used in this Quarterly Report on Form 10-Q for the period ended March 31, 2024 (this “Quarterly Report on Form 10-Q”), unless the context requires otherwise, references to the "Company," "we," "us," and "our" refer to Safe & Green Holdings Corp.

and its subsidiaries.

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and schedules included elsewhere in this Quarterly Report on Form 10-Q and with our audited condensed consolidated financial statements and notes for the year ended December 31, 2022 , which were included in our Annual Report on Form 10-K for the year then ended December 31, 2022, as filed with the Securities and Exchange Commission (the "SEC") on March 31, 2023 (the " 2022 Form 10-K").

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and schedules included elsewhere in this Quarterly Report on Form 10-Q and with our audited condensed consolidated financial statements and notes for the year ended December 31, 2023, which were included in our Annual Report on Form 10-K for the year then ended December 31, 2023, as filed with the Securities and Exchange Commission (the "SEC") on May 7, 2024 (the "2023 Form 10-K").

This discussion, particularly information with respect to our future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading "Special note regarding forward-looking statements" in this Quarterly Report on Form10-Q.

You should review the disclosure under the heading "Risk Factors" in this Quarterly Report on Form 10-Q for a discussion for important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.

You should review the disclosure under the heading "Risk Factors" in the 2023 Form 10-K and in this Quarterly Report on Form 10-Q for a discussion for important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.

Special note regarding forward-looking statements

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general economic, political and financial conditions, includ ing inflatio n, b oth in the United States and internationally;

our ability to continue as a going concern;

our ability to obtain additional financing on acceptable terms, if at all, or to obtain additional capital in other ways;

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our ability to utilize our net operating loss carryforwards and the impact of changes in the United States' tax rules and regulations;

dangers inherent in our operations, such as natural or man-made disruptions to our facilities and project sites, the impact of COVID- 19 , and related government “shelter-in-place” mandates and other restrictions on business and commercial activity and the adequacy of our insurance coverage;

dangers inherent in our operations, such as natural or man-made disruptions to our facilities and project sites and other restrictions on business and commercial activity and the adequacy of our insurance coverage;

our ability to comply with the requirements of being a public company;

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and any factors discussed in "Part II - Item 1 A.

Risk Factors" to this Quarterly Report on Form 10-Q as well as our 2022 Form 10-K, and other filings with the SEC.

Risk Factors" to this Quarterly Report on Form 10-Q as well as “Part I – Item 1A.

Risk Factors” in our 2023 Form 10-K, and other filings with the SEC.

In addition, certain information presented below is based on unaudited financial information.

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Recent Developments

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

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

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

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

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

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

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

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

May 1, 2024, we filed an amendment (the “Amendment”) to our Amended and

Restated Certificate of Incorporation (the “Restated Certificate”) with the

Secretary of State of the State of Delaware to effect a reverse stock split of

the Company’s common stock, par value $0.01 (the “Common Stock”), at a ratio of

1-for-20 (the “Reverse Stock Split”), with an effective time of 12:01 a.m.

Eastern Time on May 2, 2024 (the “Effective Time”).

Upon the opening of trading

on May 2, 2024, the Common Stock will begin trading under the existing trading

symbol “SGBX” on a split-adjusted basis

under a new CUSIP number, 78418A604.

During April 2024, the

Company issued 178,571 shares of common stock ( 8,928 as adjusted for the May Stock Split) to a

consultant for services performed.

On April 19, 2024, we

received a delinquency letter (the “Notice”) from the Nasdaq Stock Market LLC

(“Nasdaq”) notifying that we were not in compliance with the continued listing

requirements set forth in Nasdaq Listing Rule 5250 (c)( 1 ) (the “Rule”), which requires timely filing of

periodic reports with the Securities and Exchange Commission (the “SEC”) for

continued listing.

Nasdaq rules require public announcement to disclose the

Company’s receipt of the Notice within four

business days of receipt.

On May 7, 2024, we received a letter from

Nasdaq stating that we now comply with the Rule.

