OLENOX INDUSTRIES INC. 10-K

Item 7 . Management’s Discussion and Analysis of Financial Condition and Results of Operations. Introduction and Certain Cautionary Statements The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our consolidated financial statements and related notes and schedules included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, intensified competition and operating problems in our operating business projects and their impact on revenues and profit margins or additional factors, and those discussed in the section entitled “Risk Factors” in Part I, Item 1 A of this Annual Report. In addition, certain information presented below is based on unaudited financial information. Results of Operations Our operations for the years ended December 31, 2024 and 2023 may not be indicative of our future operations. Years Ended December 31, 2024 and 2023 : For the Year Ended December 31, 2024 For the Year Ended December 31, 2023 Revenue Construction services (includes engineering) $ 4,976,618 $ 16,523,080 Total 4,976,618 16,523,080 Year over year % growth: Construction services ( 70 ) % 30 % Medical revenue — ( 100 ) % Consolidated ( 70 ) % ( 32 ) % Operating income (loss) Construction services ( 319,481 ) ( 2,721,899 ) Medical ( 104,174 ) ( 529,569 ) Corporate and Support ( 9,282,960 ) ( 18,497,740 ) Consolidated ( 9,706,615 ) ( 21,749,208 ) Other income (expenses) ( 9,957,745 ) ( 808,157 ) Less: Common stock deemed dividends ( 5,621,596 ) — Add: Net income (loss) from discontinued operations 2,684,678 ( 3,725,168 ) Net loss attributable to common stockholders $ ( 22,601,278 ) $ ( 26,282,533 ) Revenue During the year ended December 31, 2024 , we derived substantially all of our revenue from the construction services segment. Total revenue for the year ended December 31, 2024 was $ 4,976,618 compared to $ 16,523,080 for the year ended December 31, 2023 . Revenue decreased 70 % in 2024 , compared to the prior year. Construction services revenue decreased 70 % in 2024 compared to the prior year. The revenue decrease is primarily from a reduction in the number of projects during 2024 . Operating Income (Loss) Operating loss was $ 9,706,615 for the year ended December 31, 2024 , compared to $ 21,749,208 for the year ended December 31, 2023 , representing an increase of $ 12,042,593 or 55 % in 2024 compared to the prior year. Construction services operating loss in 2024 was $ 319,481 as compared to the prior year's operating loss of $ 2,721,899 , primarily due to an increase in the number of projects which resulted in a loss during 2023 , and the limited number of projects during 2024 . Medical revenue operating loss in 2024 was $ 104,174 , as compared to the prior year's operating loss of $ 529,569 , primarily due to decreased expenses recognized during 2024 . 31 Corporate and support operating loss increased in 2024 , as compared to the prior year, and such increase is primarily due to increased overhead costs in public expenses related to SEC compliance and legal costs, increases in IT support and increase in insurance expenses to support our various operations. In addition, an impairment loss of $ 5,976,445 was recorded for the year ended December 31, 2023 compared to an impairment loss of $ 1,015,304 recorded for the year ended December 31, 2024. Other Income (Expense) Interest income was $ 119 for the year ended December 31, 2023. Other income for the year ended December 31, 2024 and 2023 was $ 106,043 and $ 622,096 , respectively. Other income during 2024 primarily related to miscellaneous income. Interest expense for the year ended December 31, 2024 and 2023 was $ 3,127,179 and $ 1,430,372 respectively. The increase in interest expense resulted from additional notes payable entered into during 2024 . Loss on sales of equity investments for the year ended December 31, 2024 was $ 320,408 . Additionally, during the year ended December 31, 2024 we recognized $ 6,616,201 of change in fair value of our equity investments. Income Tax Provision A 100 % valuation allowance was provided against the deferred tax asset consisting of available net operating loss carryforwards and, accordingly, no income tax benefit was provided. Impact of Inflation The impact of inflation upon our revenue and income (loss) from continuing operations during each of the past two fiscal years has not been material to its financial position or results of operations for those years because we do not maintain any inventories whose costs are affected by inflation. Liquidity and Capital Resources As of December 31, 2024 and December 31, 2023 , we had an aggregate of $ 375,873 and $ 14,212 , respectively, of cash and cash equivalents. To date, we have financed our operations from revenue generated from operations, sales of our equity and debt financing. As of December 31, 2024 , our stockholders’ equity (deficit) was $( 12,460,308 ) compared to $ ( 6,334,859 ) as of December 31, 2023 . Our net loss for the years ended December 31, 2024 and 2023 was $ 16,979,682 and $ 26,282,533 respectively. Net cash used in operating activities was $ 10,898,755 and $ 6,735,017 for the years ended December 31, 2024 and 2023 , respectively. Historically, our