10-Q: Safe & Green Holdings Reports Q2 Loss Amid Revenue Decline

Safe & Green Holdings Corp. reported a significant gross loss and revenue decline in its construction segment for Q2 2025, despite new acquisitions and capital raises, raising substantial doubt about its ability to continue as a going concern.

Summary

• Total revenue for the six months ended June 30, 2025, decreased by approximately 43% to $1,287,705 from $2,179,369 in the prior year, primarily due to a decrease in construction services.
• The company experienced a gross loss of $(1,318,223) for the six months ended June 30, 2025, a significant decline from a gross profit of $440,137 in the same period last year, with gross margin falling to (57)% from 33%.
• Net loss attributable to common stockholders for the six months ended June 30, 2025, was $(7,320,538), compared to $(9,113,031) for the same period in 2024, an improvement largely due to the absence of large equity-based investment losses and discontinued operations gain from the prior year.
• As of June 30, 2025, the company had negative working capital of $20,761,681 and an accumulated deficit of $105,852,621.
• Cash and cash equivalents increased to $2,767,210 as of June 30, 2025, from $375,873 as of December 31, 2024, primarily driven by financing activities.
• The company completed the acquisition of New Asia Holdings, Inc. (NAHD) on February 13, 2025, entering the oil and gas industry, and acquired County Line Industrial LLC on April 8, 2025.
• An asset purchase agreement was signed on May 28, 2025, to acquire approximately 1,600 acres of oil leases from Sherman Oil Company LLC for $1,000,000.
• The Nasdaq Hearings Panel granted continued listing on July 8, 2025, conditioned on a reverse stock split by August 28, 2025, and restructuring of the April 2025 offering's Class B warrants by July 18, 2025.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, evidenced by significant losses, negative working capital, and a 'going concern' warning. While new acquisitions and capital raises provide some liquidity, the core business is declining, and numerous debt defaults and Nasdaq delisting threats indicate a highly precarious situation. The outlook is overwhelmingly negative.

Positives

• Net loss attributable to common stockholders decreased to $(7,320,538) for the six months ended June 30, 2025, from $(9,113,031) in the prior year, indicating a reduction in overall losses.
• Cash and cash equivalents significantly increased to $2,767,210 as of June 30, 2025, from $375,873 at December 31, 2024, improving immediate liquidity.
• Net cash used in operating activities decreased by approximately $2,821,895, from $(6,001,442) in 2024 to $(3,179,546) in 2025, indicating improved operational cash efficiency.
• Stockholders' equity shifted from a deficit of $(12,460,308) at December 31, 2024, to a positive $23,739,021 at June 30, 2025, largely due to capital raises.
• The company successfully acquired New Asia Holdings, Inc. (NAHD), diversifying into the oil and gas industry, and completed two other asset acquisitions (County Line and Sherman Oil) to expand its business segments.
• The Nasdaq Hearings Panel granted the company's request for continued listing, providing a path to maintain its Nasdaq Capital Market listing, subject to specific conditions.

Negatives

• Total revenue decreased by approximately 43% for the six months ended June 30, 2025, primarily due to a significant decline in construction services.
• The company reported a gross loss of $(1,318,223) for the six months ended June 30, 2025, a substantial deterioration from a gross profit in the prior year, with gross margin dropping to (57)%.
• Operating loss increased to $(5,519,762) for the six months ended June 30, 2025, from $(3,421,617) in the prior year.
• Negative working capital stood at $20,761,681 as of June 30, 2025, indicating a strained short-term financial position.
• The accumulated deficit continued to grow, reaching $105,852,621 as of June 30, 2025.
• Multiple promissory notes are in default, including the July Cash Advance Agreement, Galvin Note Payable, 1800 Diagonal Note, and several acquired notes from NAHD, indicating significant debt repayment challenges.
• The company faces substantial dilution risk from the issuance of a large number of warrants and common stock in recent capital raises, including 993,551,519 warrants outstanding as of June 30, 2025.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to incurred losses, negative working capital, and negative operating cash flows.
• The company's ability to obtain additional financing on acceptable terms or at all is uncertain, which could force material changes to or abandonment of its business plan.
• A significant portion of revenue (approximately 81% for the six months ended June 30, 2025) is generated from one customer, posing a high concentration risk if that customer reduces or discontinues contracts.
• The reported construction backlog of $1,209,207 is subject to cancellation, termination, or suspension, and may not be indicative of future revenues or gross margins.
• Ongoing legal proceedings, including the Pizzarotti, Farnam, American Express, Choctaw, Durant Industrial Authority, Rulien, Caliber, and MDisrupt litigations, could result in material losses not currently estimable.
• Failure to comply with Nasdaq's continued listing requirements, specifically achieving a $1.00 bid price via a reverse stock split and restructuring warrants, could lead to delisting.
• Changes in general economic conditions, inflation, geopolitical conditions (e.g., Middle East war), supply chain disruptions, and credit risks could adversely impact business and operating results.
• The issuance of shares upon exercise of outstanding options, warrants, and restricted stock units may significantly dilute the percentage ownership of existing stockholders.

