Item 8. Financial Statements and Supplementary Data
Item 8. Financial Statements and Supplementary Data
The following Consolidated Financial Statements, and the related Notes thereto, of Safeguard Scientifics, Inc. and the Reports of Independent Registered Public Accounting Firm are filed as a part of this Form 10-K.
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248 )
21
Consolidated Balance Sheets as of December 31, 2023 and 2022
22
Consolidated Statements of Operations for the years ended December 31, 2023 and 2022
23
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2023 and 2022
24
Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022
25
Notes to Consolidated Financial Statements
26
20
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Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Safeguard Scientifics, Inc
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Safeguard Scientifics, Inc. (a Pennsylvania corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Impairment of ownership interests and advances
The Company evaluates the carrying value of its ownership interests and advances for possible impairment. This evaluation requires management to apply significant judgment particularly related to the achievement of business plan objectives and milestones, the financial condition and prospects of the portfolio company, market conditions and other relevant factors. Based on the above, management then determines whether there has been an other-than-temporary decline in the value of its ownership interest in or advance to the portfolio company. If the Company identifies an other-than-temporary decline in value, management may use valuation methods such as discounted cash flows and the market approach including valuation of comparable public companies and evaluation of recent acquisitions of similar companies. During the year ended December 31, 2023, the Company recorded $1.0M of other than temporary impairment charges. The identification and valuation of other than temporary impairment of ownership interests and advances was determined to be a critical audit matter.
The principal consideration for our determination that the identification and valuation of other-than-temporary impairment of ownership interests and advances is a critical audit matter is due to it being an area of the financial statements requiring significant auditor judgment and subjectivity in assessing the results of management’s impairment analysis. Ownership interests and advances held by the Company are primarily comprised of early-stage privately-held companies in industries that are rapidly evolving, where evaluation of other than temporary declines in value requires significant judgment by management.
Our audit procedures related to identification and valuation of other than temporary impairment of ownership interests and advances included the following, among others:
●
We evaluated the design of certain internal controls related to the Company’s impairment assessment. This included controls over the identification and valuation of other than temporary declines in value and the impairment analysis.
●
We held discussions with those outside of accounting with intimate knowledge of the portfolio companies, including those with board positions and those employed by the portfolio companies, to gain an understanding of operational performance, milestones achieved, and potential indicators of other than temporary declines in value.
●
For a selection of portfolio companies, we reviewed the financial performance, relevant third-party information with indications of company values, board materials, press releases and other public information for potential indicators of other than temporary declines in value.
●
For one ownership interest where an other than temporary impairment was recorded, we tested the completeness and accuracy of the source information used to value the ownership interest.
●
For one ownership interest where an other than temporary impairment was recorded, we utilized personnel with specialized knowledge and skill in valuation techniques to assist in (i) evaluating the appropriateness of management's valuation methodologies, and (ii) evaluating the reasonableness of the fair value of the ownership interest.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2021.
Philadelphia, Pennsylvania
March 26, 2024
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SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
As of December 31,
2023
2022
ASSETS
Current Assets:
Cash and cash equivalents
$ 9,498 $ 13,331
Restricted cash
19 25
Marketable securities
— 5,956
Ownership interests
— 860
Prepaid expenses and other current assets
394 1,251
Total current assets
9,911 21,423
Right-of-use asset, net
971 1,290
Ownership interests and advances
11,691 14,545
Other assets
263 434
Total Assets
$ 22,836 $ 37,692
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable
$ 107 $ 16
Accrued compensation and benefits
854 507
Accrued expenses and other current liabilities
596 865
Lease liability - current
489 429
Total current liabilities
2,046 1,817
Lease liability - non-current
760 1,249
Other long-term liabilities
50 50
Total Liabilities
2,856 3,116
Commitments and contingencies (Note 11)
Equity:
Preferred stock, $ 0.10 par value; 1,000 shares authorized
— —
Common stock, $ 0.10 par value; 83,333 shares authorized; 21,573 issued at December 31, 2023 and 2022, respectively
2,157 2,157
Additional paid-in capital
793,992 804,752
Treasury stock, at cost; 4,947 and 5,478 shares at December 31, 2023 and 2022, respectively
( 42,418 ) ( 48,410 )
Accumulated deficit
( 733,726 ) ( 723,898 )
Accumulated other comprehensive loss
( 25 ) ( 25 )
Total Equity
19,980 34,576
Total Liabilities and Equity
$ 22,836 $ 37,692
See Notes to Consolidated Financial Statements.
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SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
2023
2022
General and administrative expense
$
5,683
$
4,775
Operating loss
( 5,683
)
( 4,775
)
Other income (loss), net
2,037
( 3,297
)
Interest income
903
794
Equity (loss), net
( 7,085
)
( 6,985
)
Net (loss) before income taxes
( 9,828
)
( 14,263
)
Income tax benefit (expense)
—
—
Net (loss)
$
( 9,828
)
$
( 14,263
)
Net (loss) per share:
Basic
$
( 0.61
)
$
( 0.87
)
Diluted
$
( 0.61
)
$
( 0.87
)
Weighted average shares used in computing net (loss) per share:
Basic
16,221
16,337
Diluted
16,221
16,337
See Notes to Consolidated Financial Statements.
