SG BLOCKS, INC.  MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS.  (Form 10-Q)

SG BLOCKS, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS. (Form 10-Q)

Introduction and a few caveats



As used on this Quarterly Report, until the context requires in any other case,
references to the "Firm," "we," "us," and "our" seek advice from SG Blocks, Inc. and
its subsidiaries. The next dialogue and evaluation of the monetary
situation and outcomes of our operations must be learn together with our
unaudited condensed consolidated monetary statements and associated notes and
schedules included elsewhere on this Quarterly Report on Type 10-Q and with our
audited condensed consolidated monetary statements and notes for the yr ended
December 31, 2021, which have been included in our Annual Report on Type 10-Ok for the
yr then ended December 31, 2021, as filed with the Securities and Change
Fee (the "SEC") on April 18, 2022 (the "2021 Type 10-Ok"). This
dialogue, notably data with respect to our future operations,
contains forward-looking statements that contain dangers and uncertainties as
described beneath the heading "Particular observe concerning forward-looking statements"
on this Quarterly Report on Form10-Q. You ought to evaluate the disclosure beneath the
heading "Danger Elements" on this Quarterly Report on Type 10-Q for a dialogue
for necessary elements that might trigger our precise outcomes to vary materially
from these anticipated in these forward-looking statements.

Particular observe concerning forward-looking statements



This Quarterly Report on Type 10-Q incorporates forward-looking statements that
contain dangers and uncertainties. Our precise outcomes might differ materially from
these mentioned within the forward-looking statements. The statements contained in
this report that aren't purely historic are forward-looking statements inside
the which means of Part 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Part 21E of the Securities Change Act of 1934, as
amended (the "Change Act"). Statements contained on this Quarterly Report on
Type 10-Q might use forward-looking terminology, similar to "anticipates,"
"believes," "might," "would," "estimates," "might," "would possibly," "plan," "count on,"
"intend," "ought to," "will," or different variations on these phrases or their
negatives. All statements apart from statements of historic information are
statements that might probably be forward-looking. The Firm cautions that
forward-looking statements contain dangers and uncertainties and precise outcomes
might differ materially from these expressed or implied in these forward-looking
statements or might have an effect on the extent to which a selected goal,
projection, estimate or prediction is realized. Elements that might trigger or
contribute to such variations embrace, however will not be restricted to: common
financial, political and monetary situations, together with inflation, each in the
United States and internationally; our skill to acquire extra financing on
acceptable phrases, if in any respect, or to acquire extra capital in different methods; our
skill to extend gross sales, generate earnings, successfully handle our progress and
understand our backlog; competitors within the markets by which we function, together with
the consolidation of our trade, our skill to develop into and compete in new
geographic markets and our skill to compete by defending our proprietary
manufacturing course of; a disruption or cybersecurity breach in our or
third-party suppliers' data expertise programs; our skill to adapt our
services and products to trade requirements and client preferences and acquire
common market acceptance of our merchandise; product shortages and the
availability of uncooked supplies, and potential lack of relationships with key
distributors, suppliers or subcontractors; the seasonality of the development
trade basically, and the industrial and residential building markets in
specific; a disruption or restricted availability with our third occasion
transportation distributors; the loss or potential lack of any important clients;
publicity to product legal responsibility, together with the chance that our legal responsibility for
estimated warranties could also be insufficient, and varied different claims and litigation;
our skill to draw and retain key workers; our skill to draw personal
funding for gross sales of product; the credit score danger from our clients and our
clients' skill to acquiring third-party financing if and as wanted; an
impairment of goodwill; the influence of federal, state and native rules,
together with modifications to worldwide commerce and tariff insurance policies, and the influence of
any failure of any individual appearing on our behalf to adjust to relevant
rules and tips; prices incurred regarding present and future authorized
proceedings or investigations; the price of compliance with environmental, well being
and security legal guidelines and different native constructing rules; our skill to make the most of our
internet working loss carryforwards and the influence of modifications in the USA'
tax guidelines and rules; risks inherent in our operations, similar to pure
or man-made disruptions to our amenities and mission websites, the influence of
COVID-19, and associated authorities "shelter-in-place" mandates and different
restrictions on enterprise and industrial exercise and the adequacy of our
insurance coverage protection; our skill to adjust to the necessities of being a
public firm; fluctuations within the value of our widespread inventory, together with
decreases in value on account of gross sales of great quantities of inventory; potential
dilution of the possession of our present stockholders on account of, amongst different
issues, public choices or personal placements by the Firm or issuances upon
the train of excellent choices or warrants and the vesting of restricted
inventory items; the power of our principal stockholders, administration and administrators
to probably exert management on account of their possession curiosity; any skill to pay
dividends sooner or later; potential unfavorable reviews by securities or trade
analysts concerning our enterprise or the development trade basically;
Delaware regulation provisions discouraging, delaying or stopping a merger or
acquisition at a premium value; our skill to stay listed on the
Nasdaq Capital Market and the chance that our inventory will likely be topic to
penny inventory guidelines; our classification as a smaller reporting firm ensuing
in, amongst different issues, a possible discount in lively buying and selling of our widespread
inventory or elevated volatility in our inventory value; and any elements mentioned in
"Half II - Merchandise 1A. Danger Elements" to this Quarterly Report on Type 10-Q as nicely
as our 2021 Type 10-Ok, and different filings with the Securities Change
Fee. As well as, sure data offered beneath relies on
unaudited monetary data. There will be no assurance that there will likely be no
modifications to this data as soon as audited monetary data is obtainable. As
a end result, readers are cautioned to not place undue reliance on forward-looking
statements. Ahead-looking statements converse solely as of the date of this report.
The Firm won't undertake to replace any forward-looking assertion herein or
which may be made now and again on behalf of the Firm.