Results of Operations

Nine Months Ended September 30, 2023 and 2022 :

For the Nine Months Ended September 30, 2023

For the Nine Months Ended September 30, 2022

Total revenue

Total cost of revenue

Total payroll and related expenses

Total operating expenses

Total operating loss

Total other income (expense)

Total loss before income tax

Net income attributable non-controlling interest

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

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

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

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

Cost of Revenue and Gross Profit

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

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

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

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

Operating Expenses

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

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

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

Other Income (Expense)

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

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

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

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

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

Three Months Ended September 30, 2023 and 2022 :

For the Three Months Ended September 30, 2023

For the Three Months Ended September 30, 2022

Three Months Ended March 31, 2024 and 2023 :

For the Three Months Ended March 31, 2024

For the Three Months Ended March 31, 2023

Total revenue

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Total operating loss

Total other income (expense)

Total other expense

Total loss before income tax

Common stock deemed dividend

Net income attributable non-controlling interest

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

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

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

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

During the three months ended March 31, 2024 , we derived revenue from our construction segment.

as well as sales from SG DevCorp’s new revenue stream.

Total revenue for the three months ended March 31, 2024 was $ 1,017,931 compared to $ 5,503,935 for the three months ended March 31, 2023 .

This decrease of $ 4,486,004 or approximately 82 % was mainly driven by a decrease in construction services.

Cost of Revenue and Gross Profit

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

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

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

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

Cost of revenue was $ 644,983 for the three months ended March 31, 2024 , compared to $ 5,573,407 for the three months ended March 31, 2023 .

The de crease of $ 4,928,424 or an increase of approximately 88 %, is primarily related to the de crease in construction services during the three months ended March 31, 2024 .

Gross profit (loss) was $ 372,948 and $( 69,472 ) for the three months ended March 31, 2024 and 2023 , respectively.

Gross profit (loss) margin percentage increased to 37% for the three months ended March 31, 2024 compared to (1)% for the three months ended March 31, 2023 primarily due to the recognition of losses on construction services recognized during the year ended December 31, 2023 .

Operating Expenses

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

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

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

Payroll and related expenses for the three months ended March 31, 2024 were $ 3,268,069 compared to $ 1,314,390 for the three months ended March 31, 2023 .

This increase was primarily caused by stock-based compensation being recognized by SG DevCorp during the three months ended March 31, 2024 .

Other operating expenses (general and administrative expenses, marketing and business development expenses, pre-project expenses) for the three months ended March 31, 2024 were $ 1,137,338 compared to $ 1,876,207 for the three months ended March 31, 2023 .

Other Income (Expense)

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

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

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

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

Interest income for the three months ended March 31, 2024 was $ 9,570 mainly derived from bank interest and interest associated with an outstanding note receivable.

There was $ 9,362 of interest income for the three months ended March 31, 2023 .

There was $ 48,617 and $ 18,639 of other income for the three months ended March 31, 2024 and 2023 .

Interest expense for the three months ended March 31, 2024 and 2023 was $ 1,282,756 and $ 287,372 , respectively.

The increase in interest expense resulted from an increase in notes payable balances during 2024 .

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

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

Impact of Coronavirus (COVID- 19 )

With the global spread of the ongoing novel coronavirus ("COVID- 19 ") pandemic beginning in 2020 , we have implemented business continuity plans designed to address and mitigate the impact of the COVID- 19 pandemic on our employees and business.

The worldwide spread of the COVID- 19 virus has resulted in a global slowdown of economic activity, which is likely to decrease demand for a broad variety of goods and services, including from our customers, while also resulting in delays in projects due to labor shortages and supplier disruptions for an unknown period of time until the disease is contained.

To date, we have experienced some delays in projects due to COVID- 19 , which we expect to have an impact on our revenue and our results of operations, the size and duration of which we are currently unable to predict.

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

In addition, the pandemic could result in an economic downturn that could affect the ability of our customers and licensees to obtain financing and therefore impact demand for our products.

Order lead times could be extended or delayed and increases we have experienced in pricing could continue to increase.

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

Accordingly, we are considering alternative product sourcing in the event that product supply becomes problematic.

We expect this global pandemic to have an impact on our revenue and results of operations, the size and duration of which we are currently unable to predict.

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

Our operations for the three months ended March 31, 2024 and 2023 may not be indicative of our future operations.

