DEF 14A: SG DevCo Seeks Shareholder Approval for Key Strategic Moves

Safe and Green Development Corporation (SG DevCo) is seeking shareholder approval for a reverse stock split, an increase in authorized shares, and an amendment to its incentive plan at its 2025 Annual Meeting.

Summary

• Shareholders will vote on the election of three Class II directors: Anthony M. Cialone, John Scott Magrane, Jr., and David Villarreal, each for a three-year term expiring in 2028.
• The company proposes to ratify M&K CPAS PLLC as its independent registered public accounting firm for the fiscal year ending December 31, 2025.
• A reverse stock split is proposed, at the Board's discretion, with a ratio ranging from 1-for-5 to 1-for-20, primarily to maintain Nasdaq listing compliance and improve stock liquidity.
• An amendment to increase the number of authorized shares of Common Stock from 100,000,000 to 500,000,000 is sought to provide flexibility for future financing, acquisitions, and employee incentives.
• The 2023 Incentive Compensation Plan is proposed to be amended to increase the shares available for awards by 1,200,000, bringing the total to 1,489,859 shares, to attract and retain talent.
• Shareholder approval is requested for the issuance of an aggregate of 9,041,182 shares of Common Stock to prior members of Resource Group US Holdings LLC, including shares convertible from Series A Convertible Preferred Stock, to comply with Nasdaq Listing Rule 5635(d) following the acquisition.
• A proposal to adjourn the 2025 Annual Meeting is included, if necessary, to solicit further proxies for the Reverse Stock Split, Authorized Increase, 2023 Plan Amendment, and/or Resource Group Proposals.
• As of July 31, 2025, there were 3,264,625 shares of Common Stock outstanding and entitled to vote.
• Auditor fees for M&K CPAS PLLC were $96,966 in 2024 and $169,664 in 2023.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive. While the proposals address critical issues like Nasdaq compliance and future capital flexibility, the need for a reverse stock split and significant share authorization increase points to underlying challenges in stock valuation and potential dilution for existing shareholders. The acquisition of Resource Group is a positive strategic move, but its full impact is yet to be seen.

Positives

• The proposed reverse stock split aims to increase the per-share trading price, helping maintain Nasdaq listing compliance and potentially attracting a broader range of institutional investors.
• Increasing authorized shares provides flexibility for future capital raising, strategic transactions (acquisitions, partnerships), and employee incentive programs without immediate further shareholder approval.
• Amending the 2023 Incentive Compensation Plan with additional shares is intended to attract, motivate, and retain key employees, directors, and consultants, aligning their interests with long-term shareholder value.
• The acquisition of Resource Group US Holdings LLC has been completed, integrating new business lines related to advanced engineered soils, compost, logistics, and transportation.

Negatives

• The reverse stock split may not result in a sustained increase in the stock price, and past reverse splits only provided temporary compliance.
• A reverse stock split could decrease the liquidity of the Common Stock due to a reduced number of outstanding shares and potentially fewer market makers.
• The reverse stock split may lead to some stockholders owning 'odd lots' (less than 100 shares), which can incur higher transaction costs per share.
• The reverse stock split could be viewed negatively by the market, potentially leading to a decrease in overall market capitalization if the price does not increase proportionally.
• Increasing authorized shares and the issuance of shares to Resource Group members will have a dilutive effect on existing stockholders' percentage equity ownership and voting power, potentially impacting the stock price.
• Nasdaq's new rules state that if the stock price falls below $1.00 after a reverse stock split within the prior year, the company will not be eligible for any compliance period and will face immediate delisting.
• If the Resource Group Proposal is not approved, the company will not be able to issue the contractually committed 41,182 Additional Common Shares and 9,000,000 shares convertible from Series A Preferred Stock to Resource Group members.

Risks

• Failure to maintain Nasdaq listing compliance due to minimum bid price or stockholders' equity requirements, potentially leading to delisting and reduced liquidity on over-the-counter markets.
• The reverse stock split may not achieve a sustained increase in the per-share price, and could lead to decreased liquidity or a reduction in overall market capitalization.
• Future issuances of additional authorized shares could dilute existing stockholders' equity ownership and voting rights, and negatively affect the market price of the Common Stock.
• The company's ability to attract and retain employees may be hindered if the 2023 Incentive Compensation Plan amendment is not approved, limiting equity-based compensation.
• Potential conflicts of interest may arise from the shared services agreement with SG Holdings, as personnel are employees/contractors of SG Holdings.
• The deductibility of capital losses is subject to limitations for U.S. holders receiving cash in lieu of fractional shares from a reverse stock split.
• Withholding taxes under FATCA may apply to certain payments made to foreign financial institutions and non-financial foreign entities.

Future Outlook

The company anticipates having sufficient shares under the 2023 Incentive Compensation Plan through the end of 2026 if the proposed amendment is approved. Management reviews and evaluates potential capital raising activities, transactions, and other corporate actions on an ongoing basis. The Board plans to appoint a new Chairman by the end of the third quarter of fiscal 2025.

Management Comments

• The Board of Directors knows of no other business that will come before the 2025 Annual Meeting.
• The Board believes the Company is well-served by its flexible leadership structure and that the combination or separation of CEO and Chairman positions should continue to be considered on an ongoing basis.
• The Board believes that the failure of stockholders to approve the Reverse Stock Split Proposal could prevent us from maintaining compliance with the Minimum Bid Price Requirement and could inhibit our ability to conduct capital raising activities.
• The Board believes that the increase in the number of authorized shares of Common Stock is advisable and in our best interest and the best interest of our stockholders, providing flexibility in completing financing and capital raising transactions.
• The Board recommends that stockholders vote FOR the adoption of the 2023 Plan Amendment to increase the number of shares of Common Stock available under the Plan, as equity-based compensation awards are a critical element of our overall compensation program.