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Perception



We function within the following 4 segments: (i) manufacturing; (ii) medical; (ii)
actual property improvement; and (iv) environmental.  The manufacturing phase
designs and constructs modular buildings inbuilt our factories.  Within the
medical phase we use our modular expertise to offer turnkey options to
medical testing and therapy and generates income from the medical testing.
Our actual property improvement phase builds modern and inexperienced single or
multifamily initiatives in underserved areas nationally utilizing modules inbuilt
one among our vertically built-in factories. The environmental phase, the
latest phase, is a sustainable medical and waste administration answer that
collects waste and treats waste for protected disposal.


We're a supplier of Modular (as outlined beneath) amenities. Previous to the
COVID-19 pandemic, the Modules we equipped have been primarily for retail, restaurant
and army use and have been manufactured by third occasion suppliers utilizing our
proprietary expertise and design and engineering experience, which
modifies code-engineered cargo delivery containers and purpose-built modules for
use for protected and sustainable industrial, industrial and residential constructing.
With our acquisition in September 2020 of Echo DCL, LLC ("Echo"), one among our key
provide chain suppliers, we now have extra management over the manufacturing course of
and have elevated our product choices so as to add Modules made out of wooden.  In
March 2020, in response to the COVID-19 pandemic we started rising our focus
on offering our Modules as well being care amenities for deployable medical
response options. Our partnership with Readability Lab Options, LLC ("Readability
Labs") in Boca Raton, Florida, a CLIA-certified laboratory, has allowed us to
present laboratory testing in our Modules. Throughout 2021, we additionally started to focus
on buying property to construct multi-family housing communities that permits us
to make the most of the manufacturing companies of Echo.



Previous to October 2019, our enterprise mannequin was solely a project-based
building mannequin pursuant to which we have been answerable for the design and
building of completed merchandise that integrated our expertise primarily to
clients within the retail, restaurant, army and training industries
all through the USA. In October 2019, we modified our enterprise mannequin for
our residential constructing building to a royalty price mannequin and entered right into a
five-year unique license with CPF GP 2019-1 LLC ("CPF") beneath which CPF
licensed on an unique foundation our proprietary expertise and mental
property to develop and commercialize merchandise in the USA (and its
territories) for residential use, together with, with out limitation, single-family
residences and multi-family residences, however excluding army housing. On June
15, 2021, we terminated the unique license by mutual settlement and ceased our
royalty price mannequin.?



Previous to the COVID-19 pandemic, our core buyer base was comprised of
architects, landowners, builders and builders who use our Modules in
industrial and residential buildings. Our cargo modified Modules permit for the
redesign, repurpose and conversion of heavy-gauge metal cargo delivery
containers into SGBlocks™, that are protected inexperienced constructing blocks for industrial,
industrial, and residential constructing building, fairly than consuming new
metal and lumber. Our expertise and experience can also be used to purpose-build
modules, or prefabricated metal modular items personalized to be used in modular
building ("SGPBMs" and, along with SGBlocks™, "Modules"), primarily to
increase or complement an SGBlocks™ construction.



In March 2020, we started rising our concentrate on offering our Modules as well being
care amenities for deployable medical response options. In Could, we entered
right into a joint improvement settlement with Grimshaw Design to help with the
deployment of our D-Tec suite of prefabricated well being amenities for on-site
fast COVID-19 testing. In September 2020, we entered the U.S. take a look at lab
market by forming a three way partnership with Readability Labs , a producer and market
chief of fast diagnostic checks, to launch CLIA-certified laboratories.  Our
three way partnership with Readability Labs has allowed us to not solely provide our D-Tec
suite of prefabricated well being amenities but additionally permits us to offer testing
companies at such amenities. We've got equipped our constructing modular coronavirus
testing facilities and supply testing companies for Los Angeles Worldwide
Airport (LAX), Memorial in Wayne County, Michigan and have been chosen as a
Trusted Testing Companion (TTP) for Hawaii's COVID-19 journey testing program. Due
to the continuing decrease impacts of COVID-19 restrictions, our three way partnership with
Readability Labs is being wound down through the fourth quarter of 2022.