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SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
Accumulated
Accumulated Other Comprehensive
Common Stock
Additional Paid-In
Treasury Stock
Total
Deficit
Loss
Shares
Amount
Capital
Shares
Amount
Balance — December 31, 2021
$
50,566
$
( 709,635
)
$
( 25
)
21,573
$
2,157
$
806,638
5,068
$
( 48,569
)
Net loss
( 14,263
)
( 14,263
)
—
—
—
—
—
—
Restricted stock awards, forfeitures and shares repurchased for tax withholdings, net
477
—
—
—
—
( 2,622
)
( 302
)
3,099
Stock-based compensation
736
—
—
—
—
736
—
—
Repurchases of common stock
( 2,940
)
—
—
—
—
—
712
( 2,940
)
Balance — December 31, 2022
$
34,576
$
( 723,898
)
$
( 25
)
21,573
$
2,157
$
804,752
5,478
$
( 48,410
)
Net loss
( 9,828
)
( 9,828
)
—
—
—
—
—
—
Restricted stock awards, forfeitures and shares repurchased for tax withholdings, net
446
—
—
—
—
( 5,621
)
( 556
)
6,067
Stock-based compensation
680
—
—
—
—
680
—
—
Repurchases of common stock
( 75
)
—
—
—
—
—
25
( 75
)
Dividends paid
( 5,819
)
—
—
—
—
( 5,819
)
—
—
Balance — December 31, 2023
$
19,980
$
( 733,726
)
$
( 25
)
21,573
$
2,157
$
793,992
4,947
$
( 42,418
)
See Notes to Consolidated Financial Statements.
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SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2023
2022
Cash Flows from Operating Activities:
Net (loss)
$
( 9,828
)
$
( 14,263
)
Adjustments to reconcile to net cash used in operating activities:
Amortization of right of use asset
319
271
Equity (income) loss, net
6,085
6,985
Impairments of ownership interests and advances
1,173
—
Gain from observable price changes
( 1,661
)
( 553
)
Gain from sales of ownership interests
( 542
)
—
Change in fair value of ownership interests
—
3,689
Other, net
( 7
)
76
Stock-based compensation, including liability classified awards
1,121
1,445
Changes in assets and liabilities:
Prepaid expenses and other current assets
( 146
)
( 534
)
Accounts payable, accrued expenses, and other current liabilities
178
( 374
)
Net cash used in operating activities
( 3,308
)
( 3,258
)
Cash Flows from Investing Activities:
Acquisitions of ownership interests
( 3,000
)
—
Proceeds from sales and distributions from ownership interests
2,851
6,879
Advances and loans to ownership interests
( 250
)
( 5,670
)
Purchase of marketable securities
( 8,530
)
( 11,871
)
Proceeds from sales and maturities in marketable securities
14,650
6,000
Net cash provided by (used in) investing activities
5,721
( 4,662
)
Cash Flows from Financing Activities:
Payment of dividend
( 5,819
)
—
Repurchases of common stock
( 75
)
( 2,939
)
Tax withholdings related to equity-based awards
( 358
)
( 549
)
Net cash used in financing activities
( 6,252
)
( 3,488
)
Net change in cash, cash equivalents and restricted cash
( 3,839
)
( 11,408
)
Cash, cash equivalents and restricted cash equivalents at beginning of year
13,356
24,764
Cash, cash equivalents and restricted cash at end of year
$
9,517
$
13,356
See Notes to Consolidated Financial Statements.
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SAFEGUARD SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
Liquidity And Capital Resources
As of December 31, 2023 , Safeguard Scientifics, Inc. ("the Company" or "Safeguard") had $ 9.5 million of cash and cash equivalents.
In January 2018, Safeguard ceased deploying capital into new opportunities in order to focus on supporting the existing ownership interests and maximizing monetization opportunities to enable returning value to shareholders. We have considered and taken action on various initiatives including the sale of our ownership interests, the sale of certain or all of our ownership interests in secondary market transactions as well as other opportunities to maximize shareholder value. As we seek to provide additional funding to existing companies where we have an ownership interest, we may be required to expend our cash or incur debt, which will decrease our liquidity. From time to time, we are engaged in discussions concerning acquisitions and dispositions which, if consummated, could impact our liquidity, perhaps significantly. Accordingly, the Company could also pursue other sources of capital in order to maintain its liquidity.
The Company believes that its cash and cash equivalents at December 31, 2023 will be sufficient to fund operations past one year from the issuance of these consolidated financial statements.
Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Safeguard and all of its wholly-owned subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.
Principles of Accounting for Ownership Interests in Companies
The Company accounts for its ownership interests using one of the following methods: Equity or Other. The accounting method applied is generally determined by the degree of the Company's influence over the entity, primarily determined by our voting interest in the entity.
In addition to holding voting and non-voting equity and debt securities, the Company also periodically makes advances to its companies in the form of promissory notes which are included in Ownership interests and advances on the Consolidated Balance Sheets.
Equity Method. The Company accounts for ownership interests whose results are not consolidated, but over which it exercises significant influence, under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an ownership interest depends on an evaluation of several factors including, among others, representation on the board of directors and our ownership level, which is generally a 20% to 50% interest in the voting securities of a company, including voting rights associated with the Company’s holdings in common, preferred and other convertible instruments in the company. The Company records the initial ownership interest at cost. Under the equity method of accounting, the Company does not reflect a company’s financial statements within our Consolidated Financial Statements; however, our share of the income or loss of such company is reflected in Equity income (loss), net in the Consolidated Statements of Operations. The Company also adjust the carrying value to reflect third party investments in the ownership interests, which typically result in a dilution gain. The Company includes the carrying value of equity method companies in Ownership interests and advances on the Consolidated Balance Sheets. Any excess of the Company’s cost over its underlying interest in the net assets of equity method companies that is allocated to intangible assets is amortized over the estimated useful lives of the related intangible assets. The Company reflects its share of the income or loss of the equity method companies on a one quarter lag. This reporting lag could result in a delay in recognition of the impact of changes in the business or operations of these companies.
When the Company’s carrying value in an equity method company is reduced to zero, the Company records no further losses in its Consolidated Statements of Operations unless the Company has an outstanding guarantee obligation or has committed additional funding to such equity method company. If such equity method company subsequently reports income, the Company will not record its share of such income until it exceeds the amount of the Company’s share of losses not previously recognized.