operations have primarily been funded through proceeds from equity and debt financings, as well as revenue from operations. We have negative operating cash flows, which has raised substantial doubt about our ability to continue as a going concern. If we are not successful with our efforts to increase revenue, we will experience, as we have from time to time in the past, a shortfall in cash. If there is a shortfall, we will be forced to reduce operating expenses, among other steps, all of which would have a material adverse effect on our operations going forward. In addition, we have issued various types of debt to provide funds for operations as set forth below. We will also seek to obtain debt or additional equity financing to meet any cash shortfalls both in the public company or our subsidiaries. The type, timing and terms of any financing we may select will depend on, among other things, our cash needs, the availability of other financing sources and prevailing conditions in the financial markets. However, there can be no assurance that we will be able to secure additional funds if needed and that, if such funds are available, the terms or conditions would be acceptable to us. If we are unable to secure additional financing, further reduction in operating expenses might need to be substantial in order for us to ensure enough liquidity to sustain our operations. Any equity financing would be dilutive to our stockholders. If we incur debt, we will likely be subject to restrictive covenants that significantly limit our operating flexibility and require us to encumber our assets. If we fail to raise sufficient funds and continue to incur losses, our ability to fund our operations, take advantage of strategic opportunities, or otherwise respond to competitive pressures will be significantly limited. These circumstances have raised substantial doubt about our ability to continue as a going concern, and continued cash losses may risk our status as a going concern. Our consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. We will need to generate additional revenues or secure additional financing sources, such as debt or equity capital, to fund future operations, which financing may not be available on favorable terms or at all. If we fail to raise sufficient funds and continue to incur losses, our ability to fund our operations, take advantage of strategic opportunities, or otherwise respond to competitive pressures will be significantly limited and we will need to significantly curtail or cease our operations. 32 Cedar Cash Advances O n January 5, 2024, SG Building and SG Echo (together with SG Building, the “Merchants”) entered into a Cash Advance Agreement (the “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 until the $ 300,000 due to Maison under the January Cash Advance Agreement is paid in full. 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’s 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 29, 2024, SG Building entered into a Cash Advance Agreement (the “Fourth Cash Advance Agreement” and, together with the Cash Advance Agreement, the Second Cash Advance Agreement and the Third Cash Advance Agreement, the “Cedar Cash Advance Agreements”) with Cedar Advance LLC (“Cedar”) pursuant to which SG Building 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 Fourth Cash Advance Agreement, Cedar is expected to withdraw $ 49,150 a week directly from SG Building until the $ 1,733,420 due to Cedar under the Fourth Cash Advance Agreement is paid in full. In the event of a default (as defined in the Fourth Cash Advance Agreement), Cedar, among other remedies, can demand payment in full of all amounts remaining due under the Fourth Cash Advance Agreement. SG Building’s obligations under the Fourth Cash Advance Agreement have been guaranteed by SG Echo. As of December 31, 2024 there was no outstanding balance on this advance. 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 until the $ 224,850 due to Bridgecap under the February Cash Advance Agreement is paid in full. 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. As of December 31, 2024 there was no outstanding balance on this advance. 33 On July 31, 2024, SG Building entered into a Cash Advance Agreement (the “July Cash Advance Agreement”) with Cedar pursuant to which SG Building sold to Cedar $ 1,957,150 of its future receivables for a purchase price of $ 1,350,000 , less underwriting fees and expenses paid and the repayment of prior amounts due Cedar, for net funds provided of $ 285,180 , which are net of repayment of prior Cedar Cash Advance Agreements Pursuant to the July Cash Advance Agreement, Cedar is expected to withdraw $ 49,150 a week directly from SG Building until the $ 1,957,150 due to Cedar under the July Cash Advance Agreement is paid in full. In the event of a default (as defined in the July Cash Advance Agreement), Cedar, among other remedies, can demand payment in full of all amounts remaining due under the July Cash Advance Agreement. SG Building’s obligations under the July Cash Advance Agreement have been guaranteed by SG Echo. As of December 31, 2024 the principal balance on this advance was $ 1,059,983 . On August 27, 2024, SG Building entered into a Cash Advance Agreement (the “Pawn Cash Advance Agreement”) with Pawn Funding (“Pawn”) pursuant to which SG Building sold to Pawn $ 599,600 of its future receivables for a purchase price of $ 400,000 , less underwriting fees and expenses paid and the repayment of prior amounts due Pawn, for net funds provided of $ 360,000 . Pursuant to the Pawn Cash Advance Agreement, Pawn is expected to withdraw $ 4,999.67 a week directly from SG Building until the $ 599,600 due to Pawn is paid in full. In the event of a default (as defined in the Pawn Cash Advance Agreement), Cedar, among other remedies, can demand payment in full of all amounts remaining due under the Pawn Cash Advance Agreement. As of December 31, 2024 the principal balance on this advance was $ 249,833 . On December 17, 2024, SG Building entered into a Cash Advance Agreement (the “December Cash Advance Agreement”) with Cedar pursuant to which SG Building sold to Cedar $ 194,500 of its future receivables for a purchase price of $ 138,000 , less underwriting fees and expenses paid, for net funds provided of $ 125,000 . Pursuant to the Cedar Cash Advance Agreement, Cedar is expected to withdraw $ 4,900 a week directly from SG Building until the $ 194,500 due to Cedar is paid in full. In the event of a default (as defined in the Cedar Cash Advance Agreement), Cedar, among other remedies, can demand payment in full of all amounts remaining due under the Cedar Cash Advance Agreement. As of December 31, 2024 the principal balance on this advance was $ 131,047 . On December 24, 2024, SG Building entered into a Cash Advance Agreement (the “December Cash Advance Agreement”) with Cedar ”) pursuant to which SG Building sold to Cedar $ 203,000 of its future receivables for a purchase price of $ 140,000 , less underwriting fees and expenses paid, for net funds provided of $ 126,000 . Pursuant to the Cedar Cash Advance Agreement, Cedar is expected to withdraw $ 5,000 a week directly from SG Building until the $203,000 due to Cedar is paid in full. In the event of a default (as defined in the Cedar Cash Advance Agreement), Cedar, among other remedies, can demand payment in full of all amounts remaining due under the Cedar Cash Advance Agreement. As of December 31, 2024 the principal balance on this advance was $ 140,000 . 34 Southstar Factoring Agreement 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 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 a 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 a specific customer of the Company. (“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. 35 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). February Cash Advances On February 23, 2024, the SG Building Blocks and SG Echo, together with SG Building Blocks, the (“Merchants”), entered into a Cash Advance Agreement (“Third 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 Third 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 Third Cash Advance Agreement is paid. In the event of a default (as defined in the Cash Advance Agreement), Bridgecap, among other remedies (including penalties and fees) can demand payment in full of all amounts remaining due under the Third Cash Advance Agreement. The Merchants’ obligations under the Third 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 Third Cash Advance Agreement may be prepaid by the Merchants at any time without penalty. March Note 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 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 fail 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 fails 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 Company’s 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. We may ne ed to generate additional revenues or secure additional financing sources, such as debt or equity capital, to fund future growth, which financing may not be available on favorable terms or at all. We do not have any additional sources secured for future funding, and if we are unable to raise the necessary capital at the times we require such funding, we may need to materially change our business plan, including delaying implementation of aspects of such business plan or curtailing or abandoning such business plan altogether. 36 Cash Flow Summary For The Year Ended December 31, 2024 2023 Net cash provided by (used in): Operating activities $ ( 10,898,755 ) $ ( 6,735,017 ) Investing activities 6,702 ( 864,817 ) Financing activities 11,253,714 7,031,990 Net increase (decrease) in cash and cash equivalents $ 361,661 $ ( 567,845 ) Operating activities used net cash of $ 10,898,755 during the year ended December 31, 2024 , and $ 6,735,017 during the year ended December 31, 2023 . Generally, our net operating cash flows fluctuate primarily based on changes in our profitability and working capital. Cash used in operating activities increased by approximately $ 4,163,738 primarily due to a decrease in working capital due in part to decreases in accounts payable with the addition of operations of new entity, SG Echo, from the corresponding period of the prior years. In addition, we had a decrease of approximately $ 2,016,052 in