Item 1.01. Entry into a Material Definitive Agreement.
On June 24, 2021, SGB Development Corp. (“SG
DevCorp”), a subsidiary of SG Blocks, Inc., a Delaware corporation (the “Company”), as member, entered into an Operating
Agreement, with Jacoby Development, Inc., a Georgia corporation (“JDI”), as manager, dated June 24, 2021 (the “Operating
Agreement”), for JDI-Cumberland Inlet, LLC, a Georgia limited liability company (“JDI-Cumberland”), pursuant to which
the Company acquired a 10% non-dilutable equity interest (“LLC Interest”) in JDI-Cumberland and agreed to contribute $3,000,000
in capital to it for the development of a 1,286 acre waterfront parcel in downtown historic St. Mary’s, Georgia (the “Project”).
SG DevCorp in conjunction with Jacoby Development of Atlanta, Georgia expects to develop a mixed-use destination community. The closing
on the 1,286-acre waterfront parcel is scheduled to occur prior to the end of Q2 2021.
The Operating Agreement provides JDI with the
right, at its option, to purchase the LLC Interest from SG DevCorp on or before June 24, 2023 for $3,000,000, plus an amount equal to
an annual internal rate of return (IRR) on such funds of forty (40%) percent (i.e., $1,200,000 annualized). After June 24,
2023, the Operating Agreement provides JDI with the right, at its option, to purchase the LLC Interest from SG DevCorp for $3,000,000,
plus an amount equal to an IRR of thirty-two and one-half (32.5%) percent (i.e., $975,000 annualized). The Operating Agreement
also provides that if JDI receives a good faith, bona fide written offer from an unaffiliated third party to purchase all or any portion
of the Project, JDI shall first offer the Project to SG DevCorp at the same price and upon substantially the same terms as are contained
in the third party offer.
In connection with the Company’s acquisition
of its LLC Interest, the Company’s subsidiary, SG Echo, LLC (“SG Echo”), entered into a Fabrication and Building Services
Agreement (“Building Services Agreement”) with JDI-Cumberland to design, fabricate and install various improvements for the
Project using modular structures, pursuant to budgets prepared by SG Echo submitted for approval to JDI-Cumberland, including a marina,
town center, apartments and single family units, townhomes, commercial, retail and lodging buildings/structures, eco-tourism park, camping
yurts, cabins and cottages,. The Building Services Agreement has an initial term of three years, with two-year automatic renewal provisions.
The foregoing description of the terms of the
Operating Agreement and Building Services Agreement do not purport to be complete and are subject to, and are qualified in their entirety
by reference to the provisions of the Operating Agreement and Building Services Agreement, copies of which are filed as Exhibits 10.1
and 10.2 respectively to this Current Report on Form 8-K and are incorporated herein by reference.