Future Outlook

The company anticipates its construction backlog of $1,209,207 to convert to revenue within one year. It expects current cash and proceeds from anticipated financings to be sufficient for working capital until it becomes cash flow positive, which is believed to be in the second half of 2025. However, there is no assurance of success in meeting capital requirements or becoming cash flow positive, which may necessitate changes to or abandonment of its business plan. The company intends to satisfy Nasdaq's continued listing conditions, including a reverse stock split and warrant restructuring, by August 28, 2025.

Management Comments

• "We intend to meet our 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."
• "We expect our current cash and the proceeds from anticipated financings to be sufficient for working capital until we are cash flow positive, which we believe will be in the second half of 2025."
• "Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud."

Industry Context

The company is diversifying its operations beyond its traditional modular construction segment, which has seen a significant revenue decline and gross losses. The entry into the oil and gas industry through the NAHD acquisition, including Olenox Corp. (advanced energy) and Machfu, Inc. (industrial IoT), represents a strategic shift towards energy production and technology. The environmental segment, focused on biomedical waste management, is nascent. This diversification aims to leverage new market opportunities, particularly in energy, to offset challenges in the construction sector and improve overall financial health. The company's focus on 'Made-in-America' raw materials and LEED certification points in construction aligns with broader sustainability trends, but its financial performance indicates struggles in capitalizing on these advantages.

Comparison to Industry Standards

• NA The filing does not provide specific comparable companies, projects, or industry benchmarks to assess the results in the context of global standards. The company's financial performance, particularly the negative gross margin in construction, suggests underperformance relative to healthy industry standards, but direct comparisons are not provided.

Management Changes

Corporate Governance

Legal Proceedings

• Pizzarotti Litigation: Ongoing lawsuit alleging breach of contract, with the company vigorously defending claims and engaging in discovery. No estimated potential loss as of March 31, 2025.
• CPF GP 2019-1, LLC Litigation: Settled in February 2024, resulting in mutual dismissals and monthly payments of $745,000 due to the company.
• Farnam Litigation: Ongoing suit alleging breaches of a lease agreement. Settled on August 1, 2024, with SG Environmental substituted as lessee and new lease terms, but disputes have arisen post-settlement. Potential loss of approximately $1.5 million included in accounts payable.
• American Express Litigation: Default judgment granted against the company in September 2024 for $232,218.94 owed under a commercial credit card agreement. Estimated potential loss of approximately $232,000 included in accounts payable.
• Choctaw Litigation: Ongoing suit alleging breaches of a commercial lease agreement and seeking declaratory/injunctive relief regarding cranes. Estimated potential loss of approximately $138,000 included in accounts payable.
• Durant Industrial Authority Litigation: Ongoing suit alleging breaches of a forgivable promissory note, with the DIA claiming the $750,000 note is no longer forgivable and has been accelerated. No additional estimated potential loss beyond the $750,000 included in short-term notes payable.
• Rulien Litigation: Ongoing suit alleging breaches of a consulting agreement and seeking commissions for property sale and spin-off. No estimated potential loss as of March 31, 2025.
• Caliber Litigation: Ongoing suit alleging breaches of a Consulting Services Agreement for $46,350. No estimated potential loss as of March 31, 2025.
• MDisrupt Litigation: Ongoing suit against Safe and Green Medical Corporation and the company alleging breaches of a consulting services agreement for $183,901. Estimated potential loss of $183,901 included in accounts payable.
• SG Blocks, Inc. v. HOLA Community Partners, et. al.: Settled in December 2022, with all funds paid. Claims against settling parties dismissed. Default judgments pursued against Aveshi and Saddleback. Settlement with Saddleback for $400,000 executed February 17, 2025, with proceeds refunded to insurer.
• SG Blocks, Inc. v. EDI International, PC: Jury verdict in company's favor for $1.274 million in November 2024, but uncertainty remains regarding appeal and collection.
• Teton Buildings, LLC: Company dismissed action in Texas. Claims against Teton in HOLA Action settled via Teton's insurance carrier in December 2022.
• SG Blocks, Inc. v. Osang Healthcare Company, Ltd.: Court granted company $450,000 in a settlement conference on March 14, 2023.
• John Williams Shaw and Leo Patrick Shaw: Settled on September 26, 2023, with a Stipulation and Order of Dismissal with Prejudice filed on October 3, 2023.