Other Method. We account for ownership interests in companies that are not accounted for under the equity method that do not have a readily determinable fair value under the fair value measurement alternative. Under the fair value measurement alternative, these ownership interests are based on our original cost less impairments, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar interests of the same issuer. Under this method, our share of the income or losses of such companies is not included in our Consolidated Statements of Operations, however, the result of observable price changes, if any, are reflected in Other income (loss), net. We include the carrying value of these interests in Ownership interests and advances on the Consolidated Balance Sheets.
The Company accounts for ownership interests that are not accounted for under the equity method and have a readily determinable fair value at fair value based on the closing stock price on the last trading day of the reporting period. Under this method, the changes in fair value are reflected in Other income (loss), net. As of December 31, 2023 there were no remaining ownership interests following this accounting method.
Comprehensive Income (loss)
During the years ended December 31, 2023 or 2022, there were no items of comprehensive income (loss).
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SAFEGUARD SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Accounting Estimates
The preparation of the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect amounts reported in the financial statements and accompanying notes. Actual results may differ from these estimates. These estimates include the evaluation of the recoverability of the Company’s ownership interests and advances, the recoverability of deferred tax assets, stock-based compensation and commitments and contingencies. Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances.
Certain amounts recorded to reflect the Company’s share of income or losses for companies accounted for under the equity method are based on unaudited results of operations of those companies and may require adjustments in the future when audits of these entities’ financial statements are completed.
It is reasonably possible that the Company’s accounting estimates with respect to the ultimate recoverability of the carrying value of the Company’s ownership interests and advances could change in the near term and that the effect of such changes on the consolidated financial statements could be material. At December 31, 2023 , the Company believes the carrying value of the Company’s ownership interests and advances is not impaired, although there can be no assurance that the Company’s future results will confirm this assessment, that a significant write-down or write-off will not be required in the future or that a significant loss will not be recorded in the future upon the sale of a company.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist of deposits that are readily convertible into cash. The Company has not experienced any significant losses on cash equivalents and does not believe it is exposed to any significant credit risk on cash and cash equivalents.
Restricted Cash
Restricted cash represents cash required to be set aside by a contractual agreement as a shareholder representative. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Statements of Cash Flows:
December 31, 2023
December 31, 2022
(In thousands)
Cash and cash equivalents
$ 9,498 $ 13,331
Restricted cash
19 25
Total cash, cash equivalents and restricted cash
$ 9,517 $ 13,356
Financial Instruments
The Company’s financial instruments (principally cash and cash equivalents, marketable securities, accounts receivable, notes receivable, accounts payable and accrued expenses) are carried at cost, which approximates fair value due to the short-term maturity of these instruments.
Right-of-use asset
Right-of-use assets represent an operating lease for office facilities. The right-of-use assets are reduced over the remaining term of the applicable lease ( April 2026) in a manner that results in a straight-line lease expense, when combined with the interest factor on the lease liability.
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SAFEGUARD SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Lease liability
The initial lease liability represents the present value of the fixed escalating lease payments through April 2026 associated with the Company's prior corporate headquarters operating office lease. The discount rate used to calculate the lease liability was based on the Company's incremental borrowing rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease, which was approximately 12 %, at the transition to the guidance of ASU No. 2016 - 02, Leases . Subsequent values of the lease liability reflect the reduction in the lease liability for operating lease payments less an amount representing interest, which is included in the straight-line lease expense. There is no residual value guarantee associated with this operating lease arrangement. The Company has incurred operating lease expenses and operating cash outflows of $ 0.5 million for each of the years ended December 31, 2023 and 2022 , respectively, and $ 0.6 million for each of the years ended December 31, 2023 and 2022 .
In March 2019, the Company entered into a sublease of its prior corporate headquarters office space. The term of the sublease is through April 2026, the same as the Company's underlying lease. Fixed sublease payments to the Company are escalating over the term of the sublease and are reported as a component of general and administrative expenses.
A summary of the Company's expected operating lease cash flows at December 31, 2023 follows:
Operating lease payments Expected sublease receipts
(In thousands)
2024
$ 613 $ 573
2025
619 590
2026
207 199
2027
— —
2028
— —
Thereafter
— —
Total future minimum lease payments
1,439 1,362
Less imputed interest
( 190 )
Total operating lease liabilities
$ 1,249
Impairment of Ownership Interests and Advances
On a periodic basis, but no less frequently than quarterly, the Company evaluates the carrying value of its ownership interests and advances for possible impairment based on achievement of business plan objectives and milestones, the estimated value of each company relative to its carrying value, the financial condition and prospects of the company and other relevant factors. The business plan objectives and milestones the Company considers include, among others, those related to financial performance, such as achievement of planned financial results or completion of capital raising activities, and those that are not primarily financial in nature, such as hiring of key employees or the establishment of strategic relationships.
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SAFEGUARD SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Management then determines whether there has been an other than temporary decline in the value of its ownership interest in the company. Impairment is measured as the amount by which the carrying value of an asset exceeds its estimated fair value.
The estimated fair value of privately held companies is generally determined based on the value at which independent third parties have invested or have committed to invest in these companies or based on other valuation methods, including discounted cash flows, valuation of comparable public companies and the valuation of acquisitions of similar companies.
Impairment charges related to equity method companies are included in Equity income (loss), net in the Consolidated Statements of Operations. Impairment charges related to non-equity method companies and funds are included in Other income (loss), net in the Consolidated Statements of Operations.
The reduced cost basis of a previously impaired company accounted for using the Equity method are not written-up if circumstances suggest the value of the company has subsequently recovered.