In September 2020, we acquired considerably all of the belongings of Echo, a Texas
restricted legal responsibility firm, apart from Echo's actual property holdings for which we
obtained a proper of first refusal. Echo is a container/modular producer
based mostly in Durant, Oklahoma specializing within the design and building of
everlasting modular and momentary modular buildings and was one among our key provide
chain companions.  Echo catered to the army, training, administration
amenities, healthcare, authorities, industrial and residential clients. This
acquisition has allowed us to develop our attain for our Modules and has
provided us a chance to vertically combine a big portion of our value of
items bought, in addition to enhance margins, productiveness and effectivity within the
areas of design, estimating, manufacturing and supply.


As well as, throughout 2021, we shaped SGB Improvement Corp. ("SG DevCorp"), which
is our wholly-owned subsidiary. SG DevCorp was shaped with the aim of actual
property improvement using our applied sciences.  SG DevCorp develops,
co-develops builds and funds single and multi household properties in underserved
areas nationally utilizing modules inbuilt one among our vertically built-in
factories. SG DevCorp has a minority curiosity in Norman Berry II House owners LLC and
JDI-Cumberland Inlet LLC.


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Working outcomes

9 month interval ended September 30, 2022 and 2021:

                                                                                        For the
                                                                    For the 9          9
                                                                    Months Ended         Months
                                                                     September           Ended
                                                                      30, 2022         September
                                                                                        30, 2021
Whole Income                                                     $   20,289,826     $ 29,889,104
Whole Value of income                                                (17,196,605 )    (27,797,993 )
Whole Payroll and associated bills                                    (3,650,553 )     (2,665,097 )
Whole Different working bills                                        (2,853,818 )     (3,238,146 )
Whole Working loss                                                  (3,411,150 )     (3,812,132 )
Whole Different earnings                                                       347,131           67,550
Whole Loss earlier than earnings tax                                          (3,064,019 )     (3,744,582 )
Add: Web earnings attributable non-controlling curiosity                  

1,522,101 3,661,459 Web loss attributable to widespread shareholders of SG Blocks, Inc. ($4,586,120) ($7,406,041)


Income


Through the 9 months ended September 30, 2022, we derived income from the
following three classes of sources: building companies, engineering
companies and medical income. Whole income for the 9 months ended September
30, 2022 was $20,289,826 in comparison with $29,889,104 for the 9 months ended
September 30, 2021. This lower of $9,599,278 or roughly 32.1% was
primarily pushed by a lower in medical income of $12,265,124, offset by an
enhance in building companies which consisted a rise in workplace initiatives
of $5,591,942, a lower in authorities initiatives of $2,257,154 and a lower of
particular use initiatives of $1,809,838.


Income value and gross revenue


Value of income was $17,196,605 for the 9 months ended September 30, 2022,
in comparison with $27,797,993 for the 9 months ended September 30, 2021. The
lower of $10,601,388 or a lower of roughly 38%, is primarily
associated to decrease testing volumes leading to a lower in our medical value of
income in addition to a lower in value of products bought from building companies
within the quantity of $1,780,066.


The gross revenue was $3,093,221 and $2,091,111 for the 9 months ended September 30, 2022 and 2021, respectively.


Gross revenue margin proportion elevated to fifteen.25% for the 9 months ended
September 30, 2022 in comparison with 7% for the 9 months ended September 30,
2021 primarily on account of a legacy contract from the acquisition of SG Echo which
incurred losses through the 9 months ended September 30, 2021 from escalations
in materials pricing associated to COVID-19 and labor overages.


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Payroll and associated bills


Payroll and associated bills for the 9 months ended September 30, 2022 have been
$3,650,553 in comparison with $2,665,097 for the 9 months ended September 30, 2021.
This enhance was primarily attributable to a rise of roughly $1,096,200
in stock-based compensation through the 9 months ended September 30, 2022.


Different working bills (common and administrative bills, advertising and marketing and enterprise improvement bills and pre-project bills)


Different working bills (common and administrative bills, advertising and marketing and
enterprise improvement bills, pre-project bills) for the 9 months ended
September 30, 2022 have been $2,853,818 in comparison with $3,238,146 for the 9 months
ended September 30, 2021.


Different Revenue (Expense)


Curiosity earnings for the 9 months ended September 30, 2022 was $33,518 primarily
derived from financial institution curiosity and curiosity related to an excellent observe
receivable. There was $41,240 of curiosity earnings for the 9 months ended
September 30, 2021. Different earnings for the 9 months ended September 30, 2022
was $488,346 primarily associated to a return of escrow from the SG Echo
acquisition. There was $61,477 of different earnings for the 9 months ended
September 30, 2021. Curiosity expense for the 9 months ended September 30,
2022 and 2021 was $174,733 and $985, respectively. The rise in curiosity
expense resulted from the notes payable entered into throughout July 2021.



Revenue Tax Provision


A 100% valuation allowance has been supplied in opposition to the deferred tax asset consisting of obtainable internet working losses that may be carried ahead and subsequently no tax profit has been supplied.


Impression of Inflation


Inflation has resulted in will increase in a number of the Firm’s estimated prices for ongoing and accomplished building initiatives over the previous two years, which has affected the Firm’s income and revenue (loss) from operations. continued.

Our operations for the previous three months September 30, 2022 and 2021 might not be indicative of our future operations.

