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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 


For the quarterly period ended September 30, 2023

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to ____________ 

 

Commission File Number: 001-38037

 

SAFE & GREEN HOLDINGS CORP.

(Exact name of registrant as specified in its charter)

 

Delaware

 

95-4463937

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

990 Biscayne Blvd., #501, Office 12Miami, Florida

 

33132

(Address of principal executive offices)

 

(Zip Code)

 

(646) 240-4235

(Registrant’s telephone number, including area code) 

 

Securities registered pursuant to Section 12(b) of the Act: 


Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share 

SGBX

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No   


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No   


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  

 

Large accelerated filer  ☐

Accelerated filer  ☐  

Non-accelerated filer  ☒

Smaller reporting company  


Emerging growth company  


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes   No   


As of November 14, 2023 the issuer had a total of 16,482,771 shares of the registrant’s common stock, $0.01 par value, outstanding.  


 




SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

FORM 10-​Q


TABLE OF CONTENTS




Page Number

PART I. FINANCIAL INFORMATION
2
ITEM 1. Financial Statements 2

Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022 2

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited) 3

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited) 4

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (Unaudited) 6

Notes to Condensed Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of Financial Condition and Result of Operations 37
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 49
ITEM 4. Controls and Procedures 49
PART II. OTHER INFORMATION 
50
ITEM 1. Legal Proceedings 50
ITEM 1A. Risk Factors 50
ITEM 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issue Purchases of Equity Securities 53
ITEM 3. Defaults Upon Senior Securities 53
ITEM 4. Mine Safety Disclosures 53
ITEM 5. Other Information 53
ITEM 6. Exhibits 54
SIGNATURES
56

​​​

​​​​​​​​
1


PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements

SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES 

Condensed Consolidated Balance Sheets

 

 

September 30,

2023

 

 

December 31,
 
2022

 

 

 

 (Unaudited)

 

 


 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

712,906

 

 

$

582,776

 

Accounts receivable, net

 

 

741,299

 

 

 

1,280,456

 

Contract assets 

 

 

18,391

 

 

 

36,384

 

Held for sale assets

4,400,361


4,396,826
Inventories

402,186


465,560

Prepaid expenses and other current assets

 

 

826,917

 

 

 

744,211

 

Total current assets

 

 

7,102,060

 

 

 

7,506,213

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

6,901,417

 

 

 

5,608,903

 

Project development costs and other non-current assets

603,431


483,546

Goodwill

 

 

1,309,330

 

 

 

1,309,330

 

Right-of-use asset

2,203,659


4,421,002
Long-term note receivable

879,418


857,534

Intangible assets, net

 

 

1,951,367

 

 

 

1,997,833

 

Deferred contract costs, net

40,785


71,374
Investment in non-marketable securities

700,000


700,000
Investment in and advances to equity affiliates 

3,642,607


3,599,945

Total Assets 

 

$

25,334,074

 

 

$

26,555,680

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

6,193,349

 

 

$

4,009,522

 

Contract liabilities

 

 

1,311,002

 

 

 

437,271

 

    Lease liability, current maturities

1,001,138


1,225,394
    Assumed liability

20,795


5,795
    Short term notes payable, net

7,156,737


2,648,300

Total current liabilities

 

 

15,683,021

 

 

 

8,326,282

 










Long-term note payable

2,500,000


750,000
Lease liability, net of current maturities

734,027


3,039,836
Total liabilities


18,917,048


12,116,118









Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $1.00 par value, 5,405,010 shares authorized; none issued or outstanding 

 

 

 

 

 

 

Common stock, $0.01 par value, 25,000,000 shares authorized; 16,482,771 issued and 15,948,789 outstanding as of September 30, 2023 and 12,613,978 issued and 12,590,863 outstanding as of December 31, 2022

 

 

164,828

 

 

 

126,140

 

Additional paid-in capital

 

 

67,760,551

 

 

 