Liquidity and Capital Resources

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

As of March 31, 2024 and December 31, 2023 , we had an aggregate of $ 739,787 and $ 17,448 , respectively, of cash and cash equivalents and short-term investments.

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

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

On February 7, 2023, we 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 “Warrant”) to purchase up to Five Hundred Thousand ( 500,000 ) shares of our common stock, to Peak One Opportunity Fund, L.P.

(“Peak One ”).

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

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

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

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

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.

Liquidity and Capital Resources (continued)

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

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

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

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

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

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

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

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

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

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 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.

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.

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

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

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

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

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

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

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

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

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

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

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.

The BCV Loan Agreement further provides that if SG DevCorp’s shares of common stock are 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 will 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.

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

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

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

According to Amendment No.

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

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

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

According to Amendment No.

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

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

On January 5, 2024, SG Building Blocks and

SG Echo, together with SG Building Blocks, the (“Merchants”), entered into a

Cash Advance Agreement (“January Cash Advance Agreement”) with Maison Capital

Group (“Maison”) pursuant to which the Merchants sold to Maison $300,000

of their future receivables for a purchase price of $200,000,

less underwriting fees and expenses paid, for net funds provided of $190,000.

Pursuant to the January Cash Advance Agreement, Maison is expected to withdraw $12,500 a week directly from the Merchants’ bank account until the $300,000 due to Maison under the January Cash Advance Agreement is paid.

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

The Merchants’ obligations under the January Cash Advance Agreement are secured by a security interest in all accounts, including without limitation, all deposit accounts, accounts-receivable, and other receivables, chattel paper, documents, equipment, general intangibles, instruments, and inventory, as those terms are defined by Article 9 of the Uniform Commercial Code, now or hereafter owned or acquired by any of them.

In addition, SG Building Blocks’ obligations under the January Cash Advance Agreement have been guaranteed by SG Echo, and SG Echo’s obligations under the January Cash Advance Agreement have been guaranteed by SG Building Blocks.

The amounts outstanding under the January Cash Advance Agreement may be prepaid by the Merchants at any time without penalty.

On January 11, 2024, we entered into a Securities Purchase Agreement (the “January Purchase Agreement”) with Peak One, pursuant to which we agreed to issue, in a private placement offering (the “January Offering”), upon the satisfaction of certain conditions specified in the January Purchase Agreement, two debentures to Peak One in the aggregate principal amount of $1,300,000.

The closing of the first tranche was consummated on January 12, 2024 and we issued an 8% convertible debenture in the principal amount of Six Hundred Fifty Thousand Dollars ($650,000) (the “Holdings Debenture”) to Peak One and a warrant (the “Warrant”) to purchase up to Three Hundred Seventy-Five Thousand (375,000) shares of our common stock (18,750 as adjusted for the May Stock Split), par value $0.01 per share (the “common stock”) to Peak One’s designee, as described in the Purchase Agreement.

The Holdings Debenture was sold to Peak One for a purchase price of $585,000, representing an original issue discount of ten percent (10%).

In connection with the January Offering, we paid $17,500 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 to Peak One and its designee an aggregate of 300,000 shares of its restricted common stock (the “Commitment Shares”) (15,000 as adjusted for the May Stock Split) as provided in the January Purchase Agreement.

The Holdings 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 equal to the principal

amount of the Holdings Debenture, plus all accrued and unpaid interest, at a

conversion price equal to $ 0.46 (the “Conversion Price”) ($9.20 as adjusted for the May Stock Split), subject to adjustment for any stock splits, stock dividends, recapitalizations and similar events, as well as anti-dilution price protection provisions that are subject to a floor price as set forth in the Holdings Debenture.

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

While the Holdings Debenture is outstanding, if we receives cash proceeds of more than $1,500,000.00 (the “Minimum Threshold”) in the aggregate from any source or series of related or unrelated sources, weshall, within two (2) business days of our receipt of such proceeds, inform Peak One of such receipt, following which Peak One shall have the right, in its sole discretion, to require us to immediately apply up to 50% of all proceeds received by us(from any source except with respect to proceeds from the issuance of equity or debt to officers and

directors of us) after the Minimum Threshold is reached to repay the

outstanding amounts owed under the Debenture.