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Three months accomplished September 30, 2022 and 2021:


                                                                    For the Three          For the Three
                                                                     Months Ended           Months Ended
                                                                  September 30, 2022     September 30, 2021
Whole Income                                                     $        4,130,257     $        8,847,490
Whole Value of income                                                     (4,295,431 )           (9,454,311 )
Whole Payroll and associated bills                                        (1,294,857 )           (1,066,486 )
Whole Different Working bills                                            (1,042,155 )           (1,053,301 )
Whole Working loss                                                      (2,502,186 )           (2,726,608 )
     Whole Different earnings (expense)                                            (45,965 )              (24,049 )
Whole Loss earlier than earnings tax                                              (2,548,151 )           (2,750,657 )
Add: Web revenue (loss) attributable non-controlling pursuits                (94,568 )            1,080,248

Web loss attributable to widespread shareholders of SG Blocks, Inc. ($2,453,583) ($3,830,905)


Income


Through the quarter ended September 30, 2022, we derived income from the
following three classes of sources: building companies, engineering
companies and medical income. Whole income for the three months ended September
30, 2022 was $4,130,257 in comparison with $8,847,490 for the three months ended
September 30, 2021. This lower of $4,717,233 or roughly 53% was primarily
pushed by a lower in medical income of $6,726,886 offset by a rise in
building companies which consisted of a rise in resort initiatives of
$1,006,707 and in enhance in workplace initiatives of $1,316,885.


Value of income and gross revenue (loss)


Value of income was $4,295,431 for the three months ended September 30, 2022,
in comparison with $9,454,311 for the three months ended September 30, 2021. The
lower of $5,158,880 or a lower of roughly 55%, is primarily associated
to decrease testing volumes leading to a lower in our medical income as nicely
as a lower in value of products bought from building companies within the quantity of
$445,762.


The gross revenue (loss) was ($165,174) and ($606,821) for the three months ended
September 30, 2022 and 2021, respectively.

Gross revenue margin proportion elevated to roughly -4% for the three months ended September 30, 2022 in opposition to roughly -7% for the three months ended September 30, 2021. This enhance was primarily pushed by the power to scale back manufacturing employment overhead within the three months ended
September 30, 2022.


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Payroll and associated bills


Payroll and associated bills for the three months ended September 30, 2022 have been
$1,294,857 in comparison with $1,066,486 for the three months ended September 30, 2021.
This enhance was primarily attributable to a rise of roughly $348,000 in
stock-based compensation expense.


Different working bills (common and administrative bills, advertising and marketing and enterprise improvement bills and pre-project bills)


Different working bills (common and administrative bills, advertising and marketing and
enterprise improvement bills, pre-project bills) for the three months ended
September 30, 2022 have been $1,042,155 in comparison with $1,053,301 for the three months
ended September 30, 2021.


Different Revenue (Expense)


Curiosity earnings for the three months ended September 30, 2022 was $9,756 primarily
derived from financial institution curiosity and curiosity related to an excellent observe
receivable. There was $9,973 of curiosity earnings for the three months ended
September 30, 2021. Curiosity expense for the three months ended September
30, 2022 and 2021 was $52,758 and $293, respectively. Different earnings (expense) for
the three months ended September 30, 2022 and 2021 was $(2,963) and $453,
respectively.



Revenue Tax Provision


A 0% valuation allowance was supplied in opposition to the deferred tax asset consisting
of obtainable internet working loss carry forwards and, accordingly, no earnings tax
profit was supplied.



Impression of Inflation

Inflation has resulted in will increase in a number of the Firm’s estimated prices for ongoing and accomplished building initiatives over the previous two years, which has affected the Firm’s income and revenue (loss) from operations. continued.


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Impression of the coronavirus (COVID-19)


With the worldwide unfold of the continuing novel coronavirus ("COVID-19") pandemic
starting in 2020, we've carried out enterprise continuity plans designed to
tackle and mitigate the influence of the COVID-19 pandemic on our workers and
enterprise. The worldwide unfold of the COVID-19 virus has resulted in a world
slowdown of financial exercise, which is more likely to lower demand for a broad
number of items and companies, together with from our clients, whereas additionally
leading to delays in initiatives on account of labor shortages and provider disruptions
for an unknown time period till the illness is contained. Up to now, we've
skilled some delays in initiatives on account of COVID-19, which we count on to have an
influence on our income and our outcomes of operations, the scale and length of
which we're at present unable to foretell. Any quarantines, the timing and size
of containment and eradication options, journey restrictions, absenteeism by
contaminated staff, labor shortages or different disruptions to the suppliers and
contract producers or clients would doubtless adversely influence our gross sales, and
working outcomes and lead to additional mission delays. As well as, the
pandemic might lead to an financial downturn that might have an effect on the power of
our clients and licensees to acquire financing and subsequently influence demand for
our merchandise. Order lead occasions might be prolonged or delayed and will increase we
have skilled in pricing might proceed to extend. Some merchandise or
companies might change into unavailable if the regional or world unfold have been
important sufficient to stop various sourcing. Accordingly, we're
contemplating various product sourcing within the occasion that product provide
turns into problematic. We count on this world pandemic to have an effect on our
income and outcomes of operations, the scale and length of which we're
at present unable to foretell. As well as, to the extent the continuing COVID-19
pandemic adversely impacts our enterprise and outcomes of operations, it could additionally
have the impact of heightening most of the different dangers and uncertainties which
we face.