stock-based compensation and a decrease in the overall net loss of approximately $ 5,462,977 , during the year ended December 31, 2024 compared to the year ended December 31, 2023 . The December 31, 2024 amount is due to a net loss of $ 16,979,682 , adjusted by depreciation expense of $ 513,125 , amortization of intangible assets of $ 13,668 , impairment of $ 1,566,806 , write off of project development costs of $ 266,129 , amortization of deferred license costs of $ 30,589 , amortization of debt issuance costs of $ 676,819 , gain on deconsolidation of $ 4,637,013 , increase of right-of-use asset of $ 971,833 , plus change in fair value of equity method investment of $ 6,616,201 , loss on sale of equity method investment $ 320,408 , stock-based compensation of $ 1,194,597 , and a decrease in accounts receivable of $ 77,274 , contract assets of $ 8,209 , inventories of $ 314,956 , prepaid expenses and other current assets of $ 136,194 ,; added by increase in liability of $ 1,300,172 of accounts payable and accrued expenses, intangible assets of $ 23,920 less decrease of contract liabilities of $ 770,916 and lease liability of $ 1,338,557 . Additionally, during the year ending December 31, 2024 there was $1,594 net cash used in discontinued operations. Investing activities received net cash of $ 6,702 during the year ended December 31, 2024 , and $ 864,817 during the year ended December 31, 2023 . Cash used in investing activities decreased by $ 871,520 from the corresponding period of the prior year. The December 31, 2024 amount is due to $ 13,946 purchase of fixed assets, $ 125,000 received from sale of equity investment, and $ 104,352 used in discontinued operations Financing activities provided net cash of $ 11,253,714 during the year ended December 31, 2024 , and provided net cash of $ 7,031,990 during the year ended December 31, 2023 . Cash provided by financing activities increased by approximately $ 4,221,724 . December 31, 2024 amount is due to $ 7,273,044 proceeds from short-term note payable, $ 2,104,868 proceeds from inducement agreement, less $ 5,834,000 payment of short-term notes payable, $ 3,590,386 from the issuance of common stock, $ 125 from warrant exercise, $ 28,867 related to peak put, and $ 3,596,211 provided by discontinued operations. 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. The decrease in backlog at December 31, 2024 is primarily attributable to revenue being recognized during the year ended December 31, 2024 .We expect our backlog revenue will be realized by December 31, 2025. 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. 37 Off-Balance Sheet Arrangements As of December 31, 2024 and 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. These agreements are typically with consultants and certain vendors. Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or incurred by the indemnified parties with respect to actions taken or omitted by us. The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited. We have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. 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 December 31, 2024 . Critical Accounting Estimates and New Accounting Pronouncements Critical Accounting Estimates Our financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). In connection with the preparation of the financial statements, we are required to make assumptions and estimates and apply judgments that affect the reported amounts of assets, liabilities, revenue, and expenses, and the related disclosures. We base our assumptions, estimates, and judgments on historical experience, current trends, and other factors that we believe to be relevant at the time the consolidated financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates, and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Our significant accounting policies are discussed in “Note 3 —Summary of Significant Accounting Policies” of the notes to our consolidated financial statements included elsewhere in this Annual Report. We believe that the following accounting policies are the most critical in fully understanding and evaluating our reported financial results. Share-based payments. We measure 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 the award is measured on the grant date. For non-employees, the fair value of the award is generally re-measured on interim financial reporting dates and vesting dates until the service period is complete. 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. We recognize 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 is 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 consolidated statements of operations. Convertible instruments . Safe & Green 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 (i) 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; (ii) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable GAAP measures with changes in fair value reported in earnings as they occur; and (iii) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. 