Related Party Transactions

• As of June 30, 2025, approximately $450,000 is accrued for amounts due to Paul Galvin, the former CEO, for deferred salary.
• The Galvin Note Payable, a promissory note with Paul Galvin for $17,805 as of June 30, 2025, is currently in default.
• Notes J, L, and M, acquired in the NAHD acquisition, are due to related parties, totaling $1,886,321 as of June 30, 2025.
• As of June 30, 2025, $3,474,727 is due to related parties, primarily resulting from the acquisition of NAHD.
• Certain shareholders and related parties paid operating expenses and outstanding bills on behalf of Olenox, recorded as related party liabilities.

Stakeholder Impact

• Shareholders face significant dilution risk from ongoing equity issuances and warrant exercises, as well as potential loss of investment due to the 'going concern' uncertainty and Nasdaq delisting threat.
• Employees may face uncertainty due to the company's financial instability and potential need for further cost reductions.
• Customers in the construction segment may experience project delays or disruptions given the company's financial challenges and declining revenue in that segment.
• Creditors, particularly those holding defaulted notes, face uncertainty regarding repayment of their obligations.
• New stakeholders in the oil and gas and environmental segments will be impacted by the success or failure of these new ventures and the company's ability to integrate and grow them profitably.

Next Steps

• Effect a reverse stock split on or before August 28, 2025, to achieve a closing bid price of $1.00 or more per share for at least ten consecutive business days to regain Nasdaq compliance.
• Publicly disclose the restructuring of the terms of the April 2025 offering to eliminate Class B warrants and provide Nasdaq with confirmation by July 18, 2025.
• Complete due diligence and potentially execute a definitive purchase agreement for the acquisition of Rock Springs Energy Group, LLC's oil refinery, with an estimated purchase price of $35 million.
• Continue efforts to generate revenue from operations and contain costs to achieve cash flow positive status, believed to be in the second half of 2025.
• Address ongoing legal proceedings and potential liabilities arising from them.

Key Dates

Recommendation

The company faces severe financial challenges, including a significant decline in core construction revenue, a shift to gross losses, and a substantial accumulated deficit. The 'going concern' warning from management and auditors, coupled with negative working capital, indicates a high risk of financial instability. While recent capital raises have improved cash on hand and stockholders' equity, these have come at the cost of significant shareholder dilution and reliance on high-interest debt, much of which is already in default. The ongoing Nasdaq delisting threat adds further uncertainty and could severely impact liquidity and access to capital. Despite diversification into oil & gas, the profitability of these new segments is unproven. Given the persistent losses, high debt burden, and operational risks, a seasoned investor would likely recommend selling to mitigate further potential losses.

Keywords

Modular Construction, Oil and Gas, SEC Filing, 10-Q, Financial Results, Nasdaq Compliance, Going Concern, Acquisitions, Debt Default, Dilution, Risk Factors, Environmental Solutions, Medical Technology