10-K: Safe & Green Holdings Corp. Details Common Stock and Anti-Takeover Measures in 10-K Filing

Safe & Green Holdings Corp.'s 10-K filing outlines the terms of its common stock, potential anti-takeover effects, and various business activities.

Summary

• Safe & Green Holdings Corp. has 25,000,000 authorized shares of common stock, with each share entitling holders to one vote.
• The company has not paid any dividends on its common stock and does not anticipate doing so in the foreseeable future, planning to use earnings for growth.
• Holders of common stock are entitled to a share of assets remaining after liabilities are paid in the event of liquidation.
• The company's common stock has no preemptive, subscription, or redemption rights and cannot be converted into other securities.
• Delaware law and the company's charter and bylaws include provisions that could delay or discourage a takeover, including a blank check preferred stock provision and board vacancy filling procedures.
• The company is subject to Section 203 of the Delaware General Corporation Law, which restricts business combinations with interested stockholders for three years unless certain conditions are met.
• The company's common stock is listed on the Nasdaq Capital Market under the symbol SGBX.
• The transfer agent for the common stock is American Stock Transfer and Trust Company, LLC.
• The company operates in four segments: manufacturing and construction services, medical, real estate development, and environmental.
• The company's manufacturing and construction segment designs and manufactures modular structures using raw materials made in America.
• The medical segment focuses on providing modular health facilities and generating revenue from medical testing.
• The real estate development segment focuses on acquiring and developing properties for green single or multi-family projects.
• The environmental segment plans to offer a sustainable medical and waste management solution using patented technology.
• The company's modular construction uses both code-engineered cargo shipping containers and traditional construction materials.
• The company acquired Echo DCL, LLC in September 2020, which allowed for more control over the manufacturing process.
• The company formed SG Environmental Solutions Corp in March 2022 and Safe and Green Medical Corporation in March 2023.
• The company has not generated revenue from SG DevCorp, SG Environmental, or SG Medical to date.
• The company's ESR program is based out of its main manufacturing facility in Durant, Oklahoma.
• The company's target markets include single and multi-family housing, restaurants, military, education, healthcare, and office spaces.
• The company has a second factory in Waldron, Oklahoma, which opened in the second half of 2023.
• The company terminated the Clarity Mobile Venture in September 2022.
• SG DevCorp has acquired three properties and invested in two entities that have acquired two properties to be further developed.
• SG DevCorp distributed approximately 30% of its outstanding shares to the company's stockholders on September 27, 2023.
• SG DevCorp's common stock began trading on the Nasdaq Capital Market under the symbol SGD on September 28, 2023.
• SG DevCorp plans to monetize its real estate holdings throughout 2024.
• SG DevCorp acquired a 50+ acre site in Lago Vista, Texas in May 2021 for $3,500,000.
• SG DevCorp acquired a 50% membership interest in Norman Berry II Owners, LLC in May 2021 for $600,000.
• SG DevCorp acquired a 10% non-dilutable equity interest in JDI-Cumberland Inlet, LLC in June 2021 for $3.0 million.
• SG DevCorp purchased approximately 27 acres of land adjacent to the Cumberland Inlet Project in August 2022 for $296,870.
• SG DevCorp entered into a Purchase Agreement to acquire approximately 114 mixed-use acres in Durant, Oklahoma for $868,000 in November 2021.
• SG DevCorp closed its acquisition of Majestic World Holdings in February 2024 for $500,000 in cash and 500,000 shares of restricted stock.
• The company entered into a ten-year exclusive distribution agreement with Sanitec Industries LLC in March 2022.
• The company's competitive strengths include its ESR, quality, cost, and construction time savings.
• The company's customers include government agencies, private developers, the U.S. Military, and various entrepreneurs.
• The company's intellectual property includes the registered trademarks Safe & Green and GreenSteel and the SG logo.
• The company is subject to various federal, state, and local government regulations.
• The company was incorporated in Delaware on December 29, 1993, and changed its name to Safe & Green Holdings Corp. on December 16, 2022.
• The company emerged from bankruptcy in June 2016.
• The company effected a 1-for-20 reverse stock split on May 2, 2024.
• The company directly employed twelve full-time employees and two part-time employees and SG Echo directly employed eighty full-time employees as of December 31, 2023.

Sentiment

Score: 3

Explanation: The document highlights significant financial challenges, including substantial losses, a decrease in cash, and a going concern warning, which overshadows any positive aspects of the company's operations and strategic initiatives.

Positives

• The company's modular construction methods are environmentally sensitive and can achieve LEED certification.
• The company's ESR certification expedites reviews and approvals by state and local building departments.
• The company has a diverse customer base, including government agencies and private developers.
• The company has vertically integrated its manufacturing process through the acquisition of Echo DCL, LLC.
• The company has a management team with a combined 130 years of experience in the modular building industry.