38 Safe & Green determined that the embedded conversion options that were included in the previously outstanding convertible debentures should be bifurcated from their host and a portion of the proceeds received upon the issuance of the hybrid contract has been allocated to the fair value of the derivative. The derivative was subsequently marked to market at each reporting date based on current fair value, with the changes in fair value reported in results of operations. 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 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. 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, Safe & Green 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 value. Our evaluation of goodwill completed during the year ended December 31, 2024 , resulted in $ 0 worth of impairment loss. 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. The Company evaluated intangible assets for impairment during the years ended December 31, 2024 and 2023 and determined that there are $ 0 of impairment loss for the year ended December 31, 2024 and $ 1,880,547 impairment loss for the year ended December 31, 2023. The accumulated amortization and amortization expense as of and for the year ended December 31, 2024 was $ 63,392 and $ 44,256 , respectively. The accumulated amortization and amortization expense for the years ended December 31, 2023 was $ 2,852,929 and $ 187,640 respectively. New Accounting Pronouncements See Note 3 to the accompanying consolidated fin ancial statements for all recently adopted and new accounting pronouncements. 39 Non-GAAP Financial Information In addition to our results under GAAP, we also present EBITDA and Adjusted EBITDA for historical periods. EBITDA and Adjusted EBITDA are non-GAAP financial measures and have been presented as supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. We calculate EBITDA as net income (loss) attributable to common stockholders before interest expense, income tax benefit (expense), depreciation and amortization. We calculate Adjusted EBITDA as EBITDA before certain non-recurring, unusual or non-operational items, such as litigation expense, stock issuance expense and stock compensation expense. We believe that adjusting EBITDA to exclude the effects of these items that are not closely associated with ongoing corporate operations provides management and investors with a meaningful measure that increases period-to -period comparability of our operating performance. We believe the presentation of EBITDA and Adjusted EBITDA is relevant and useful by enhancing the readers’ ability to understand the Company’s operating performance. Our management utilizes EBITDA and Adjusted EBITDA as a means to measure performance. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. These measures, when used in conjunction with related GAAP financial measures, provide investors with an additional financial analytical framework that may be useful in assessing us and our results of operations. Our measurements of EBITDA and Adjusted EBITDA may not be comparable to similar titled measures reported by other companies. Other companies, including other companies in our industry, may not use such measures or may calculate one or more of the measures differently than as presented in this Quarterly Report on Form 10-Q, limiting their usefulness as a comparative measure. EBITDA and Adjusted EBITDA are not measurements of financial performance under GAAP and should not be considered as an alternative to net income (loss) attributable to common stockholders, or any other measures of financial performance derived in accordance with GAAP. We do not consider these non-GAAP measures to be substitutes for or superior to the information provided by our GAAP financial results. . The non-GAAP information should be read in conjunction with our consolidated financial statements and related notes. These measures also should not be construed as an inference that our future results will be unaffected by the non-recurring, unusual or non-operational items for which these non-GAAP measures make adjustments. Additionally, EBITDA and Adjusted EBITDA are not intended to be liquidity measures . The following is a reconciliation of EBITDA and Adjusted EBITDA to the nearest GAAP measure, net loss: For the Year Ended December 31, 2024 For the Year Ended December 31, 2023 Net loss attributable to common stockholders $ ( 22,601,278 ) $ ( 26,282,533 ) Addback interest expense 3,127,179 1,430,372 Addback interest income — ( 119 ) Addback depreciation and amortization 557,382 598,714 EBITDA (non-GAAP) ( 18,916,717 ) ( 24,253,566 ) Common stock deemed dividend 5,621,596 — Gain on deconsolidation – SG DevCorp ( 4,637,013 ) — Loss on disposition of equity-based investments 320,408 — Change in fair value of equity-based investments 6,616,201 — Addback litigation expense 356,046 154,217 Addback stock-based compensation expense 1,194,597 3,210,631 Adjusted EBITDA (non-GAAP) $ ( 9,444,882 ) $ ( 20,888,718 ) Item 7 A. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. Item 8 . Financial Statements and Supplementary Data. Our financial statements and the notes thereto, together with the reports of our registered public accounting firm appear beginning on page F- 1 of this Annual Report. 40 Item 9 . Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.