Income Taxes
The Company accounts for income taxes under the asset and liability method whereby deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company measures deferred tax assets and liabilities using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled. The Company recognizes the effect on deferred tax assets and liabilities of a change in tax rates in income in the period of the enactment date. The Company provides a valuation allowance against the net deferred tax asset for amounts which are not considered more likely than not to be realized.
Net Income (Loss) Per Share
The Company computes net income (loss) per share using the weighted average number of common shares outstanding during each year. The Company includes in diluted net income (loss) per share common stock equivalents (unless anti-dilutive) which would arise from the exercise of stock options and conversion of other convertible securities and adjusted, if applicable, for the effect on net income (loss) of such transactions. Diluted net income (loss) per share calculations adjust net income (loss) for the dilutive effect of common stock equivalents and convertible securities issued by the Company’s consolidated or equity method companies.
Segment Information
The Company operates as one operating segment based upon the similar nature of its technology-driven companies, the functional alignment of the organizational structure, and the reports that are regularly reviewed by the chief operating decision maker for the purpose of assessing performance and allocating resources.
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SAFEGUARD SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
2. Ownership Interests and Advances
The following summarizes the carrying value of the Company’s ownership interests and advances.
December 31, 2023
December 31, 2022
(In thousands)
Equity Method:
Companies
$ 8,400 $ 8,749
Private equity funds
97 97
8,497 8,846
Other Method:
Companies, fair value
— 860
Companies, fair value measurement alternative
2,555 1,067
Private equity funds, fair value measurement alternative
250 250
2,805 2,177
Advances to companies
389 4,382
$ 11,691 $ 15,405
During the year ended December 31, 2023, the Company recorded an impairment of $ 1.0 million related to the Moxe ownership interest, which is accounted for under the equity method. The impairment was determined based on declines in the fair value of our ownership interest resulting from lower forward looking revenue expectations. There were no impairments during the year ended December 31, 2022. The measurement of fair value for the impairment was estimated based on evaluating several valuation inputs available, primarily including the valuation of comparable public companies, the valuation of acquisitions of similar companies and the present value of our expected outcomes. Assumptions considered within these methods include determining which public companies are comparable, projecting forward revenues for the measured ownership interest, discounts to apply for the lack of marketability or lack of comparability, other factors and the relative weight to apply to each valuation input available. Due to the unobservable nature of some of these inputs, we have determined these fair value estimates to be non-recurring Level 3 fair value measurements.
During 2023, the Company has received $ 0.9 million from the collection of escrowed amounts related to the 2022 Lumesis transaction, $ 0.8 million from the sale of its ownership interest in BHG, $ 0.5 million from the resolution of escrow contingencies resulting from the 2021 Flashtalking transaction, $ 0.4 million from the secondary sale of a subordinated promissory note issued by Aktana and additional amounts from other earn-outs or contingencies.
In September 2022, Lumesis, Inc. was acquired by another entity for cash. The Company received $ 5.5 million in cash proceeds in connection with this transaction, excluding holdbacks and escrows. This transaction resulted in a gain of $ 4.9 million, including $ 0.8 million other receivable related to an indemnification escrow during the year ended December 31, 2022.
During the year ended December 31, 2022, the Company recognized $ 0.5 million as gain on sale as the result of the 2021 WebLinc transaction from the collection of additional amounts and as contingencies were resolved, those amounts were recorded as gain on the sale and included within Equity income (loss).
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SAFEGUARD SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
As of December 31, 2023 , the Company held ownership interests accounted for using the equity method in 4 non-consolidated companies.
Certain of the Company’s ownership interests as of December 31, 2023 and 2022 included the following:
Safeguard Primary Ownership as of December 31,
Company Name
2023
2022
Accounting Method as of December 31, 2023
Clutch Holdings, Inc.
41.7 % 41.7 % Equity
InfoBionic, Inc.
* 25.2 % Other
MedCrypt, Inc.
* * Other
meQuilibrium
30.2 % 31.3 % Equity
Moxe Health Corporation
19.3 % 19.3 % Equity
Prognos Health Inc.
19.0 % 28.4 % Equity
*minimal ownership interest
Summarized Financial Information
The following table provides summarized financial information for ownership interests accounted for under the equity method for the periods presented and has been compiled from respective company financial statements, reflect certain historical adjustments, and are reported on a one quarter lag. Results of operations are excluded for periods prior to their acquisition and subsequent to their disposition. Historical results are not adjusted when the Company exits or writes-off a company.
As of December 31,
2023
2022
(In thousands)
Balance Sheets:
Current assets
$ 49,546 $ 126,042
Non-current assets
9,892 55,073
Total assets
$ 59,438 $ 181,115
Current liabilities
$ 32,461 $ 92,990
Non-current liabilities
42,370 220,681
Shareholders’ deficit
( 15,393 ) ( 132,556 )
Total liabilities and shareholders’ deficit
$ 59,438 $ 181,115
Number of equity method ownership interests
4 8
Year Ended December 31,
2023
2022
(In thousands)
Results of Operations:
Revenue
$ 101,021 $ 144,771
Gross profit
$ 71,529 $ 88,666
Net loss
$ ( 73,913 ) $ ( 152,936 )
As of December 31, 2023 , the Company’s carrying value in equity method companies, in the aggregate, exceeded the Company’s share of the net assets of such companies by approximately $ 1.1 million. Of this excess, $ 1.0 million was allocated to goodwill and $ 0.1 million was allocated to intangible assets.
3. Acquisitions of Ownership Interests
2023 Transactions
The Company deployed $ 3.0 million to Prognos Health during the three months ended June 30, 2023. The Company had previously deployed an aggregate of $ 14.6 million. Prognos is a healthcare platform company transforming the ability to access, manage and analyze healthcare data in partnership with life sciences brands, payers, and clinical diagnostics organizations.
