10-K/A: Safe & Green Holdings Corp. Files Amended 10-K to Include Omitted Exhibit and Updated Certifications

Safe & Green Holdings Corp. has filed an amendment to its annual report on Form 10-K to include an exhibit that was inadvertently omitted and to provide updated certifications from its principal executive and financial officers.

Summary

• Safe & Green Holdings Corp. filed an amendment to its annual report on Form 10-K to include Exhibit 32.2, which was inadvertently omitted from the original filing.
• The amended 10-K also includes new certifications from the company's principal executive officer and principal financial officer as Exhibits 31.3 and 31.4 and Exhibits 32.3 and 32.4.
• The amendment does not reflect any other changes to the original annual report and speaks as of the date of the original report.
• The document includes forward-looking statements that are subject to risks and uncertainties, and actual results could differ materially from those discussed.
• The company operates in four segments: manufacturing and construction services, medical, real estate development, and environmental.
• The manufacturing and construction segment designs and manufactures modular structures using raw materials that are Made-in-America.
• The medical segment offers prefabricated health facilities and plans to provide turnkey solutions for medical testing and treatment.
• 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 modules are made from code-engineered cargo shipping containers and traditional construction materials.
• The company's ESR indicates that the ICC-ES recognizes the suitability and technical capabilities of the Safe & Green structural building materials for use in compliance with the International Building Code and Residential Code, the California Building Code and Residential Code, and the Florida Building CodeBuilding and Residential.
• The company's target markets include single-family and multi-family housing, restaurants, military, education, healthcare, and office spaces.
• 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 to focus on biomedical waste removal.
• The company formed Safe and Green Medical Corporation in March 2023 to focus on providing modular healthcare facilities.
• 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 key personnel, a few customers, and vendors.
• The company is subject to cybersecurity 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 is 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 must timely register the shares issuable under the Debenture and the Warrant.
• The company may not have an adequate number of shares of common stock authorized to complete future equity transactions.
• The company's stock price has been subject to fluctuations and is thinly traded.
• The company has availed itself of reduced disclosure requirements, which may make its common stock less attractive.

Sentiment

Score: 3

Explanation: The document highlights significant financial challenges, including substantial losses, declining cash reserves, and a going concern warning from the auditor. While there are some positive aspects related to the company's technology and market position, the overall sentiment is negative due to the financial instability and risks.

Positives

• The company's ESR has expedited reviews and approvals by state and local building departments.
• The company's ESR has helped the Safe & Green concept gain wider acceptance in the construction industry.
• The company's ESR has opened up licensing opportunities internationally.
• The company's management team has a breadth of knowledge in the modular building industry with a combined 130 years of experience.
• The company's experience in a wide range of construction applications gives it an advantage over its competition through the use of market-based prototypes.
• The acquisition of Echo has allowed the company to vertically integrate its manufacturing process and reduce some of its cost of goods sold, productivity and efficiency.

Negatives

• The company has a fixed cost base that will affect profitability if sales decrease.
• The company is dependent on key personnel, a few customers, and vendors.
• The company is subject to cybersecurity risks.
• The company could experience a shortfall in cash over the next twelve months.
• The company has incurred net losses in prior periods and there is no assurance that it will generate income in the future.
• The company may not have an adequate number of shares of common stock authorized to complete future equity transactions.
• The company's stock price has been subject to fluctuations and is thinly traded.
• The company has availed itself of reduced disclosure requirements, which may make its common stock less attractive.

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 is 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 must timely register the shares issuable under the Debenture and the Warrant.
• The company may not have an adequate number of shares of common stock authorized to complete future equity transactions.
• The company's stock price has been subject to fluctuations and is thinly traded.
• The company has availed itself of reduced disclosure requirements, which may make its common stock less attractive.
• 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 Echos facilities could prevent it from meeting customer demand.
• A natural disaster, the effects of climate change, or other disruptions at the company's SG Echo facility could adversely affect it.
• 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 currently is, and may in the future be, subject to legal proceedings or investigations.
• The loss customers or vendors could have a material adverse effect on the company.
• Changes in general economic conditions and geopolitical and other conditions may adversely impact the company's business.
• Limited availability or increases in costs of transportation could adversely affect the company's business and operations.
• Expansion of the company's operations may strain resources.
• The company's clients may adjust, cancel or suspend the contracts in its backlog.
• The company's liability for estimated warranties may be inadequate.
• The company can be adversely affected by failures of persons who act on its behalf to comply with applicable regulations.
• The cyclical and seasonal nature of the construction industry causes the company's revenues and operating results to fluctuate.
• The company's business depends on the construction industry and general business, financial market and economic conditions.
• The company's business relies on private investment and a slower than expected economy may adversely affect its results.
• A material disruption at one of the company's suppliers facilities could negatively affect its overall financial results.
• The company is subject to risks regarding environmental, health and safety laws and regulations.
• The company's business may be subject to economic and political risks of vendors obtaining supplies from foreign countries.
• The company's operating results will be subject to fluctuations and are inherently unpredictable.
• The company is subject to cybersecurity risks.
• The company could suffer adverse tax and other financial consequences if it is unable to utilize its net operating loss carryforwards.
• 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.