Money and capital assets

From September 30, 2022 and December 31, 2021 we had a complete of $2,118,169

and $13,024,381respectively, money and money equivalents and short-term investments.


Traditionally, our operations have primarily been funded by way of proceeds from
fairness and debt financings, in addition to income from operations.
In June 2017, we accomplished a public providing, leading to internet proceeds of
roughly $6,800,000 after deducting underwriting reductions and commissions
and different bills. In July 2017, in reference to a public providing, the
underwriters exercised their choice to buy 11,250 extra shares of
widespread inventory. On account of the train and shutting of the choice to buy
extra shares, whole internet proceeds from the general public providing have been
roughly $7,900,000 after deducting underwriting reductions and commissions
and associated bills.


In April 2019, we issued 42,388 shares of our widespread inventory at a value of $22.00
per share by way of a Securities Buy Settlement with sure institutional
traders and accredited traders.


In August 2019we issued 45,000 widespread shares at a value of $17.00
per share pursuant to the phrases of a public subscription settlement.

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Liquidity and capital assets (continued)


In December 2019, we accomplished a public providing the place we issued 857,500 shares
of widespread inventory at a public providing value of $3.00 per share leading to internet
proceeds of roughly $2,117,948 after deducting underwriting reductions and
commissions and different bills. In our November 2019 debt financing, we acquired
a money fee within the mixture quantity of $375,000 pursuant to a Securities
Buy Settlement that we entered into with Pink Diamond Companions LLC (the
"Lender"), and we issued to the Lender a Debenture (the "Debenture") within the
mixture principal quantity of $480,770 (representing an authentic difficulty low cost
of twenty-two%), which Debenture was secured by a safety curiosity in all of our
current and future belongings, topic to current safety pursuits and
exceptions. We acquired internet proceeds of roughly $326,250 after deducting
sure charges because of the placement agent and sure transaction bills. The
Debenture was repaid in full out of the proceeds of our December 2019 public
providing.


On February 4, 2020, we entered right into a Securities Buy Settlement with an
accredited investor, pursuant to which we issued to the investor a secured observe
within the mixture principal quantity of $200,000 (the "Word"). The Word bears
curiosity at a price of 9 p.c (9%) every year, is due on July 31, 2023, and
is secured beneath a Pledge Settlement, dated February 4, 2020, entered into with
the investor (the "Pledge Settlement") by a safety curiosity within the royalty
payable to us beneath that sure Unique License Settlement, dated October 3,
2019, with CPF GP 2019-1 LLC. We've got the appropriate to prepay the Word, in entire or
partly, at any time and now and again, with out premium or penalty. Throughout
the third quarter of 2020, the Word to investor of $200,000 and unpaid accrued
curiosity of $86,263 was transformed into 73,665 shares of widespread inventory.


In April 2020, we accomplished a public providing the place we issued 440,000 shares of
widespread inventory at a public providing value of $4.25 per share, which resulted in
internet proceeds of roughly $1,522,339, after deducting underwriting reductions
and commissions and different bills associated to the providing.


In Could 2020, we bought an mixture of 6,900,000 shares of our widespread inventory at a
public providing value of $2.50 per share and on Could 15, 2020, and acquired whole
internet proceeds after deducting underwriting reductions and commissions and different
providing bills payable by us, have been roughly $15,596,141.


In October 2021, we acquired mixture gross proceeds of $11.55 million from our
issuance to an investor (A) in a registered direct providing of (i) 975,000
shares of our widespread inventory and (ii) pre-funded warrants to buy an mixture
of two,189,384 shares of widespread inventory and (B) in a concurrent personal placement
Sequence A warrants to buy as much as 1,898,630 shares of Frequent Inventory.


We proceed to generate losses from operations. At September 30, 2022 and
December 31, 2021 we had a money steadiness and short-term funding of $2,118,169
and $13,024,381, respectively. As of September 30, 2022, our stockholders'
fairness was $18,312,626 in comparison with $21,715,789 as of December 31, 2021. Our internet
loss attributable to widespread stockholders of SG Blocks, Inc. for the 9 months
ended September 30, 2022 was $4,568,120 and internet money utilized in working
actions was $5,553,160. We anticipate our money steadiness is ample to final
no less than twelve months from the date of this Quarterly Report on Type 10-Q.


We might have to generate extra revenues or safe extra financing
sources, similar to debt or fairness capital, to fund future progress, which financing
might not be accessible on favorable phrases or in any respect. We would not have any extra
sources secured for future funding, and if we're unable to boost the required
capital on the occasions we require such funding, we might have to materially change
our marketing strategy, together with delaying implementation of elements of such enterprise
plan or curbing or abandoning such marketing strategy altogether.


Money Movement Abstract


                                                 9 Months Ended
                                                   September 30,
                                                2022            2021
Web money utilized in:
Working actions                       $  (5,553,160 ) $ (1,032,417 )
Investing actions                          (3,549,372 )   (8,283,525 )
Financing actions                          (1,803,680 )     (403,712 )

Web lower in money and money equivalents ($10,906,212) ($9,719,654)


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Working actions used internet money of $5,553,160 through the 9 months ended
September 30, 2022, and used internet money of  $1,032,417 through the 9 months
ended September 30, 2021. Typically, our internet working money flows fluctuate
based on modifications in our profitability and dealing capital. Money used
in working actions elevated by roughly $4,520,743.


Investing actions used internet money of $3,549,372 through the 9 months ended
September 30, 2022, and $8,283,525 internet money through the 9 months ended
September 30, 2021 a lower in money used of $4,734,153. This modification outcomes
primarily from a lower of $2,810,094 of the acquisition of property and
gear through the 9 months ended September 30, 2022 and $3,350,239 of an
funding in and advances to fairness associates through the 9 months ended
September 30, 2021.


Financing actions used internet money of $1,803,680 through the 9 months ended
September 30, 2022. Financing actions used $403,712 internet money through the 9
months ended September 30, 2021. This modification of $ 1,399,968 outcomes from the
proceeds from conversion of warrants to widespread inventory having a worth of $707,188
through the 9 months ended September 30, 2021 and a lower of $805,134 of
distributions paid to non-controlling curiosity through the 9 months ended
September 30, 2022. As well as, through the 9 months ended September 30, 2022
we acquired $500,000 from proceeds of short-term notes payable.


We offer companies to our building and engineering clients in three
separate phases: the design part, the architectural and engineering part and
the development part. Every part is unbiased of the opposite, however builds
by way of a development of idea by way of supply of a accomplished construction.
These phases could also be embodied in a single contract or in separate contracts,
which is typical of a design construct course of mannequin. As of September 30, 2022, we
had eleven initiatives totaling $2,585,012 beneath contract. Of those contracts, all
eleven initiatives mix all three phases or elements thereof and together with
building. We count on that every one of this income will likely be realized by December
31, 2022.


Backlog might fluctuate considerably because of the timing of orders or awards for
massive initiatives and isn't essentially indicative of future backlog ranges or the
price at which backlog will likely be acknowledged as income. Our backlog decreased by
roughly $633,000 from December 31, 2021 to September 30, 2022. We count on
that every one of this income will likely be realized by December 31, 2022. Backlog doesn't
embrace COVID checks or testing companies supplied by way of our three way partnership,
Readability Cellular Enterprise.


There will be no assurance that our clients will determine to and/or have the ability to
proceed with these building initiatives, or that we'll finally acknowledge
income from these initiatives in a well timed method or in any respect.


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Off-balance sheet preparations

From September 30, 2022 and December 31, 2021we had no materials off-balance sheet preparations to which we entered.



Within the bizarre course of enterprise, we enter into agreements with third events
that embrace indemnification provisions which, in our judgment, are regular and
customary for firms in our trade sector. These agreements are usually
with consultants and sure distributors. Pursuant to those agreements, we usually
comply with indemnify, maintain innocent, and reimburse indemnified events for losses
suffered or incurred by the indemnified events with respect to actions taken or
omitted by us. The utmost potential quantity of future funds we might be
required to make beneath these indemnification provisions is limitless. We've got
not incurred materials prices to defend lawsuits or settle claims associated to those
indemnification provisions. Consequently, the estimated honest worth of liabilities
relating to those provisions is minimal. Accordingly, we've no liabilities
recorded for these provisions as of September 30, 2022.





Important accounting estimates



Our condensed consolidated monetary statements have been ready utilizing
usually accepted accounting rules in the USA of America
("GAAP"). In reference to the preparation of the monetary statements, we're
required to make assumptions and estimates and apply judgments that have an effect on the
reported quantities of belongings, liabilities, income, and bills, and the associated
disclosures. We base our assumptions, estimates, and judgments on historic
expertise, present tendencies, and different elements that we imagine to be related at
the time the consolidated monetary statements are ready. Regularly,
we evaluate the accounting insurance policies, assumptions, estimates, and judgments to
be sure that our monetary statements are offered pretty and in accordance with
GAAP. Nonetheless, as a result of future occasions and their results can't be decided with
certainty, precise outcomes might differ from our assumptions and estimates, and
such variations might be materials.



Our important accounting insurance policies are described in “Word 3 – Abstract of great accounting insurance policies” within the notes to our abstract consolidated monetary statements included elsewhere on this report. We imagine the next accounting insurance policies are most necessary to understanding and evaluating our reported monetary outcomes.