During the three months ended

March 31, 2024, Peak One converted $ 300,000 of its principal balance into 57,627 shares of common stock.

Such conversion was

within the terms of the agreement with no gains or losses recognized on the transactions.

The Warrant expires five years from its date of issuance.

The Warrant is exercisable, at the option of the holder, at any time, for up to 375,000 of shares of common stock (18,750 as adjusted for the May Stock Split) at an exercise price equal to $0.53 (the “Exercise Price”) ($10.60 as adjusted for the May Stock Split), subject to adjustment for any stock splits, stock dividends, recapitalizations and similar events, as well as anti-dilution price protection provisions that are subject to a floor price as set forth in the Warrant.

The Warrant provides for cashless exercise under certain circumstances.

Maxim Group LLC (“Maxim”) acted as placement agent in the Offering.

In connection with the closing of the first tranche of the Offering, we paid a placement fee of $40,950 to Maxim.

Assuming the second tranche is closed, a placement fee in an amount equal to $40,950 will be payable by us to Maxim upon closing of the second tranche of the Offering.

On January 29, 2024, SG Building Blocks, Inc., entered into a Cash Advance Agreement (“Second Cash Advance Agreement”) with Cedar Advance LLC (“Cedar”) pursuant to which SG Building Blocks sold to Cedar $1,733,420 of its future receivables for a purchase price of $1,180,000, less underwriting fees and expenses paid and the repayment of prior amounts due Cedar, for net funds provided of $215,575.

Pursuant to the Second Cash Advance Agreement, Cedar is expected to withdraw $49,150 a week directly from SG Building Blocks’ bank account until the $1,733,420 due to Cedar under the Second Cash Advance Agreement is paid.

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

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

On February 15, 2024, SG DevCo, entered into an amendment (the “Amendment”) to the Securities Purchase Agreement, dated November 30, 2023 (the “Purchase Agreement”) with Peak One pursuant to which SG DevCo agreed to issue, in a private placement offering (the “Offering”) upon the satisfaction of certain conditions specified in the Purchase Agreement, two Debentures to Peak One in the aggregate principal amount of $1,200,000.

The closing of the first tranche was consummated on November 30, 2023.

The Purchase Agreement provided that at any time after January 29, 2024, a second tranche closing could occur subject to the mutual written agreement of Peak One and SG DevCo and satisfaction of the closing conditions set forth in the Purchase Agreement, upon which SG DevCo would issue and sell to Peak One on the same terms and conditions a second 8% convertible debenture in the principal amount of $500,000.

The Amendment provides that the second tranche be separated into two tranches (the second and third tranche) wherein which SG DevCo would issue in each tranche an 8% convertible debenture in the principal amount of $250,000 at a purchase price of $225,000.

In addition, the Amendment provides that SG DevCo will issue (i) 35,000 shares of SG DevCo’s common stock on the closing of each of the second tranche and the third tranche as follows:

17,500 shares of common stock to Peak One’s designee as described in the Amendment and 17,500 shares of common stock to Peak One, as a commitment fee in connection with the issuance of the second debenture and the third debenture, respectively;

(ii) a common stock purchase warrant to Peak One’s designee as described in the Amendment for the purchase of 125,000 shares of common stock on the closing of each of the second tranche and the third tranche;

and (iii) pay $6,500 of Peak One’s non-accountable fees in connection with each of the second tranche and the third tranche.

The closing of the second tranche was consummated on February 16, 2024 and SG DevCo issued an 8% convertible debenture in the principal amount of $250,000 (the “Second Debenture”) to Peak One and a warrant (the “Second Warrant”) to purchase up to 125,000 shares of SG DevCo’s common stock to Peak One’s designee as described in the Amendment.

The Second Debenture was sold to Peak One for a purchase price of $225,000, representing an original issue discount of ten percent (10%).

In connection with the closing of the second tranche, SG DevCo paid $6,500 as a non-accountable fee to Peak One to cover its accounting fees, legal fees and other transactional costs incurred in connection with the second tranche and issued to Peak One and its designee an aggregate total of 35,000 shares of SG DevCo’s restricted common stock as described in the Amendment.

