SG Blocks Announces Second Quarter Financial Results

NEW YORK, NY--(Marketwired - Aug 9, 2017) - SG Blocks, Inc. (NASDAQ: SGBX) ("SG Blocks" or the "Company"), a premier designer, innovator and fabricator of container-based structures, today announced its operating results for the three months ended June 30, 2017, as published in its Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission.

Operating Results for the Quarter Ended June 30, 2017:

• Total revenues increased 17% to $1,001,734 for the three months ended June 30, 2017, compared to $828,477 for the three month period ending June 30, 2016.
  
  
• Gross profit for the three months ended June 30, 2017 was $145,787 compared to $141,732 for the three month period ending June 30, 2016.
  
  
• GAAP net loss was $(1,705,672), or $(3.15) per basic and diluted share, for the three months ended June 30, 2017 with 541,424 weighted average basic and diluted shares outstanding as of June 30, 2017.
  
  
• Non-GAAP net loss was $318,998, or $ (0.59) per basic and diluted share, for the three months ended June 30, 2017, with 541,424 weighted average basic and diluted shares outstanding as of June 30, 2017. Reconciliations between net income, earnings per share and other measures on a GAAP and non-GAAP basis are provided in the tables located in the section entitled "Reconciliation of EBITDA and Adjusted EBITDA to the nearest GAAP measure, net loss."
  
  
• As of June 30, 2017, the Company had $5,662,488 of cash and cash equivalents and short-term investments.

Paul Galvin, Chief Executive Officer of SG Blocks, stated, "It's been a very busy quarter for us at SG Blocks. The recent public offering of our shares now traded on Nasdaq, resulting in net proceeds of approximately $7.2 million, has placed the Company on its strongest financial footing to date, with no debt and a clean capital structure. With a construction backlog of $9.7 million on June 30^th, we are galvanized around our core as the first company to receive an ESR rating from the ICC, and we are driving growth with disciplined decisions, product leadership and focused execution. We are very optimistic about the future and we look forward to building atop recent operational momentum while driving towards measurable earnings growth."

Galvin concluded, "I want to also take this opportunity to thank all of those who have supported us and helped get us where we are today. We are grateful and humbled by your support. Rest assured, we will continue to work diligently on your behalf as we focus on building shareholder value."

Mahesh Shetty, Chief Financial Officer of SG Blocks, stated, "We have held the line on our operating expenses and look forward to expanding our margins as we execute on our pipeline."

SG Blocks will host a corresponding conference call to discuss the results with Chief Executive Officer Paul Galvin and Chief Financial Officer Mahesh Shetty today at 4:30 PM ET/1:30 PM PT. To participate in the conference call, investors from the U.S. and Canada should dial (877) 407-9716 ten minutes prior to the scheduled start time. International callers should dial (201) 493-6779.

In addition, the call will be broadcast live over the Internet and can be accessed through the Investor Relations section of the Company's website at www.sgblocks.com. The broadcast will be archived online upon completion of the conference call. A telephonic replay of the conference call will also be available until 11:59 p.m. ET on Wednesday, August 23, 2017 by dialing (844) 512-2921 in the U.S. and Canada and (412) 317-6671 internationally and entering the pin number: 13668248.

SG BLOCKS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
				For the Three Months Ended June 30,								For the Six Months Ended June 30,
				Successor 2017				Predecessor 2016				Successor 2017				Predecessor 2016
				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Revenue:
	Construction revenue			$	882,499			$	801,692			$	1,402,457			$	1,004,216
	Engineering services				119,235				26,785				203,870				52,007
	Project management				-				-				-				-
		Total			1,001,734				828,477				1,606,327				1,056,223
Cost of revenue:
	Construction revenue				738,860				664,848				1,133,026				816,076
	Engineering services				117,087				21,897				174,285				43,898
	Project management				-				-				-				-
		Total			855,947				686,745				1,307,311				859,974
Gross profit					145,787				141,732				299,016				196,249
Operating expenses:
	Payroll and related expenses				292,550				200,318				635,598				367,254
	General and administrative expenses				330,118				432,249				724,059				557,069
	Marketing and business development expense				37,618				12,877				66,186				22,729
	Pre-project expenses				7,508				22,233				16,647				26,411
		Total			667,794				667,677				1,442,490				973,463
Operating loss					(522,007	)			(525,945	)			(1,143,474	)			(777,214	)
Other income (expense):
	Interest expense				(165,194	)			(265,253	)			(330,388	)			(429,017	)
	Interest income				4				5				8				8
	Loss on conversion of convertible debentures				(1,018,475	)			-				(1,018,475	)			-
	Change in fair value of financial instruments				-				-				96,327				-
		Total			(1,183,665	)			(265,248	)			(1,252,528	)			(429,009	)
Net loss before reorganization items					(1,705,672	)			(791,193	)			(2,396,002	)			(1,206,223	)
Reorganization items:
	Legal and professional fees				-				(80,239	)			-				(171,893	)
	Gain on reorganization				-				713,379				-				713,379
		Total			-				633,140				-				541,486
Net loss				$	(1,705,672	)		$	(158,053	)		$	(2,396,002	)		$	(664,737	)
Net loss per share - basic and diluted:
	Basic and diluted			$	(3.15	)		$	0.00			$	(6.75	)		$	(0.01	)
Weighted average shares outstanding:
	Basic and diluted				541,424				42,918,927				354,703				42,918,927