Share-based funds. We measure the price of companies acquired in alternate for
an award of fairness devices based mostly on the honest worth of the award. For
workers and administrators, together with non-employee administrators, the honest worth of the
award is measured on the grant date. For non-employees, the honest worth of the
award is usually re-measured on interim monetary reporting dates and vesting
dates till the service interval is full. The honest worth quantity is then
acknowledged over the interval companies are required to be supplied in alternate for
the award, often the vesting interval. We acknowledge stock-based compensation
expense on a graded-vesting foundation over the requisite service interval for every
individually vesting tranche of every award. Inventory-based compensation expense to
workers and all administrators is reported inside payroll and associated bills in
the consolidated statements of operations. Inventory-based compensation expense to
non-employees is reported inside advertising and marketing and enterprise improvement expense in
the consolidated statements of operations.



Different spinoff monetary devices. SGB classifies as fairness any contracts
that (i) require bodily settlement or net-share settlement or (ii) present a
selection of net-cash settlement or settlement in SGB's personal shares (bodily
settlement or net-share settlement), supplied that such contracts are listed to
SGB's personal inventory. SGB classifies as belongings or liabilities any contracts that (i)
require net-cash settlement (together with a requirement to net-cash settle the
contract if any occasion happens and if that occasion is exterior SGB's management) or (ii)
give the counterparty a selection of net-cash settlement or settlement shares
(bodily settlement or net-cash settlement). SGB assesses classification of
widespread inventory buy warrants and different free-standing derivatives at every
reporting date to find out whether or not a change in classification between belongings
and liabilities or fairness is required.


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Important accounting insurance policies (continued)


Convertible devices. SGB bifurcates conversion choices from their host
devices and accounts for them as free-standing spinoff monetary
devices in line with sure standards. The factors embrace circumstances in
which (i) the financial traits and dangers of the embedded spinoff
instrument will not be clearly and intently associated to the financial traits
and dangers of the host contract; (ii) the hybrid instrument that embodies each
the embedded spinoff instrument and the host contract isn't re-measured at
honest worth beneath in any other case relevant GAAP measures with modifications in honest worth
reported in earnings as they happen; and (iii) a separate instrument with the
similar phrases because the embedded spinoff instrument can be thought-about a
spinoff instrument.



SGB decided that the embedded conversion choices that have been included within the
beforehand excellent convertible debentures must be bifurcated from their
host and a portion of the proceeds acquired upon the issuance of the hybrid
contract has been allotted to the honest worth of the spinoff. The spinoff
was subsequently marked to market at every reporting date based mostly on present honest
worth, with the modifications in honest worth reported in outcomes of operations.



Income recognition - we decide, at contract inception, whether or not it should
switch management of a promised good or service over time or at a cut-off date,
whatever the size of contract or different elements. The popularity of
income aligns with the timing of when promised items or companies are
transferred to clients in an quantity that displays the consideration to which
we count on to be entitled in alternate for these items or companies. To realize
this core precept, we apply the next 5 steps in accordance with its
income coverage:



                (1) Determine the contract with a buyer


                (2) Determine the efficiency obligations within the contract



                (3) Decide the transaction value



                (4) Allocate the transaction value to efficiency obligations in
the contract



                (5) Acknowledge income as efficiency obligations are happy


     On sure contracts, we apply recognition of income over time, which is
just like the tactic we utilized beneath earlier steering (i.e. proportion of
completion). Because of uncertainties inherent within the estimation course of, it's
attainable that estimates of prices to finish a efficiency obligation will likely be
revised within the near-term. For these efficiency obligations for which income is
acknowledged utilizing a cost-to-cost enter technique, modifications in whole estimated prices,
and associated progress towards full satisfaction of the efficiency obligation,
are acknowledged on a cumulative catch-up foundation within the interval by which the
revisions to the estimates are made. When the present estimate of whole prices
for a efficiency obligation point out a loss, a provision for all the
estimated loss on the unhappy efficiency obligation is made within the interval
by which the loss turns into evident.


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For gross sales of merchandise or gear, we apply income recognition when the shopper obtains management of such items, ie at a given time.


On October 3, 2019, we entered into an Unique License Settlement ("ELA" )
pursuant to which it granted an unique license for its expertise as outlined
within the ELA. The ELA is described beneath. Below the ELA, we are going to obtain royalty
funds based mostly upon gross revenues earned by the licensee for commercialized
merchandise inside the discipline of design and mission administration platforms for
residential use, together with single-family residences and multi-family residences,
however excluding army housing. We've got decided that the ELA grants the
licensee a proper to entry our mental property all through the license
interval (or its remaining financial life, if shorter), and thus acknowledges income
over time because the licensee acknowledges income and we've the appropriate to fee of
royalties. No income has been acknowledged beneath the ELA for the 9 months
ended September 30, 2022.


We entered right into a three way partnership settlement with Readability Lab Options, LLC
("Readability Labs") (the "JV") within the fourth quarter of 2020. Income from the
actions of the JV is expounded to medical testing companies and is acknowledged
when companies have been rendered, which is at a cut-off date. As well as, we
shaped Chicago Airport Testing, LLC which collects rental income Included in
the consideration we anticipated to be entitled to obtain, we estimate its
contractual allowances, payer denials and value concessions. Through the 9
months ended September 30, 2022, we acknowledged $11,640,953 in income associated to
actions by way of the JV, which is included in medical income on the
accompanying consolidated statements of operations.