The Second 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 Second Debenture is convertible, at the option of the holder, at any time, into such number of shares of common stock of SG DevCo equal to the principal amount of the Second Debenture plus all accrued and unpaid interest at a conversion price equal to $2.14, subject to adjustment for any stock splits, stock dividends, recapitalizations and similar events, as well as anti-dilution price protection provisions that are subject to a floor price as set forth in the Second Debenture.

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

While the Second Debenture is outstanding, if SG DevCo receives cash proceeds of more than $1,500,000.00 (“Minimum Threshold”) in the aggregate from any source or series of related or unrelated sources, SG DevCo shall, within two business days of SG DevCo’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 SG DevCo to immediately apply up to 50% of all proceeds received by SG DevCo (from any source except with respect to proceeds from the issuance of equity or debt to officers and directors of SG DevCo) after the Minimum Threshold is reached to repay the outstanding amounts owed under the Second Debenture.

The Second Debenture contains customary events of default.

If an event of default occurs, until it is cured, Peak One may increase the interest rate applicable to the Second Debenture to the lesser of eighteen percent (18%) per annum and the maximum interest rate allowable under applicable law and accelerate the full indebtedness under the Second Debenture, in an amount equal to 110% of the outstanding principal amount and accrued and unpaid interest.

The Second Debenture prohibits SG DevCo from entering into a Variable Rate Transaction (as defined in the Second Debenture) until the Second Debenture is paid in full.

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

The Second Warrant is exercisable, at the option of the holder, at any time, for up to 125,000 shares of common stock of SG DevCo at an exercise price equal to $2.53, subject to adjustment for any stock splits, stock dividends, recapitalizations, and similar events, as well as anti-dilution price protection provisions that are subject to a floor price as set forth in the Second Warrant.

The Second Warrant provides for cashless exercise under certain circumstances.

Under the Amendment, a closing of the third tranche may occur subject to the mutual written agreement of Peak One and SG DevCo and satisfaction of the closing conditions set forth in the Purchase Agreement at any time after April 16, 2024.

Maxim acted as placement agent in connection with the Offering.

In connection with the closing of the second tranche, SG DevCo paid a placement fee of $13,500 to Maxim.

Assuming the third tranche is closed, a placement fee in an amount equal to $13,500 will be payable by SG DevCo to Maxim upon closing of the third tranche.

On February 23, 2024, the Merchants entered into a Cash Advance Agreement (“February Cash Advance Agreement”) with Bridgecap Advance LLC (“Bridgecap”) pursuant to which the Merchants sold to Bridgecap $224,850 of their future receivables for a purchase price of $150,000, less underwriting fees and expenses paid, for net funds provided of $135,000.

Pursuant to the February Cash Advance Agreement, Bridgecap is expected to withdraw $2,248.50 a day directly from the Merchants’ bank account until the $224,850 due to Bridgecap under the February Cash Advance Agreement is paid.

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

The Merchants’ obligations under the February Cash Advance Agreement are secured by a security interest in all accounts, including without limitation, all deposit accounts, accounts-receivable, other receivables, and proceeds therefrom, as those terms are defined by Article 9 of the Uniform Commercial Code, now or hereafter owned or acquired by any of them.

The amounts outstanding under the February Cash Advance Agreement may be prepaid by the Merchants at any time without penalty.

On March 1, 2024, SG DevCorp entered into a credit agreement with the Bryan Leighton Revocable Trust Dated December 13th, 2023 (the “Lender”) pursuant to which the Lender agreed to provide SG DevCorp with a line of credit facility (the “Line of Credit”) up to the maximum amount of $250,000 from which SG DevCorp may draw down, at any time and from time to time, during the term of the Line of Credit.

The “Maturity Date “of the Line of Credit is September 1, 2024.

At any time prior to the Maturity Date, upon mutual written consent of SG DevCorp and the Lender, the Maturity Date may be extended for up to an additional six-month period.

The advanced and unpaid principal of the Line of Credit from time to time outstanding will bear interest at a fixed rate per annum equal to 12.0% (the “Fixed Rate”).

