SG Blocks, Inc. (Nasdaq: SGBX) ("SG Blocks" or the "Company"), a leading designer, innovator and fabricator of container-based structures, reported its ?nancial results for the first quarter ended March 31, 2020.
Management Commentary
"During the first quarter we continued to build our pipeline of opportunities for the application of our container solutions and are moving forward aggressively to reach agreements with a number of new customers," commented Paul Galvin, CEO of SG Blocks. "Most recently, we announced the launch of a distributorship agreement with Osang Healthcare Co., Ltd. We are encouraged by the momentum we are building for accelerating growth in 2020."
Mr. Galvin concluded, "We are making great progress with an increasing number of prospects and expect production to accelerate and our business to really begin to scale as we move into the second half of the year. Active, ongoing discussions with customers in a number of different verticals, including healthcare, local government, education and financial services reinforce our optimism for our business to reach an inflection point in 2020."
On February 5, 2020, the Company effected a 1-for-20 reverse stock split of its common stock. All share and per share amounts set forth in the consolidated financial statements have been retroactively restated to reflect the split effected in February 2020 as if it had occurred as of the earliest period presented.
First Quarter 2020 Financial Highlights:
First Quarter 2020 and Subsequent Operational Highlights:
First Quarter 2020 Financial Results
Revenue was approximately $199,000 compared to approximately $1.7 million in Q1 2019. This decrease was mainly driven by a decline in all of the Company's customer types and the shift to a royalty-based model for its residential business, for which royalty revenue is expected in the second-half of 2020.
The Company's backlog no longer includes residential contracts that are captured under the license agreement. Construction backlog decreased to $17.5 million as of March 31, 2020, as compared to $17.6 million at December 31, 2019. The decrease in backlog is primarily attributable to work in progress or completed contracts during the first three months of 2020.
Gross profit was approximately $46,000 as compared to approximately $544,000 in Q1 2019.
Operating expenses decreased by approximately $240,000 to approximately $795,000 in Q1 2020 compared to approximately $1.035 million in Q1 2019. The decrease was driven by a reduction in payroll and related expenses of approximately $367,000, which was partially offset by an increase in legal fees of approximately $138,000.
Net loss totaled approximately $747,000, or $(0.64) per basic and diluted share, compared to a net loss of approximately $491,000, or $(2.30) per basic and diluted share, in Q1 2019.
Adjusted EBITDA loss was approximately $527,000 compared to an Adjusted EBITDA loss of approximately $289,000 in Q1 2019. See below under the heading "Use of Non-GAAP Financial Information" for a discussion of Adjusted EBITDA and a reconciliation of such measure to the most comparable measure calculated under U.S. generally accepted accounting principles ("GAAP").
Balance Sheet
Cash and cash equivalents at March 31, 2020 totaled approximately $399,000, as compared to approximately $1.6 million at December 31, 2019.
Subsequent to quarter end, the Company completed a public offering in April of 2020 of 440,000 shares of common stock at an offering price of $4.25 per common share for aggregate net proceeds of approximately $1.5 million after deducting underwriting discounts and commissions and other expenses related to the offering. The Company completed another public offering in May of 2020 of 6,000,000 shares of common stock at an offering price of $2.50 per common share for aggregate net proceeds of approximately $13.475 million after deducting underwriting discounts and commissions and other expenses related to the offering.
Further details about the Company's results will be available in its Quarterly Report on Form 10-Q, accessible in the investor relations section of the Company's website at www.sgblocks.com and through the U.S. Securities and Exchange Commission's website.
Conference Call Information
SG Blocks' CEO, Paul Galvin, and Acting CFO, Gerald Sheeran, will host a listen only conference call.
To access the call, please use the following information:
Date: |
Thursday, May 14, 2020 |
||
Time: |
4:30 p.m. ET, 1:30 p.m. PT |
||
Toll-free dial-in number: |
1-877-300-8521 |
||
International dial-in number: |
1-412-317-6026 |
||
Conference ID: |
10143913 |
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Hayden IR at (646) 755-7412 or [email protected].
The conference call will be broadcast live and available for replay at http://public.viavid.com/player/index.php?id=139766 and via the investor relations section of the Company's website at www.sgblocks.com.
A replay of the conference call will be available on May 14, 2020, after 7:30 p.m. Eastern time, through May 28, 2020.