The Company funded $ 0.3 million of convertible loans to Trice Medical during the three months ended March, 31 2023. During the three months ended September 30, 2023, Trice Medical completed a recapitalization transaction in which Safeguard declined to participate that resulted in Safeguard retaining a small, subordinated debt position and a de minimis ownership interest. The Company had previously deployed an aggregate of $ 12.0 million. Trice Medical is focused on orthopedic diagnostics using fully integrated camera-enabled technologies to provide clinical solutions to physicians.
During the three months ended September 30, 2023, InfoBionic completed a recapitalization transaction, in which Safeguard declined to participate, that reduced our ownership position to approximately 5 % and resulted in a $ 1.7 million observable price change gain to reflect the fair value of the ownership interest. InfoBionic provides a remote patient monitoring platform delivering on-demand, actionable monitoring data and analytics directly to physicians.
2022 Transactions
The Company funded $ 1.6 million of convertible loans to Syapse, Inc. The Company had previously deployed an aggregate of $ 25.0 million. Syapse drives healthcare transformation through precision medicine, enabling provider systems to improve clinical outcomes, streamline operations, and shift to new payment models.
The Company funded $ 2.0 million of convertible loans to Prognos Health Inc. The Company had previously deployed an aggregate of $ 12.6 million.
The Company funded $ 1.4 million of convertible loans to Clutch Holdings, Inc. The Company had previously deployed an aggregate of $ 16.9 million. Clutch provides customer intelligence and personalized engagements that empower consumer-focused businesses to identify, understand and motivate each segment of their customer base.
The Company funded $ 0.5 million of convertible loans to meQuilibrium. The Company had previously deployed an aggregate of $ 14.0 million. meQuilibrium is a digital coaching platform that delivers clinically validated and highly personalized resilience solutions to employers, health plans, wellness providers, and consumers increasing engagement, productivity and performance, as well as improving outcomes in managing stress, health and well-being.
The Company funded $ 0.1 million of convertible loans to Trice Medical. The Company had previously deployed an aggregate of $ 11.8 million. The Company also committed to provide another $ 0.3 million under certain conditions pursuant to a subordinated line of credit. At December 31, 2022, the Company's obligation under this line of credit is included in accrued expenses. During the year ended December 31, 2023, the Company funded $ 0.3 million in accordance with this line of credit.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
4. Fair Value Measurements
The Company categorizes its financial instruments into a three -level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1 ) and the lowest priority to unobservable inputs (Level 3 ). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.
Cash, cash equivalents and restricted cash approximate fair value due to their short term nature. The Company did not have any Level 2 or Level 3 financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 .
Carrying
Fair Value Measurement at December 31, 2023
Value
Level 1
Level 2
Level 3
(in thousands)
Cash and cash equivalents
$ 9,498 $ 9,498 $ — $ —
Restricted cash
$ 19 $ 19 $ — $ —
Carrying
Fair Value Measurement at December 31, 2022
Value
Level 1
Level 2
Level 3
(In thousands)
Cash and cash equivalents
$ 13,331 $ 13,331 $ — $ —
Restricted cash
$ 25 $ 25 $ — $ —
Marketable securities—held-to-maturity:
U.S. Government securities
$ 5,956 $ 5,956 $ — $ —
Ownership interests
$ 860 $ 860 $ — $ —
Ownership interests accounted for at fair value as of December 31, 2022 consist of approximately 1.3 million common shares of Bright Health. The securities are carried at fair value based on the closing stock price on the last trading day of the reporting period.
5. Equity
In July 2015, the Company's Board of Directors authorized the Company, from time to time and depending on market conditions, to repurchase up to $ 25.0 million of the Company's outstanding common stock. During the years ended December 31, 2023 and 2022 , the Company did not repurchase any shares under the existing authorization.
In May 2021, the Company's Board of Directors authorized a $ 6.0 million share repurchase program (the "2021 Plan") using existing funds in accordance with the requirements of Rule 10b5 - 1 and Rule 10b - 18 under the Securities Exchange Act of 1934, as amended. During the year ended December 31, 2021, the Company purchased 236,159 shares under the 2021 Plan at an aggregate cost of $ 1.6 million, or $ 6.94 per share. During October 2021, the Company suspended the 2021 Plan and completed a modified Dutch auction self-tender that resulted in the repurchase of 4.3 million common shares for an aggregate price of $ 38.7 million, or $ 9.00 per share.
In March 2022, the Company's Board of Directors replaced the 2021 Plan and authorized a separate $ 3.0 million share repurchase program (the "2022 Plan") using existing funds in accordance with the requirements of Rule 10b5 - 1 and Rule 10b - 18 under the Securities Exchange Act of 1934, as amended. During the year ended December 31, 2022, the Company purchased 711,481 shares under the 2022 Plan at an aggregate cost of $ 2.9 million, or $ 4.13 per share. The Company completed the 2022 Plan in January 2023 by purchasing an additional 25,096 shares, resulting in an average price of $ 4.09 for the 2022 Plan.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
6. Stock-Based Compensation
Equity Compensation Plans
The 2014 Equity Compensation Plan has 4.1 million shares authorized for issuance. During 2023 and 2022 , the Company issued no stock-based awards outside of existing plans. To the extent allowable, service-based options are incentive stock options. Options granted under the plans are at prices equal to or greater than the fair market value at the date of grant. Upon exercise of stock options, the Company issues shares first from treasury stock, if available, then from authorized but unissued shares. At December 31, 2023 , the Company had reserved 1.5 million shares of common stock for possible future issuance under its 2014 Equity Compensation Plan and other previously expired equity compensation plans.
