10-Q: Safe & Green DevCo Shifts Focus Amidst Rising Losses
Sentiment:
Quarterly Report
Safe and Green Development Corporation reported a significant net loss increase in Q3 2025, driven by a strategic shift to organic recycling and substantial debt.
Delay expectedThe sale of the Lago Vista Site to Lithe Development Inc. was canceled, and the property continues to be actively marketed.The LV Note, with a maturity date of April 1, 2025, was not paid upon maturity, though the lender has not declared default and negotiations are ongoing.The Gail Baird Foundation Mortgage note payable, due April 21, 2025, was not paid upon maturity, though the lender has not declared default and standard interest payments continue.The MCS related party note payable, due January 1, 2025, was not paid upon maturity, though the lender has not declared default and standard interest payments continue.The St. Mary's note payment schedule was amended, extending the final payment due date to October 30, 2025 (or November 29, 2025, if the second payment was extended), and the borrower exercised a 30-day extension option for the second payment.
Capital raiseCompleted a private placement on October 17, 2025, raising approximately $8.175 million in net proceeds through the issuance of Series B Non-Voting Convertible Preferred Stock and common warrants.In July 2025, completed a private placement raising approximately $560,422 in gross proceeds through common stock, pre-funded warrants, and five-year warrants.The company is considering multiple alternatives for future financing, including additional equity and debt financings.The Equity Purchase Agreement (EP Agreement) with Peak One for up to $10,000,000 was terminated.The ELOC Purchase Agreement with Arena Business Solutions Global SPC II, LTD for up to $50.0 million was terminated.
Worse than expectedNet loss significantly increased to $(12,254,272) for the nine months ended September 30, 2025, from $(7,378,464) in the prior year.Operating loss widened to $(8,530,514) for the nine months ended September 30, 2025, from $(4,795,411) in the prior year.Incurred a $3,025,000 bad debt expense related to the uncollectability of the $4.5 million Cumberland Note.Recorded an impairment loss of $965,812 on software development costs.Cash balance remains low at $233,037, with current cash only expected to fund operations through February 2026.Substantial doubt about the ability to continue as a going concern.
Summary
- The company reported a net loss of $(12,254,272) for the nine months ended September 30, 2025, compared to $(7,378,464) for the same period in 2024.
- Revenue for the nine months ended September 30, 2025, increased significantly to $4,936,388 from $173,188 in 2024, primarily due to the acquisition of Resource Group.
- Operating loss widened to $(8,530,514) for the nine months ended September 30, 2025, from $(4,795,411) in the prior year.
- In June 2025, the company completed the acquisition of Resource Group US Holdings LLC, marking a strategic shift to engineered soils and organic recycling as its primary operational focus.
- Auditors have expressed substantial doubt about the company's ability to continue as a going concern due to accumulated net losses and a net capital deficiency.
- A bad debt expense of $3,025,000 was recorded for the nine months ended September 30, 2025, due to the uncertainty of collecting a $4.5 million promissory note related to Cumberland.
- An impairment loss of $965,812 was recorded on software development costs during the nine months ended September 30, 2025.
- The company successfully remediated a previously identified material weakness in internal control over financial reporting during the third quarter of 2025.
- Subsequent to the reporting period, in October 2025, the company completed a private placement raising approximately $8.175 million in net proceeds.
Sentiment
Score: 3
Explanation: While revenue increased due to an acquisition and a material weakness was remediated, the company faces significant financial challenges including substantial net losses, going concern doubt, high debt, and asset impairments. The strategic shift is positive but its success is uncertain, and the company remains highly dependent on future capital raises.
Positives
- Revenue for the nine months ended September 30, 2025, increased significantly to $4,936,388, primarily driven by the acquisition of Resource Group.
- The company successfully remediated a previously identified material weakness in internal control over financial reporting during the third quarter of 2025.
- A strategic shift into the engineered soils and organic recycling industry through the Resource Group acquisition diversifies the business and offers new growth avenues.
- Completed a private placement in October 2025, raising approximately $8.175 million in net proceeds, providing much-needed capital.
Negatives
- Net loss significantly increased to $(12,254,272) for the nine months ended September 30, 2025, from $(7,378,464) in the prior year.
- Operating loss widened to $(8,530,514) for the nine months ended September 30, 2025, from $(4,795,411) in the prior year.
- Substantial doubt exists about the company's ability to continue as a going concern due to accumulated losses and a net capital deficiency.
- Incurred a $3,025,000 bad debt expense related to the uncollectability of the $4.5 million Cumberland Note.