On the first day of each month, SG DevCorp will pay to the Lender interest, in arrears, on the aggregate outstanding principal indebtedness of the Line of Credit at the Fixed Rate.

The entire principal indebtedness of the Line of Credit and any accrued interest thereon will be due and payable on the Maturity Date.

In consideration for the extension of the Line of Credit, SG DevCorp issued 154,320 shares of SG DevCorp restricted common stock to Lender.

The fair value of the shares issued to Lender amounted to $125,000 and has been recorded as a debt discount and will be amortized over the effective rate method.

During the three months ended March 31, 2024, SG DevCorp drew down $100,000 from the Line of Credit.

On March 5, 2024, we issued a Promissory Note (“Note”) in favor of 1800 Diagonal Lending LLC (the “Lender”) in the aggregate principal amount of $149,500 (the “Principal”), and an accompanying Securities Purchase Agreement, dated March 5, 2024 (the “SPA”).

The Note was purchased by the Lender for a purchase price of $130,000, representing an original issue discount of $19,500.

A one-time interest charge of ten percent (10%) (the “Interest Rate”) will be applied on the issuance date to the Principal.

Under the terms of the Note, beginning on April 15, 2024, we are required to make nine monthly payments of accrued, unpaid interest and outstanding principal, subject to adjustment, in the amount of $18,272,23.

We shall have a five business day grace period with respect to each payment.

Any amount of principal or interest on this Note which is not paid when due will bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”).

We have the right to accelerate payments or prepay in full at any time with no prepayment penalty.

Among other things, an event of default (“Event of Default”) will be deemed to have occurred if we fails to pay the principal or interest when due on the Note, whether at maturity, upon acceleration or otherwise, if bankruptcy or insolvency proceedings are instituted by or against us or if we fail to maintain the listing of its common stock on The Nasdaq Stock Market.

Upon the occurrence of an Event of Default, the Note will become immediately due and payable and we will be obligated to pay to the Investor, in satisfaction of its obligations under the Note, an amount equal to 200% times the sum of the then outstanding principal amount of the Note plus accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment plus Default Interest, if any.

After an Event of Default, at any time following the six month anniversary of the Note, the Lender will have the right, to convert all or any part of the outstanding and unpaid amount of the Note into shares of the our common stock at a conversion price equal to the greater of $0.08 or 65% multiplied by the lowest closing bid price during the 10 trading days prior to the conversion date (representing a discount rate of 35%).

The Note may not be converted into shares of our common stock if the conversion would result in the Lender and its affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our common stock.

In addition, unless we obtain shareholder approval of such issuance, we shall not issue a number of shares of its common stock under Note, which when aggregated with all other securities that are required to be aggregated for purposes of Nasdaq Rule 5635(d), would exceed 19.99% of the shares of our common stock outstanding as of the date of definitive agreement with respect to the first of such aggregated transactions (the “Conversion Limitation”).

Upon the occurrence of an Event of Default as a result of us being delisted from Nasdaq, the Conversion Limitation shall no longer apply.

On May 3, 2024, we entered into a Securities Purchase

Agreement (the “May Securities Purchase Agreement”) for a private placement

(the “Private Placement”) with a single accredited institutional investor (the

“Purchaser”).

Pursuant to the Securities Purchase Agreement, the Purchaser

agreed to purchase 130,000 shares (the “Shares”)

of our common stock, par value $ 0.01 per share

(the “Common Stock”), and pre-funded warrants to purchase 1,249,310 shares of Common Stock in lieu thereof (the

“Pre-Funded Warrants”) and common warrants (the “Common Warrants”) to purchase

up to 2,758,620 shares of Common Stock.

to the May Securities Purchase Agreement, the combined offering price of each

Share and Common Warrant was set at $ 2.90 and the

combined offering price of each Pre-Funded Warrant and Common Warrant was set

at $ 2.8999 .

The Shares, the Pre-Funded Warrants,

the Common Warrants and the shares of Common Stock issuable upon exercise of

the Pre-Funded Warrants and Common Warrants are collectively referred to herein

as the “Securities.”

The Pre-Funded Warrants are

exercisable immediately following the date of issuance, may be exercised at any

time until all of the Pre-Funded Warrants are exercised in full, and have an

exercise price of $ 0.0001 per share.