Toll-free replay number: |
1-844-512-2921 |
||
International replay number: |
1-412-317-6671 |
||
Replay ID: |
10143913 |
Use of Non-GAAP Financial Information
In addition to its results under GAAP, the Company presents EBITDA and Adjusted EBITDA for historical periods. EBITDA and Adjusted EBITDA are non-GAAP ?nancial measures and have been presented as supplemental measures of ?nancial performance that are not required by, or presented in accordance with, GAAP. The Company calculates EBITDA as net income (loss) before interest expense, income tax benefit (expense), depreciation and amortization. It calculates Adjusted EBITDA as EBITDA before certain non-recurring adjustments such stock-based compensation expense. EBITDA and Adjusted EBITDA are presented because they are important metrics used by management as one of the means by which it assesses the Company's ?nancial performance. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company's industry. These measures, when used in conjunction with related GAAP ?nancial measures, provide investors with an additional ?nancial analytical framework that may be useful in assessing the Company and its results of operations.
EBITDA and Adjusted EBITDA have certain limitations. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income (loss), or any other measures of financial performance derived in accordance with GAAP. These measures also should not be construed as an inference that the Company's future results will be unaffected by unusual or non-recurring items for which these non-GAAP measures make adjustments. Additionally, EBITDA and Adjusted EBITDA are not intended to be liquidity measures because of certain limitations, including, but not limited to:
The non-GAAP information should be read in conjunction with the Company's consolidated financial statements and related notes.
The following is a reconciliation of EBITDA and Adjusted EBITDA to the nearest GAAP measure, net loss:
|
|
For the three months ended March 31, 2020 |
|
|
For the three months ended March 31, 2019 |
|
||
Net loss |
|
$ |
(747,427 |
) |
|
$ |
(490,735 |
) |
Addback interest expense |
|
|
2,811 |
|
|
|
? |
|
Addback interest income |
(4,863 |
) |
? |
|||||
Addback depreciation and amortization |
|
|
47,401 |
|
|
|
39,446 |
|
EBITDA (non-GAAP) |
|
|
(702,078 |
) |
|
|
(451,289 |
) |
|
|
|
|
|
|
|
|
|
Addback litigation expense |
|
|
136,738 |
|
|
|
? |
|
Addback stock-based compensation expense |
|
|
38,764 |
|
|
|
162,493 |
|
Adjusted EBITDA (non-GAAP) |
|
$ |
(526,576 |
) |
|
$ |
(288,796 |
) |
About SG Blocks, Inc.
SG Blocks, Inc. is a premier innovator in advancing and promoting the use of code-engineered cargo shipping containers for safe and sustainable construction. The firm offers a product that exceeds many standard building code requirements, and also supports developers, architects, builders and owners in achieving greener construction, faster execution, and stronger buildings of higher value. Each project starts with GreenSteeltm, the structural core and shell of an SG Blocks building, and then customized to client specifications. For more information, visit www.sgblocks.com.
Safe Harbor Statement
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by terminology such as "may," "should," "potential," "continue," "expects," "anticipates," "intends," "plans," "believes," "estimates," and similar expressions and includes statements such as building momentum for accelerating growth in 2020, production accelerating and our business to really begin to scale as we move into the second half of the year, the manufacturing phase of the hospitality project commencing in Q3 2020, finishing construction of the Planet Smoothie container-based structure in the second quarter of 2020, and finishing the architectural and engineering design for a modular office extension at the end of the second quarter of 2020. These forward-looking statements are based on management's expectations and assumptions as of the date of this press release and are subject to a number of risks and uncertainties, many of which are difficult to predict that could cause actual results to differ materially from current expectations and assumptions from those set forth or implied by any forward-looking statements. Important factors that could cause actual results to differ materially from current expectations include, among others, the Company's ability to accelerate growth in 2020, the Company's ability to accelerate production and scale its business in the second half of the year, the Company's ability to complete the manufacturing phase of the hospitality project as scheduled, the Company's ability to complete construction of the Planet Smoothie container-based structure as scheduled, the Company's ability to finish the architectural and engineering design for a modular office extension at the end of the second quarter of 2020, the Company's ability to achieve positive outcomes from the license of its residential technology, the Company's ability to successfully distribute and generate revenue from the GeneFindertm COVID-19 Plus RealAmp Kittm, the Company's ability to capitalize on new commercial and military opportunities, the Company's ability to maintain compliance with the NASDAQ listing requirements, and the other factors discussed in the Company's most recent Annual Report on Form 10-K and the Company's subsequent filings with the SEC, including subsequent periodic reports on Forms 10-Q and 8-K. The information in this release is provided only as of the date of this release, and we undertake no obligation to update any forward-looking statements contained in this release on account of new information, future events, or otherwise, except as required by law.