Classification of Stock-Based Compensation Expense
Stock-based compensation consists of time based awards to employees, financial liability based awards to employees and non-employees to be settled in stock, performance based awards to employees, and financial liability based awards to Directors for quarterly and annual services. Stock-based compensation expense was recognized in the Consolidated Statements of Operations as follows:
Year Ended December 31,
2023
2022
(In thousands)
General and administrative expense
$ 1,121 $ 1,445
$ 1,121 $ 1,445
Stock-based compensation expense of $ 1.1 million and $ 1.4 million was recognized during the years ended December 31, 2023 and 2022 , respectively, related to annual and quarterly Board fees, time based management awards and management bonuses earned during the year that were subsequently settled in stock. For the years ended December 31, 2023 and 2022 , the Company issued 377 thousand and 165 thousand, respectively, of restricted shares to Directors for their annual and quarterly services. The annual grants vest over a one year period, or are vested at issuance for directors 65 or older, while quarterly amounts are paid in arrears. The Company vested 275 thousand and 110 thousand shares during the years ended December 31, 2023 and 2022 . The Company vested 125 thousand and 22 thousand shares during the years ended December 31, 2023 and 2022 , respectively, for time based management compensation. The Company settled in stock other management bonuses resulting in the issuance of 51 thousand and 82 thousand vested shares for the years ended December 31, 2023 and 2022 , respectively. The Company issued 0 thousand and 15 thousand vested shares to a non-employee for services during the years ended December 31, 2023 and 2022 . The Company had liabilities of $ 0.1 million and $ 0.4 million as of December 31, 2023 and 2022 , respectively, that were settled through the issuance of common stock in the subsequent period.
The Company has previously granted certain performance-based stock units that vest based on the achievement of targeted capital returns based on net cash proceeds received by the Company on the sale, merger or other exit transaction of certain identified companies. The requisite service periods for these performance-based awards were based on the Company’s estimate of when the performance conditions will be met. Compensation expense was recognized for performance-based awards for which the performance condition is considered probable of achievement. During the years ended December 31, 2023 and 2022 , respectively, zero and 92 thousand performance-based stock units pursuant to these targeted capital return pools were canceled or forfeited. In January 2022, the Company granted the CEO restricted stock units that may vest based on certain performance targets and criteria determined by the Board of Directors. Such performance-based stock units represent the right to receive shares of the Company’s common stock, on a one -for- one basis at target for certain specified thresholds. For the year ended December 31, 2022, the Company recognized stock based compensation expense of $ 0.2 million and vested 64 thousand shares pursuant to this arrangements.
Unrecognized compensation expense related to performance stock units and restricted stock at December 31, 2023 was immaterial.
While there were no stock options granted during 2023 and 2022 , the Company had outstanding options that vest based on two different types of vesting schedules:
1 ) performance-based; and
2 ) service-based.
Performance-based option awards also entitled participants to vest in a number of awards determined by achievement by the Company of target capital returns based on net cash proceeds received by the Company upon the sale, merger or other exit transaction of certain identified companies. Compensation expense is recognized over the requisite service periods using the straight-line method but is accelerated if capital return targets are achieved earlier than estimated. The Company did not issue any performance-based units during the years ended December 31, 2023 and 2022 . During the years ended December 31, 2023 and 2022 , respectively, there were no performance-based options vested and no compensation cost was recognized. During the years ended December 31, 2023 and 2022 , respectively, 0 thousand and 11 thousand performance-based options were canceled or forfeited. The maximum number of unvested options at December 31, 2023 attainable under these grants was zero shares.
Service-based awards generally vest over four years after the date of grant and expire eight years after the date of grant. Compensation expense is recognized over the requisite service period using the straight-line method. The requisite service period for service-based awards is the period over which the award vests. During the years ended December 31, 2023 and 2022 , respectively, the Company issued no service-based options to employees and recorded zero compensation expense from the vesting of previously issued awards. During the years ended December 31, 2023 and 2022 , respectively, 10 thousand and 0 thousand service-based options were canceled or forfeited.
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SAFEGUARD SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Option activity of the Company is summarized below:
Shares
Weighted Average Exercise Price Weighted Average Remaining Contractual Life
Aggregate Intrinsic Value
(In thousands)
(In years)
(In thousands)
Outstanding at January 1, 2022
29 14.20
Options granted
— —
Options exercised
— —
Options canceled/forfeited
( 11 ) 14.48
Outstanding at December 31, 2022
18 14.05
Options granted
— —
Options exercised
— —
Options canceled/forfeited
( 10 ) 17.11
Outstanding at December 31, 2023
8 10.37 0.39 $ —
Options exercisable at December 31, 2023
8 10.37 0.39 —
Shares available for future grant
1,482
At December 31, 2023 , total unrecognized compensation cost related to non-vested service-based options was immaterial. At December 31, 2023 , total unrecognized compensation cost related to non-vested performance-based options was immaterial.
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SAFEGUARD SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Deferred stock unit, performance-based stock unit and restricted stock activity are summarized below:
Shares
Weighted Average Grant Date Fair Value
(In thousands)
Unvested at January 1, 2022
202 $ 9.70
Granted
343 5.60
Vested
( 293 ) 5.77
Forfeited
( 92 ) 13.90
Unvested at December 31, 2022
160 5.70
Granted
678 2.30
Vested
( 640 ) 2.90
Forfeited
( 16 ) 7.10
Unvested at December 31, 2023
182 1.89
7. Employee Benefit Pla n
The Company maintains a qualified 401 (k) retirement plan for eligible employees. The Plan’s matching formula is 100 % of the first 5 % of participants’ qualified compensation. Compensation expense related to our matching contributions to the Plan for the years ended December 31, 2023 and 2022 , were $ 0.1 million and $ 0.1 million, respectively.
8. Income Taxes
The federal and state provision (benefit) for income taxes was $ 0.0 million for the years ended December 31, 2023 and 2022 .