- Recorded an impairment loss of $965,812 on software development costs.
- Cash balance remains low at $233,037 as of September 30, 2025, with current cash only expected to fund operations through February 2026.
- High interest expense of $3,789,105 for the nine months ended September 30, 2025, an increase of $1,206,052 from the prior year, due to increased debt.
- The Equity Purchase Agreement (EP Agreement) and the ELOC Purchase Agreement were terminated.
- The 'Treasury Opportunity' failed, leading to the termination of the consulting agreement with Bill Panagiotakopoulos.
Risks
- Limited operating history makes it difficult to evaluate future business prospects.
- Auditors have expressed substantial doubt about the ability to continue as a going concern.
- Financial condition and results of operations could be negatively affected by failure to grow or manage growth/investments effectively.
- Long-term sustainability and future growth depend on acquiring suitable land parcels for residential projects at reasonable prices.
- Operates in a highly competitive market for investment opportunities, and may be unable to identify and complete acquisitions of real property assets.
- Property portfolio has a high concentration of properties located in certain states.
- No assurance that properties in the development pipeline will be completed in accordance with anticipated timing or cost.
- Insurance coverage on properties may be inadequate, and insurance costs may increase.
- Operating results may be negatively affected by potential development and construction delays and resultant increased costs and risks.
- Relies on third-party suppliers and long supply chains, with risks of failure to develop relationships or significant interruptions.
- Previously undetected environmentally hazardous conditions may adversely affect the business.
- Legislative, regulatory, accounting, or tax rules, and any changes to them, could adversely affect the company.
- If deemed an investment company, applicable restrictions could make it impractical to continue business as contemplated.
- Industry is cyclical, and adverse changes in general and local economic conditions could reduce housing demand.
- Fluctuations in real estate values may require write-downs of real estate assets.
- Investments through joint ventures involve risks not present in investments where the company is the sole owner.
- May not be able to sell real property assets when desired.
- Access to financing sources may not be available on favorable terms, or at all, which could adversely affect the ability to maximize returns.
- Future outbreaks of highly infectious diseases could materially and adversely impact performance, financial condition, results of operations, and cash flows.
- Does not intend to pay dividends on common stock; stockholders' ability to achieve a return depends on appreciation in stock price.
- May issue shares of preferred or common stock in the future, which could dilute percentage ownership.
- If securities or industry analysts do not publish research or publish inaccurate or unfavorable research, stock price and trading volume could decline.
- Provisions in corporate charter documents and under Delaware law could make an acquisition of the company more difficult.
- Failure to comply with Nasdaq continued listing requirements could result in a de-listing of common stock.
- Risks relating to ownership of common stock, including high volatility and dilution.
- Ability to successfully integrate Resource Group's operations, personnel, and systems into existing business structure while preserving customer relationships and operational efficiency.
- Demand for engineered soils, mulch, compost, and other organic recycling products, and the impact of fluctuations in construction activity, landscaping demand, or public infrastructure spending on such demand.
- Operational risks inherent in Resource Group's business, including equipment breakdowns, fuel price volatility, and disruptions to transportation and logistics networks.
- Ability to secure, maintain, and renew permits, licenses, and other regulatory approvals required for Resource Group's operations, and to comply with evolving environmental, health, and safety laws and regulations.
- Availability and cost of sourcing, processing, and transporting green waste feedstock, and the risk of supply interruptions or quality inconsistencies.
- Competitive pressures in both the engineered soils and real estate markets, including from larger, better-capitalized companies with greater resources.
- Potential liabilities related to environmental remediation or contamination at current or former operating sites.
- Ability to monetize or otherwise generate value from legacy real estate holdings while focusing on the growth of Resource Group.
- Effect of adverse weather conditions, natural disasters, or climate-related events on operations, supply chain, or customer demand.
- Liquidity position, capital needs, and access to financing, particularly in light of current debt obligations and going concern considerations.
- Potential for changes in government policies, infrastructure funding, environmental initiatives, or economic conditions to materially affect business strategies or results.
- Possibility that the company may explore or consummate strategic transactions, and the risks associated with evaluating, negotiating, or completing such transactions.
- A shutdown of the U.S. federal government may adversely affect the business.
- Holders of Series B Preferred Stock are entitled to certain payments that may be paid in cash or in shares of Common Stock, potentially requiring substantial cash expenditure or resulting in substantial dilution.
- The Series B Certificate of Designation and Warrants contain anti-dilution provisions, which may dilute the interests of stockholders, depress the price of common stock, and make it difficult to raise additional capital.