Warrants are exercisable immediately following the date of issuance, have a

term of five years from the effective date of the

Registration Statement (as defined below) registering the Shares and the shares

of Common Stock issuable upon exercise of the Pre-Funded Warrants and the

Common Warrants and have an exercise price of $ 2.65

A holder may not exercise any Pre-Funded Warrants that would cause

the aggregate number of shares of common stock beneficially owned by the holder

to exceed 9.99 % of the Company’s outstanding

Common Stock immediately after exercise.

A holder may not exercise any Common

Warrants that would cause the aggregate number of shares of common stock

beneficially owned by the holder to exceed 4.99 %

of the Company’s outstanding Common Stock immediately after exercise.

Pre-Funded Warrants and the Common Warrants are subject to adjustment in the

event of certain stock dividends and distributions, stock splits, stock

combinations, reclassifications or similar events affecting the Common Stock

and also upon any distributions for no consideration of assets to the Company’s

stockholders.

In the event of certain corporate transactions, the holders of

the Pre-Funded Warrants and the Common Warrants will be entitled to receive,

upon exercise of the Pre-Funded Warrants and the Common Warrants, respectively,

the kind and amount of securities, cash or other property that the holders

would have received had they exercised the Pre-Funded Warrants and the Common

Warrants immediately prior to such transaction.

The Pre-Funded Warrants and the

Common Warrants do not entitle the holders thereof to any voting rights or any

of the other rights or privileges to which holders of common stock are

In the event of a

“Fundamental Transaction,” which term is defined in the Pre-Funded Warrants and

the Common Warrants and generally includes (i) the Company, directly or

indirectly, in one or more related transactions

effects any merger or consolidation of the Company with or into another Person

(as defined in the Pre-Funded Warrants and Common Warrants) in which the

Company is not the surviving entity (other than a reincorporation in a different

state, a transaction for changing the Company’s name, or a similar transaction

pursuant to which the surviving company remains a public company), (ii) the

Company, directly or indirectly, effects any sale, lease, license, assignment,

transfer, conveyance or other disposition of all or substantially all of the

Company’s assets in one or a series of related

transactions (which, for the avoidance of doubt, shall not include such

transactions that do not require approval of the Company’s stockholders), (iii)

any, direct or indirect, purchase offer, tender offer or exchange offer

(whether by the Company or another Person) is completed pursuant to which

holders of Common Stock are permitted to sell, tender or exchange their shares

for other securities, cash or property and has been accepted by the holders of

more than 50 % of the voting power of the common

equity of the Company, (iv) the Company, directly or indirectly, in one or more related transactions effects any

reclassification, reorganization or recapitalization of the Common Stock or any

compulsory share exchange pursuant to which the Common Stock is effectively

converted into or exchanged for other securities, cash or property other than a

stock split, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or

share purchase agreement or other business combination (including, without

limitation, a reorganization, recapitalization, spin-off, merger or scheme of

arrangement) with another Person or group of Persons whereby such other

Person or group acquires more than 50 % of the

voting power of the common equity of the Company, the holders of the Pre-Funded

Warrants and Common Warrants will be entitled to receive upon exercise of the

Pre-Funded Warrants and the Common Warrants the kind and amount of securities,

cash or other property that the holders would have received had they exercised

such warrants immediately prior to such Fundamental Transaction.

Additionally,

as more fully described in the Common Warrants, in the event of certain

Fundamental Transactions, the holders of the Common Warrants will be entitled

to receive consideration in an amount equal to the Black Scholes Value (as

defined in the Common Warrants) of the remaining unexercised portion of the

Common Warrants on the date of consummation of such Fundamental Transaction.

The Private Placement closed

on May 7, 2024.

We received gross proceeds from the Private Placement of

approximately $ 4.0 million before deducting fees

to the placement agent and other offering expenses.

We intend to use the net

proceeds from the Private Placement for general corporate purposes and

potential repayment of indebtedness.

We continue to generate losses from operations.

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

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

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

As of March 31, 2024, our stockholders’ equity was $6,637,478, compared to $6,334,859 as of December 31, 2023, and we had an accumulated deficit of $79,930,088, compared to $75,930,805 as of December 31, 2023.