Industry Context

This proxy statement primarily addresses corporate governance, capital structure, and incentive compensation matters specific to Safe and Green Development Corporation. While the company's business involves real estate development and, following the Resource Group acquisition, advanced engineered soils and compost, the filing does not provide specific analysis of broader industry trends or competitive landscape in relation to these proposals. The proposals are largely driven by Nasdaq listing requirements and internal strategic needs for capital and talent retention.

Management Changes

Corporate Governance

Related Party Transactions

• On August 9, 2023, SG Holdings cancelled and forgave a $4,000,000 balance on a promissory note from SG DevCo. As of December 31, 2024, $1,720,844 was due from SG Holdings for advances made by SG DevCo, with a reserve recorded due to collectability uncertainty.
• On January 29, 2025, SG DevCo entered into a mutual release with SG Holdings, forgiving $908,322.95 on a promissory note and $815,522 in inter-company advances, in exchange for SG Holdings forgiving $394,329 of inter-company debt owed to it by SG DevCo and transferring 276,425 shares of SG DevCo Common Stock to SG DevCo's treasury. SG Holdings is no longer a stockholder.
• SG DevCo entered into a separation and distribution agreement, tax matters agreement, and shared services agreement with SG Holdings in connection with its separation. The shared services agreement was terminated in January 2025.
• Derek Villarreal, son of CEO David Villarreal, is employed as a Senior Project Manager with an annual salary of $140,000 for 2023-2025.
• Marc Brune, father of CFO Nicolai Brune, provides consulting services, receiving 100,000 restricted stock units in April 2023 and March 2024, a consulting fee of $10,000/month from January 2024 through May 2025, and $15,000/month from June 2025 through December 2025.
• In connection with the Resource Group acquisition, SG DevCo issued shares, Series A Convertible Preferred Stock, and promissory notes to entities managed by Bjarne Borg (Index Equity US LLC, Index Resource Equity LLC), James D. Burnham, and Anthony M. Cialone, who are now directors. SG DevCo also agreed to indemnify Messrs. Borg, Burnham, and Cialone for certain obligations and trade debts of Resource Group.
• An 11.5% note in the principal amount of $1,255,000 was issued to Mr. Burnham for funds previously advanced to Resource Group US LLC.
• Resource Group US entered into amended and restated consulting agreements with AMC Environmental Consulting LLC (controlled by Mr. Cialone) and JDB Consulting Services, Inc. (controlled by Mr. Burnham), providing monthly consulting fees, car reimbursements, and eligibility for bonuses/incentive equity awards, along with termination fees under certain conditions.

Stakeholder Impact

• Shareholders: Will experience dilution from the increase in authorized shares and the issuance of shares related to the Resource Group acquisition. The reverse stock split aims to benefit shareholders by maintaining Nasdaq listing and potentially improving liquidity, but carries risks of no sustained price increase or decreased liquidity. Voting rights will be affected by dilution but relative voting power will remain proportional for those not holding fractional shares.
• Employees: The amendment to the 2023 Incentive Compensation Plan is designed to attract, retain, and incentivize employees through equity awards, aligning their interests with company success.
• Management: Executive officers and directors have substantial interests in the incentive plan amendment as they are eligible for equity awards. Their compensation includes salary, bonuses, and stock awards. The reverse stock split and authorized share increase proposals are supported by management to ensure company stability and growth opportunities.
• Creditors: The company's financial health and ability to raise capital, potentially enhanced by the proposed actions, could impact its standing with creditors. The promissory notes issued in the Resource Group acquisition represent new debt obligations.
• Resource Group Members: Will receive a significant number of Common Stock shares (or convertible preferred stock) upon shareholder approval, completing the acquisition terms and integrating them into SG DevCo's ownership structure.

Next Steps

• Hold the 2025 Annual Meeting of Stockholders on September 29, 2025, to vote on the proposals.
• If approved, the Board will determine the exact ratio for the reverse stock split (between 1-for-5 and 1-for-20) and the timing of its implementation.
• If approved, the Board will determine the timing for filing the certificate of amendment to increase authorized shares.
• If approved, the 2023 Plan Amendment will become effective, increasing shares available for awards.
• If the Resource Group Proposal is approved, the company will be able to issue the additional 41,182 Common Shares and allow for conversion of Series A Convertible Preferred Stock to Resource Group members, subject to Nasdaq rules.
• The company plans to appoint a new Chairman by the end of the third quarter of fiscal 2025.
• Announce preliminary voting results at the 2025 Annual Meeting and publish final results in a Current Report on Form 8-K within four business days.

Key Dates

Recommendation

The company is taking necessary steps to address Nasdaq listing compliance and secure future capital flexibility, which are positive for long-term stability. The acquisition of Resource Group also represents a strategic expansion. However, the significant potential for dilution from the authorized share increase and the Resource Group share issuance, coupled with the inherent risks and past volatility associated with reverse stock splits, creates uncertainty. While the proactive measures are commendable, the immediate dilutive effects and the speculative nature of sustained stock price improvement warrant a 'hold' recommendation, advising investors to monitor the execution of these strategies and their impact on financial performance and market valuation before making further investment decisions.

Keywords

Proxy Statement, Reverse Stock Split, Authorized Shares Increase, Incentive Compensation Plan, Nasdaq Compliance, Shareholder Approval, Corporate Governance, Director Election, Auditor Ratification, Resource Group Acquisition, Stock Dilution, Capital Raise, SEC Filing