The total income tax provision (benefit) differed from the amounts computed by applying the U.S. federal income tax rate of 21.0 % for the years ended December 31, 2023 and 2022 to net income (loss) before income taxes as a result of the following:
Year Ended December 31,
2023
2022
Statutory tax expense (benefit)
(21.0 )% (21.0 )%
Increase (decrease) in taxes resulting from:
Nondeductible expenses
( 0.4 ) ( 2.6 )
Valuation allowance
21.4 23.6
0.0 % 0.0 %
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SAFEGUARD SCIENTIFICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows:
As of December 31,
2023
2022
(In thousands)
Deferred tax asset:
Carrying values of ownership interests and other holdings
$ 24,370 $ 33,222
Tax loss and credit carryforwards
69,638 68,492
Disallowed interest carryforwards
6,613 6,891
Accrued expenses
13 47
Stock-based compensation
( 3 ) 180
Other
66 ( 106 )
100,697 108,726
Valuation allowance
( 100,697 ) ( 108,726 )
Net deferred tax asset
$ — $ —
As of December 31, 2023 , the Company and its subsidiaries had federal net operating and capital loss carryforwards for tax purposes of approximately $ 332 million, of which approximately $ 59 million have an indefinite life. These carryforwards expire as follows:
Total
(In thousands)
2024
$ 50,140
2025
17,408
2026
7,648
2027
15,100
2028 and thereafter
182,520
$ 272,816
In assessing the recoverability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has determined that it is more likely than not that certain future tax benefits may not be realized as a result of current and future income. Accordingly, a valuation allowance has been recorded against substantially all of the Company’s deferred tax assets.
The Company recognizes in its Consolidated Financial Statements the impact of a tax position if that position is more likely than not to be sustained upon examination, based on the technical merits of the position. All uncertain tax positions relate to unrecognized tax benefits that would impact the effective tax rate when recognized.
The Company does not expect any material increase or decrease in its income tax expense, in the next twelve months, related to examinations or changes in uncertain tax positions.
There were no changes in the Company’s uncertain tax positions for the years ended December 31, 2023 and 2022 .
The Company files income tax returns in the U.S. federal jurisdiction, and various state jurisdictions. Tax years 2019 and forward remain open for examination for federal tax purposes and the Company’s more significant state tax jurisdictions. To the extent utilized in future years’ tax returns, net operating loss carryforwards at December 31, 2023 will remain subject to examination until the respective tax year is closed. The Company recognizes penalties and interest accrued related to income tax liabilities in income tax benefit (expense) in the Consolidated Statements of Operations.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
9. Net Income (Loss) Per Share
The calculations of net income (loss) per share were:
Year Ended December 31,
2023
2022
(In thousands, except per share data)
Basic:
Net (loss)
$ ( 9,828 ) $ ( 14,263 )
Weighted average common shares outstanding
16,221 16,337
Net (loss) per share
$ ( 0.61 ) $ ( 0.87 )
Diluted:
Net (loss)
$ ( 9,828 ) $ ( 14,263 )
Weighted average common shares outstanding
16,221 16,337
Net (loss) per share
$ ( 0.61 ) $ ( 0.87 )
Basic and diluted average common shares outstanding for purposes of computing net income (loss) per share includes outstanding common shares and vested deferred stock units (DSUs).
If an equity method company has dilutive stock options, unvested restricted stock, DSUs, or warrants, diluted net income (loss) per share is computed by first deducting from net income (loss) the income attributable to the potential exercise of the dilutive securities of the company from net income (loss). Any impact is shown as an adjustment to net income (loss) for purposes of calculating diluted net income (loss) per share.
Diluted income (loss) per share for the years ended December 31, 2023 and 2022 do not reflect the following potential shares of common stock that would have an anti-dilutive effect or have unsatisfied performance or market conditions:
•
At December 31, 2023 and 2022 , options to purchase 8 thousand and 18 thousand shares of common stock, respectively, at a price of $ 10.37 per share for 2023, and $ 10.37 to $ 17.11 per share per share for 2022 were excluded from the calculation.
•
At December 31, 2023 and 2022 , unvested restricted stock, performance-based stock units and DSUs convertible into 0.2 million and 0.2 million shares of stock, respectively, were excluded from the calculations.
10. Related Party Transactions
In the normal course of business, the Company’s officers and employees hold board positions with companies in which the Company has a direct or indirect ownership interest.
11. Commitments and Contingencies
The Company and the companies in which it holds ownership interests are involved in various claims and legal actions arising in the ordinary course of business. In the current opinion of the Company, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position or results of operations, however, no assurance can be given as to the outcome of these actions, and one or more adverse rulings could have a material adverse effect on the Company’s consolidated financial position and results of operations or that of its companies. The Company records costs associated with legal fees as such services are rendered.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The Company has provided a guarantee, which is fully funded by escrowed funds held by a third party, of $ 3.8 million at December 31, 2023 which related to one of the Company's private equity holdings.
The Company has agreements with certain employees that provide for severance payments to the employee in the event the employee is terminated without cause or an employee terminates his employment for "good reason". The Company has recorded severance expenses of $ 0.7 million during the year ended December 31, 2023, which is expected to be paid during 2024.