Negatives

• The company has not generated revenue from SG DevCorp, SG Environmental, or SG Medical to date.
• The company has a fixed cost base that will affect profitability if sales decrease.
• The company is dependent on a few key customers and vendors.
• The company has experienced a shortfall in cash and may need to raise additional capital.
• The company's independent registered public accounting firm has expressed doubt about its ability to continue as a going concern.
• The company's stock price has been volatile and is thinly traded.
• The company has incurred net losses in prior periods and there is no assurance of future profitability.

Risks

• The company could experience a shortfall in cash over the next twelve months.
• The company's independent registered public accounting firm has expressed doubt about its ability to continue as a going concern.
• The company has incurred net losses in prior periods and there can be no assurance that it will generate income in the future.
• The company will need to raise additional capital to fund its existing operations.
• The company may not have an adequate number of shares of common stock authorized to complete future equity transactions.
• The company's ability to meet its workforce needs is crucial to its results of operations and future sales and profitability.
• A material disruption of the company's suppliers or SG Echo's facilities could prevent it from meeting customer demand.
• The requirements of being a public company may strain the company's resources and divert management's attention.
• The company is dependent on the services of key personnel, a few customers and vendors.
• The company is subject to legal proceedings or investigations.
• Changes in general economic conditions and geopolitical and other conditions may adversely impact the company's business.
• The company is subject to cybersecurity risks.
• Failure to meet the continued listing requirements of the Nasdaq Capital Market could result in a delisting.
• Sales of shares of the company's common stock could cause the price of its common stock to decline and result in dilution.
• Certain provisions of Delaware law could discourage, delay or prevent a merger or acquisition at a premium price.
• The company has availed itself of reduced disclosure requirements, which may make its common stock less attractive.

Future Outlook

The company anticipates that all earnings that may be generated from its operations will be used to finance its growth. SG DevCorp plans to monetize its real estate holdings throughout 2024.

Management Comments

• The company anticipates that all earnings that may be generated from its operations will be used to finance its growth.
• The company believes it can distinguish itself from its competitors on the basis of its ESR, quality, cost and construction time savings when utilizing its technology and expertise.
• The company is committed to educating the real estate community on the benefits of its technology and expertise and positioning the products that utilize its technology and expertise as complementary to the strategy of developers, rather than as competition.

Industry Context

The company operates in the modular construction industry, which is highly competitive and influenced by various economic factors. The company's focus on sustainable and efficient construction methods aligns with current industry trends.

Comparison to Industry Standards

• The company competes with regional, national, and international builders, some of which have greater financial and marketing resources.
• The company's proprietary construction method for cargo-based containers is typically less expensive than traditional construction methods, particularly in urban locations and multi-story projects.
• The company's ESR certification is a unique competitive advantage, as it is the first modular building company to receive such certification.
• The company's management team has a combined 130 years of experience in the modular building industry, which provides a competitive edge.
• The company's ability to vertically integrate its manufacturing process through the acquisition of Echo DCL, LLC is a competitive advantage.

Management Changes

Corporate Governance

Legal Proceedings

• The company is subject to certain claims and lawsuits arising in the normal course of business.
• The company is involved in ongoing litigation with Pizzarotti, LLC, and others.
• The company is involved in ongoing litigation with EDI International, PC.
• The company is involved in ongoing litigation with Farnam Street Financial, Inc.
• The company settled a lawsuit with HOLA Community Partners and others in December 2022.
• The company settled a lawsuit with John Williams Shaw and Leo Patrick Shaw in September 2023.

Related Party Transactions

• The company has a promissory note in the principal amount of $100,000 from CPF GP 2019-1 LLC.
• Mr. Galvin loaned $75,000 to the company on December 14, 2023.
• SG DevCorp received $4,200,000 from the company in 2021, which was subsequently cancelled and forgiven.
• The company entered into a separation and distribution agreement and several other agreements with SG DevCorp.
• SG DevCorp entered into a Fabrication Agreement with SG Echo on December 2, 2022.
• SG DevCorp entered into a Master Purchase Agreement with SG Echo on December 17, 2023.

Stakeholder Impact

• Shareholders may experience dilution due to potential equity financings.
• Employees may be affected by potential layoffs or changes in compensation.
• Customers may be affected by potential delays or disruptions in service.
• Suppliers may be affected by potential delays in payments.
• Creditors may be affected by the company's financial instability.

Next Steps

• The company will need to increase revenues or raise sufficient capital to continue operations.
• SG DevCorp will strategically look to monetize its real estate holdings throughout 2024.
• SG DevCorp anticipates that the first phase of development activities at the Cumberland Inlet site will commence during the third quarter of 2024.
• SG DevCorp anticipates that the first phase of development activities at the McLean site will commence during the first quarter of 2024.

Key Dates

Keywords

modular construction, real estate development, common stock, anti-takeover, medical facilities, environmental solutions, manufacturing, Nasdaq, SGBX, reverse stock split