SG BLOCKS, INC. AND SUBSIDIARIES |
||||||||
Condensed Consolidated Balance Sheets |
||||||||
|
March 31,
|
|
|
December 31,
|
|
|||
|
|
(Unaudited) |
|
|
|
|||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
398,737 |
|
|
$ |
1,625,671 |
|
Accounts receivable, net |
|
|
1,094,713 |
|
|
|
1,101,185 |
|
Contract assets |
|
|
12,660 |
|
|
|
106,015 |
|
Prepaid expenses and other current assets |
|
|
145,378 |
|
|
|
73,938 |
|
Total current assets |
|
|
1,651,488 |
|
|
|
2,906,809 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
10,823 |
|
|
|
11,747 |
|
Goodwill |
|
|
1,223,520 |
|
|
|
1,223,520 |
|
Long-term note receivable |
404,863 |
? |
||||||
Intangible assets, net |
|
|
2,262,525 |
|
|
|
2,298,805 |
|
Deferred contract costs, net |
183,533 |
193,730 |
||||||
Total Assets |
|
$ |
5,736,752 |
|
|
$ |
6,634,611 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
1,748,182 |
|
|
$ |
2,105,505 |
|
Contract liabilities |
|
|
137,206 |
|
|
|
168,957 |
|
Total current liabilities |
|
|
1,885,388 |
|
|
|
2,274,462 |
|
Long-term note payable |
200,000 |
? |
||||||
Total liabilities |
2,085,388 |
2,274,462 |
||||||
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Preferred stock, $1.00 par value, 5,405,010 shares authorized; none issued or outstanding |
|
|
? |
|
|
|
? |
|
Common stock, $0.01 par value, 25,000,000 shares authorized; 1,170,524 issued and outstanding as of March 31, 2020 and 1,157,890 issued and outstanding as of December 31, 2019. |
|
|
11,705 |
|
|
|
11,579 |
|
Additional paid-in capital |
|
|
21,970,903 |
|
|
|
21,932,387 |
|
Accumulated deficit |
|
|
(18,331,244 |
) |
|
|
(17,583,817 |
) |
Total stockholders' equity |
|
|
3,651,364 |
|
|
|
4,360,149 |
|
Total Liabilities and Stockholders' Equity |
|
$ |
5,736,752 |
|
|
$ |
6,634,611 |
|
SG BLOCKS, INC. AND SUBSIDIARIES |
|||||||
Condensed Consolidated Statements of Operations |
|||||||
|
|
For the Three Months Ended March 31, |
|
For the Three Months Ended March 31, |
|
||
|
|
2020 |
|
2019 |
|
||
|
|
(Unaudited) |
|
(Unaudited) |
|
||
Revenue: |
|
|
|
|
|
||
Construction services |
$ |
89,341 |
$ |
1,658,074 |
|||
Engineering services |
|
|
109,415 |
|
|
77,050 |
|
Total |
|
|
198,756 |
|
|
1,735,124 |
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
Construction services |
|
|
71,911 |
|
|
1,159,229 |
|
Engineering services |
|
|
80,864 |
|
|
31,790 |
|
Total |
|
|
152,775 |
|
|
1,191,019 |
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
45,981 |
|
|
544,105 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Payroll and related expenses |
|
|
271,808 |
|
|
638,550 |
|
General and administrative expenses |
|
|
491,314 |
|
|
333,000 |
|
Marketing and business development expense |
|
|
32,338 |
|
|
47,359 |
|
Pre-project expenses |
|
|
? |
|
|
15,931 |
|
Total |
|
|
795,460 |
|
|
1,034,840 |
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(749,479 |
) |
|
(490,735 |
) |
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
Interest expense |
|
|
(2,811 |
) |
|
? |
|
Interest income |
|
|
4,863 |
|
|
? |
|
Total |
|
|
2,052 |
|
? |
||
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(747,427 |
) |
|
(490,735 |
) |
Income tax expense |
|
|
? |
|
|
? |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(747,427 |
) |
$ |
(490,735 |
) |
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted: |
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.64 |
