Safe & Green Holdings Corp. (NASDAQ:SGBX), a distributor of lumber and construction materials, has entered into a Material Definitive Agreement with 1800 Diagonal Lending LLC, issuing a Promissory Note for $174,000 on October 22, 2024. The Note was sold at a discounted purchase price of $150,000, reflecting an original issue discount.
The company, formerly known as SG Blocks, Inc., agreed to a one-time interest charge of 12% on the principal at issuance. Starting November 15, 2024, Safe & Green is obliged to make nine monthly payments of $21,653.34, covering both interest and principal. Payments made after a five-day grace period will incur a Default Interest rate of 22% per annum.
An Event of Default occurs if the company fails to pay on time, files for bankruptcy, or is delisted from The Nasdaq Stock Market. In such an event, the outstanding balance becomes immediately due, and the company must pay 200% of the sum of the outstanding principal plus accrued interest and any Default Interest.
The Lender also has the right to convert the outstanding balance into Safe & Green's common stock. For 180 days post-issuance, the conversion price is set at $1.30 per share, after which it drops to $0.25 per share. However, the Lender's conversion is limited to a maximum of 4.99% ownership of the company's outstanding common stock and, unless shareholder approval is obtained, cannot exceed 19.9% of the company's outstanding shares as of the agreement date.
Safe & Green Holdings Corp. is prohibited from selling a significant portion of its assets without the Lender's consent for as long as the Note is in effect. Any asset disposals must comply with the Lender's conditions regarding the use of proceeds.
InvestingPro Insights
Safe & Green Holdings Corp.'s recent financial agreement with 1800 Diagonal Lending LLC comes at a critical time for the company, as revealed by InvestingPro data and tips. With a market capitalization of just $2.21 million, SGBX is operating under significant financial strain. The company's revenue has seen a sharp decline, with a 56.5% decrease over the last twelve months as of Q2 2024, and an even more dramatic 75.41% drop in quarterly revenue.
InvestingPro Tips highlight that SGBX is "quickly burning through cash" and "may have trouble making interest payments on debt." These insights are particularly relevant given the new $174,000 Promissory Note, which adds to the company's debt burden. The tip suggesting that "short term obligations exceed liquid assets" further underscores the potential challenges SGBX may face in meeting its new monthly payment obligations.
The company's financial health is also reflected in its stock performance. InvestingPro data shows a year-to-date price total return of -86.62% as of the latest available data, indicating significant investor concern. However, there has been a strong return of 30.1% over the last month, which could suggest some speculative interest or a potential turnaround effort.
For investors seeking a more comprehensive analysis, InvestingPro offers 16 additional tips for SGBX, providing a deeper understanding of the company's financial position and market performance.
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