- Restrictive covenants under the October Purchase Agreement may make it difficult to procure additional financing.
Future Outlook
Resource Group is expected to serve as the primary operational focus going forward, while the company plans to continue to optimize and operate its legacy real estate assets and joint venture interests. The company is evaluating the most efficient path to manage its property portfolio while supporting the growth and operational scale of Resource Group. It expects to incur increasing losses in the future and anticipates current cash will fund operations only through February 2026, necessitating additional future financing. The company does not expect to generate revenue from its AI segment for years and anticipates increased expenses due to the Resource Group acquisition. Negotiations to restructure debt for the Lago Vista and Durant properties are expected to finalize in Q4 2025.
Management Comments
- We are evaluating the most efficient path to manage our property portfolio while supporting the growth and operational scale of Resource Group.
- Management believes this strategic alignment will allow the Company to capture synergies across its operational segments while creating long-term shareholder value.
- Our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2025.
- During the third quarter of 2025, we completed the remediation of the previously identified material weakness in internal control over financial reporting.
Industry Context
The company is undergoing a significant strategic shift from its historical focus on real estate development and nascent AI technologies to the engineered soils and organic recycling industry through the Resource Group acquisition. This move diversifies its business away from the cyclical real estate market and into environmental services, which may offer more stable revenue streams and align with growing sustainability trends. However, it also introduces new operational and regulatory risks specific to waste management and soil production. The company must effectively integrate the new operations while managing its legacy real estate portfolio. The AI segment is not expected to generate revenue for years, indicating a long-term play or a less immediate strategic priority.
Comparison to Industry Standards
- NA
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Executive Consultant | NA | Bill Panagiotakopoulos | July 29, 2025 | Appointed to assist in pursuing a $100 million private-placement financing (Treasury Opportunity). |
| Executive Consultant | Bill Panagiotakopoulos | NA | August 26, 2025 | Consulting agreement terminated due to the failure of the Treasury Opportunity. |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Amendment to Incentive Compensation Plan | The Board approved, and stockholders approved on September 29, 2025, an amendment to the 2023 Plan to increase the number of shares authorized for issuance thereunder by 1,200,000 shares of common stock. | September 29, 2025 | Increases the pool of shares available for equity compensation, potentially impacting future dilution but also enabling talent retention/attraction. |
| Charter Amendment | Filed a Certificate of Designation establishing the rights and preferences of its Series B Non-Voting Convertible Preferred Stock. | October 16, 2025 | Establishes a new class of preferred stock with specific conversion and dividend rights, impacting capital structure and potential future dilution. |
| Charter Amendment | Filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation increasing the authorized common shares from 100,000,000 to 500,000,000. | October 16, 2025 | Provides flexibility for future equity issuances, including conversions of preferred stock and warrants, but significantly increases the potential for dilution. |
Legal Proceedings
- Not currently involved in any legal proceedings.
Related Party Transactions
- On January 29, 2025, the company entered into a Mutual Release with Safe & Green Holdings Corp. (SG Holdings), forgiving $908,323 in principal and $815,522 in inter-company advances owed by SG Holdings, in exchange for SG Holdings forgiving $394,329 of inter-company debt owed to the company and transferring 276,425 treasury shares. The total amount forgiven by the company was $391,524.
- As of September 30, 2025, $740,000 was included in accounts payable and accrued expenses due to the company's board members for pro-rated cash retainers.
- As of September 30, 2025, $3,591,036 was due to related parties from non-interest bearing advances, due on demand.
- As of September 30, 2025, notes payable from related parties amounted to $5,472,266.
Stakeholder Impact
- Shareholders face significant dilution risk from past and future equity issuances (e.g., Series B Preferred Stock, warrants), increased net losses, and going concern doubt, which could negatively impact share price and investment value. The strategic shift to organic recycling could offer long-term value if successful.
- Employees in the Resource Group segment may see growth due to increased payroll expenses, while the remediation of internal control weaknesses may improve operational stability.
- Customers may benefit from expanded service offerings in engineered soils and organic recycling through the Resource Group acquisition.
- Suppliers face potential impacts from the company's reliance on third-party suppliers and long supply chains, particularly for Resource Group, where disruptions could affect operations.
- Creditors face elevated risk due to high debt levels, increased interest expense, and the company's going concern doubt. Some notes payable were not paid at maturity, indicating ongoing negotiations and potential for default.
Next Steps
- Optimize and operate legacy real estate assets and joint venture interests.