56,173,977

 

Treasury stock, at cost – 67,318 shares as of September 30, 2023 and 23,115 shares as of December 31, 2022

(92,396 )

(49,680 )

Accumulated deficit

 

 

(62,331,370

)

 

 

(41,428,268

)
Total Safe & Green Holdings Corp. stockholders’ equity

5,501,613


14,822,169

Non-controlling interest

 

 

915,413

 

 

(382,607

)
Total stockholders’ equity

6,417,026


14,439,562

Total Liabilities and Stockholders’ Equity

 

$

25,334,074

 

 

$

26,555,680

 

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

2


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES


Condensed Consolidated Statements of Operations

 

For the

Three Months Ended

September 30,



For the

Three Months Ended

September 30,



For the

Nine Months Ended

September 30,



For the

Nine Months Ended

September 30,


 

2023

2022

2023


2022

 

(Unaudited)

(Unaudited)

(Unaudited)


(Unaudited)

Revenue:














Construction services $ 3,965,361

$ 2,685,920

$ 14,566,351

$ 8,567,568

Engineering services  





6,599





81,305

Medical revenue





1,437,738





11,640,953

Total  


3,965,361


4,130,257


14,566,351


20,289,826

 
















Cost of revenue:
















Construction services


4,501,393


2,688,450


15,138,225


8,631,031

Engineering services





5,001





58,893
Medical revenue 



1,601,980





8,506,681

Total   


4,501,393


4,295,431


15,138,225


17,196,605

 
















Gross profit (loss)


(536,032 )

(165,174 )

(571,874 )

3,093,221

 
















Operating expenses:
















Payroll and related expenses


819,909


1,294,857


6,318,728


3,650,553

General and administrative expenses


1,353,866


939,044


4,499,982


2,515,877

Marketing and business development expenses


265,313


103,111


455,463


337,941

Total


2,439,088


2,337,012


11,274,173


6,504,371

 
















Operating loss


(2,975,120 )

(2,502,186 )

(11,846,047 )

(3,411,150 )

 
















Other income (expense):
















Interest expense


(738,649 )

(52,758 )

(1,549,992 )

(174,733 )

Interest income


3,186


9,756


22,002


33,518
Other income (expense)
102,449


(2,963 )

690,939


488,346

Total


(633,014 )

(45,965 )

(837,051 )

347,131

 
















Loss before income taxes  


(3,608,134 )

(2,548,151 )

(12,683,098 )

(3,064,019 )

Income tax expense   












 
















Net loss


(3,608,134 )

(2,548,151 )

(12,683,098 )

(3,064,019 )

 
















Add: net income (loss) attributable to noncontrolling interests  


(94,568 )




1,522,101
Net loss attributable to common stockholders of Safe & Green Holdings Corp.  $ (3,608,134 )
$ (2,453,583 )
$ (12,683,098 )
$ (4,586,120 )
















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
















Basic and diluted

$ (0.22 )
$ (0.18 )
$ (0.86 )
$ (0.35 )

 
















Weighted average shares outstanding:
















Basic and diluted


16,057,132


13,459,713


14,761,502


13,228,828

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

3


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)


 

 

$0.01 Par Value
Common Stock

 


Additional
Paid-in

 



Treasury


Accumulated

 



Safe & Green Holdings Corp. Stockholders' 

Noncontrolling


Total
Stockholders’

 

 

 

Shares

 


Amount

 


Capital

 



Stock

Deficit

 


Equity


Interests


Equity

 

Balance at June 30, 2023

 


16,016,107

 


$

160,161

 


$

60,189,651

 


$ (92,396 )

$

(50,503,232

)
$ 9,754,184

$ (429,024 )
$ 9,325,160

 

Distribution of SG DevCorp








6,875,567





(8,220,004 )

(1,344,437 )

1,344,437

Conversion of short-term notes payable

466,664


4,667


695,333








700,000





700,000

Net loss

 