SG BLOCKS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
				June 30, 2017				December 31, 2016
				(Unaudited)
Assets
Current assets:
	Cash and cash equivalents			$	5,632,463			$	549,100
	Short-term investment				30,025				30,017
	Accounts receivable, net				97,441				234,518
	Costs and estimated earnings in excess of billings on uncompleted contracts				258,149				33,349
	Prepaid expenses				317,344				124,720
	Inventory				-				9,445
		Total current assets			6,335,422				981,149
Equipment, net					4,180				5,559
Goodwill					4,162,173				4,162,173
Intangible assets, net					3,322,879				3,587,250
		Totals		$	13,824,654			$	8,736,131
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable and accrued expenses			$	1,444,068			$	350,772
	Billings in excess of costs and estimated earnings on uncompleted contracts				439,191				48,478
	Deferred revenue				-				72,788
	Conversion option liabilities				-				384,461
		Total current liabilities			1,883,259				856,499
	Convertible debentures, net of discounts				-				2,446,337
		Total liabilities			1,883,259				3,302,836
Commitments and Contingencies
Stockholders' equity:
	Preferred stock, $1.00 par value, 5,405,010 shares authorized; 0 issued and outstanding as of June 30, 2017 and 1,801,670 issued and outstanding as of December 31, 2016				-				1,801,670
	Common stock, $0.01 par value, 300,000,000 shares authorized; 3,982,238 issued and outstanding as of June 30, 2017 and 163,901 issued and outstanding as of December 31, 2016				39,823				1,639
	Additional paid-in capital				15,604,150				4,936,562
	Accumulated deficit				(3,702,578	)			(1,306,576	)
		Total stockholders' equity			11,941,395				5,433,295
		Totals		$	13,824,654			$	8,736,131

SG BLOCKS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
						Successor For the Six Months Ended June 30, 2017				Predecessor For the Six Months Ended June 30, 2016
						(Unaudited)				(Unaudited)
Cash flows from operating activities:
Net loss						$	(2,396,002	)		$	(664,737	)
Adjustments to reconcile net loss to net cash used in operating activities:
	Depreciation expense						1,379				1,629
	Amortization of debt issuance costs						-				5,204
	Amortization of discount on convertible debentures						330,388				387,965
	Amortization of intangible assets						293,191				-
	Interest income on short-term investment						(8	)			(8	)
	Loss on conversion of convertible debentures						1,018,475				-
	Change in fair value of financial instruments						(96,327	)			-
	Interest expense on debtor in possession financing						-				35,848
	Gain on reorganization						-				(713,379	)
	Stock-based compensation						209,383				119,146
		Changes in operating assets and liabilities:
			Accounts receivable				137,077				(104,858	)
			Cost and estimated earnings in excess of billings on uncompleted contracts				(224,800	)			-
			Prepaid expenses				(192,624	)			(28,589	)
			Inventory				9,445				118,011
			Intangible assets				(28,820	)			-
			Accounts payable and accrued expenses				378,123				269,317
			Accounts payable and accrued expenses - subject to compromise				-				(22,457	)
			Related party accounts payable and accrued expenses				-				(163,522	)
			Billings in excess of costs and estimated earnings on uncompleted contracts				390,713				14,650
			Deferred revenue				(72,788	)			(87,115	)
				Net cash used in operating activities			(243,195	)			(832,895	)
Cash flows provided by investing activities:
	Security deposit refund						-				2,700
				Net cash provided by investing activities			-				2,700
Cash flows from financing activities:
	Proceeds from issuance of convertible debentures						-				1,319,001
	Proceeds from public stock offering, net of offering costs						6,826,558				-
	Payments on convertible debentures						(1,500,000	)			-
				Net cash provided by financing activities			5,326,558				1,319,001
Net increase in cash and cash equivalents							5,083,363				488,806
Cash and cash equivalents - beginning of period							549,100				466,997
Cash and cash equivalents - end of period						$	5,632,463			$	955,803
Supplemental disclosure of cash flow information:
	Cash paid during the period for:
	Interest					$	-			$	-
Supplemental disclosure of non-cash financing activities:
	Conversion of debtor in possession financing to convertible debentures					$	-			$	600,000
	Conversion of convertible debentures to common stock					$	2,583,334			$	-
	Conversion of preferred stock to common stock					$	1,801,670			$	-
	Offering costs not paid and included in accounts payable and accrued expenses					$	715,173			$	-

SG BLOCKS, INC. AND SUBSIDIARIES Reconciliation of EBITDA and Adjusted EBITDA to the nearest GAAP measure, net loss
			Six Months Ended June 30, 2017				Three Months Ended June 30, 2017
Net loss			$	(2,396,002	)		$	(1,705,672	)
	Addback interest expense			330,388				165,194
	Addback depreciation and amortization			294,570				148,005
EBITDA (non-GAAP)				(1,771,044	)			(1,392,473	)
	Addback loss on conversion of convertible debentures			1,018,475				1,018,475
	Less change in fair value of financial instruments			(96,327	)			-
	Addback stock compensation expense			209,383				55,000
Adjusted EBITDA (non-GAAP)			$	(639,513	)		$	(318,998	)

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. For more information, visit www.sgblocks.com.

Forward-Looking Statements

Certain statements in this press release constitute "forward-looking statements" within the meaning of the federal securities laws. Words such as "may," "might," "will," "should," "believe," "expect," "anticipate," "estimate," "continue," "predict," "forecast," "project," "plan," "intend" or similar expressions, or statements regarding intent, belief, or current expectations, are forward-looking statements. While the Company believes these forward-looking statements are reasonable, undue reliance should not be placed on any such forward-looking statements, which are based on information available to us on the date of this release. These forward looking statements are based upon current estimates and assumptions and are subject to various risks and uncertainties, including without limitation those set forth in the Company's filings with the Securities and Exchange Commission. Thus, actual results could be materially different. The Company expressly disclaims any obligation to update or alter statements whether as a result of new information, future events or otherwise, except as required by law.