Future Outlook

The company's future results are subject to numerous uncertainties, and it may not achieve sufficient revenues to sustain or increase profitability. The company may be unable to successfully achieve or maintain its growth strategy, including its ability to expand into new geographic markets.

Management Comments

• The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27 A of the Securities Act of 1933 , as amended, or the Securities Act, and Section 21 E of the Securities Exchange Act of 1934 , as amended, or the Exchange Act.
• These statements are based on the beliefs and assumptions of our management based on information currently available to management.
• Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate.

Industry Context

The company operates in the modular construction industry, which is highly competitive and influenced by various economic factors. The company believes it can distinguish itself from competitors based on its ESR, quality, cost, and construction time savings.

Comparison to Industry Standards

• The document does not provide specific details on comparable companies or projects.
• The company claims its proprietary construction method is typically less expensive than traditional methods, particularly in urban locations and multi-story projects.
• The company claims its construction time is generally reduced by using its construction method, reducing both construction and soft costs substantially.
• The company claims its Safe & Green structures are designed to be hurricane-, tornadoand earthquake-resistant and able to withstand harsh climate conditions.
• The company claims its modules allow architects, developers and owners to design modules to meet their specific needs.

Legal Proceedings

• The Company is subject to certain claims and lawsuits arising in the normal course of business.
• The Company is subject to government regulation, which could result in administrative proceedings in the future.

Related Party Transactions

• On January 21, 2020, CPF GP 2019 1 LLC (CPF GP) issued to the Company a promissory note in the principal amount of $400,000 (the Company Note) and issued to Paul Galvin, the Companys Chairman and CEO, a promissory note in the principal amount of $100,000 (the Galvin Note).
• On December 14, 2023, Mr. Galvin, loaned $75,000 to the Company.
• During 2021, SG DevCorp received $4,200,000 from due to affiliates.
• On August 9, 2023, the Company and SG DevCorp entered into a Note Cancellation Agreement, effective as of July 1, 2023, pursuant to which the Company cancelled and forgave the remaining $4,000,000 balance then due on that certain promissory note, dated December 19, 2021, made by SG DevCorp in favor of the Company.
• As of September 30, 2023, $1,717,694 is due from the Company for advances made by the SG DevCorp.
• In connection with the Separation and Distribution, the Company entered into a separation and distribution agreement and several other agreements with SG DevCorp.
• On December 2, 2022, SG DevCorp entered into the Fabrication Agreement with SG Echo for the fabrication of approximately 800 multifamily market rate rental units.
• The Master Purchase Agreement provides that SG Echo will be paid a fee equal to 12% of the agreed cost of each project.

Stakeholder Impact

• The company's financial instability and potential delisting could negatively impact shareholders.
• The company's ability to meet its workforce needs is crucial to its results of operations and future sales and profitability, which could impact employees.
• The company's reliance on a few customers and vendors could impact its ability to meet customer demand and maintain vendor relationships.
• The company's ability to raise capital and maintain its operations could impact its ability to fulfill contracts and obligations to suppliers and creditors.

Next Steps

• The company intends to actively monitor the bid price of its Common Stock and will consider available options to regain compliance with the Nasdaq listing requirements, including such actions as effecting a reverse stock split.
• The company will seek to obtain debt or additional equity financing to meet any cash shortfalls both in the public company or its subsidiaries.
• The company intends to invest resources to comply with evolving laws, regulations and standards.

Key Dates

Keywords

modular construction, real estate development, medical facilities, environmental solutions, shipping containers, construction services, financial reporting, Sarbanes-Oxley Act, internal control, risk factors