Important accounting insurance policies (continued)


Goodwill - Goodwill represents the surplus of reorganization worth over the honest
worth of recognized internet belongings upon emergence from chapter. In accordance
with the accounting steering on goodwill, we carry out our impairment take a look at of
goodwill on the reporting unit degree every fiscal yr, or extra regularly if
occasions or circumstances change that might extra doubtless than not scale back the honest
worth of its reporting unit beneath its carrying worth. Our analysis of goodwill
accomplished through the yr ended December 31, 2021, resulted in no impairment
loss. There was no impairment through the 9 months ended September 30, 2022.


Intangible belongings - Intangible belongings encompass $2,766,000 of proprietary
information and expertise which is being amortized over 20 years, $97,164 of
emblems which is being amortized over 5 years, $47,800 of web site charges which
is being amortized over 5 years. Our analysis of intangible belongings for
impairment through the yr ended December 31, 2021, decided that there have been
no impairment losses. There was no impairment through the 9 months ended
September 30, 2022.



New accounting statements

See Word 3 to the accompanying consolidated monetary statements for all just lately adopted and new accounting requirements.


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Non-GAAP Monetary Info



Along with our outcomes beneath GAAP, we additionally current EBITDA and Adjusted
EBITDA for historic intervals. EBITDA and Adjusted EBITDA are non-GAAP monetary
measures and have been offered as supplemental measures of monetary
efficiency that aren't required by, or offered in accordance with, GAAP. We
calculate EBITDA as internet earnings (loss) earlier than curiosity expense, earnings tax
profit (expense), depreciation and amortization. We calculate Adjusted EBITDA
as EBITDA earlier than sure non-recurring changes similar to loss on conversion of
convertible debentures, change in honest worth of monetary devices and inventory
compensation expense.



EBITDA and Adjusted EBITDA are offered as a result of they're necessary metrics used
by administration as one of many means by which it assesses our monetary
efficiency. EBITDA and Adjusted EBITDA are additionally regularly utilized by analysts,
traders and different  events to judge firms in our trade.
These measures, when used together with associated GAAP monetary measures,
present traders with a further monetary analytical framework which may be
helpful in assessing us and our outcomes of operations.



EBITDA and Adjusted EBITDA have sure limitations. EBITDA and Adjusted EBITDA
shouldn't be thought-about as alternate options to internet earnings (loss), or every other
measures of monetary efficiency derived in accordance with GAAP. These
measures additionally shouldn't be construed as an inference that our future outcomes
will likely be unaffected by uncommon or non-recurring objects for which these non-GAAP
measures make changes. Moreover, EBITDA and Adjusted EBITDA will not be
meant to be liquidity measures due to sure limitations, together with, however
not restricted to:



  ? They don't mirror our money outlays for capital expenditures;



? They don’t mirror variations or money necessities for working capital; and

? Though depreciation and amortization are non-cash bills, belongings are

being depreciated and amortized and should have to be changed sooner or later, and

    these non-GAAP measures don't mirror money necessities for such
    replacements.




Different firms, together with different firms in our trade, might not use such
measures or might calculate a number of of the measures in a different way than as
offered on this Quarterly Report on Type 10-Q, limiting their usefulness as a
comparative measure.



In evaluating EBITDA and Adjusted EBITDA, you have to be conscious that sooner or later
we are going to incur bills which can be the identical or just like a number of the changes
made in our calculations, and our presentation of EBITDA and Adjusted EBITDA
shouldn't be construed to imply that our future outcomes will likely be unaffected by
such adjustment. Administration compensates for these limitations by utilizing EBITDA
and Adjusted EBITDA as supplemental monetary metrics and together with
our outcomes ready in accordance with GAAP. The non-GAAP data must be
learn together with our consolidated monetary statements and associated
notes.



Non-GAAP monetary data (continued)

The next is a reconciliation of EBITDA and Adjusted EBITDA to the closest GAAP measure, internet acquire (loss):

                                                                   Three
                                                                Months Ended
                                         Three Months Ended    September 30,       9 Months Ended      9 Months Ended
                                         September 30, 2022         2021           September 30, 2022     September 30, 2021
Web loss attributable to widespread
stockholders of SG Blocks, Inc.         $       (2,453,583 )   $   (3,830,905 )   $       (4,586,120 )   $       (7,406,041 )
    Addback curiosity expense                        52,758                293                174,733                    985
    Addback curiosity earnings                         (9,756 )           (9,973 )              (33,518 )              (41,240 )
   Addback depreciation and
amortization                                       145,515            148,482                470,425                449,502
EBITDA (non-GAAP)                               (2,265,066 )      (3,692,103) )           (3,974,480 )           (6,996,794 )
Addback loss on asset disposal                           -             34,182                      -                 34,182
    Addback litigation expense                     121,830            413,796                466,959                555,068
   Addback inventory compensation expense              594,694            246,236              1,874,857                778,657
Adjusted EBITDA (non-GAAP)              $       (1,548,542 )   $   (2,997,889 )   $       (1,632,664 )   $       (5,628,887 )



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