Sg blocks, inc enters into its first licensing transaction

Sg blocks, inc. 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. 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 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, the company 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.
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