SG Blocks Signs First Licensing Agreement Converting its Residential Construction Vertical to a Royalty Model Reducing Execut...
October 04 2019 - 8:30AM
Business Wire
SG Blocks, Inc. (NASDAQ: SGBX) (“SG Blocks” or the
“Company”) — a leading designer, innovator and fabricator of
container-based structures — today announced that it has entered
into its first Licensing transaction, with a Licensee that has
injected over $100 million into underserved communities.
The Company intends to enter into additional similar licensing
transactions for its other construction opportunity verticals –
such as education and hospitality - reducing the project execution
risk and corporate overhead costs associated with executing
construction projects, and allowing the Company to focus on sales
and marketing and on qualified lead generation for its
licensees.
The first Licensing transaction provides for the Licensee to pay
SG Blocks up to 5% of the total gross revenues generated from the
construction, development and manufacture of residential housing
using the SG Blocks method or SG Blocks referrals of any kind. It
is limited geographically to the United States and U.S.
territories.
As part of this transaction:
- The Licensee will operate under the name SG Residential,
thereby continuing to promote and represent the SG Blocks name and
continuing to build the SG Blocks brand in the marketplace.
- SG Residential (“SGR”) will pay SG Blocks a 5% royalty on the
first $20 million in annual topline revenues generated using the
SGBX residential pipeline, referrals and/or technology, regardless
of how it is generated. The Royalty fee decreases to 4.5% on the
next $30 million and increases back to 5% on revenues generated in
excess of $50 million from those sources.
- SGR has agreed to a rate card wherein it will reimburse SGBX
for staff time allocated to the residential business. These
reimbursements will be an offset to our SG&A. The Licensee will
also assume responsibility for SGBX’s remaining and future
residential pipeline and will accordingly reimburse SG Blocks for
any third-party expenses incurred by SGBX in developing those
projects as they come online.
- The agreement allows SGBX to pivot to a much lower cost
structure as it relates to overhead. Cash SG&A will be reduced
50% to just $2 million annually.
- SG Blocks retains its right to construction projects in
non-residential verticals. These include a wide variety of areas
including food service, military, non-military government, retail,
commercial, industrial and disaster relief related construction.
Additionally, we continue to be approached by developers,
contractors and consumers with new potential applications.
- SG Blocks retains the right to License its residential platform
internationally and may separately do so by country or region. For
example, the Company is free to enter into a similar arrangement in
Canada.
Paul Galvin, Chairman and CEO of SG Blocks commented, “Today’s
agreement is transformational for SG Blocks and its shareholders.
This deal significantly reduces project-level financing risk as
well as execution risk. As importantly, our fixed expenses are
reduced dramatically, and we expect with the execution of
additional License Agreements to reduce them even further. Given
the real estate experience and financial strength of our Licensee,
the Licensing model increases the likelihood of success of these
projects and ultimately reduces not only the amount of expense but
also the capital required by the Company.”
Said Galvin, “This licensing model allows SG Blocks to focus its
efforts on qualified lead generation, new product application. It
is our ultimate goal to be a product driven, low-overhead, high
margin, royalty-driven company.”
He continued, “Our focus is on working with well positioned,
financially stable and socially responsible operators. Our current
Licensee fits that profile, and we look forward to working with
others to craft similar agreements. Given that the Licensee has
injected over $100 million into disadvantaged and underserved
communities, we are proud to be aligned with them.”
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 GreenSteel™, the structural core
and shell of an SG Blocks building, and is then customized to
client specifications. For more information, visit
www.sgblocks.com. Due to confidentiality agreements, the
Company is limited in the details about the Licensee that it can
disclose now but anticipates communicating more details about the
Licensee in the near future.
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 SG Blocks
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 SG Blocks' filings with the Securities and Exchange
Commission. Thus, actual results could be materially different. SG
Blocks 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20191004005104/en/
Media Rubenstein Public Relations Christina
Levin Account Director 212-805-3029
clevin@rubensteinpr.com or James Carbonara
Hayden IR (646)-755-7412 james@haydenir.com
Brett Maas Hayden IR (646) 536-7331
brett@haydenir.com
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