- Evaluate the most efficient path to manage the property portfolio while supporting the growth and operational scale of Resource Group.
- Negotiate to restructure debt associated with the Lago Vista property and an additional property in Durant, Oklahoma, with finalization expected during Q4 2025.
- Hold a meeting of stockholders at the earliest practicable date (and in no event later than 60 days after October 17, 2025) to seek stockholder approval for the issuance of October Warrant Shares, and if not obtained, hold subsequent meetings every 90 days until approval or December 31, 2026.
Key Dates
| Date | Description |
|---|---|
| 2023-01-01 | Company adopted ASC 326, Current Expected Credit Losses. |
| 2023-02-28 | Company's Board of Directors approved the issuance of up to 200,000 shares under the 2023 Incentive Compensation Plan. |
| 2023-06-23 | Company entered into a Loan Agreement with BCV S&G for up to $2,000,000. |
| 2023-11-30 | Company entered into an Equity Purchase Agreement (EP Agreement) with Peak One for up to $10,000,000 in shares. |
| 2024-01-01 | 459,000 shares of common stock were added to the 2023 Plan pursuant to the evergreen provision. |
| 2024-02-07 | Company completed the acquisition of Majestic World Holdings LLC. |
| 2024-03-01 | Company entered into a credit agreement with the Bryan Leighton Revocable Trust. |
| 2024-04-03 | LV Holding entered into a Modification and Extension Agreement to extend the maturity date of the LV Note to April 1, 2025. |
| 2024-06-06 | Company completed the acquisition of all assets related to My Virtual Online Intelligent Assistant (MyVONIA) A.I. technology. |
| 2024-07-10 | Company issued a promissory note in favor of 1800 Diagonal Lending LLC in the principal amount of $64,400. |
| 2024-07-23 | Company entered into a Joint Venture Agreement with Milk & Honey for Sugar Phase. |
| 2024-07-24 | Company issued a second promissory note in favor of 1800 Diagonal Lending LLC in the principal amount of $49,000. |
| 2024-08-12 | Company entered into a Securities Purchase Agreement with Arena Investors for the first tranche of secured convertible debentures. |
| 2024-08-12 | Company entered into an ELOC Purchase Agreement with Arena Business Solutions Global SPC II, LTD. |
| 2024-08-30 | The ELOC Purchase Agreement was amended. |
| 2024-09-02 | Company entered into a second Joint Venture Agreement with Milk & Honey for Pulga Internacional. |
| 2024-09-06 | Company issued a third promissory note in favor of 1800 Diagonal Lending LLC in the principal amount of $49,000. |
| 2024-09-17 | Company entered into a Cash Advance Agreement with Cedar Advance LLC. |
| 2024-09-30 | Registration statement for securities issuable upon conversion or exercise of First Closing Arena Debentures and Warrants was declared effective by the SEC. |
| 2024-10-01 | Company and Milk & Honey entered into a joint venture for Hacienda Olivia Phase II LLC. |
| 2024-10-08 | Company effected a 1-for-20 reverse stock split of its then-outstanding common stock. |
| 2024-10-25 | Company closed the second tranche of its private placement offering with the Arena Investors. |
| 2024-10-30 | Company and members of Majestic entered into an amendment to the MIPA, reducing cash consideration. |
| 2024-10-31 | Company and Arena Investors entered into Global Amendment No. 2 to the First Closing Arena Debentures. |
| 2024-11-12 | Company entered into a Credit Extension Agreement for the agreement with the Bryan Leighton Revocable Trust. |
| 2024-11-13 | Company entered into a promissory note for $960,672 in connection with the sale of the St. Mary's Site. |
| 2025-01-01 | 66,784 shares of common stock were added to the 2023 Plan pursuant to the evergreen provision. |
| 2025-01-29 | Company entered into a mutual release and discharge agreement with Safe & Green Holdings Corp. |
| 2025-01-30 | Company entered into a definitive agreement with Lithe Development Inc. for the sale of the Lago Vista Site (subsequently canceled). |
| 2025-02-05 | Company entered into a Second Cash Advance Agreement with Cedar. |
| 2025-02-11 | Company entered into an Amendment to the Operating Agreement for Cumberland and a Forced Sale Agreement. |
| 2025-02-12 | Company entered into a Third Cash Advance Agreement with Cedar. |
| 2025-02-18 | Company issued a fourth promissory note in favor of 1800 Diagonal Lending LLC in the principal amount of $90,000. |
| 2025-03-05 | Company approved a stock dividend from the Treasury Shares. |
| 2025-03-06 | Company entered into a Buyout Agreement with Milk & Honey to sell its 60% membership interest in Sugar Phase. |