) |
$ |
(2.30 |
) |
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
Basic and diluted |
|
|
1,165,470 |
|
|
213,002 |
|
SG BLOCKS, INC. AND SUBSIDIARIES |
||||||||||||||||||||
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) |
||||||||||||||||||||
|
|
$0.01 Par Value
|
|
Additional
|
|
Accumulated |
|
Total
|
|
|||||||||||
|
|
Shares |
|
Amount |
|
Capital |
|
Deficit |
|
Equity |
|
|||||||||
Balance at December 31, 2018 |
|
213,002 |
|
$ |
2,130 |
|
$ |
17,741,214 |
|
$ |
(10,663,277 |
) |
$ |
7,080,067 |
|
|||||
Stock-based compensation |
|
? |
|
? |
|
|
216,808 |
|
|
? |
|
216,808 |
|
|||||||
Net loss |
|
? |
|
? |
|
|
? |
|
|
(490,735 |
) |
(490,735 |
) |
|||||||
Balance at March 31, 2019 |
213,002 |
$ |
2,130 |
$ |
17,958,022 |
$ |
(11,154,012 |
) |
$ |
6,806,140 |
||||||||||
Balance at December 31, 2019 |
|
1,157,890 |
|
$ |
11,579 |
|
$ |
21,932,387 |
|
$ |
(17,583,817 |
) |
$ |
4,360,149 |
|
|||||
Stock-based compensation |
? |
? |
38,764 |
? |
38,764 |
|||||||||||||||
Conversion of restricted stock units to common stock |
|
12,672 |
|
126 |
|
|
(126 |
) |
|
? |
|
? |
|
|||||||
Reverse stock split settlement |
|
(38 |
) |
? |
|
|
(122 |
) |
|
? |
|
(122 |
) |
|||||||
Net loss |
|
? |
|
? |
|
|
? |
|
|
(747,427 |
) |
(747,427 |
) |
|||||||
Balance at March 31, 2020 |
|
1,170,524 |
|
$ |
11,705 |
|
$ |
21,970,903 |
|
$ |
(18,331,244 |
) |
$ |
3,651,364 |
|
SG BLOCKS, INC. AND SUBSIDIARIES |
|||||||
Condensed Consolidated Statements of Cash Flows |
|||||||
|
|
For the
Three Months Ended
|
|
For the Three Months Ended
March 31,
|
|
||
|
|
(Unaudited) |
|
(Unaudited) |
|
||
Cash flows from operating activities: |
|
|
|
|
|
||
Net loss |
|
$ |
(747,427 |
) |
$ |
(490,735 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
Depreciation expense |
|
|
924 |
|
|
3,165 |
|
Amortization of intangible assets |
|
|
36,280 |
|
|
36,281 |
|
Amortization of deferred license costs |
|
|
10,197 |
|
|
? |
|
Interest income on long-term note receivable |
|
|
(4,863 |
) |
|
? |
|
Stock-based compensation |
|
|
38,764 |
|
|
162,493 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
|
6,472 |
|
|
(1,210,288 |
) |
Contract assets |
|
|
93,355 |
|
|
247,901 |
|
Prepaid expenses and other current assets |
|
|
(71,440 |
) |
|
205,641 |
|
Accounts payable and accrued expenses |
|
|
(357,323 |
) |
|
(317,983 |
) |
Contract liabilities |
(31,751 |
) |
|
245,594 |
|||
Net cash used in operating activities |
|
|
(1,026,812 |
) |
|
(1,117,931 |
) |
|
|
|
|
|
|
|
|
Cash flows provided by investing activities: |
|
|
|
|
|
|
|
Advances in note receivable |
(400,000 |
) |
? |
||||
Net cash used in investing activities |
|
|
(400,000 |
) |
|
? |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Proceeds from long-term note payable |
|
|
200,000 |
|
|
? |
|
Settlement of common stock from reverse stock split |
(122 |
) |
? |
||||
Net cash provided by financing activities |
|
|
199,878 |
|
|
? |
|
|
|
|
|||||
Net decrease in cash and cash equivalents |
(1,226,934 |
) |
(1,117,931 |
) |
|||
Cash and cash equivalents - beginning of period |
1,625,671 |
1,368,395 |
|||||
Cash and cash equivalents - end of period |
$ |
398,737 |
$ |
250,464 |
|||
Supplemental disclosure of non-cash operating activities: |
|||||||
Non-cash conversion of accrued salary to restricted stock units |
$ |
? |
$ |
54,315 |
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