 



 


 

 





 

(3,608,134

)

(3,608,134 )



(3,608,134 )
Balance at September 30, 2023

16,482,771

$ 164,828

$ 67,760,551

$ (92,396 )
$ (62,331,370 )
$ 5,501,613

$ 915,413
$ 6,417,026

































Balance at December 31, 2022  

 


12,613,978

 


$

126,140

 


$

56,173,977

 


$ (49,680 )

$

(41,428,268

)
$ 14,822,169

$ (382,607 )
$ 14,439,562

 

Stock-based compensation







3,210,631








3,210,631





3,210,631
Issuance of restricted common stock

287,512


2,875


434,450








437,325





437,325
Issuance of restricted stock units

3,014,617


30,146


(30,146 )














Common stock issued for services

50,000


500


47,000








47,500





47,500
Issuance of warrants and restricted common stock

50,000


500


353,739








354,239





354,239
Noncontrolling interest distribution



















(46,417 )

(46,417 )
Treasury stock










(42,716 )




(42,716 )




(42,716 )
Distribution of SG DevCorp







6,875,567





(8,220,004 )

(1,344,437 )

1,344,437



Conversion of short-term notes payable

466,664


4,667


695,333








700,000





700,000

Net loss

 


 



 


 

 





 

(12,683,098

)

(12,683,098 )




(12,683,098 )

Balance at September 30, 2023

 


16,482,771

 


$

164,828

 


$

67,760,551

 


$ (92,396 )

$

(62,331,370 )
$ 5,501,613

$ 915,413
$
6,417,026


  

4


 

SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)


 

 

$0.01 Par Value
Common Stock

 


Additional
Paid-in

 



Treasury


Accumulated

 



Safe & Green Holdings Corp. Stockholders' 

Noncontrolling


Total
Stockholders’

 

 

 

Shares

 


Amount

 


Capital

 



Stock

Deficit

 


Equity


Interests


Equity

 

Balance at June 30, 2022

 


12,050,206

 


$

120,502

 


$

54,660,934

 


$

$

(35,241,757

)
$ 19,539,679

$ 824,404

$ 20,364,083

 

Stock-based compensation

 


 



 


 

594,694

 





 

 



594,694





594,694

 

Noncontrolling interest distribution




















(98,000 )

(98,000 )
Repurchase of common stock

(23,115 )







(49,680 )




(49,680 )




(49,680 )

Net income (loss)

 


 



 


 

 





 

(2,453,583

)

(2,453,583 )

(94,568 )

(2,548,151 )
Balance at September 30, 2022

12,027,091

$ 120,502

$ 55,255,628

$ (49,680 )
$ (37,695,340 )
$ 17,631,110

$ 631,836

$ 18,262,946

































Balance at December 31, 2021   

 


11,986,873

 


$

119,869

 


$

53,341,405

 


$

$

(33,109,220

)
$ 20,352,054

$ 1,363,735
$ 21,715,789

 

Stock-based compensation

20,000


200


1,914,656








1,914,856





1,914,856
Issuance of restricted stock units

43,333


433


(433 )














Noncontrolling interest distribution



















(2,254,000 )

(2,254,000 )
Repurchase of common stock

(23,115 )







(49,680 )




(49,680 )




(49,680 )

Net income (loss) 

 


 



 


 

 





 

(4,586,120

)

(4,586,120 )

1,522,101


(3,064,019 )

Balance at September 30, 2022

 


12,027,091

 


$

120,502

 


$

55,255,628

 


$ (49,680 )

$

(37,695,340 )
$ 17,631,110

$ 631,836
$
18,262,946



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


5



SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Condensed Consolidated Statements of Cash Flows

 

 

For the

Nine Months Ended 
September 30, 2023

 


For the

Nine Months Ended 
September 30, 2022

 

 

 

(Unaudited)

 


(Unaudited)

 

Cash flows from operating activities:

 

 

 


 

 

Net loss

 

$

(12,683,098

)

$

(3,064,019

)

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

 

 

 

 


 

 

 

Depreciation expense

 

 

277,648

 


 

317,249

 

Amortization of intangible assets

 

 

140,437

 


 

122,587

 

Amortization of deferred license costs

30,589


30,589
Amortization of debt issuance costs and debt discount

685,308



23,726
Amortization of right of use asset

613,092



Common stock issued for services

484,825



Bad debt expense

 

 


 

7,024

Interest income on long-term note receivable

 

 

(21,884

)

 

(28,048

)

Stock-based compensation

 

 

3,210,631

 


 

1,874,857

 

Loss on asset disposal




241

Changes in operating assets and liabilities:

 

 

   

 


 

   

 

Accounts receivable

 

 

539,157


 

1,197,149

Escrow - bond




(2,000,000 )

Contract assets

 

 

17,993


 

41,916

Inventories

63,374

378,863

Prepaid expenses and other current assets

 

 

(82,710

)

 

(35,845

)
Intangible assets

(93,971 )


Right of use asset




356,350

Accounts payable and accrued expenses

 

 

2,183,831


 

(4,006,868

)

Contract liabilities



873,731


 

(163,161

)
     Due to affiliates



(264,451 )
     Lease liability

(925,815 )

(341,319 )
Assumed liability

15,000


Net cash used in operating activities

 

 

(4,671,862

)

 

(5,553,160

)

 

 

 

 

 


 

 

 

Cash flows from investing activities:

 

 

 

 


 

 

 

Purchase of property, plant and equipment

(530,057 )

(1,996,200 )
Proceeds from sale of equipment




760
Repayment of promissory note



(100,000 )
Project development costs

(119,885 )

(805,362 )
Investment in and advances to equity affiliates

(42,662 )

(148,570 )
Investment in non-marketable securities



(500,000 )

Net cash used in investing activities

 

 

(692,604

)

 

(3,549,372

)

 

 

 

 

 


 

 

 

Cash flows from financing activities:

 

 

 

 


 

 

 

Repurchase of common stock

(42,716 )

(49,680 )
Repayment of short term notes payable

(2,732,144 )


Proceeds from short-term notes payable and warrants, net of debt issuance costs

7,609,514


500,000
Proceeds from long-term notes payable

706,359



Distribution paid to non-controlling interest

(46,417
)

(2,254,000 )

Net cash provided by (used in) financing activities

 

 

5,494,596


 

(1,803,680

)
 

 


 
Net increase/(decrease) in cash and cash equivalents

130,130

(10,906,212 )









Cash and cash equivalents - beginning of period

582,776


13,024,381









Cash and cash equivalents - end of period
$ 712,906

$ 2,118,169









Supplemental disclosure of non-cash investing and financing activities:







Initial value of lease liability
$

$ 1,801,584
Conversion of short-term notes payable to common stock
$ 700,000

$

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

6


SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2023 and 2022 (Unaudited)

 

1.

Description of Business 

 

Safe & Green Holdings Corp. (collectively with its subsidiaries, the “Company,” “we”, “us” or “our”) was previously known as SG Blocks, Inc. as well as CDSI Holdings, Inc., a Delaware corporation incorporated on December 29, 1993. On November 4, 2011, CDSI Merger Sub, Inc., the Company’s wholly-owned subsidiary, was merged with and into SG Building Blocks, Inc. (“SG Building,” formerly SG Blocks Inc.) (the “Merger”), with SG Building surviving the Merger and becoming a wholly-owned subsidiary of the Company. The Merger was a reverse merger that was accounted for as a recapitalization of SG Building, as SG Building was the accounting acquirer.


The Company operates in the following four segments: (i) manufacturing & construction services; (ii) medical; (ii) real estate development; and (iv) environmental. The construction segment designs and constructs modular structures built in the Company’s factories. In the medical segment the Company uses its modular technology to (i) provide turnkey solutions to medical testing and treatment and generate revenue from the medical testing and point of care treatment in our medical suites and (ii) sell and lease medical suites and privacy pods. The Company’s real estate development segment, SG Development Corp., our majority owned subsidiary, builds innovative and green single or multifamily projects in underserved regions nationally using modules (“Modules”) built in one of the Company’s vertically integrated factories. The environmental segment, the newest segment, is a sustainable medical and waste management solution that collects waste and treats waste for safe disposal.

 

The building products developed with the Company's proprietary technology and design and engineering expertise are generally stronger, more durable, environmentally sensitive, and erected in less time than traditional construction methods. The use of the Company's Modules typically provides between four to six points towards the Leadership in Energy and Environmental Design (“LEED”) certification levels, including reduced site disturbance, resource reuse, recycled content, innovation in design and use of local and regional materials. Due to the ability of the Modules to satisfy such requirements, the Company believes the products produced utilizing its technology and expertise is a leader in environmentally sustainable construction.


There are three core product offerings that utilize the Company's technology and engineering expertise. The first product offering involves GreenSteel™ modules, which are the structural core and shell of an SGBlocks building. The Company procures the containers, engineer required openings with structural steel enforcements, paint the SGBlocks and then deliver them on-site, where the customer or a customer’s general contractor will complete the entire finish out and installation. The second product offering involves replicating the process to create the GreenSteel product and, in addition, installing selected materials, finishes and systems (including, but not limited to floors, windows, doors, interior painting, electrical wiring and fixtures, plumbing outlets and bathrooms, roofing system) and delivering SGBlocks pre-fabricated containers to the site for a third party licensed general contractor to complete the final finish out and installation. Finally, the third product offering is the completely fabricated and finished SGBlocks building (including but not limited to floors, windows, doors, interior painting, electrical wiring and fixtures, plumbing outlets and bathrooms, roofing systems), including erecting the final unit on site and completing any other final steps. The building is ready for occupancy and/or use as soon as installation is completed. Construction administration and/or project management services are typically included in the Company's product offerings. 


The Company also provides engineering and project management services related to the use and modification of Modules in construction.

 

Construction

During 2020, the Company formed, SG Echo, LLC ("SG Echo"), a wholly owned subsidiary of the Company. The Company acquired substantially all the assets of Echo DCL (“Echo”), a Texas limited liability company, except for Echo's real estate holdings for which the Company obtained a right of first refusal. Echo is a container/modular manufacturer based in Durant, Oklahoma specializing in the design and construction of permanent modular and temporary modular buildings and was one of the Company's key supply chain partners. Echo caters to the military, education, administration facilities, healthcare, government, commercial and residential customers. This acquisition has allowed the Company to expand its reach for the Modules and offer an opportunity to vertically integrate a large portion of the Company's cost of goods sold, as well as increase margins, productivity and efficiency in the areas of design, estimating, manufacturing and delivery and to become the manufacturer of the Company's core container and modular product offerings. 
7



SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2023 and 2022 (Unaudited)


1.

Description of Business (continued)


Medical

 

As of January 2021 and through the fourth quarter of 2021, the Company’s consolidated financial statements include the accounts of Chicago Airport Testing LLC (“CAT”). The Company had a variable interest in CAT as described further below. CAT is in the business of marketing, selling, distributing, leasing and otherwise commercially exploiting certain products and services in the COVID-19 testing and other medical industry. In addition, during March 2023, the Company formed Safe and Green Medical Corporation. (“SG Medical”). The Company also entered into a joint venture with Clarity Lab Solutions LLC., to provide clinical lab testing related to COVID-19.

Real Estate Development

 

During 2021, the Company formed Safe and Green Development Corporation, formerly, SGB Development Corp. (“SG DevCorp”), as a wholly-owned by the Company. SG DevCorp was formed with the purpose of real property development utilizing the Company's technologies.  SG DevCorp has a minority interest in Norman Berry II Owners LLC and JDI-Cumberland Inlet LLC as described further below.

In December 2022, the Company and then owner of 100% of the issued and outstanding securities of SG DevCorp, announced its plan to separate the Company and SG DevCorp into two separate publicly traded companies (the “Separation”). To implement the Separation, on September 27, 2023 (the “Distribution Date”), the Company, effected a pro rata distribution to its stockholders of approximately 30% of the outstanding shares of SG DevCorp’s common stock (the “Distribution”). In connection with the Distribution, each Company stockholder received 0.930886 shares of SG DevCorp’s common stock for every five (5) shares of Company common stock held as of the close of business on September 8, 2023, the record date for the Distribution, as well as a cash payment in lieu of any fractional shares. Immediately after the Distribution, SG DevCorp was no longer a wholly owned subsidiary of the Company and the Company held approximately 70% of SG DevCorp’s issued and outstanding securities. On September 28, 2023, SG DevCorp’s common stock began trading on the Nasdaq Capital Market under the symbol “SGD.”

 

In connection with the Separation and Distribution, SG DevCorp entered into a separation and distribution agreement and several other agreements with the Company. These agreements provide for the allocation between SG DevCorp and the Company of the assets, employees, liabilities and obligations (including, among others, investments, property, employee benefits and tax-related assets and liabilities) of the Company and its subsidiaries attributable to periods prior to, at and after the Separation and will govern the relationship between the Company and SG DevCorp subsequent to the completion of the Separation. In addition to the separation and distribution agreement, the other principal agreements entered into with the Company included a tax matters agreement and a shared services agreement.     


Environmental
During 2022, SG Environmental Solutions Corp. (“SG Environmental”) was formed and is focused on biomedical waste removal and will utilize a patented technology that it licenses to shred and disinfect biomedical waste, rendering the waste disinfected, unrecognizable, and of no greater risk to the public health than residential household waste.


2.

Liquidity 


As of September 30, 2023, the Company had cash and cash equivalents of $712,906 and a backlog of $4,000,771. See Note 11 for a discussion of construction backlog. Based on its conversations with key customers, the Company anticipates its backlog to convert to revenue over the following period:  



   
2023


Within 1 year
$ 4,000,771

Total Backlog
$ 4,000,771


The Company has incurred losses since its inception, has negative working capital of $(9,280,961) and has negative operating cash flows, which has raised substantial doubt about its ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty concerning the Company’s ability to continue as a going concern.     


8



SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2023 and 2022 (Unaudited)


2.

Liquidity 


The Company intends to meet its capital needs from revenue generated from operations and by containing costs, entering into strategic alliances, as well as exploring other options, including the possibility of raising additional debt or equity capital as necessary. There is, however, no assurance the Company will be successful in meeting its capital requirements prior to becoming cash flow positive. The Company does not have any additional sources secured for future funding, and if it is unable to raise the necessary capital at the times it requires such funding, it may need to materially change its business plan, including delaying implementation of aspects of such business plan or curtailing or abandoning such business plan altogether.


3.

Summary of Significant Accounting Policies 

 

Basis of presentation and principals of consolidation – The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 8 Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. The condensed financial statements and notes should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2022 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission on March 31, 2023. In the opinion of management, all adjustments, consisting of normal accruals, considered necessary for a fair presentation of the interim financial statements have been included. Results for the nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.


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

 

Accounting estimates – The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgements and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period, together with amounts disclosed in the related notes to the financial statements. The Company's estimates used in these financial statements include, but are not limited to, revenue recognition, stock-based compensation, accounts receivable reserves, inventory valuations, goodwill, the valuation allowance related to the Company’s deferred tax assets, the carrying amount of intangible assets, right of use assets and the recoverability and useful lives of long-lived assets. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.


Operating cycle – The length of the Company’s contracts varies, but is typically between six to twelve months. In some instances, the length of the contract may exceed twelve months. Assets and liabilities relating to contracts are included in current assets and current liabilities, respectively, in the accompanying balance sheets as they will be liquidated in the normal course of contract completion, which at times could exceed one year.


Revenue recognition – The Company determines, at contract inception, whether it will transfer control of a promised good or service over time or at a point in time, regardless of the length of contract or other factors. The recognition of revenue aligns with the timing of when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. To achieve this core principle, the Company applies the following five steps in accordance with its revenue policy: 


                (1)  Identify the contract with a customer


                (2)  Identify the performance obligations in the contract


                (3)  Determine the transaction price

 

                (4)  Allocate the transaction price to performance obligations in the contract

 

                (5)  Recognize revenue as performance obligations are satisfied



9



SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2023 and 2022 (Unaudited)

 

3.

Summary of Significant Accounting Policies (continued)

On certain contracts, the Company applies recognition of revenue over time, which is similar to the method the Company applied under previous guidance (i.e. percentage of completion). Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near-term. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress toward complete satisfaction of the performance obligation, are recognized on a cumulative catch-up basis in the period in which the revisions to the estimates are made. When the current estimate of total costs for a performance obligation indicate a loss, a provision for the entire estimated loss on the unsatisfied performance obligation is made in the period in which the loss becomes evident. 


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


The Company entered into a joint venture agreement with Clarity Lab Solutions, LLC (“Clarity Labs”) (the “JV”) in the fourth quarter of 2021. Revenue from the activities of the JV is related to clinical testing services and was recognized when services have been rendered, which was at a point in time.  Included in the consideration the Company expected to be entitled to receive, the Company estimated its contractual allowances, payer denials and price concessions. In addition, the Company formed Chicago Airport Testing, LLC which collected rental revenue from subleasing to a consortium of government entities assisting in COVID-19 testing. For the nine months ended September 30, 2023 and 2022, the Company recognized $0 and $10,200,000, respectively related to activities through these two joint ventures, which is included in medical revenue on the accompanying consolidated statements of operations. Due to the ongoing lower affects of COVID-19 restrictions, the JV began to wind down during the fourth quarter of 2022.


Disaggregation of Revenues


The Company’s revenue for the three and nine months ended September 30, 2022 was principally derived from construction and engineering contracts related to the manufacturing of modular units used for construction, and medical revenue derived from lab testing and test kit sales. The Company’s revenues for the three and nine months ended September 30, 2023 was principally derived from construction contracts related to the manufacturing of modular units The Company's contracts are with customers in various industries. Revenue recognized at a point in time and recognized over time were $0 and $14,566,351, respectively, for the nine months ended September 30, 2023. Revenue recognized at a point in time and recognized over time were $11,640,953 and $8,648,873, respectively, for the nine months ended September 30, 2022. Revenue recognized at a point in time and recognized over time were $0 and $3,965,361, respectively, for the three months ended September 30, 2023. Revenue recognized at a point in time and recognized over time were $1,437,738 and $2,692,519, respectively, for the three months ended September 30, 2022.

   

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




Three Months Ended September 30,

Revenue by Customer Type

2023

2022


Construction and Engineering Services:















    Hotel
$

%
$ 1,224,181

30 %

    Office

3,965,361


100

%


1,468,338

35


Subtotal

3,965,361

100 %

2,692,519

65 %

Medical Revenue:














 Medical (lab testing, kit sales and equipment)


%

1,437,738


35

%


Total revenue by customer type

$

3,965,361


100

%  


$

4,130,257

100


10



SAFE & GREEN HOLDINGS CORP. AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2023 and 2022 (Unaudited)

 

3.

Summary of Significant Accounting Policies (continued)




Nine Months Ended September 30,

Revenue by Customer Type

2023

2022


Construction and Engineering Services:















    Government

$


%
$ 39