| 2025-03-07 | Closing under the Buyout Agreement for Sugar Phase occurred. |
| 2025-03-13 | Company entered into a Fourth Cash Advance Agreement with Cedar. |
| 2025-04-04 | Company closed the third tranche of its private placement offering with the Arena Investors. |
| 2025-04-11 | BCV and the Company amended the BCV Loan Agreement to extend the maturity date and increase the principal balance. |
| 2025-04-22 | Stock dividend was distributed to stockholders. |
| 2025-04-29 | Company issued a fifth promissory note in favor of 1800 Diagonal Lending LLC in the principal amount of $128,000. |
| 2025-05-01 | Company entered into a consolidated promissory note agreement with the Bryan Leighton Revocable Trust. |
| 2025-05-12 | Company issued a sixth promissory note in favor of 1800 Diagonal Lending LLC in the principal amount of $66,700. |
| 2025-06-02 | Company completed the acquisition of Resource Group. |
| 2025-06-03 | Company issued a seventh promissory note in favor of 1800 Diagonal Lending LLC in the principal amount of $124,200. |
| 2025-06-23 | Company entered into an amendment to the promissory note for the St. Mary's Site sale. |
| 2025-06-26 | Company entered into a Securities Purchase Agreement with an institutional investor (Peak Investor). |
| 2025-07-15 | The Pulga JV and Hacienda Oliva joint-venture entities with Milk & Honey were formally dissolved and ceased operations. |
| 2025-07-29 | Company entered into a Securities Purchase Agreement with two investors (July 2025 Investors) for a private placement. |
| 2025-07-29 | Company entered into a consulting agreement with Bill Panagiotakopoulos. |
| 2025-07-29 | Company entered into a Waiver and Consent with Arena Business Solutions Global SPC II, LTD. |
| 2025-07-29 | A Forbearance Agreement was entered into by and between the Company and assignees of the Arena Debentures. |
| 2025-08-04 | Company terminated the ELOC Purchase Agreement. |
| 2025-08-11 | Company issued an eighth promissory note in favor of 1800 Diagonal Lending LLC in the principal amount of $239,200. |
| 2025-08-22 | Company entered into a Promissory Note with Index Equity US, LLC for $200,000. |
| 2025-08-26 | Company provided written notice to July 2025 investors that their right of first refusal had expired, and the consulting agreement with Bill Panagiotakopoulos terminated. |
| 2025-08-31 | Company's Board approved, subject to stockholder approval, an amendment to the 2023 Plan to increase authorized shares by 1,200,000. |
| 2025-09-15 | Company issued a ninth promissory note in favor of 1800 Diagonal Lending LLC in the principal amount of $68,400. |
| 2025-09-29 | Stockholders approved the amendment to the 2023 Incentive Compensation Plan. |
| 2025-09-30 | End of the quarterly reporting period. |
| 2025-10-16 | Company entered into a securities purchase agreement for a private placement (October Private Placement). |
| 2025-10-16 | Company filed a Certificate of Designation for Series B Non-Voting Convertible Preferred Stock and a Certificate of Amendment to increase authorized common shares to 500,000,000. |
| 2025-10-17 | The October Private Placement closed, with net proceeds of approximately $8.175 million. |
| 2025-11-14 | Date of filing of this Quarterly Report on Form 10-Q. |
Recommendation
sellThe company faces severe financial distress, evidenced by substantial and increasing net losses, a significant accumulated deficit, and explicit 'going concern' doubt from its auditors. While the acquisition of Resource Group provides revenue growth and a strategic shift, it has also contributed to increased debt and operating expenses. The company's liquidity is precarious, with cash only sufficient for a few months, necessitating continuous capital raises that lead to significant shareholder dilution. The bad debt expense and asset impairment further highlight financial instability. Despite recent capital raises, the fundamental financial health remains weak, and the numerous risk factors, including potential Nasdaq delisting and restrictive covenants, suggest a high-risk investment with limited near-term upside.
Keywords
Organic Recycling, Engineered Soils, Green Waste, Real Estate Development, SEC Filing, 10-Q, Financial Results, Going Concern, Capital Raise, Nasdaq Listing, Debt, Acquisition, Environmental Services, Construction Materials, Waste Management, Corporate Governance, Risk Factors, Dilution, Preferred Stock, Warrants, AI Technology
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