In 2018, the Board of Directors (the “Board”) of the Company adopted a long-term incentive plan, which was amended in February 2019 and June 2020, known as the Amended and Restated Safeguard Scientifics Transaction Bonus Plan (the “LTIP”). The purpose of the LTIP is to promote the interests of the Company and its shareholders by providing an additional incentive to employees to maximize the value of the Company in connection with the execution of the business strategy that the Company adopted and announced in January 2018. The June 2020 amendment lowered the level of the first threshold and the resulting bonus pool percentage as an incentive to employees to accelerate actions consistent with the business strategy. Under the LTIP, participants, which includes certain current and former employees, have received awards that may result in cash payments in connection with sales of the Company’s ownership interests (“Sale Transaction(s)”). The LTIP provides for a bonus pool corresponding to: (i) specified vesting thresholds or (ii) specified events. In the first case, the bonus pool will range from an amount equal to 0.2 % (previously 1.0 %) of received proceeds at the first threshold to 1.3 % at higher thresholds. In the second case, a minimum pool will be created and paid under specified circumstances. The bonus pool will be allocated and paid to participants in the LTIP based on the product of (i) the participant’s applicable bonus pool percentage and (ii) the bonus pool calculated as of the vesting date, minus any previously paid portion of the bonus pool. Any portion of the bonus pool available as of the applicable vesting date that is reserved will be allocated in connection with each vesting date so that the entire bonus pool available as of such vesting date is allocated and payable to participants. Subject to the terms of the LTIP, payments under the LTIP will be paid in cash within 60 days of the applicable vesting date. All current officers and employees of the Company are eligible to participate in the LTIP. The Board, in its sole discretion, will determine the participants to whom awards are granted under the LTIP. The Company recorded no compensation expense during each of the years ended December 31, 2023 and 2022 , respectively. The Company has not paid any amounts during the years ended December 31, 2023 and 2022 and has no amounts accrued under the LTIP as of December 31, 2023 .
In June 2011, Advanced BioHealing, Inc. (“ABH”) was acquired by Shire plc (“Shire”). Prior to the expiration of the escrow period in March 2012, Shire filed a claim against all amounts held in escrow related to the sale based principally upon a United States Department of Justice (“DOJ”) false claims act investigation relating to ABH (the “Investigation”). In connection with the Investigation, in July 2015 the Company received a Civil Investigation Demand-Documentary Material (“CID”) from the DOJ regarding ABH and Safeguard’s relationship with ABH. Pursuant to the CID, the Company provided the requested materials and information. To the Company’s knowledge, the CID was related to multiple qui tam (“whistleblower”) actions, one of which was filed in 2014 by an ex-employee of ABH that named the Company and one of the Company’s employees along with other entities and individuals as defendants. At this time, the DOJ has declined to pursue the qui tam action as it relates to the Company and such Company employee. In addition, in connection with the above matters, the Company and other former equity holders in ABH entered into a settlement and release with Shire during 2017, which resulted in the release to Shire of all amounts held in escrow related to the sale of ABH.
12. Supplemental Cash Flow Information
During the years ended December 31, 2023 and 2022 , the Company converted $ 1.5 million and zero , respectively, of advances into ownership interests.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
13. Segment Reporting
The Company operates as one operating segment based upon the similar nature of its technology-driven companies, the functional alignment of the organizational structure, and the reports that are regularly reviewed by the chief operating decision maker for the purpose of assessing performance and allocating resources.
As of December 31, 2023 and 2022 , all of the Company’s assets were located in the United States.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
14. Selected Quarterly Financial Information (Unaudited)
Three Months Ended
March 31
June 30
September 30
December 31
(In thousands, except per share data)
2023:
General and administrative expense
$ 1,185 $ 1,186 $ 1,313 $ 1,999
Operating loss
( 1,185 ) ( 1,186 ) ( 1,313 ) ( 1,999 )
Other income (loss), net
( 9 ) ( 166 ) 1,661 551
Interest income
274 249 198 182
Equity income (loss), net
( 2,564 ) ( 1,759 ) 386 ( 3,148 )
Net income (loss) before income taxes
( 3,484 ) ( 2,862 ) 932 ( 4,414 )
Income tax benefit (expense)
— — — —
Net income (loss)
$ ( 3,484 ) $ ( 2,862 ) $ 932 $ ( 4,414 )
Net income (loss) per share (a)
Basic
$ ( 0.22 ) $ ( 0.18 ) $ 0.06 $ ( 0.27 )
Diluted
$ ( 0.22 ) $ ( 0.18 ) $ 0.06 $ ( 0.27 )
2022:
General and administrative expense
$ 1,234 $ 1,146 $ 1,360 $ 1,035
Operating loss
( 1,234 ) ( 1,146 ) ( 1,360 ) ( 1,035 )
Other income (loss), net
( 1,997 ) 30 ( 1,012 ) ( 318 )
Interest income
101 145 230 318
Equity income (loss), net
( 3,579 ) 1,454 ( 1,022 ) ( 3,838 )
Net income (loss) before income taxes
( 6,709 ) 483 ( 3,164 ) ( 4,873 )
Income tax benefit (expense)
— — — —
Net income (loss)
$ ( 6,709 ) $ 483 $ ( 3,164 ) $ ( 4,873 )
Net income (loss) per share (a)
Basic
$ ( 0.40 ) $ 0.03 $ ( 0.19 ) $ ( 0.30 )
Diluted
$ ( 0.40 ) $ 0.03 $ ( 0.19 ) $ ( 0.30 )
(a)
Per share amounts for the quarters have each been calculated separately. Accordingly, quarterly amounts may not add to the annual amounts because of differences in the average common shares outstanding during each period. Additionally, in regard to diluted per share amounts only, quarterly amounts may not add to the annual amounts because of the inclusion of the effect of potentially dilutive securities only in the periods in which such effect would have been dilutive, and because of the adjustments to net income (loss) for the dilutive effect of common stock equivalents and convertible securities at our ownership interests.
15. Subsequent Events
On January 12, 2024, the Company completed a reverse stock split at a ratio of 1 -for- 100 , followed by a forward stock split at a ratio of 100 -for- 1 (collectively referred to as "stock splits"). In conjunction with the stock splits, certain fractional shareholders aggregating to approximately 6,000 shares for $ 9 thousand were repurchased for cash resulting in a reduction in the Company's shareholders of record.
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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.