Our net loss attributable to our common stockholders for the three months ended March 31, 2024 was $4,670,164 and net cash used in operating activities was $923,847.

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

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

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

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

Cash Flow Summary

Nine Months Ended

September 30,

Three Months Ended

Net cash provided by (used in):

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Financing activities

Net increase/(decrease) in cash and cash equivalents

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

Net increase in cash and cash equivalents

Operating activities used net cash of $ 923,847 during the three months ended March 31, 2024 , and used net cash of $ 1,378,685 during the three months ended March 31, 2023 .

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

Cash used in operating activities decreased by approximately $ 454,838 .

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

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

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

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

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

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

the design phase, the architectural and engineering phase and the construction phase.

Each phase is independent of the other, but builds through a progression of concept through delivery of a completed structure.

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

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

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

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

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

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

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

Backlog does not include COVID tests or testing services provided through our joint venture, Clarity Mobile Venture.

Investing activities used net cash of $ 257,186 during the three months ended March 31, 2024 , and $ 638,348 net cash during th e three months ended March 31, 2023 a decrease in cash used of $ 381,162 .

This amount resulted from $31,841

in purchases of property an equipment, $1,082 received from our business combination and $226,425 in project development costs.

Financing activities provided net cash of $ 1,903,372 during the three months ended March 31, 2024 .

Financing activities used $ 2,886,758 net cash during the three months ended March 31, 2023 .

This amount resulted from $885,485 in repayments of short-term notes payable, proceeds of $2,293,644 from the issuances

of short-term notes payable and $494,213 received from a warrant inducment transaction.

There can be no assurance that our customers will decide to and/or be able to proceed with these construction projects, or that we will ultimately recognize revenue from these projects in a timely manner or at all.

Off-Balance Sheet Arrangements

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

As of March 31, 2024 and December 31, 2023 , we had no material off-balance sheet arrangements to which we are a party.

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

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

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

Accordingly, we have no liabilities recorded for these provisions as of March 31, 2024 .

Critical Accounting Estimates

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( 5 ) Recognize revenue as performance obligations are satisfied

On certain contracts, we apply recognition of revenue over time, which is similar to the method we 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, we apply recognition of revenue when the customer obtains control over such goods, which is at a point in time.

Goodwill – Goodwill represents the excess of reorganization value over the fair value of identified net assets upon emergence from bankruptcy.

In accordance with the accounting guidance on goodwill, we perform our impairment test of goodwill at the reporting unit level each fiscal year, or more frequently if events or circumstances change that would more likely than not reduce the fair value of its reporting unit below its carrying value.

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

There was no impairment during the September 30, 2023 .

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

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

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

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

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.

Additionally, SG DevCorp

has begun to generate revenue resulting from commissions on residential real

estate purchases and sales transactions.

For this revenue, the Company applies

recognition of revenue when the customer obtains control over such service,

which his at a point in time.

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 than

not reduce the fair value of its reporting unit below its carrying

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 three months ended

March 31, 2024 or 2023.

Intangible assets – Intangible assets consist

of $2,766,000 of proprietary knowledge and technology, which is being amortized

over 20 years.

In addition, included in intangible assets is $68,344 of

trademarks, and $238,422 of website costs that are being amortized over 5

The Company evaluated intangible assets for impairment during the

year ended December 31, 2023 and determined that there was an

$1,880,547 impairment loss for the year ended December 31, 2023.

amortization expense for the three months ended March 31, 2024 and 2023 was

$3,417 and $46,119, respectively.

The accumulated amortization as of March 31,

2024 and December 31, 2023 was $2,921,272 and $2,852,929, respectively.

remaining balance of the Company’ intangible assets is comprised of website

cost which are not yet placed in service.

New Accounting Pronouncements

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Three Months Ended

September 30, 2023

March 31, 2024

Three Months Ended

September 30, 2022

Nine Months Ended

September 30, 2023

Nine Months Ended

September 30, 2022

March 31, 2023

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

3 unchanged sentences

EBITDA (non-GAAP)

Common stock deemed

Addback litigation expense

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis