10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549 

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE QUARTERLY PERIOD ENDED	MARCH 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE TRANSITION PERIOD FROM              TO

Commission file number: 001-35947

Star Equity Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware				33-0145723
(State or Other Jurisdiction of Incorporation or Organization)				(I.R.S. Employer Identification No.)
	53 Forest Ave. Suite 101,	Old Greenwich	CT	06870
(Address of Principal Executive Offices)				(Zip Code)

(203) 489-9500

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	STRR	NASDAQ Global Market
Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share	STRRP	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes No ☒

As of May 7, 2021, the registrant had 5,018,271 shares of Common Stock ($0.0001 par value) outstanding.

STAR EQUITY HOLDINGS, INC.

TABLE OF CONTENTS

 

IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS	4
PART I. FINANCIAL INFORMATION	5
Item 1. Financial Statements (Unaudited)	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3. Quantitative and Qualitative Disclosures about Market Risk	52
Item 4. Controls and Procedures	52
PART II. OTHER INFORMATION	54
Item 1. Legal Proceedings	54
Item 1A. Risk Factors	54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3. Defaults Upon Senior Securities	55
Item 4. Mine Safety Disclosures	55
Item 5. Other Information	55
Item 6. Exhibits	56

3

Important Information Regarding Forward-Looking Statements

Portions of this Quarterly Report on Form 10-Q (including information incorporated by reference) include “forward-looking statements” based on our current beliefs, expectations, and projections regarding our business strategies, market potential, future financial performance, industry, and other matters. This includes, in particular, “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q, as well as other portions of this Quarterly Report on Form 10-Q. The words “believe,” “expect,” “anticipate,” “project,” “could,” “would,” and similar expressions, among others, generally identify “forward-looking statements,” which speak only as of the date the statements were made. The matters discussed in these forward-looking statements are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially from those projected, anticipated, or implied in the forward-looking statements. The most significant of these risks, uncertainties, and other factors are described in “Item 1A — Risk Factors” of this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the U.S. Securities and Exchange Commission on March 29, 2021. Except to the limited extent required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

4

PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

STAR EQUITY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) (In thousands, except for per share amounts)

	Three Months Ended March 31,
	2021		2020
Revenues:
Healthcare	$	13,307	$	13,675
Construction	9,047		5,484
Investments	—		31
Total revenues	22,354		19,190
Cost of revenues:
Healthcare	10,709		10,801
Construction	8,503		5,081
Investments	65		65
Total cost of revenues	19,277		15,947
Gross profit	3,077		3,243
Operating expenses:
Selling, general and administrative	5,055		4,863
Amortization of intangible assets	438		576
Gain on sale of MD Office Solutions	(847)		—
Total operating expenses	4,646		5,439
Loss from operations	(1,569)		(2,196)
Other income (expense):
Other income, net	1,255		160
Interest expense, net	(272)		(305)
Total other income (expense)	983		(145)
Loss from continuing operations before income taxes	(586)		(2,341)
Income tax expense	(2)		(27)
Loss from continuing operations, net of tax	(588)		(2,368)
Income (loss) from discontinued operations, net of tax	6,020		(585)
Net income (loss)	5,432		(2,953)
Deemed dividend on Series A redeemable preferred stock	(479)		(484)
Net income (loss) attributable to common shareholders	$	4,953	$	(3,437)
Net income (loss) per share—basic and diluted
Net loss per share, continuing operations	$	(0.12)	$	(1.15)
Net income (loss) per share, discontinued operations	$	1.22	$	(0.28)
Net income (loss) per share—basic and diluted	$	1.10	$	(1.44)
Deemed dividend on Series A cumulative perpetual preferred stock per share	$	(0.10)	$	(0.24)
Net income (loss) per share, attributable to common shareholders—basic and diluted:	$	1.01	$	(1.67)
Weighted-average shares outstanding—basic and diluted	4,916		2,055

See accompanying notes to the unaudited consolidated financial statements.

5

STAR EQUITY HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share amounts)

	March 31, 2021		December 31, 2020
Assets:
Current assets:
Cash and cash equivalents	$	13,175	$	3,225
Restricted cash	168		168
Accounts receivable, net	14,886		12,975
Inventories, net	9,838		9,787
Other current assets	2,738		2,025
Assets held for sale	—		20,756
Total current assets	40,805		48,936
Property and equipment, net	9,383		9,762
Operating lease right-of-use assets, net	2,848		1,769
Intangible assets, net	16,362		16,900
Goodwill	9,405		9,542
Other assets	2,588		1,384
Total assets	$	81,391	$	88,293
Liabilities, Mezzanine Equity and Stockholders’ Equity:
Current liabilities:
Accounts payable	$	5,535	$	4,952
Accrued compensation	3,695		2,825
Accrued warranty	180		214
Deferred revenue	2,352		2,184
Short-term debt and current portion of long-term debt	12,548		18,362
Payable to related parties	2,307		2,307
Operating lease liabilities	1,075		1,011
Other current liabilities	2,859		3,000
Liabilities held for sale	—		7,871
Total current liabilities	30,551		42,726
Long-term debt, net of current portion	1,967		3,700
Deferred tax liabilities	51		51
Operating lease liabilities, net of current portion	1,824		828
Other liabilities	1,018		1,059
Total liabilities	35,411		48,364
Commitments and contingencies (Note 9)
Preferred stock, $0.0001 par value: 10,000,000 shares authorized: 10% Series A Cumulative Redeemable preferred stock, 8,000,000 shares authorized, liquidation preference ($10.00 per share), 1,915,637 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	21,979		21,500
Stockholders’ Equity:
Common stock, $0.0001 par value: 30,000,000 shares authorized; 5,020,969 and 4,798,367 shares issued and outstanding (net of treasury shares) at March 31, 2021 and December 31, 2020, respectively	—		—
Treasury stock, at cost; 258,849 shares at March 31, 2021 and December 31, 2020, respectively	(5,728)		(5,728)

6

Additional paid-in capital	149,283		149,143
Accumulated deficit	(119,554)		(124,986)
Total stockholders’ equity	24,001		18,429
Total liabilities, mezzanine equity and stockholders’ equity	$	81,391	$	88,293

See accompanying notes to the unaudited consolidated financial statements.

7

STAR EQUITY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Three Months Ended March 31,
	2021		2020
Operating activities
Net income (loss)	$	5,432	$	(2,953)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	471		1,593
Amortization of intangible assets	438		814
Non-cash lease expense	584		543
Provision for bad debt, net	359		32
Stock-based compensation	131		109
Amortization of loan issuance costs	50		31
Debt issuance costs write-off	130		—
Gain on disposal of discontinued operations	(5,224)		—
Gain on disposal of MD Office Solutions	(847)		—
Loss on sale of assets	34		180
Gain on Paycheck Protection Program loan forgiveness	(1,220)		—
Deferred income taxes	—		20
Other, net	(23)		26
Changes in operating assets and liabilities:
Accounts receivable	(2,476)		3,606
Inventories	(51)		481
Other assets	(782)		154
Accounts payable	258		(1,525)
Accrued compensation	1,075		(1,123)
Deferred revenue	119		(166)
Operating lease liabilities	(597)		(545)
Other liabilities	(93)		(654)
Net cash (used in) provided by operating activities	(2,232)		623
Investing activities
Purchases of property and equipment	(449)		(158)
Proceeds from sale of discontinued operations	18,750		—
Proceeds from sale of property and equipment	14		23
Net cash provided by (used in) investing activities	18,315		(135)
Financing activities
Proceeds from borrowings	32,088		31,996
Repayment of debt	(38,495)		(32,407)
Loan issuance costs	—		(317)
Proceeds from exercise of warrants	493		—
Taxes paid related to net share settlement of equity awards	(6)		—
Repayment of obligations under finance leases	(260)		(229)
Net cash used in financing activities	(6,180)		(957)
Net increase (decrease) in cash, cash equivalents, and restricted cash including cash classified within current assets held for sale	9,903		(469)
Less: Net (decrease) increase in cash classified within current held for sale	(47)		108
Net increase (decrease) in cash, cash equivalents, and restricted cash	9,950		(577)
Cash, cash equivalents, and restricted cash at beginning of period	3,393		1,987
Cash, cash equivalents, and restricted cash at end of period	$	13,343	$	1,410

8

Non-Cash Investing Activities
MD Office Solutions Promissory Note Receivable	$	1,385	$	—
Non-Cash Financing Activities
Gain on Paycheck Protection Program Loan Forgiveness	$	1,220	$	—

See accompanying notes to the unaudited consolidated financial statements.

9

STAR EQUITY HOLDINGS, INC. CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)

	Perpetual Preferred Stock			Common stock			Treasury Stock		Additional paid-in capital		Accumulated deficit		Total stockholders’ equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2020	1,916	$	21,500	4,798	$	—	$	(5,728)	$	149,143	$	(124,986)	$	18,429
Stock-based compensation	—	—		—	—		—		131		—		131
Shares issued under stock incentive plans, net of shares withheld for employee taxes	—	—		3	—		—		(5)		—		(5)
Accrued dividend on redeemable preferred stock	—	479		—	—		—		(479)		—		(479)
Proceeds from exercise of warrants	—	—		220	—		—		493		—		493
Net income	—	—		—	—		—		—		5,432		5,432
Balance at March 31, 2021	1,916	$	21,979	5,021	$	—	$	(5,728)	$	149,283	$	(119,554)	$	24,001

	Perpetual Preferred Stock			Common stock			Treasury Stock		Additional paid-in capital		Accumulated deficit		Total stockholders’ equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2019	1,916	$	19,602	2,050	$	—	$	(5,728)	$	145,352	$	(118,529)	$	21,095
Stock-based compensation	—	—		—	—		—		109		—		109
Shares issued under stock incentive plans, net of shares withheld for employee taxes	—	—		5	—		—		—		—		—
Accrued dividend on redeemable preferred stock	—	484		—	—		—		(484)		—		(484)
Net loss	—	—		—	—		—		—		(2,953)		(2,953)
Balance at March 31, 2020	1,916	$	20,086	2,055	$	—	$	(5,728)	$	144,977	$	(121,482)	$	17,767

See accompanying notes to unaudited consolidated financial statements.

10

STAR EQUITY HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

Basis of Presentation

The unaudited consolidated financial statements included in this Form 10-Q have been prepared in accordance with the U.S. Securities and Exchange Commission (the “SEC”) instructions for Quarterly Reports on Form 10-Q. Accordingly, the consolidated financial statements are unaudited and do not contain all the information required by U.S. generally accepted accounting principles (“GAAP”) to be included in a full set of financial statements. The unaudited condensed consolidated balance sheet at December 31, 2020 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for a complete set of financial statements. The audited consolidated financial statements for our fiscal year ended December 31, 2020, filed with the SEC on Form 10-K on March 29, 2021, include a summary of our significant accounting policies and should be read in conjunction with this Form 10-Q. In the opinion of management, all material adjustments necessary to present fairly the results of operations, cash flows, and balance sheets for such periods have been included in this Form 10-Q. All such adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results of operations for the entire year.

The Company and Discontinued Operations

On March 31, 2021, Star Equity Holdings, Inc. (“Star Equity,” the “Company,” “we,” or “our”), a diversified holding company with three divisions: Healthcare, Construction, and Investments, announced the completion of the sale of DMS Health Technologies, Inc., a North Dakota corporation and wholly owned indirect subsidiary of Star Equity (“DMS Health”), for $18.75 million in cash, as originally announced on November 3, 2020 (the “DMS Sale Transaction”). The assets and liabilities of DMS Health were previously classified as held for sale and the results of DMS Health’s operations were presented as a discontinued operations in our previously issued financial statements. Unless otherwise noted, discussion within these notes to the consolidated financial statements relates to continuing operations. Refer to Note 2. Discontinued Operations for additional information.

COVID-19 Pandemic

During the three months ended March 31, 2021, we experienced a $0.4 million decrease in Healthcare division revenue which was offset by a $3.6 million increase, in Construction division revenue, as compared to the same period of the prior year. With the COVID-19 vaccine rollout now well underway, we are hopeful that we will gradually make our way back to pre-COVID levels of business activity. We believe the uncertainty surrounding the pandemic will continue to decrease as we progress through 2021. On the healthcare side, we expect to see imaging volume recover as the pandemic is brought under control. In construction, we expect that continued recovery in employment and a strong housing market will underpin the growth we are seeing. However, we are unsure about the potential impact.

Mezzanine Equity

Pursuant to the Certificate of Designations, Rights and Preferences of 10% Series A Cumulative Perpetual Preferred Stock of Star Equity Holdings, Inc. (formerly Digirad Corporation) (the “Certificate of Designations”), upon a Change of Control Triggering Event, as defined in the Certificate of Designations, holders of the 10% Series A Cumulative Perpetual Preferred Stock (the “Company Preferred Stock”) may require us to redeem the Company Preferred Stock at a price of $10.00 per share, plus any accumulated and unpaid dividends (a “Change of Control Redemption”). As this redemption feature of the shares is not solely within the control of the Company, the Company Preferred Stock does not qualify as permanent equity and has been classified as mezzanine or temporary equity. Accordingly, the Company Preferred Stock is not redeemable and it was not probable that the Company Preferred Stock would become redeemable as of March 31, 2021. Therefore, we are not currently required to accrete the Preferred Stock to its redemption value.

In addition to a Change of Control Redemption, the Certificate of Designations also provides that the Company may redeem (at its option, in whole or in part) the Company Preferred Stock following the fifth anniversary of issuance of the Company Preferred Stock, at a cash redemption price of $10.00 per share, plus any accumulated and unpaid dividends.

11

Common Stock Equity Offering

On May 28, 2020, we closed a public offering (the “Offering”) of 2,225,000 shares of our common stock, and 2,225,000 warrants (the “Warrants”) to purchase up to 1,112,500 additional shares of our common stock. The Offering price was $2.24 per share of common stock and $0.01 per accompanying Warrant (for a combined Offering price of $2.25), initially raising $5.0 million in gross proceeds before underwriter discounts and offering-related expenses. The underwriting agreement (the “Underwriting Agreement”) we entered into with Maxim Group LLC (“Maxim”), as representative of the underwriters, for the Offering contained customary representations, warranties, and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and Maxim and certain other obligations.

Pursuant to the terms of the Underwriting Agreement, we granted to Maxim an option for a period of 45 days (the “Over-Allotment Option”) to purchase up to 225,000 additional shares of our common stock and 225,000 Warrants to purchase up to an additional 112,500 shares of our common stock. Effective as of the closing of the Offering, Maxim exercised the Over-Allotment Option for the purchase of 225,000 Warrants for a price of $0.01 per Warrant. On June 10, 2020, Maxim exercised the Over-Allotment Option for the purchase of 225,000 shares of our common stock for a price of $2.24 per share, before underwriting discounts. The closing of the sale of the over-allotment shares brought the total number of shares of common stock we sold in the Offering to 2,450,000 shares, and total gross proceeds to approximately $5.5 million. In addition, the Company received $0.5 million from investors in the Offering throughout the balance of 2020 due to the exercise of a portion of the Warrants sold in the Offering, bringing the total gross proceeds from equity issuance to $6.0 million.

The net proceeds to the Company from the Offering and Warrant exercises in 2020 were approximately $5.2 million (inclusive of the exercise of the over-allotment option), after deducting underwriter fees and offering-related expenses estimated at $0.8 million. We used a significant portion of the net proceeds from the Offering to fund working capital needs at our construction businesses, particularly related to modular housing projects which we produced at KBS Builders, Inc. (“KBS”) for the Boston-area projects. The remainder of the net proceeds is being used for working capital and for other general corporate purposes. We have broad discretion in determining how the proceeds of the Offering is used, and our discretion is not limited by the aforementioned possible uses.

As of March 31, 2021, 0.9 million warrants were exercised and 1.5 million warrants remained outstanding at an exercise price of $2.25.

Liquidity Outlook

The accompanying financial statements have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and settlement of obligations in the normal course of business. We incurred net losses from operations of approximately $1.6 million and $2.2 million for the three months ended March 31, 2021 and 2020, respectively. We have an accumulated deficit of $119.6 million and $125.0 million as of March 31, 2021 and December 31, 2020, respectively. Net cash used in operations of $2.2 million for the three months ended March 31, 2021 compared to net cash provided by operations of $0.6 million for the same prior year period in 2020.

Regarding our debt, we had approximately $12.5 million in short term debt due to our borrowings which is classified as short term as disclosed in Note 8. Debt. The $5.0 million SNB debt primarily supports our healthcare business and actually matures in 2024, but GAAP rules require that the outstanding balance be classified as short-term debt, due to the automatic sweep feature embedded in the traditional lockbox arrangement along with a subjective acceleration clause in the SNB Loan and Security Agreement. In practice, we have the ability to immediately borrow back these daily sweeps to fund our working capital. As of March 31, 2021, we were in compliance with all borrowing arrangements related to our Healthcare division. As of March 31, 2021, we had $4.5 million of borrowing capacity to fund the operations of these divisions.

As of March 31, 2021, we have $4.6 million outstanding on our Construction revolvers with Gerber and were in compliance with all borrowing covenants for Gerber, however, we were in breach of our covenants as of December 31, 2020 and may be in breach at our next measurement period at June 30, 2021. While Gerber has historically provided us with waivers, there is no assurance that we will be able to receive waivers for covenant violations in the future, or that we will meet compliance with covenants in the future. Related party notes of $2.3 million was paid off on April 1, 2021 using proceeds from the DMS Sale Transaction. In addition, as of March 31, 2021, we had cash and cash equivalents of $13.3 million.

Management believes that the Company has the liquidity and operations to continue to support the business through the next 12 months from the issuance of this Quarterly Report. Our ability to continue as a going concern is dependent on its ability to execute its plans.

12

Use of Estimates

Preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from management’s estimates.

Revenue Recognition

We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606 and Topic 842 for the three months ended March 31, 2021 and 2020, which are explained below.

Pursuant to ASC 606, Revenue from Contracts with Customers, we recognize revenue when a customer obtains control of promised goods or services. We record the amount of revenue that reflects the consideration that it expects to receive in exchange for those goods or services. We apply the following five-step model in order to determine this amount: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

Revenue recognition is evaluated on a contract by contract basis. Performance obligations are satisfied over time as work progresses or at a point in time. A performance obligation is satisfied over time if we have an enforceable right to payment. Determining if there is an enforceable right to payment is assessed on a contract by contract basis. For contracts requiring over time revenue recognition, the selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. We use a cost-based input measurement of progress because it best depicts the transfer of assets to the customer, which occurs as costs are incurred during the manufacturing process or as services are rendered. Under the cost-based measure of progress, the extent of progress towards completion is measured based on the costs incurred to date.

Healthcare Services Revenue Recognition. We generate service revenue primarily from providing diagnostic services and cardiac monitoring services to our customers. Service revenue within our Diagnostic Services reportable segments is derived from providing our customers with contract diagnostic services, which includes use of our imaging systems, qualified personnel, radiopharmaceuticals, licensing, logistics and related items required to perform testing in their own offices.  We bill customers either on a per-scan or fixed-payment methodology, depending upon the contract that is negotiated with the customer. Within our Diagnostic Service segment, we also rent cameras to healthcare customers for use in their operations.  Rental revenues are structured as either a weekly or monthly payment arrangement, and are recognized in the month services are provided. Revenue related to provision of our services is recognized at the time services are performed.

Healthcare Product and Product-Related Revenue Recognition. We generate revenue from product and product-related sales, primarily from the sale of gamma cameras and accessories.

Diagnostic Imaging product revenues are generated from the sale of internally developed solid-state gamma camera imaging systems and camera maintenance service contracts. Revenue from sales of imaging systems is generally recognized at point in time upon delivery of systems and acceptance by customers. We also provide installation services and training on cameras sold, primarily in the United States. Installation and initial training is generally performed shortly after delivery and the revenue related to the provision of these services is recognized at the time services are performed. Neither installation nor training is essential to the functionality of the product. Finally, we offer camera maintenance service contracts that are sold beyond the term of the initial warranty, generally one year from the date of purchase. Revenue from these service contracts is deferred and recognized ratably over the period of the obligation.

13

Construction Revenue Recognition. Within the Construction segment, we service residential and commercial construction projects by manufacturing modular housing units and other products and supplies general contractors with building materials. KBS manufactures modular buildings for both single-family residential homes and larger, commercial building projects. Our EdgeBuilder, Inc. (“EdgeBuilder”) subsidiary manufactures structural wall panels, permanent wood foundation systems and other engineered wood products, and our Glenbrook Building Supply, Inc. (“Glenbrook”) subsidiary is a retail supplier of lumber and other building supplies. Revenue is generally recognized at point in time upon delivery of product. Retail sales at Glenbrook are recognized at the point of sale. For bill and hold sales, we determine when the customer obtains control of the product on a case-by-case basis to determine the amount of revenue to recognize each period.

Leases

Lessee Accounting

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities, and operating lease liabilities, net of current portion in our condensed consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our condensed consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We use the implicit discount rate when readily determinable; however, as most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease valuation may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

We elected not to separate lease and non-lease components of its operating leases in which it is the lessee and lessor. Additionally, we elected not to recognize right-of-use assets and leases liabilities that arise from short-term leases of twelve months or less.

Lessor Accounting

Majority of the lease income of the Healthcare division comes from camera rentals and the lease income of the Construction division comes from the rental of the Waterford facility to a commercial tenant. We determine lease classification at the commencement date. Leases not classified as sales-type or direct financing leases are classified as operating leases. The primary accounting criteria we use for lease classification are (a) review to determine if the lease transfers ownership of the underlying asset to the lessee by the end of the lease term, (b) review to determine if the lease grants the lessee a purchase option that the lessee is reasonably certain to exercise, (c) determine, using a seventy-five percent or more threshold, if the lease term is for a major part of the remaining economic life of the underlying asset (however, we do not use this classification criterion when the lease commencement date falls within the last 25 percent of the total economic life of the underlying asset) and (d) determine, using a ninety percent or more threshold, if the present value of the sum of the lease payments and any residual value guarantees equal or exceeds substantially all of the fair value of the underlying asset. We do not lease equipment of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. Each of the Company’s leases is classified as an operating lease.

We elected the operating lease practical expedient for its leases to not separate non-lease components of regular maintenance services from associated lease components. This practical expedient is available when both of the following are met: (i) the timing and pattern of transfer of the non-lease components and associated lease component are the same and (ii) the lease component, if accounted for separately, would be classified as an operating lease.

Property taxes paid by the lessor that are reimbursed by the lessee are considered to be lessor costs of owning the asset, and are recorded gross with revenue included in other non-interest income and expense recorded in operating expenses. 

We selected a lessor accounting policy election to exclude from revenue and expenses sales taxes and other similar taxes assessed by a governmental authority on lease revenue-producing transactions and collected by the lessor from a lessee.

Operating lease equipment is carried at cost less accumulated depreciation. Operating lease equipment is depreciated to its estimated residual value using the straight-line method over the lease term or estimated useful life of the asset.

Rental revenue on operating leases is recognized on a straight-line basis over the lease term unless collectability is not probable. In these cases, rental revenue is recognized as payments are received.

14

Recently Adopted Accounting Pronouncements

In December of 2019, the Financial Accounting Standards Board issued ASU No 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 in Generally Accepted Accounting Principles. ASU 2019-12 is effective for public entities for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company adopted the guidance during the three months ended 2021. ASU 2019-12 does not have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

New Accounting Standards To Be Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available-for-sale debt securities. This update is effective for annual periods beginning after December 15, 2022, and interim periods within those periods, and early adoption is permitted. We expect to adopt the standard on its effective date in the first quarter of 2023. We believe the adoption will modify the way we analyze financial instruments, but currently do not expect the adoption to have a material financial impact on our consolidated financial statements.

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848), to temporarily ease the potential burden in accounting for reference rate reform. The standard provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. The guidance generally can be applied through December 31, 2022. We will monitor our contracts and transactions for potential application of this ASU.

Note 2. Discontinued Operations

On October 30, 2020, Star Equity entered into a Stock Purchase Agreement (the “DMS Purchase Agreement”) by and among the Company, Project Rendezvous Acquisition Corporation, a Delaware corporation and wholly owned subsidiary of the Company (“Seller”), DMS Health, and Knob Creek Acquisition Corp., a Tennessee corporation (“Buyer”) pursuant to which, subject to the satisfaction or waiver of certain conditions, Buyer purchased all of the issued and outstanding common stock of DMS Health from Seller. The purchase price for the DMS Sale Transaction was $18.75 million in cash, subject to certain adjustments, including a working capital adjustment. The DMS Sale Transaction was announced on November 3, 2020, and was subsequently completed on March 31, 2021. We deemed the disposition of the Mobile Healthcare business unit, which was effected upon the closing of the DMS Sale Transaction, to represent a strategic shift that will have a major effect on our operations and financial results. As of December 31, 2020, the Mobile Healthcare business met the criteria to be classified as held for sale. This segment is reported on the Consolidated Statement of Operations as discontinued operations and on the Consolidated Balance Sheet as Assets and Liabilities held for sale.

We allocated a portion of interest expense to discontinued operations since the proceeds received from the sale were required to be used to pay down outstanding borrowings under our revolving credit facility with Sterling National Bank. The allocation was based on the ratio of assets generated based on the borrowing capacity to total borrowings capacity for the period. In addition, certain general and administrative costs related to corporate and shared service functions previously allocated to the mobile healthcare reportable segment are included in discontinued operations.

15

The following table presents financial results of DMS Health for the three months ended March 31, 2021 and 2020 business (in thousands):

	Three Months Ended March 31,
	2021		2020
Total revenues	$	9,490	$	9,667
Total cost of revenues	6,973		8,469
Gross profit	2,517		1,198
Operating expenses:
Selling, general and administrative	1,469		1,366
Amortization of intangible assets	—		241
Total operating expenses	1,469		1,607
Income (loss) from discontinued operations	1,048		(409)
Interest expense	(180)		(169)
Gain on sale of discontinued operations	5,224		—
Income (loss) from discontinuing operations before income taxes	6,092		(578)
Income tax expense	(72)		(7)
Income (loss) from discontinuing operations	$	6,020	$	(585)

The following represents the carrying amounts of the major classes of assets reported as “Assets held for sale” as of twelve months ended December 31, 2020 (in thousands):

	December 31, 2020
Cash and cash equivalents	$	443
Accounts receivable, net	4,305
Inventories, net	50
Other current assets	459
Property and equipment, net	7,721
Operating lease right-of-use assets, net	4,863
Intangible assets, net	2,915
	$	20,756

The following represents the carrying amounts of the major classes of liabilities reported as “Liabilities held for sale” as of December 31, 2020 (in thousands):

	December 31, 2020
Accounts payable	$	1,597
Accrued compensation	645
Deferred revenue	96
Operating lease liabilities	4,863
Other current liabilities	560
Deferred tax liabilities	16
Other liabilities	94
	$	7,871

16

The following table presents the significant non-cash operating, investing and financing activities from discontinued operations for the three months ended March 31, 2021 and 2020 (in thousands):

	Three Months Ended March 31,
	2021		2020
Operating activities
Depreciation	$	8	$	1,137
Amortization of intangible assets	—		241
Non-cash lease expense	256		192
Loss on extinguishment of debt	130		—
Gain on sale of DMS discontinued operations	(5,224)		—
Share-based compensation	2		4
Loss on disposal of assets	1		130
Provision for bad debt	—		2
Investing activities
Purchase of property and equipment	(154)		(243)
Proceeds from sale of discontinued operations	18,750		—
Proceeds from sale of property and equipment	3		15
Financing activities
Repayment of obligations under finance leases	(60)		(80)
Non-Cash Investing Activities
Fixed asset purchases in accounts payable	—		150
Lease assets obtained in exchange for new operating lease liabilities	—		564

Following is the reconciliation of purchase price to the gain recognized in income from discontinued operations for the three months ended March 31, 2021 (in thousands):

Estimated proceeds of the disposition, net of transaction costs	$	18,750
Assets of the businesses	(20,920)
Liabilities of the businesses	7,712
Transaction expenses	(318)
Pre-tax gain on the disposition	$	5,224

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Note 3. Revenue

Healthcare Product and Product-Related Revenues and Services Revenue

Healthcare product and product-related services revenue are generated from the sale of gamma cameras, accessories and post-warranty maintenance service contracts within our Diagnostic Imaging reportable segment.

Healthcare Imaging services revenue are generated from providing diagnostic imaging services to customers within our Diagnostic Services reportable segment. Services revenue also includes lease income generated from camera rentals of imaging systems to our customers.

Construction

Construction revenue is generated from selling modular buildings for both single-family residential homes, larger commercial building projects and selling structural wall panels, permanent wood foundation systems and other engineered wood products.

Investments

Star Real Estate Holdings USA, Inc. (“SRE”) generates revenue from the lease of commercial properties and equipment and Lone Star Value Management, LLC (“LSVM”), a Connecticut based exempt reporting advisor through March 31, 2021, provided services that included investment advisory services, and the servicing of pooled investment vehicles.

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Taxes collected from customers, which are subsequently remitted to governmental authorities, are excluded from revenue.

The majority of our contracts have a single performance obligation, as we provide a series of distinct goods or services that are substantially the same and are transferred with the same pattern to the customer. For contracts with multiple performance obligations, we allocate the total transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. We use an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. For bill and hold sales, we determine when the customer obtains control of the product on a case-by-case basis to determine the amount of revenue to recognize each period.

Revenue recognition is evaluated on a contract by contract basis. Performance obligations are satisfied over time as work progresses or at a point-in-time. A performance obligation is satisfied over time if the Company has an enforceable right to payment. Determining if there is an enforceable right to is assessed on a contract by contract basis. For contracts requiring over time revenue recognition, the selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. The Company uses a cost-based input measurement of progress because it best depicts the transfer of assets to the customer, which occurs as costs are incurred during the manufacturing process or as services are rendered. Under the cost-based measure of progress, the extent of progress towards completion is measured based on the costs incurred to date.

Our products are generally not sold with a right of return and the Company does not provide significant credits or incentives, which may be a variable consideration when estimating the amount of revenue to be recognized.

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Disaggregation of Revenue

The following tables present our revenues for the three months ended March 31, 2021 and 2020, disaggregated by major source (in thousands):

	Three Months Ended March 31, 2021
	Diagnostic Services		Diagnostic Imaging		Construction		Total
Major Goods/Service Lines
Mobile Imaging	$	10,181	$	—	$	—	$	10,181
Camera	—		1,422		—		1,422
Camera Support	—		1,646		—		1,646
Healthcare Revenue from Contracts with Customers	10,181		3,068		—		13,249
Lease Income	58		—		38		96
Construction	—		—		9,009		9,009
Total Revenues	$	10,239	$	3,068	$	9,047	$	22,354
Timing of Revenue Recognition
Services and goods transferred over time	$	10,239	$	1,490	$	2,731	$	14,460
Services and goods transferred at a point in time	—		1,578		6,316		7,894
Total Revenues	$	10,239	$	3,068	$	9,047	$	22,354

	Three Months Ended March 31, 2020
	Diagnostic Services		Diagnostic Imaging		Construction		Investments		Total
Major Goods/Service Lines
Mobile Imaging	$	10,602	$	—	$	—	$	—	$	10,602
Camera	—		1,339		—		—		1,339
Camera Support	—		1,522		—		—		1,522
Healthcare Revenue from Contracts with Customers	10,602		2,861		—		—		13,463
Lease Income	212		—		84		—		296
Construction	—		—		5,400		—		5,400
Investments	—		—		—		31		31
Total Revenues	$	10,814	$	2,861	$	5,484	$	31	$	19,190
Timing of Revenue Recognition
Services and goods transferred over time	$	10,814	$	1,487	$	84	$	—	$	12,385
Services and goods transferred at a point in time	—		1,374		5,400		31		6,805
Total Revenues	$	10,814	$	2,861	$	5,484	$	31	$	19,190

Nature of Goods and Services

Mobile Imaging

Within our Diagnostic Services segment, our sales are derived from providing services and materials to our customers, primarily physician practices and hospitals that allow them to perform diagnostic imaging services at their site. We typically bundle our services in providing staffing, our imaging systems, licensing, radiopharmaceuticals, and supplies depending on our customers’ needs. Our contracts with customers are typically entered into annually and are billed on a fixed rate per-day or per-scan basis, depending on terms of the contract. For the majority of these contracts, the Company has the right to invoice the customer in an amount that directly corresponds with the value to the customer as the Company performs the services. The Company uses the practical expedient to recognize revenue corresponding with amounts we have the right to invoice for services performed.

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Camera

Within our Diagnostic Imaging segment, camera revenues are generated from the sale of internally developed solid-state gamma camera imaging systems and accessories. We recognize revenue upon transfer of control to the customer at a point-in-time, which is generally upon delivery and acceptance. We also provide installation services and training on cameras we sell, primarily in the United States. Installation and initial training is generally performed shortly after delivery. The Company recognizes revenues for installation and training over time as the customer receives and consumes benefits provided as the Company performs the installation services.

Our sale of imaging systems includes a one-year assurance-type warranty. The estimated costs associated with our standard warranties and field service actions continue to be recognized as expense when cameras are sold. Maintenance service contracts sold beyond the term of our standard warranties are accounted for as a service-type warranty and revenue is deferred and recognized ratably over the period of the warranty obligation.

Camera Support

Within our Diagnostic Imaging segment, camera support revenue is derived from the sale of separately-priced extended maintenance contracts to camera owners, training, and the sale of parts to customers that do not have an extended warranty. Our separately priced service contracts range from 12 to 48 months. Service contracts are usually billed at the beginning of the contract period or at periodic intervals (e.g., monthly, quarterly, or annually) and revenue is recognized ratably over the term of the agreement.

Services and training revenues are recognized in the period the services and training are performed. Revenue for sales of parts are recognized when the parts are delivered to the customer and control is transferred.

Lease Income

Within our Diagnostic Service segment, we also generate income from rentals of state-of-the-art equipment including cameras and ultrasound machines to customers. Rental contracts are structured as either a weekly or monthly payment arrangement and are accounted for as operating leases. Revenues are recognized on a straight-line basis over the term of the rental.

Construction

Within the Construction segment, we service residential and commercial construction projects by manufacturing modular housing units and other products and supply general contractors with building materials. KBS manufactures modular buildings for both single-family residential homes and larger, commercial building projects. EdgeBuilder manufactures structural wall panels, permanent wood foundation systems and other engineered wood products, and Glenbrook is a retail supplier of lumber and other building supplies. Revenues are evaluated on a contract by contract basis. In general, construction revenues are recognized upon transfer of control to the customer at a point-in-time, which is generally upon delivery and acceptance. However, construction revenues are recognized over time for arrangements with customers for which: (i) performance does not create an asset with an alternative use, and (ii) we have an enforceable right to payment for performance completed to date.

Deferred Revenues

We record deferred revenues when cash payments are received in advance of our performance. We have determined our contracts do not include a significant financing component. The majority of our deferred revenue relates to payments received on camera support post-warranty service contracts, which are billed at the beginning of the contract period or at periodic intervals (e.g., monthly, quarterly, or annually).

Changes in the deferred revenues for continuing operations for three months ended March 31, 2021, is as follows (in thousands):

Balance at December 31, 2020	$	2,352
Revenue recognized that was included in balance at beginning of the year	(1,019)
Deferred revenue, net, related to contracts entered into during the year	1,327
Balance at March 31, 2021	$	2,660

Included in the balances above as of March 31, 2021 and December 31, 2020 is non-current deferred revenue included in other liabilities of $308 thousand and $168 thousand, respectively.

The Company has elected to use the practical expedient under ASC 606 to exclude disclosures of unsatisfied remaining performance obligations for (i) contracts having an original expected length of one year or less or (ii) contracts for which the practical expedient has been applied to recognize revenue at the amount for which it has a right to invoice.

20

Contract Costs

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less. These costs mainly include the Company’s internal sales commissions; under the terms of these programs these are generally earned and the costs are recognized at the time the revenue is recognized.

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Note 4. Basic and Diluted Net Income (Loss) Per Share

We present net loss per share attributable to common stockholders in conformity with the two-class method required for participating securities, as the warrants are considered participating securities. We have not allocated net loss attributable to common stockholders to warrants because the holders of our warrants are not contractually obligated to share in our losses. Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per share attributable to common stockholders is calculated to give effect to all potential shares of common stock, including common stock issuable upon exercise of warrants, stock options, and restricted stock units (“RSUs”). In periods for which there is a net loss, diluted loss per common share is equal to basic loss per common share, since the effect of including any common stock equivalents would be antidilutive.

The following table sets forth the reconciliation of shares used to compute basic and diluted net loss income per share for the periods indicated (in thousands):

	Three Months Ended March 31
	2021		2020
Numerator:
Loss from continuing operations, net of tax	$	(588)	$	(2,368)
Income (loss) from discontinued operations, net of tax	6,020		(585)
Net income (loss)	5,432		(2,953)
Deemed dividend on Series A redeemable preferred stock	(479)		(484)
Net income (loss) attributable to common shareholders	$	4,953	$	(3,437)
Denominator:
Weighted average shares outstanding - basic and diluted	4,916		2,055
Net loss per common share - basic and diluted
Net loss per share, continuing operations	$	(0.12)	$	(1.15)
Net income (loss) per share, discontinued operations	$	1.22	$	(0.28)
Net income (loss) per share	$	1.10	$	(1.44)
Deemed dividend on Series A perpetual preferred stock per share	$	(0.10)	$	(0.24)
Net income (loss) per share, attributable to common shareholders - basic and diluted	$	1.01	$	(1.67)

Antidilutive common stock equivalents are excluded from the computation of diluted loss per share. Stock options and restricted stock units are antidilutive when the assumed proceeds per share are greater than the average market price of the common shares. In addition, in periods where net losses are incurred, stock options and restricted stock units with assumed proceeds per share less than the average market price of the common shares become antidilutive as well. The computation of diluted earnings per share excludes stock options and stock units that are anti-dilutive. The following common stock equivalents were anti-dilutive (in thousands):

	Three Months Ended March 31
	2021	2020
Stock options	25	54
Restricted stock units	68	13
Stock warrants	866	—
Total	959	67

As of March 31, 2021, 0.9 million warrants were exercised and 1.5 million warrants remained outstanding at an exercise price of $2.25.

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Note 5. Supplementary Balance Sheet Information

The components of inventories are as follows (in thousands):

	March 31, 2021		December 31, 2020
Raw materials	$	6,170	$	5,489
Work-in-process	2,879		2,821
Finished goods	1,108		1,876
Total inventories	10,157		10,186
Less reserve for excess and obsolete inventories	(319)		(399)
Total inventories, net	$	9,838	$	9,787

Property and equipment consist of the following (in thousands):

	March 31, 2021		December 31, 2020
Land	$	805	$	805
Buildings and leasehold improvements	4,771		4,771
Machinery and equipment	28,635		29,375
Total property and equipment	34,211		34,951
Less accumulated depreciation	(24,828)		(25,189)
Total property and equipment, net	$	9,383	$	9,762

Note 6. Leases

Lessee

We have operating and finance leases for corporate offices, vehicles, and certain equipment. Our leases have remaining lease terms of 1 year to 10 years, some of which include options to extend the leases and some of which include options to terminate the leases within 1 year. Operating leases are included separately in the unaudited condensed consolidated balance sheets and finance lease assets are included in property and equipment with the related liabilities included in other current liabilities and other liabilities in the unaudited consolidated balance sheets.

The components of lease expense are as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Operating lease cost	$	334	$	328
Finance lease cost:
Amortization of finance lease assets	$	106	$	124
Interest on finance lease liabilities	21		24
Total finance lease cost	$	127	$	148

23

Supplemental cash flow information related to leases from continuing operations was as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	317	$	282
Operating cash flows from finance leases	$	21	$	24
Financing cash flows from finance leases	$	149	$	148
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	1,537	$	596

Supplemental balance sheet information related to leases was as follows (in thousands):

	March 31, 2021			December 31, 2020
Operating lease right-of-use assets, net	$	2,848		$	1,769
Operating lease liabilities	$	1,075		$	1,011
Operating lease liabilities, net of current	1,824			828
Total operating lease liabilities	$	2,899		$	1,839
Finance lease assets	$	2,567		$	2,765
Finance lease accumulated amortization	(1,130)			(791)
Finance lease assets, net	$	1,437		$	1,974
Finance lease liabilities	$	580		$	594
Finance lease liabilities, net of current	722			937
Total finance lease liabilities	$	1,302		$	1,531
Weighted average remaining lease term (in years)
Operating leases	3.1			2.3
Finance leases	2.7			2.8
Weighted average discount rate
Operating leases	4.54		%	5.53		%
Finance leases	6.44		%	6.44		%

24

We are committed to making future cash payments on non-cancelable operating leases and finance leases (including interest). The future minimum lease payments due under both non-cancelable operating leases and finance leases having initial or remaining lease terms in excess of one year as of March 31, 2021 were as follows (in thousands):

	Operating Leases		Finance Leases
2021 (excludes the three-months ended March 31, 2021)	$	931	$	507
2022	831		515
2023	330		273
2024	606		118
2025 and thereafter	373		2
Total future minimum lease payments	3,071		1,415
Less amounts representing interest	172		113
Present value of lease obligations	$	2,899	$	1,302

Lessor

In the Healthcare division, we generate lease income in the Diagnostic Services segment, from equipment rentals to customers. Rental contracts are structured as either a weekly or monthly payment arrangement and are accounted for as operating leases. Revenues are recognized on a straight-line basis over the term of the rental. During the three months ended March 31, 2021 and 2020, our lease contracts are mainly month to month contracts.

Note 7. Financial Instruments

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents information about our financial assets that are measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation techniques we utilize to determine such fair value at March 31, 2021 and December 31, 2020 (in thousands).

	Fair Value as of March 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Equity securities	$	65	$	49	$	—	$	114
Total	$	65	$	49	$	—	$	114

	Fair Value as of December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Equity securities	$	35	$	55	$	—	$	90
Total	$	35	$	55	$	—	$	90

The investment in equity securities consists of common stock of publicly traded companies. The fair value of these securities is based on the closing prices observed on March 31, 2021 and December 31, 2020, respectively. During the three months ended March 31, 2021 and 2020, the Company recorded net unrealized loss and gain of $23 thousand and $26 thousand, respectively, in the other income (expenses) of condensed unaudited consolidated statement of operations.

The Company occasionally enters into lumber derivative contracts in order to protect its gross profit margins from fluctuations caused by volatility in lumber prices. At March 31, 2021 and December 31, 2020, the Company had no lumber derivative contracts.

We did not reclassify any investments between levels in the fair value hierarchy during the three months ended March 31, 2021.The fair values of the Company’s revolving credit facility approximate carrying value due to the variable rate nature of these borrowings.

25

Note 8. Debt

A summary of debt as of March 31, 2021 and December 31, 2020 are as follows (dollars in thousands):

	March 31, 2021			December 31, 2020
	Amount		Weighted-Average Interest Rate	Amount		Weighted-Average Interest Rate
Revolving Credit Facility - Gerber KBS	$	2,672	6.00%	$	1,099	6.00%
Revolving Credit Facility - Gerber EBGL	1,969		6.00%	2,016		6.00%
Revolving Credit Facility - SNB	5,000		2.61%	12,710		2.64%
Total Short-term Revolving Credit Facility	$	9,641	4.24%	$	15,825	3.30%
Gerber - Star Term Loan	$	271	6.25%	$	262	6.75%
Premier - Term Loan	335		5.75%	419		5.75%
Total Short Term Debt	$	606	5.97%	$	681	6.13%
Short-term Paycheck Protection Program Notes	$	2,301	1.00%	$	1,856	1.00%
Short-term debt and current portion of long-term debt	$	12,548	3.73%	$	18,362	3.17%
Gerber - Star Term Loan	$	985	6.25%	$	1,058	6.75%
Premier - Term Loan	324		5.75%	321		5.75%
Total Long Term Debt	$	1,309	6.13%	$	1,379	6.52%
Long-term Paycheck Protection Program Notes	$	658	1.00%	$	2,321	1.00%
Long-term debt, net of current portion	$	1,967	4.41%	$	3,700	3.06%
LSV Co-Invest I Promissory Note (“January Note”)	$	709	12.00%	$	709	12.00%
LSV Co-Invest I Promissory Note (“June Note”)	1,220		12.00%	1,220		12.00%
LSVM Note	378		12.00%	378		12.00%
Total Notes Payable To Related Parties (1)	$	2,307	12.00%	$	2,307	12.00%
Total Debt	$	16,822	4.94%	$	24,369	3.99%

(1) See Note 12. Related Party Transactions, for information regarding certain ATRM promissory notes that are outstanding.

Term Loan Facilities

As of March 31, 2021, the short-term debt and current portion of long-term debt included $0.3 million of the Gerber Star term loan, net of issuance costs, and $0.3 million of the Premier term loan. Long-term debt, net of current portion, included $1.0 million of the Gerber Star term loan, net of issuance costs, and $0.3 million of the Premier term loan.

The following table presents the Star and Premier term loans balance net of unamortized debt issuance costs as of March 31, 2021 (in thousands):

	March 31, 2021
	Amount
Gerber - Star Term Loan	$	1,533
Premier - Term Loan	659
Total Principal	2,192
Unamortized debt issuance costs	(277)
Total	$	1,915

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Sterling Credit Facility

On March 29, 2019, the Company entered into a Loan and Security Agreement (the “SNB Loan Agreement”) by and among certain subsidiaries of the Company, as borrowers (collectively, the “SNB Borrowers”); the Company, as guarantor; and Sterling National Bank, a national banking association, as lender (“Sterling” or “SNB”).

The SNB Loan Agreement is a five-year credit facility maturing in March 2024, with a maximum credit amount of $20.0 million for revolving loans (the “SNB Credit Facility”). Under the SNB Credit Facility, the SNB Borrowers can request the issuance of letters of credit in an aggregate amount not to exceed $0.5 million at any one time outstanding. The borrowings under the SNB Loan Agreement were classified as short-term obligations under GAAP as the agreement contained a subjective acceleration clause and required a lockbox arrangement whereby all receipts within the lockbox are swept daily to reduce borrowings outstanding. As of March 31, 2021, the Company had $0.2 million of letters of credit outstanding and had additional borrowing capacity of $4.5 million.

At the Borrowers’ option, the SNB Credit Facility will bear interest at either (i) a Floating LIBOR Rate, as defined in the Loan Agreement, plus a margin of 2.50% per annum; or (ii) a Fixed LIBOR Rate, as defined in the Loan Agreement, plus a margin of 2.25% per annum. As our largest single debt outstanding, our floating rate on this facility at March 31, 2021 was 2.61%.

The SNB Loan Agreement includes certain representations, warranties of SNB Borrowers, as well as events of default and certain affirmative and negative covenants by the SNB Borrowers that are customary for loan agreements of this type. These covenants include restrictions on borrowings, investments and dispositions by SNB Borrowers, as well as limitations on the SNB Borrowers’ ability to make certain distributions. Upon the occurrence and during the continuation of an event of default under the SNB Loan Agreement, SNB may, among other things, declare the loans and all other obligations under the SNB Loan Agreement immediately due and payable and increase the interest rate at which loans and obligations under the SNB Loan Agreement bear interest. The SNB Credit Facility is secured by a first-priority security interest in substantially all of the assets of the Company and the SNB Borrowers and a pledge of all shares of the SNB Borrowers.

On March 29, 2019, in connection with the Company’s entry into the SNB Loan Agreement, Jeffery E. Eberwein, the Executive Chairman of the Company’s board of directors, entered into Limited Guaranty Agreement (the “SNB Eberwein Guaranty”) with SNB pursuant to which he guaranteed the prompt performance of all the Borrowers’ obligations under the SNB Loan Agreement. The SNB Eberwein Guaranty is limited in the aggregate to the amount of (a) $1.5 million, plus (b) reasonable costs and expenses of SNB incurred in connection with the SNB Eberwein Guaranty. Mr. Eberwein’s obligations under the SNB Eberwein Guaranty terminate upon the Company and Borrowers achieving certain milestones set forth therein.

On February 1, 2021, in connection with the closing of the Company’s sale of MD Office Solutions, the Company entered into a First Amendment to the SNB Loan Agreement pursuant to which, among other things, Sterling consented to the sale of MD Office Solutions and the Company’s name change from Digirad Corporation to Star Equity Holdings, Inc.

On March 31, 2021, in connection with completing the sale of DMS Health, the Company, certain subsidiaries of the Company, and Sterling entered into a Second Amendment to the SNB Loan Agreement pursuant to which, among other things, Sterling consented to the sale of DMS Health and its subsidiaries, removed DMS Health and its subsidiaries as borrowers under the SNB Loan Agreement, and required the principle to be paid down to $7.0 million.

At March 31, 2021, the Company was in compliance with the covenants under the SNB Loan Agreement.

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Construction Loan Agreements

As of March 31, 2021, the Construction division had outstanding revolving lines of credit and term loans of approximately $5.4 million. This debt includes: (i) $2.7 million principal outstanding on KBS’s $4.0 million revolving credit facility under a Loan and Security Agreement, dated February 23, 2016, (as amended, the “KBS Loan Agreement”), with Gerber and (ii) $2.0 million principal outstanding on EBGL’s $3.0 million revolving credit facility under a Revolving Credit Loan Agreement, and $0.7 million with Premier term loan, dated June 30, 2017 (as amended, the “Premier Loan Agreement”). The Construction division was at the maximum borrowing capacity under both revolving lines of credit, based on the inventory and accounts receivable on March 31, 2021 which fluctuates weekly.

KBS Loan Agreement

On February 23, 2016, ATRM, KBS and Main Modular Haulers, Inc. (a former subsidiary of ATRM) entered into a Loan and Security Agreement, (as amended, the “KBS Loan Agreement”), with Gerber. The KBS Loan Agreement provides KBS with a revolving line of credit with borrowing availability of up to $4.0 million. Availability under the line of credit is based on a formula tied to KBS’s eligible accounts receivable, inventory and other collateral. The KBS Loan Agreement, which was scheduled to expire on February 22, 2018, has been automatically extended for successive one (1) year periods in accordance with its terms and is now scheduled to expire on February 22, 2022. The KBS Loan Agreement will be automatically extended for another one (1) year period unless a party thereto provides prior written notice of termination. As of March 31, 2021 neither party has provided notice of termination. Upon the final expiration of the term of the KBS Loan Agreement, the outstanding principal balance is payable in full. Borrowings bear interest at the prime rate plus 2.75%, equating to 6.00% at March 31, 2021, with interest payable monthly. The KBS Loan Agreement also provides for certain fees payable to Gerber during its term, including a 1.5% annual facilities fee and a 0.10% monthly collateral monitoring fee. KBS’s obligations under the KBS Loan Agreement are secured by all of its assets and are guaranteed by ATRM. Unsecured promissory notes issued by KBS and ATRM are subordinate to KBS’s obligations under the KBS Loan Agreement. The KBS Loan Agreement contains representations, warranties, affirmative and negative covenants, defined events of default and other provisions customary for financings of this type. Financial covenants require that KBS maintain a maximum leverage ratio (as defined in the KBS Loan Agreement) and KBS not incur a net annual post-tax loss in any fiscal year during the term of the KBS Loan Agreement. The borrowings under the KBS Loan Agreement were classified as short-term obligations under GAAP as the agreement contained a subjective acceleration clause and required a lockbox arrangement whereby certain receipts are swept daily to reduce borrowings outstanding. At March 31, 2021, approximately $2.7 million was outstanding under the KBS Loan Agreement.

During the three months ended, March 31, 2021, the parties to the KBS Loan Agreement have amended the KBS Loan Agreement to provide for increased availability under the KBS Loan Agreement to KBS under certain circumstances, including for new equipment additions, and certain other changes, as well as a waiver of certain covenants.

As of December 31, 2020 and 2019, KBS was not in compliance with the financial covenants requiring no net annual post-tax loss for KBS or the minimum leverage ratio covenant as of 2020. The occurrence of any event of default under the KBS Loan Agreement may result in KBS’s obligations under the KBS Loan Agreement becoming immediately due and payable. In April 2019, June 2019, February 2020 and February 2021, we obtained a waiver from Gerber for these events.

On September 10, 2019, the parties to the KBS Loan Agreement entered into the twelfth amendment to the KBS Loan Agreement (the “Twelfth KBS Amendment”), pursuant to which the Company agreed to guarantee amounts borrowed by certain ATRM’s subsidiaries from Gerber.

On January 31, 2020, the Company, ATRM, KBS and Gerber entered into a thirteenth amendment to the KBS Loan Agreement (the “Thirteenth KBS Amendment”) to amend the terms of the KBS Loan Agreement, in order to, among other things (a) amend the definitions of “Ancillary Credit Parties,” “Guarantor,” “Obligations,” and “Subordinated Lender” to address the obligations of the Star Borrowers, the EBGL Borrowers, the Star Credit Parties, and the EBGL Credit Parties under the Star Loan Agreement, EBGL Loan Agreement and the Subordination Agreements (each as defined below) to which they are a party and (b) add a new cross default provision.

On March 5, 2020, in connection with the First EBGL Amendment, Gerber, KBS, ATRM and the Company entered into a fourteenth amendment to the KBS Loan Agreement in order to, among other things consent to the First EBGL Amendment and remove cash and cash collateral from the borrowing base.

On April 1, 2020, Gerber and KBS entered into a fifteenth amendment to the KBS Loan Agreement pursuant to which the “Minimum Average Monthly Loan Amount” was decreased to twenty-five percent (25%) of the Maximum Revolving Amount.

On January 5, 2021, Gerber and KBS entered into a sixteenth amendment to the KBS Loan Agreement in order to, among other things, amend certain definitions under the KBS Loan Agreement and to increase the inventory assets against which funds can be borrowed.

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On February 26, 2021 Gerber and KBS entered into a seventeenth amendment to the KBS Loan Agreement in order to provide the waiver to the 2020 covenant breach and amended the financial covenants. The financial covenants under the KBS Loan Agreement, as amended, provide that (i) KBS shall make no distribution, transfer, payment, advance, or contribution of cash or property which would constitute a restricted payment; (ii) KBS shall report annual post-tax net income at least equal to (a) $385 thousand for the trailing 6-month period ending June 30, 2021 and (b) $500 thousand for the trailing fiscal year end December 31, 2021; and (iii) a minimum EBITDA at June 30, 2021 of more than $880 thousand or at December 31, 2021 of more than $1.5 million.

EBGL Premier Note

On June 30, 2017, EdgeBuilder and Glenbrook (together, EBGL) entered into a Revolving Credit Loan Agreement (as amended, the “Premier Loan Agreement”) with Premier providing EBGL with a working capital line of credit of up to $3.0 million. The Premier Loan Agreement replaced the prior revolving credit facility.

Availability under the Premier Loan Agreement is based on a formula tied to EBGL’s eligible accounts receivable, inventory and equipment, and borrowings bear interest at the prime rate plus 1.50%, with interest payable monthly and the outstanding principal balance payable upon expiration of the term of the Premier Loan Agreement. The Premier Loan Agreement also provides for certain fees payable to Premier during its term. The initial term of the Premier Loan Agreement was scheduled to expire on June 30, 2018, but was extended multiple times by Premier until January 31, 2023. EBGL’s obligations under the Premier Loan Agreement are secured by all of their inventory, equipment, accounts and other intangibles, fixtures and all proceeds of the foregoing.

On January 31, 2020, Glenbrook and EdgeBuilder entered into an Extension and Modification Agreement (the “Modification Agreement”) with Premier that modified the terms of the Revolving Credit Promissory Note made by Glenbrook and EdgeBuilder. The Modification Agreement reduced the outstanding borrowings to $1.0 million, extended the final maturity date to January 31, 2023, and set the interest rate to at 5.75% per annum. Mr. Eberwein executed a guaranty in favor of Premier, which has been extended through January 1, 2023, under which ATRM and Mr. Eberwein have absolutely and unconditionally guaranteed all of EBGL’s obligations under the Premier Loan Agreement. As of March 31, 2021, approximately $0.7 million was outstanding under the Premier Loan Agreement.

Gerber Star and EBGL Loans

On January 31, 2020, SRE, 947 Waterford Road, LLC (“947 Waterford”), 300 Park Street, LLC (“300 Park”), and 56 Mechanic Falls Road, LLC (“56 Mechanic” and together with SRE, 947 Waterford, and 300 Park, (the “Star Borrowers”), each an Investments Subsidiary, and the Company, ATRM, KBS, EdgeBuilder, and Glenbrook (collectively, the “Star Credit Parties”), entered into a Loan and Security Agreement (as amended, the “Star Loan Agreement”) with Gerber providing the Star Borrowers with a credit facility with borrowing availability of up to $2.5 million ($2.0 million and $0.5 million to KBS and EBGL, respectively) (the “Star Loan”). The advance of $2.0 million to KBS is to be repaid in monthly installments of sixty (60) consecutive equal payments. The advance of $0.5 million to EBGL, which has been temporarily increased by $0.3 million due to be repaid on April 30, 2020, is to be repaid in monthly installments of twelve (12) consecutive equal payments. On February 20, 2020, the Star Borrowers entered into a first amendment to the Star Loan Agreement (the “First Star Amendment”) in order to (i) temporarily advance $0.3 million to EBGL, which amount is to be repaid to Gerber on or before April 30, 2020; (ii) clarify that Gerber can make multiple advances under the Star Loan Agreement, and (iii) to correct the maturity date of the Star Loan. On April 30, 2020, the Star Borrowers entered into a second amendment to the Star Loan Agreement (the “Second Star Amendment”) to change terms of repayment for the advance of $0.3 million to EBGL to provide for repayment in three consecutive equal monthly installments, commencing on May 30, 2020, with a final installment on or before July 31, 2020. As of March 31, 2021, EBGL repaid approximately $0.5 million and $1.3 million was outstanding, net with deferred financing costs, under the Star Loan Agreement.

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On January 31, 2020, EdgeBuilder and Glenbrook (the “EBGL Borrowers”), each a Construction Subsidiary, and the Company, Star, 947 Waterford, 300 Park, 56 Mechanic, ATRM, and KBS (collectively, the “EBGL Credit Parties”), entered into a Loan and Security Agreement (the “EBGL Loan Agreement”) with Gerber providing the EBGL Borrowers with a credit facility with borrowing availability of up to $3.0 million (the “EBGL Loan”). On March 5, 2020, the EBGL Borrowers entered into a first amendment to the EBGL Loan Agreement (the “First EBGL Amendment”) with Gerber that amended the EBGL Loan Agreement and the KBS Loan Agreement to include a pledge $0.3 million of cash collateral by LSVI under the EBGL Loan Agreement which, prior to the First EBGL Amendment, was pledged by LSVI in connection with the KBS Loan Agreement. On July 1, 2020, the EBGL Borrowers entered into a second amendment to the EBGL Loan Agreement to terminate the pledge of $0.3 million in cash collateral. On February 26, 2021, the EBGL Borrowers entered into a third amendment to the EBGL Loan Agreement (the “Third EBGL Amendment”) pursuant to which the Company and Gerber agreed to, among other things, eliminate the minimum leverage ratio covenant, lower the minimum EBITDA, and require the borrowers to not incur a net operating loss on bi-annual basis. The Third EBGL Amendment also discharged the EBGL Eberwein Guaranty described below. As of March 31, 2021, approximately $2.0 million was outstanding under the EBGL Loan Agreement.

Availability under the Star Loan Agreement is based on a formula tied to the value of real estate owned by the Star Borrowers, and borrowings bear interest at the prime rate plus 3.5% per annum. Availability under the EBGL Loan Agreement is based on a formula tied to the EBGL Borrowers’ eligible accounts receivable and inventory, and borrowings bear interest at the prime rate plus 2.75% per annum. The Loan Agreements also provide for certain fees payable to Gerber during their respective terms. The Star Loan matures on the earlier of (a) January 1, 2025 or (b) the termination, the maturity or repayment of the EBGL Loan. The EBGL Loan matures on the earlier of (a) January 1, 2022, unless extended, or (b) the termination, the maturity or repayment of the Star Loan. The maturity of the EBGL Loan is automatically extended for successive periods of one (1) year each unless terminated by Gerber or the EBGL Borrowers. The borrowings under the EBGL Loan Agreement were classified as short-term obligations under GAAP as the agreement contained a subjective acceleration clause and required a lockbox arrangement whereby all receipts are swept daily to reduce borrowings outstanding.

The obligations of the EBGL Borrowers under the EBGL Loan Agreement are guaranteed by the EBGL Credit Parties and are secured by substantially all the assets of the EBGL Borrowers and the EBGL Credit Parties. The obligations of the Star Borrowers under the Star Loan Agreement are guaranteed by the Star Credit Parties and are secured by substantially all the assets of the Star Borrowers and the Star Credit Parties. Contemporaneously with the execution and delivery of the Star Loan Agreement, Jeffrey E. Eberwein, the Executive Chairman of the Company’s board of directors, executed and delivered a Guaranty (the “Gerber Eberwein Guaranty”) to Gerber pursuant to which he guaranteed the performance of all the Star Borrowers’ obligations to Gerber under the Star Loan Agreement, including the full payment of all indebtedness owing by the Star Borrowers to Gerber under or in connection with the Star Loan Agreement and related financing documents. Mr. Eberwein’s obligations under the Gerber Eberwein Guaranty are limited in the aggregate to the amount of (a) $2.5 million, plus (b) costs of Gerber incidental to the enforcement of the Gerber Eberwein Guaranty or any guaranteed obligations. On March 5, 2020, contemporaneously with the execution and delivery of the First EBGL Amendment, Mr. Eberwein, the Executive Chairman of the Company’s board of directors, executed and delivered a Guaranty (the “EBGL Eberwein Guaranty”) to Gerber pursuant to which he guaranteed the performance of all the EBGL Borrowers’ obligations to Gerber under the EBGL Loan Agreement, including the full payment of all indebtedness owing by the EBGL Borrowers to Gerber under or in connection with the EBGL Loan Agreement and related financing documents. Mr. Eberwein’s obligations under the EBGL Eberwein Guaranty are limited in the aggregate to the amount of (a) $0.5 million, plus (b) costs of Gerber incidental to the enforcement of the EBGL Eberwein Guaranty or any guaranteed obligations.

On February 26, 2021, the Star Borrowers entered into a third amendment to the Star Loan Agreement (the “Third Star Amendment”) with Gerber that, among other things, amended the contract rate to prime rate plus 3% and discharged the $2.5 million Gerber Eberwein Guaranty.

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The Star Loan Agreement and EBGL Loan Agreement contains representations, warranties, affirmative and negative covenants, events of default and other provisions customary for financings of this type. The financial covenants under the EBGL Loan Agreement applicable to the EBGL Borrowers include maintenance of a minimum tangible net worth, a minimum debt service coverage ratio and minimum net income. The Financial covenants under the Star Loan Agreement applicable to the Star Borrowers include a minimum debt service coverage ratio. The occurrence of any event of default under the Loan Agreements may result in the obligations of the Borrowers becoming immediately due and payable. As of December 31, 2020, EBGL was not in compliance with the financial covenants under the Star Loan Agreement and EBGL Loan Agreement as of 2020. The occurrence of any event of default under the EBGL Loan Agreement may result in EBGL’s obligations under the EBGL Loan Agreement becoming immediately due and payable. In February 2021, we obtained a waiver from Gerber for these events and, as part of the Third EBGL Amendment (described above), the Company and Gerber agreed to, among other things, eliminate the minimum leverage ratio covenant, lower the minimum EBITDA, and require the borrowers to not incur a net operating loss on bi-annual basis, as well as discharge the EBGL Eberwein Guaranty.

As a condition to the extension of credit to the Star Borrowers and EBGL Borrowers under the Star Loan Agreement and EBGL Loan Agreement, the holders of certain existing unsecured promissory notes made by ATRM and certain of its subsidiaries entered into subordination agreements (the “Subordination Agreements”) with Gerber pursuant to which such noteholders (including the Company and certain of its subsidiaries) agreed to subordinate the obligations of ATRM and its subsidiaries to such noteholders to the obligations of the Star Borrowers and EBGL Borrowers to Gerber under the loan agreements.

Paycheck Protection Program

From April 2020 through May 2020, the Company and its subsidiaries received $6.7 million, of loans under the Paycheck Protection Program (“PPP”). Total PPP loans received the Construction division and Healthcare division were $5.5 million and $1.2 million, respectively.

The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (“SBA”). PPP loans for the Construction and Healthcare division were made through Bremer Bank and Sterling as lenders, respectively.

The PPP loans have two-year terms and bear interest at a rate of 1.00% per annum. Monthly principal and interest payments under the PPP loans are deferred for ten months, after the end of covered periods. The PPP loans may be prepaid at any time prior to maturity with no prepayment penalties.

The promissory notes issued in connection with the PPP loans (the “PPP Notes”) contain customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the SBA or lender, or breaching the terms of the applicable PPP loan documents. Upon an event of default under a PPP Note, the lender thereunder may, among other things, require immediate payment of all amounts owing under the applicable PPP Note, collect all amounts owing from the applicable borrower, or file suit and obtain judgment.

Under the terms of the CARES Act, recipients of loans under the PPP can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and certain other eligible costs. However, no assurance is provided that forgiveness for any portion of the PPP loans will be obtained. and even if forgiveness is granted the PPP loans may remain subject to review and audit due to all affiliated PPP Notes equaling more than $2 million.

In order to apply for the PPP loans, we certified that the economic uncertainty at the time of application, made the PPP loans request necessary to support ongoing operations of the Company. This certification was made taking into account our then current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that would not be significantly detrimental to the business.

The Company is continuing to evaluate the criteria and new guidance put out by the SBA regarding loan forgiveness criteria and procedures to seek loan forgiveness. During October 2020 and January 2021, the Company applied for forgiveness on all PPP loans. Our PPP loan forgiveness is sought under the belief all entities requesting loan forgiveness have met the stated criteria and guidelines provided by the SBA and terms of the CARES Act; however, no assurance can be provided that forgiveness for any portion of the PPP loans will be obtained.

During Q4 2020, $2.5 million of the Healthcare division PPP Notes were forgiven. As of March 31, 2021, the Company has $3.0 million in PPP loans outstanding for the Healthcare division. During Q1, 2021, all amounts under the Construction division PPP Notes were forgiven.

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Note 9. Commitments and Contingencies

In the normal course of business, we have been, and will likely continue to be, subject to other litigation or administrative proceedings incidental to our business, such as claims related to customer disputes, employment practices, wage and hour disputes, product liability, professional liability, commercial disputes, licensure restrictions or denials, and warranty or patent infringement. Responding to litigation or administrative proceedings, regardless of whether they have merit, can be expensive and disruptive to normal business operations. We are not able to predict the timing or outcome of these matters and do not expect that the resolution of these matters will have a material adverse effect on our financial position or results of operations.

Note 10. Income Taxes

We provide for income taxes under the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of differences between the tax basis of assets or liabilities and their carrying amounts in the financial statements. We provide a valuation allowance for deferred tax assets if it is more likely than not that these items will expire before we are able to realize their benefit. We calculate the valuation allowance in accordance with the authoritative guidance relating to income taxes, which requires an assessment of both positive and negative evidence regarding the realizability of these deferred tax assets, when measuring the need for a valuation allowance. Significant judgment is required in determining any valuation allowance against deferred tax assets. We continue to record a full valuation allowance against our deferred tax assets and intend to maintain a valuation allowance until sufficient positive evidence exists to support its reversal.

Intraperiod tax allocation rules require us to allocate our provision for income taxes between continuing operations and other categories of comprehensive income, such as discontinued operations.

For the three months ended March 31, 2021, the Company recorded an income tax expense of $2 thousand within continuing operations and an income tax expense of $72 thousand within discontinued operations. For the three months ended March 31, 2020, the Company recorded an income tax expense of $27 thousand within continuing operations and an income tax expense of $7 thousand within discontinued operations.

As of March 31, 2021, we had unrecognized tax benefits of approximately $2.6 million related to uncertain tax positions. Included in the unrecognized tax benefits were $2.1 million of tax benefits that, if recognized, would reduce our annual effective tax rate, subject to the valuation allowance.

We file income tax returns in the U.S. and in various state jurisdictions with varying statutes of limitations. We are no longer subject to income tax examination by tax authorities for years prior to 2016; however, our net operating loss carryforwards and research credit carryforwards arising prior to that year are subject to adjustment. Our policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense.                                 

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). There were several income tax provisions included in the CARES Act, as well as other non-tax matters incorporated into law as a result of the enactment of the CARES Act.

Under the CARES Act, net operating losses generated in tax years 2018, 2019, and 2020 can be carried back five years, allowing corporate taxpayers to amend earlier tax returns and potentially obtain a tax refund. In addition, losses generated and utilized prior to January 1, 2021 are not subject to the 80 percent limitation that was previously applied to losses generated after December 31, 2017 under the Tax Cuts and Jobs Act of 2017. The Company doesn’t currently estimate that any tax will be recoverable from these tax provisions and therefore does not anticipate there to be a material impact from these provisions on the Company’s income tax balances in its current year financial statements.

The Tax Cuts and Jobs Act of 2017 limited interest deductions to 30% of adjusted taxable income ("ATI"). The CARES Act increases the limitation to 50 percent of adjusted taxable income for tax years 2019 or 2020, thereby raising the limitation ceiling and potentially allowing for increased interest deductions. In addition, companies have the option of using 2019 ATI to compute the limitation for 2020. The Company tentatively plans to take advantage of certain of these provisions to eliminate any potential section 163(j) interest carryovers from its inventory of deferred tax assets for the year ending December 31, 2020.

The CARES Act adopts a technical correction to the Tax Cuts and Jobs Act's apparent oversight in excluding the eligibility of qualified improvement property (e.g., real estate/leasehold improvements) from eligibility for bonus depreciation for tax years after 2017. Companies are allowed to amend 2018 income tax or file accounting method changes in 2019 to claim the additional deductions. The Company is still evaluating the impact of this provision; however, the Company does not anticipate that this provision will have any impact on the Company’s tax expense or payable balances. If pursued, this provision may have an impact on the Company’s allocation of its deferred tax assets related to property, plant, and equipment and net operating losses, which are substantially offset by the Company’s full valuation allowance.

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Certain other provisions of the CARES Act, such as the ability to obtain a refund of alternative minimum taxes (“AMT”) previously paid to the IRS and the increased ability to deduct charitable contributions by corporations are not expected to be applicable to the Company. Overall, we do not expect the income tax provisions of the CARES Act to have a material impact to the Company’s financial statements.

On December 21, 2020, Congress passed the $2.3 trillion Consolidated Appropriations Act, 2021, H.R. 133 (the “Act”), which combined the $1.4 trillion omnibus spending bill for the 2021 federal fiscal year with the $900 billion stimulus relief package aimed to respond to the economic fallout caused by the COVID-19 pandemic. On December 27, 2020, President Trump signed the Act, which enhanced and expanded certain provisions of the previous relief package—the Coronavirus Aid, Relief, and Economic Security Act, H.R. 748 (the “Cares Act”) into law. The Company does not expect the Act to have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.                                                            

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Note 11. Segments

Our business is organized into four reportable segments:

1. Diagnostic Services

2. Diagnostic Imaging

3. Construction

4. Investments

Effective January 1, 2020, the Company revised the allocation methodology used to allocate corporate costs to each of the operating segments. “Loss (income) by operating segment” for the historical period has been recast to conform to our current allocation methodology. Segment information is as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Revenue by segment:
Diagnostic Services	$	10,239	$	10,814
Diagnostic Imaging	3,068		2,861
Construction	9,047		5,484
Investments	—		31
Consolidated revenue	$	22,354	$	19,190
Gross profit by segment:
Diagnostic Services	$	1,608	$	2,005
Diagnostic Imaging	990		869
Construction	544		403
Investments	(65)		(34)
Consolidated gross profit	$	3,077	$	3,243
Income (loss) from operations by segment:
Diagnostic Services	$	859	$	59
Diagnostic Imaging	(22)		(267)
Construction	(1,547)		(1,300)
Investments	76		(54)
Unallocated corporate and other expenses	(935)		(634)
Segment loss from operations	$	(1,569)	$	(2,196)
Depreciation and amortization by segment:
Diagnostic Services	$	290	$	329
Diagnostic Imaging	67		63
Construction	479		572
Investments	65		65
Total depreciation and amortization	$	901	$	1,029

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Note 12. Related Party Transactions

Eberwein Guarantees

SNB

On March 29, 2019, in connection with the Company’s entry into the SNB Loan Agreement, Mr. Eberwein, the Executive Chairman of the Company’s board of directors, entered into the Limited Guaranty Agreement (the SNB Eberwein Guaranty) with SNB pursuant to which he guaranteed to SNB the prompt performance of all the Borrowers’ obligations to SNB under the SNB Loan Agreement, including the full payment of all indebtedness owing by Borrowers to SNB under or in connection with the SNB Loan Agreement and related SNB Credit Facility documents. Mr. Eberwein’s obligations under the SNB Eberwein Guaranty are limited in the aggregate to the amount of (a) $1.5 million, plus (b) reasonable costs and expenses of SNB incurred in connection with the SNB Eberwein Guaranty. Mr. Eberwein’s obligations under the SNB Eberwein Guaranty terminate upon the Company and SNB Borrowers achieving certain milestones set forth therein.

Gerber

On March 5, 2020, contemporaneously with the execution and delivery of the First EBGL Amendment, Mr. Eberwein, the Executive Chairman of the Company’s board of directors, executed and delivered a Guaranty (the EBGL Eberwein Guaranty) to Gerber pursuant to which he guaranteed the performance of all the EBGL Borrowers’ obligations to Gerber under the EBGL Loan Agreement, including the full payment of all indebtedness owing by the EBGL Borrowers to Gerber under or in connection with the EBGL Loan Agreement and related financing documents. Mr. Eberwein’s obligations under the EBGL Eberwein Guaranty were limited in the aggregate to the amount of (a) $0.5 million, plus (b) costs of Gerber incidental to the enforcement of the EBGL Eberwein Guaranty or any guaranteed obligations.

On February 26, 2021, the Third EBGL Amendment discharged the EBGL Eberwein Guaranty and removed Mr. Eberwein as an ancillary guarantor from the EBGL Loan Agreement. On February 26, 2021, the Third Star Amendment discharged the $2.5 million Gerber Eberwein Guaranty.

Premier

As a condition to the Premier Loan Agreement, Mr. Eberwein entered into a guaranty in favor of Premier, absolutely and unconditionally guaranteeing all of the borrowers’ obligations thereunder.

Premier Participation

Pursuant to a certain Participation Agreement by and between Mr. Eberwein and Premier, which was signed on March 31, 2020 and was effective as of March 26, 2020, Mr. Eberwein purchased a ratable participation in, and assumed a ratable part of, the aggregate maximum principal amount of the outstanding balance of the loan under the Premier Loan Agreement in the amount of $0.3 million.

ATRM

Jeffrey E. Eberwein, the Executive Chairman of our board of directors is also the Chief Executive Officer of Lone Star Value Management, LLC (“LSVM”), which is the investment manager of Lone Star Value Investors, LP (“LSVI”) and Lone Star Value Co-Invest I, LP (“LSV Co-Invest I”). Mr. Eberwein is also the sole manager of Lone Star Value Investors GP, LLC (“LSV GP”), the general partner of LSVI and LSV Co-Invest I, and is the sole owner of LSV Co-Invest I. LSVM was a wholly owned subsidiary of ATRM on the ATRM Acquisition Date (see Acquisition of LSVM below). Prior to the closing of the ATRM Merger, Mr. Eberwein was also Chairman of the board of directors of ATRM. On October 25, 2019, ATRM distributed its interest in LSVM to Star Equity, resulting in LSVM becoming a wholly owned direct subsidiary of Star Equity.

Prior to the closing of the ATRM Merger, Mr. Eberwein and his affiliates owned approximately 4.3% of the outstanding Company common stock and 17.4% of the outstanding ATRM common stock. In addition, LSVI owned 222,577 shares of ATRM’s 10.0% Series B Cumulative Preferred Stock (the “ATRM Preferred Stock”) and another 374,562 shares of ATRM Preferred Stock were owned directly by LSV Co-Invest I. Through these relationships and other relationships with affiliated entities, Mr. Eberwein may be deemed the beneficial owner of the securities owned by LSVI and LSV Co-Invest I. Mr. Eberwein disclaimed beneficial ownership of ATRM Preferred Stock, except to the extent of his pecuniary interest therein. At the effective time of the ATRM Merger, (i) each share of ATRM common stock converted into the right to receive three one-hundredths (0.03) of a share of Company Preferred Stock and (ii) each share of ATRM Preferred Stock converted into the right to receive two and one-half (2.5) shares of Company Preferred Stock.

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As of March 31, 2021, Mr. Eberwein owned approximately 3.1% of the outstanding Star Equity common stock. In addition, as of March 31, 2021, Mr. Eberwein owned 1,310,036 shares of Company Preferred Stock. Mr. Eberwein as the CEO of LSVM, which is the investment advisor of LSVI, and as the sole manager of LSV GP, which is the general partner of LSVI Mr. Eberwein may be deemed the beneficial owner of the securities held by LSVI. Mr. Eberwein disclaims beneficial ownership of Company Preferred Stock, except to the extent of his pecuniary interest therein.

On July 10, 2020, Star Equity authorized LSVI to initiate a pro-rata distribution to its partners of an aggregate of 300,000 shares of Company Preferred Stock at $10 per share, which was finalized by the Company's transfer agent on July 22, 2020 (the "Distribution"), which includes 114,624 shares of Company Preferred Stock consisting of (i) 113,780 shares of Company Preferred Stock received by the Jeffrey E. Eberwein Revocable Trust (the “Eberwein Trust”) as a result of the Distribution and (ii) 844 shares of Company Preferred Stock acquired by the Eberwein Trust as a result of shares of Company Preferred Stock distributable to LSV GP in the Distribution being transferred directly to the Eberwein Trust contemporaneously with the Distribution. At the time of the Distribution, the Eberwein Trust was a limited partner of LSVI and LSV GP was the general partner of LSVI. Mr. Eberwein, as the trustee of the Eberwein Trust, may be deemed to beneficially own the securities held in the Eberwein Trust. Mr. Eberwein expressly disclaims beneficial ownership of such securities held in the Eberwein Trust except to the extent of his pecuniary interest therein. Mr. Eberwein, by virtue of his position as the manager and sole beneficial owner of LSV GP, the general partner of LSVI, may be deemed to beneficially own the securities owned by LSVI and LSV GP. Mr. Eberwein expressly disclaims beneficial ownership of such securities owned by LSVI and the securities owned by LSV GP, except to the extent of his pecuniary interest therein.

Private Placement

Immediately prior to the closing of the ATRM Merger, the Company issued 300,000 shares of Company Preferred Stock in a private placement (the “Private Placement”) to LSVI for a price of $10.00 per share for total proceeds to the Company of $3.0 million.

At the closing of the Private Placement, the Company and LSVI entered into a Registration Rights Agreement.

On September 17, 2020, in connection with satisfying the Company’s obligations under the Registration Rights Agreement, the Company filed a registration statement 1,492,321 shares of Company Preferred Stock.

Put Option Agreement

In addition, prior to the effective time of the ATRM Merger, the Company entered into a put option purchase agreement with Mr. Eberwein, pursuant to which the Company has the right to require Mr. Eberwein to acquire up to 100,000 shares of Company Preferred Stock at a price of $10.00 per share for aggregate proceeds of up to $1.0 million at any time, in the Company’s discretion, during the 12 months following the effective time of the ATRM Merger. In March 2020, Mr. Eberwein extended the put option agreement through June 30, 2021.

ATRM Notes Payable

ATRM, had the following related party promissory notes (the “ATRM Notes”) outstanding as of March 31, 2021, which were repaid in full during April 2021 using proceeds from the DMS Sale Transaction:

(i) Unsecured promissory note (principal amount of $0.7 million payable to LSV Co-Invest I), with interest payable semi-annually at a rate of 10.0% per annum (LSV Co-Invest I may elect to receive interest in-kind at a rate of 12.0% per annum), with any unpaid principal and interest previously due on January 12, 2020 (the “January Note”). On November 13, 2019, LSV Co-Invest I extended the maturity date of the January Note from January 12, 2020, to the earlier of (i) October 1, 2020 and (ii) the date when the January Note is no longer subject to a certain Subordinate Agreement dated January 12, 2018, as amended, in favor of Gerber. As described below, in November 2020 and March 2021, Mr. Eberwein signed the second and third extension letter to extend the maturity date of the January Note.

(ii) Unsecured promissory note (principal amount of $1.2 million payable to LSV Co-Invest I), with interest payable semi-annually at a rate of 10.0% per annum (LSV Co-Invest I may elect to receive interest in-kind at a rate of 12.0% per annum), with any unpaid principal and interest previously due on June 1, 2020 (the “June Note”). On November 13, 2019 LSV Co-Invest I also extended the maturity date of the June Note from June 1, 2020, to the earlier of (i) October 1, 2020 and (ii) the date when the January Note is no longer subject to a certain Subordinate Agreement dated June 1, 2018, as amended, in favor of Gerber. As described below, in November 2020 and March 2021, Mr. Eberwein signed the second and third extension letter to extend the maturity date of the June Note.

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(iii) Unsecured promissory note (principal amount of $0.4 million payable to LSVM), with interest payable annually at a rate of 10.0% per annum (LSVM may elect to receive any interest payment entirely in-kind at a rate of 12.0% per annum), with any unpaid principal and interest previously due on November 30, 2020 (the “LSVM Note”). As described below, in November 2020, Mr. Eberwein signed the second and third extension letter to extend the maturity date of the LSVM Note.

LSVM and LSV Co-Invest I on July 17, 2019, waived any right to accelerate payment with respect to the ATRM Merger under the ATRM Notes. In March 2020, Mr. Eberwein, sole manager of LSV Co-Invest I and LSVM, provided the Company a Letter of Support of the ATRM Notes indicating that he will take no adverse action against ATRM for failure to pay the principal due on the ATRM Notes by the maturity date and intends to work with the Company and ATRM to assure the financial success of the Company. In November 2020, Mr. Eberwein signed the second extension letter to extend the maturity date of the ATRM Notes to the earlier of (i) the date that is 5 business days after the Closing Date defined within the DMS stock Purchase Agreement dated October 30, 2020 between the Company and Knob Creek Acquisition Corp. or (ii) the date when the Note is no longer subject to a certain subordinate letter agreement dated January 12, 2018, as amended in favor of Gerber. In March 2021, Mr. Eberwein signed the third extension letter to extend the maturity dates of the ATRM Notes to aforementioned two conditions or to June 30, 2022. The ATRM Notes were paid off in full in April 2021, upon the completion of DMS Sale Transaction.

Subordination Agreement

LSVM and LSV Co-Invest I are party to subordination agreements with ATRM and Gerber pursuant to which LSVM and LSV Co-Invest I agreed to subordinate the obligations of ATRM under their unsecured promissory notes to the obligations of the borrowers to Gerber.

Acquisitions and Leases of Maine Facilities

Through its SRE subsidiary, and prior to the completion of the ATRM Merger, the Company purchased two plants in Maine that manufacture modular buildings from KBS, a wholly-owned subsidiary of ATRM. SRE then leased these properties back to KBS, as further described below.

Waterford

On April 3, 2019, 947 Waterford, a wholly-owned subsidiary of SRE, entered into a Purchase and Sale Agreement (the “Waterford Purchase Agreement”) with KBS pursuant to which 947 Waterford closed on the purchase of certain real property and related improvements (including buildings) located in Waterford, Maine (the “Waterford Facility”) from KBS, and acquired the Waterford Facility. The purchase price of the Waterford Facility was $1.0 million, subject to adjustment for taxes and other charges and assessments.

Paris

On April 3, 2019, 300 Park, a wholly-owned subsidiary of SRE, entered into a Purchase and Sale Agreement (the “Park Purchase Agreement”) with KBS, pursuant to which 300 Park closed on the purchase of certain real property and related improvements and personal property (including buildings, machinery and equipment) located in Paris, Maine (the “Park Facility”) from KBS, and acquired the Park Facility. The purchase price of the Park Facility was $2.9 million, subject to adjustment for taxes and other charges and assessments.

Lease of Maine Facilities

On April 3, 2019, KBS entered into a separate lease agreement with each of 947 Waterford (the “Waterford Lease”) and 300 Park (the “Park Lease”). The Waterford Lease has an initial term of 120 months, which is subject to extension. The base rental payments associated with the initial term under the Waterford Lease were estimated to be between $1.2 million and $1.3 million in the aggregate. The Park Lease had an initial term of 120 months, which is subject to extension. The base rental payments associated with the initial term under the Park Lease are estimated to be between $3.3 million and $3.6 million in the aggregate. ATRM had unconditionally guaranteed the performance of all obligations under the Waterford Lease and Park Lease to be performed by KBS under each lease, including, without limitation, the payment of all required rent.

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On March 27, 2019, 56 Mechanic, a wholly-owned subsidiary of SRE, purchased from a third party certain property and equipment located in Oxford, Maine (the “Oxford Facility”). The transaction closed on April 25, 2019. The purchase price of the Oxford Facility was $1.2 million, subject to adjustment for taxes and other charges and assessments. On April 3rd and 18th of 2019, KBS signed a lease and an amendment, respectively, with 56 Mechanic (the “Oxford Lease”), which became effective upon the closing of the transaction. The initial term under the Oxford Lease will commence upon delivery of the Oxford Facility to KBS. The Oxford Lease had an initial term of 120 months, which is subject to extension. The base rental payments associated with the initial term under the Oxford Lease are estimated to be between $1.4 million and $1.5 million in the aggregate. ATRM had unconditionally guaranteed the performance of all obligations under the Oxford Lease to be performed by KBS, including, without limitation, the payment of all required rent.

As of March 31, 2021 and upon the completion of the ATRM Merger, the Waterford Lease, the Park Lease and the Oxford Lease are treated as intercompany transactions and eliminated in the consolidation.

Note 13. Perpetual Preferred Stock

Holders of shares of Series A Preferred Stock (the Company Preferred Stock) are entitled to receive, when, as and if, authorized by the Company’s board of directors (or a duly authorized committee of the Company’s board of directors) and declared by the Company out of funds legally available for the payment of dividends, preferential cumulative cash dividends at the rate of 10.0% per annum of the liquidation preference of $10.00 per share. Dividends are payable quarterly, in arrears, on the last calendar day of March, June, September and December to holders of record at the close of business on the first day of each payment month. The Company Preferred Stock is not convertible and does not have any voting rights, except when dividends are in arrears for six or more consecutive quarters, then the holders of those shares together with holders of all other series of preferred stock equal in rank will be entitled to vote separately as a class for the election of two additional directors to board of directors, until all dividends accumulated on such shares of Company Preferred Stock for the past dividend periods and the dividend for the then current dividend period shall have been fully paid or declared and a sum sufficient for the payment thereof set apart for payment. Under change of control or other conditions, the Company Preferred Stock may be subject to redemption. The Company may redeem the Company Preferred Stock upon the occurrence of a change of control, subject to certain conditions. The Company may also voluntarily redeem some or all of the Company Preferred Stock on or after September 10, 2024.

As of March 31, 2021, the Company’s board has not declared a dividend on the Company Preferred Stock and the aggregate and per-share amounts of cumulative preferred dividends in arrears are $3.0 million and $0.60 per share, respectively.

A roll forward of the balance of Company Preferred Stock for the quarter ended March 31, 2021 is as follows (in thousands):

Balance at December 31, 2020	$	21,500
Deemed dividend on redeemable convertible preferred stock	479
Balance at March 31, 2021	$	21,979

Note 14. Subsequent Events

None.

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis of financial condition and results of operations (“MD&A”), contains forward-looking statements that involve risks and uncertainties. Please see “Important Information Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks, and assumptions that may cause our actual results to differ materially from those discussed in the forward-looking statements. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and related notes thereto for the fiscal year ended December 31, 2020, which were included in our Form 10-K, filed with the SEC on March 29, 2021.

The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods.

Overview

The year 2020 marked the first full year that Star Equity, known prior to January 1, 2021 as Digirad Corporation, operated as a multi-industry holding company. With the acquisition of ATRM in September 2019, we added construction businesses to what had historically been a healthcare company and thereby transformed the Company into a diversified holding company with operating businesses in two important industry sectors of the economy, healthcare and construction.

Our Healthcare division, which is operated as Digirad Health, provides products and services in the area of nuclear medical imaging with a focus on cardiac health. Digirad Health operates across the U.S. The healthcare business involves two reporting segments, Diagnostic Services, which offers imaging services to healthcare providers using a fleet of our proprietary solid-state gamma cameras and Diagnostic Imaging, which manufactures, distributes and maintains our proprietary solid-state gamma cameras.

Our Construction division is a single reporting segment but is made up of three operating business, KBS, EdgeBuilder and Glenbrook. KBS is based in Maine and manufactures modular buildings for installation throughout the New England market. EdgeBuilder and Glenbrook, referred to together as “EBGL” internally and based in the Minneapolis-Saint Paul area, together manufacture structural wall panels and other engineered wood-based products as well as distribute building materials to professional builder customers in the Upper Midwest.

Currently, our Investments division is an internally-focused unit that is directly supervised by Star Equity management and is responsible for the management of our real estate and investments, which currently includes our three manufacturing facilities in Maine that are leased to KBS.

Strategy

Star Equity

We believe our diversified, multi-industry holding company structure will allow Star Equity management to focus on capital allocation, strategic leadership, mergers and acquisitions, capital markets transactions, investor relations, management of our real estate and investments, and other public company activities. Our structural will free up our operating Chief Executive Officers to manage their respective businesses, look for organic and bolt-on growth opportunities and improve operations, with fewer distractions and administrative burdens.

We continue to explore strategic alternatives to improve the market position and profitability of our product offerings in the marketplace, generate additional liquidity, and enhance our valuation. We may pursue our goals through organic growth or through strategic transactions. Some of these strategic transactions have included, and could continue to include, selective acquisitions of business segments or entire businesses, divestitures of assets or divisions, or a restructuring of our company.

We seek to grow our business by, among other things:

•Organic growth from our core businesses. We believe that we operate in markets and geographies that will allow us to continue to grow our core businesses, allowing us to benefit from our scale and strengths. We plan to focus our efforts on markets in which we already have a presence in order to take advantage of personnel, infrastructure, and brand recognition we have in these areas.

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•Introduction of new services. In the Healthcare division, we plan to continue to focus on healthcare solutions related businesses that deliver necessary assets, services and logistics directly to the customer site. We believe that over time we can either purchase or develop new and complementary businesses and take advantage of our customer loyalty and distribution channels. In the Construction division, we will consider opportunities to augment our service offering to better serve our customer base. We have done this in the New England market by adding a structural wall panel line. Other areas might include logistics, installation on site, and manufacturing of sub-components or enhancements that create even more complete modules, such as full HVAC installation.

•Acquisition of complementary businesses. We plan to continue to look at complementary businesses that meet our internally developed financially disciplined approach for acquisitions to grow our company. We believe there are many potential small targets that can be acquired over time and integrated into our platform. We will also look at larger, more transformational acquisitions (public or private) if we believe the appropriate mix of value, risk and return is present for our shareholders. The timing of these potential acquisitions will always depend on market conditions, available capital, and the value for each transaction. In general, we want to be “value” buyers, and will not pursue any transaction unless we believe the post-transaction potential value is high for shareholders.

We continue to explore strategic alternatives to improve the market position and profitability of our product offerings in the marketplace, generate additional liquidity, and enhance our valuation. We may pursue our goals through organic growth and through strategic alternatives. Some of these alternatives have included, and could continue to include, selective acquisitions of business segments or entire businesses, divestitures of assets or divisions, or a restructuring of our company.

Current Market Conditions

The year 2020 proved to be a challenging year for the vast majority of businesses across many sectors of the economy. With the COVID-19 vaccine rollout now well underway, we are hopeful that we will soon make our way back to pre-COVID levels of business activity. We believe the uncertainty surrounding the pandemic will continue to decrease as we progress through 2021. On the healthcare side, we expect to see imaging volume recover as the pandemic is brought under control. In construction, we expect that continued recovery in employment and a strong housing market will underpin the growth we are seeing.

The target market for our healthcare products and services is comprised of cardiologists, internal medicine physicians, family practice physicians, hospitals, IDNs, and federal institutions in the United States that perform or could perform a diagnostic imaging procedure, have a need for cardiac event monitoring, or have interest in purchasing a diagnostic imaging products. Our diagnostic services businesses currently operate in approximately 25 states. The overriding challenge during 2020 was the drop in imaging volume due to the COVID-19 pandemic. During the three months ended March 31, 2021, while we provide critical and important imaging services focused in the cardiac area, the risks of exposure led to reduced patient volumes as these tests were deferred or canceled in hopes that the pandemic would abate.

The target market for our construction division includes residential home builders, general contractors, owners or developers of commercial buildings, and individual retail customers. While we witnessed a number of municipalities, especially in the Boston area, shutdown construction sites during the early wave of infections and even shutdown our own plant in South Paris, Maine for six weeks in April and May of 2020, housing demand and demand for building materials have increased as the COVID-19 pandemic has led to “nesting” at home, which were positive factors in the second half of 2020 and have continued through the first quarter of 2021. The challenge has been less on the demand side and more on the supply chain, as wood-based commodities prices, lumber and OSB, have increased rapidly coming out of the first wave of the pandemic in the Spring of 2020 and supply has not kept up with demand. We have seen some supply chain disruption and tightness during the second half of 2020 and that has continued into 2021 as lead times have extended out, but we are still able to operate at normal levels of production. We believe that the high price environment that we are currently experiencing will lead to additional supply coming on line later this year.

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Trends and Drivers

The market for diagnostic services and products is highly competitive. Our business, which is focused primarily on the private practice and hospital sectors, continues to face uncertainty in the demand for diagnostic services and imaging equipment, which we believe is due in part to the impact of the Deficit Reduction Act on the reimbursement environment and the 2010 Healthcare Reform laws, COVID-19 pandemic impact, as well as general uncertainty in overall healthcare and legislative changes in healthcare, such as the Affordable Care Act. These challenges have impacted, and will likely continue to impact, our operations. We believe that the principal competitive factors in our market include budget availability for our capital equipment, qualifications for reimbursement, pricing, ease-of-use, reliability, and mobility. We have addressed, and will continue to address, these market pressures by modifying our Diagnostic Services business models, and by assisting our healthcare customers in complying with new regulations and requirements.

In our construction division, we continue to see a greater adoption of offsite or prefab construction in single-family and multi-family residential building projects, our target market. Our modular units and structural wall panels offer builders a number of benefits over traditional onsite or “stick built” construction. These include shorter time to market, higher quality, reduced waste, readily available labor and potential cost savings, among others. 3D BIM software modeling and developments in engineered wood products offers greater design flexibility for higher-end applications. The need for more affordable housing solutions also presents a great opportunity for the continued emergence of factory built housing.

COVID-19 Pandemic

During the three months ended March 31, 2021, we experienced a $0.4 million decrease in Healthcare division revenue which was offset by a $3.6 million increase, in Construction revenue, as compared to the same period of the prior year. With the COVID-19 vaccine rollout now well underway, we are hopeful that we will gradually make our way back to pre-COVID levels of business activity. We believe the uncertainty surrounding the pandemic will continue to decrease as we progress through 2021. On the healthcare side, we expect to see imaging volume recover as the pandemic is brought under control. In construction, we expect that continued recovery in employment and a strong housing market will underpin the growth we are seeing.

Discontinued Operations

The DMS Sale Transaction was completed on March 31, 2021, for $18.75 million in cash, subject to certain adjustments, including a working capital adjustment. The divestiture of DMS Health, which operated our Mobile Healthcare segment, met the definition of a strategic shift that has a significant effect on our operations and financial results; therefore, the results of operations for the Mobile Healthcare segment have been presented as discontinued operations in accordance with ASC 205-20, Presentation of Financial Statements-Discontinued Operations for all periods presented. Additionally, Mobile Healthcare’s assets and liabilities as of December 31, 2020 are separately presented as held for sale on the unaudited consolidated balance sheet. Unless otherwise noted, discussion within these notes to the unaudited consolidated financial statements relates to continuing operations.

Business Segments

As of March 31, 2021, our business is organized into four reportable segments:

•Diagnostic Services

•Diagnostic Imaging

•Construction

•Investments

Diagnostic Services

Through this segment, we offer a convenient and economically efficient imaging and monitoring services program as an alternative to purchasing equipment or outsourcing the procedures to another physician or imaging center. For physicians who wish to perform nuclear imaging, echocardiography, vascular or general ultrasound tests, we provide imaging systems, qualified personnel, radiopharmaceuticals, licensing services, and the logistics required to perform imaging in their own offices, and thereby the ability to bill Medicare, Medicaid, or one of the third-party healthcare insurers directly for those services, which are primarily cardiac in nature. We provide imaging services primarily to cardiologists, internal medicine physicians, and family practice doctors who typically enter into annual contracts for a set number of days ranging from once per month to five times per week.

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Diagnostic Imaging

Through this segment, we sell our internally developed solid-state gamma cameras, imaging systems and camera maintenance contracts. Our imaging systems include nuclear cardiac imaging systems, as well as general purpose nuclear imaging systems. We sell our imaging systems to physician offices and hospitals primarily in the United States, although we have sold a small number of imaging systems internationally. Our imaging systems are sold in both portable and fixed configurations, provide enhanced operability and improved patient comfort, fit easily into floor spaces as small as seven feet by eight feet, and facilitate the delivery of nuclear medicine procedures in a physician’s office, an outpatient hospital setting, or within multiple departments of a hospital (e.g., emergency and operating rooms). Our Diagnostic Imaging segment revenues derive primarily from selling solid-state gamma cameras and post-warranty camera maintenance contracts.

Construction

Through this segment, by way of our wholly-owned subsidiaries KBS, Glenbrook and EdgeBuilder, we service residential and commercial construction projects by manufacturing modular housing units, structural wall panels, permanent wood foundation systems, other engineered wood products, and supply general contractors with building materials. KBS is a Maine-based manufacturer that started business in 2001 as a manufacturer of modular homes. KBS offers products for both multi-family and single-family residential buildings with a focus on customization to suit the project requirements and provide engineering and design expertise. Glenbrook is a supplier of lumber, windows, doors, cabinets, drywall, roofing, decking and other building materials to professional builders and conducts its operations in Oakdale, Minnesota. EdgeBuilder is a manufacturer of structural wall panels, permanent wood foundation systems and other engineered wood products and conducts its operations in Prescott, Wisconsin.

Investments

Through this segment, we hold real estate assets that we have acquired and will potentially manage other future investments of Star Equity. In April 2019, the Company funded the initial purchase of three manufacturing facilities in Maine that manufacture modular buildings and leased those three properties back to KBS. The initial funding of the assets acquisition was primarily through the revolver loan under our SNB Credit Facility. Since that time, we have secured a new facility from Gerber to finance these properties.

Healthcare Services and Products

Diagnostic imaging depictions of the internal anatomy or physiology are generated primarily through non-invasive means. Diagnostic imaging facilitates the early diagnosis of diseases and disorders, often minimizing the scope, cost, and amount of care required and reducing the need for more invasive procedures. Currently, the major types of non-invasive diagnostic imaging technologies available are: ultrasound and nuclear imaging. The most widely used imaging acquisition technology utilizing gamma cameras is single photon emission computed tomography, or SPECT. All our current internally-developed cardiac gamma cameras employ SPECT technology.

Diagnostic imaging is the standard of care in diagnosis of diseases and disorders. We offer, through our businesses, the majority of these diagnostic imaging modalities. All of the diagnostic imaging modalities that we offer (both from provision of services and product sales) have been consistently utilized in clinical applications for many years, and are stable in their use and need. By offering a wide array of these modalities, we believe that we have strategically diversified our operations in possible changing trends of utilization of one diagnostic imaging modality from another.

Construction Services and Products

In the construction business, KBS markets its modular homes products through a direct sales organization and through inside sales, outside sales, a network of independent dealers, builders, and contractors in the New England states (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont). KBS’s direct sales organization is responsible for all commercial building projects, and works with developers, architects, owners, and general contractors to establish the scope of work, terms of payment, and general requirements for each project. KBS’s sales people also work with independent dealers, builders, and contractors to accurately configure and place orders for residential homes for their end customers. KBS’s network of independent dealers and contractors do not work with it exclusively, although many have KBS model homes on display at their retail centers. KBS does not assign exclusive territories to its independent dealers and contractors, but they tend to sell in areas of New England where they will not be competing against another KBS dealer or contractor. KBS’s backlog and pipeline, along with its market initiatives to build more workforce housing, are expected to position KBS for continued growth.

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EBGL markets its engineered structural wall panels and permanent wood foundation systems through direct sales people and a network of builders, contractors and developers in and around Minneapolis and St. Paul areas. EBGL’s direct sales organization is responsible for both residential and commercial projects and it works with general contractors, developers and builders to provide bids and quotes for specific projects. Our marketing efforts include participation in industry trade shows, production of product literature, and sales support tools. These efforts are designed to generate sales leads for our independent builders and dealers, and direct salespeople.

Critical Accounting Policies and Estimates

In preparing our financial statements, we make estimates, assumptions and judgments that can have a significant impact on our revenue and net income or loss, as well as on the value of certain assets and liabilities on our balance sheet. We believe that the estimates, assumptions, and judgments involved in the accounting policies described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 have the greatest potential impact on our financial statements, so we consider them to be our critical accounting policies and estimates.

Results of Operations

Comparison of the Three Months Ended March 31, 2021 and 2020

The following table summarizes our results for the three months ended March 31, 2021 and 2020 (in thousands): 

	Three Months Ended March 31,
	2021		Percent of  Revenues		2020		Percent of  Revenues		Change from Prior Year
									Dollars		Percent
Total revenues	$	22,354	100.0	%	$	19,190	100.0	%	$	3,164	16.5	%
Total cost of revenues	19,277		86.2	%	15,947		83.1	%	3,330		20.9	%
Gross profit	3,077		13.8	%	3,243		16.9	%	(166)		(5.1)	%
Total operating expenses	4,646		20.8	%	5,439		28.3	%	(793)		(14.6)	%
Loss from operations	(1,569)		(7.0)	%	(2,196)		(11.4)	%	627		(28.6)	%
Total other expense	983		4.4	%	(145)		(0.8)	%	1,128		(777.9)	%
Loss before income taxes	(586)		(2.6)	%	(2,341)		(12.2)	%	1,755		(75.0)	%
Income tax expense	(2)		—	%	(27)		(0.1)	%	25		(92.6)	%
Net loss from continuing operations	$	(588)	(2.6)	%	$	(2,368)	(12.3)	%	$	1,780	(75.2)	%

Revenues

Healthcare

Healthcare revenue by segments is summarized as follows (in thousands):

	Three Months Ended March 31,
	2021		2020		Change		% Change
Diagnostic Services	$	10,239	$	10,814	$	(575)	(5.3)	%
Diagnostic Imaging	3,068		2,861		207		7.2	%
Total Healthcare Revenue	$	13,307	$	13,675	$	(368)	(2.7)	%

Although Q1 2021 revenues for the Diagnostic Services decreased slightly from Q1 2020, this division has largely recovered and is now performing near pre-pandemic levels. Most doctor offices have reopened and hospitals are now performing non-emergency procedures. As state-by-state vaccination levels increase, we expect to see our operations fully return to normal levels later this year.

The increase in Diagnostic Imaging is due to higher number of cameras sold compared to the prior year quarter.

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Construction

Construction revenue is summarized as follows (in thousands):

	Three Months Ended March 31,
	2021		2020		Change		% Change
Construction	$	9,047	$	5,484	$	3,563	65.0	%
Construction Revenue	$	9,047	$	5,484	$	3,563	65.0	%

The increase in revenue for the Construction division was predominately due to higher production levels at KBS, with $2.7 million in revenue recognized on a large commercial project.

Investments

Investments revenue is summarized as follows (in thousands):

	Three Months Ended March 31,
	2021		2020		Change		% Change
Investments	$	—	$	31	$	(31)	(100.0)	%
Investments Revenue	$	—	$	31	$	(31)	(100.0)	%

The decrease in investments revenue was due to the wind down of investment vehicles from LSVM.

Gross Profit

Healthcare Gross Profit

Healthcare gross profit and gross margin by segments is summarized as follows (in thousands):

	Three Months Ended March 31,
	2021			2020			% Change
Diagnostic Services gross profit	$	1,608		$	2,005		(19.8)	%
Diagnostic Services gross margin	15.7		%	18.5		%
Diagnostic Imaging gross profit	$	990		$	869		13.9	%
Diagnostic Imaging gross margin	32.3		%	30.4		%
Total healthcare gross profit	$	2,598		$	2,874		(9.6)	%
Total healthcare gross margin	19.5		%	21.0		%

The decrease in Diagnostic Services gross margin percentage was mainly due to the COVID-19 pandemic impact and the associated public health measures in place, which directly reduced scanning revenue. While management proactively applied measures to contain costs during the pandemic, there were fixed costs which resulted in the decrease in gross margin.

The increase in Diagnostic Imaging gross margin percentage was mainly due to higher camera revenue recognized in the three months ended March 31, 2021 compared to the prior year same period.

Construction Gross Profit

Construction gross profit and margin is summarized as follows (in thousands):

	Three Months Ended March 31,
	2021			2020			% Change
Construction gross profit	$	544		$	403		35.0	%
Construction gross margin	6.0		%	7.3		%

The increase in Construction gross profit was predominately due to higher production levels at KBS, with $2.7 million in revenue recognized on a large commercial project. The decrease in gross margin percentage is due to the negative effect of higher raw material prices.

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Investments Gross Loss

Investments gross loss is summarized as follows (in thousands):

	Three Months Ended March 31,
	2021		2020		% Change
Investments gross loss	$	(65)	$	(34)	91	%

The Investments gross loss relates to depreciation expense associated with the three manufacturing facilities acquired in April 2019 and investment vehicles through LSVM. The decrease was due the reduced activities in investment vehicles from LSVM.

Operating Expenses

Operating expenses are summarized as follows (in thousands):

	Three Months Ended March 31,								Percent of Revenues
	2021		2020		Change				2021		2020
					Dollars		Percent
Selling, general and administrative	$	5,055	$	4,863	$	192	3.9	%	22.6	%	25.3	%
Amortization of intangible assets	438		576		(138)		(24.0)	%	2.0	%	3.0	%
Gain on sale of MD Office Solutions	(847)		—		(847)		(100.0)	%	(3.8)	%	—	%
Total operating expenses	$	4,646	$	5,439	$	(793)	(14.6)	%	20.8	%	28.3	%

The $0.2 million increase in sales, general and administrative expenses was primarily due to a $0.3 million increase in the Construction business as a result of increased commissions and headcount, offset by $0.1 million reduced travel expense in Healthcare division.

The $0.1 million decrease in amortization of intangible assets and the $0.8 million gain was due to the sale of MD Office Solutions.

Total Other Income (Expense)

Total other income (expense) is summarized as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Other income, net	$	1,255	$	160
Interest expense, net	(272)		(305)
Total other income (expense)	$	983	$	(145)

Other income, net for three months ended March 31, 2021 is predominantly comprised of $1.3 million PPP loan forgiveness from KBS and EBGL.

Interest expense, net, for the three months ended March 31, 2021 and 2020 are predominantly comprised of interest costs and the related amortization of deferred issuance costs on our debt, respectively.

Income Tax Expense

For the three months ended March 31, 2021, we recorded an income tax expense from continuing operations of $2 thousand. See Note 10, Income Taxes, within the notes to our unaudited consolidated financial statements for further information related to the Company’s income taxes.

Income from Discontinued Operations

See Note 2, Discontinued Operations of the unaudited condensed consolidated financial statements for information regarding discontinued operations.

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Liquidity and Capital Resources

Overview

We used cash of $2.2 million for operations during the three months ended March 31, 2021. Cash flow used in operations primarily consist of our net loss (adjusted for depreciation, amortization, and other non-cash items), and the net effect of changes in working capital. Cash flow provided by investing activities was used primarily for investment in capital equipment required to maintain and grow our business, as well as acquisitions and dispositions. Cash flow from financing activities primarily consisted of our net proceeds from borrowings on various revolving facilities and the receipt of cash from the conversion of cash warrants converted into common stock, offset by the repayments of long-term borrowings.

Our principal sources of liquidity include our existing cash and cash equivalents, cash generated from operations, and funds available under various credit facilities and proceeds from sale of DMS Health. As of March 31, 2021, we had $13.3 million of cash, cash equivalents and restricted cash and $4.5 million available under our Sterling revolving line of credit.

We require capital, principally for capital expenditures, acquisition activity, dividend payments and to finance accounts receivable and inventory. Our working capital requirements vary from period to period depending on inventory requirements, the timing of deliveries, and the payment cycles of our customers. Our capital expenditures consist primarily of medical imaging and diagnostic devices utilized in the delivery of our services, as well as vehicles and information technology hardware and software.

Regarding our debt, we had approximately $12.5 million in short term debt due to our borrowings which is classified as short term as disclosed in Note 8. Debt. The $5.0 million SNB credit facility primarily supports our healthcare business and actually matures in 2024, but GAAP rules require that the outstanding balance be classified as short-term debt, due to the automatic sweep feature embedded in the traditional lockbox arrangement along with a subjective acceleration clause in the SNB Loan and Security Agreement. In practice, we have the ability to immediately borrow back these daily sweeps to fund our working capital. As of March 31, 2021, we were in compliance with all borrowing arrangements related to our Healthcare division. As of March 31, 2021, we had $4.5 million of borrowing capacity to fund the operations of these divisions.

As of March 31, 2021, we have $4.6 millionoutstanding on our Construction revolvers with Gerber and were in compliance with all borrowing covenants for Gerber, however, we were in breach of our covenants as of December 31, 2020 and may be in breach at our next measurement period at June 30, 2021. While Gerber has historically provided us with waivers, there is no assurance that we will be able to receive waivers for covenant violations in the future, or that we will meet compliance with covenants in the future. Related party notes of $2.3 million was paid off on April 1, 2021 using proceeds from the DMS Sale Transaction. In addition, as of March 31, 2021, we had cash and cash equivalents of $13.3 million.

Management believes that the Company has the liquidity and operations to continue to support the business through the next 12 months from the issuance of this Quarterly Report. Our ability to continue as a going concern is dependent on its ability to execute its plans.

Common Stock Equity Offering

On May 28, 2020, we closed a public offering (the “Offering”) of 2,225,000 shares of our common stock, and 2,225,000 warrants (the “Warrants”) to purchase up to 1,112,500 additional shares of our common stock. The Offering price was $2.24 per share of common stock and $0.01 per accompanying Warrant (for a combined Offering price of $2.25), initially raising $5.0 million in gross proceeds before underwriter discounts and offering-related expenses. The underwriting agreement (the “Underwriting Agreement”) we entered into with Maxim Group LLC (“Maxim”), as representative of the underwriters, for the Offering contained customary representations, warranties, and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and Maxim and certain other obligations.

Pursuant to the terms of the Underwriting Agreement, we granted to Maxim an option for a period of 45 days (the “Over-Allotment Option”) to purchase up to 225,000 additional shares of our common stock and 225,000 Warrants to purchase up to an additional 112,500 shares of our common stock. Effective as of the closing of the Offering, Maxim exercised the Over-Allotment Option for the purchase of 225,000 Warrants for a price of $0.01 per Warrant. On June 10, 2020, Maxim exercised the Over-Allotment Option for the purchase of 225,000 shares of our common stock for a price of $2.24 per share, before underwriting discounts. The closing of the sale of the over-allotment shares brought the total number of shares of common stock we sold in the Offering to 2,450,000 shares, and total gross proceeds to approximately $5.5 million. In addition, the Company received $0.5 million from investors in the Offering throughout the balance of March 31, 2021 due to the exercise of a portion of the Warrants sold in the Offering, bringing the total gross proceeds from equity issuance to $6.5 million.

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The net proceeds to the Company from the Offering and Warrant exercises in 2020 were approximately $5.2 million (inclusive of the exercise of the over-allotment option), after deducting underwriter fees and offering-related expenses estimated at $0.8 million. We used a significant portion of the net proceeds from the Offering to fund working capital needs at our construction businesses, particularly related to modular housing projects which we produced at KBS Builders, Inc. (“KBS”) for the Boston-area projects. The remainder of the net proceeds is being used for working capital and for other general corporate purposes. We have broad discretion in determining how the proceeds of the Offering is used, and our discretion is not limited by the aforementioned possible uses.

As of March 31, 2021, 0.9 million warrants were exercised and 1.5 million warrants remained outstanding at an exercise price of $2.25.

Cash Flows

The following table shows cash flow information for the three months ended March 31, 2021 and 2020 (in thousands): 

	Three Months Ended March 31,
	2021		2020
Net cash (used in) provided by operating activities	$	(2,232)	$	623
Net cash provided by (used in) investing activities	$	18,315	$	(135)
Net cash (used in) provided by financing activities	$	(6,180)	$	(957)

Operating Activities

The increase in cash used compared to the prior year period was primarily due to increased investment in working capital to fund the revenue growth in the Construction division.

Investing Activities

The increase in investing activities cash flow compared to the prior year period was primarily attributable to $18.75 million proceeds received from DMS Health disposition.

Financing Activities

The decrease in cash flows from financing activities is primarily due to a $7.9 million pay down of the SNB Credit Facility using the proceeds from the sale of the DMS Health business.

Sterling Credit Facility

On March 29, 2019, the Company entered into a Loan and Security Agreement (the “SNB Loan Agreement”) by and among certain subsidiaries of the Company, as borrowers (collectively, the “SNB Borrowers”); the Company, as guarantor; and Sterling as lender.

The SNB Loan Agreement is a five-year credit facility maturing in March 2024, with a maximum credit amount of $20.0 million for revolving loans (the “SNB Credit Facility”). Under the SNB Credit Facility, the SNB Borrowers can request the issuance of letters of credit in an aggregate amount not to exceed $0.5 million at any one time outstanding. The borrowings under the SNB Loan Agreement were classified as short-term obligations under GAAP as the agreement contained a subjective acceleration clause and required a lockbox arrangement whereby all receipts within the lockbox are swept daily to reduce borrowings outstanding. As of March 31, 2021, the Company had $0.2 million of letters of credit outstanding and had additional borrowing capacity of $4.5 million.

At the Borrowers’ option, the SNB Credit Facility will bear interest at either (i) a Floating LIBOR Rate, as defined in the Loan Agreement, plus a margin of 2.50% per annum; or (ii) a Fixed LIBOR Rate, as defined in the Loan Agreement, plus a margin of 2.25% per annum. As our largest single debt outstanding, our floating rate on this facility at March 31, 2021 was 2.61%.

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The SNB Loan Agreement includes certain representations, warranties of SNB Borrowers, as well as events of default and certain affirmative and negative covenants by the SNB Borrowers that are customary for loan agreements of this type. These covenants include restrictions on borrowings, investments and dispositions by SNB Borrowers, as well as limitations on the SNB Borrowers’ ability to make certain distributions. Upon the occurrence and during the continuation of an event of default under the SNB Loan Agreement, SNB may, among other things, declare the loans and all other obligations under the SNB Loan Agreement immediately due and payable and increase the interest rate at which loans and obligations under the SNB Loan Agreement bear interest. The SNB Credit Facility is secured by a first-priority security interest in substantially all of the assets of the Company and the SNB Borrowers and a pledge of all shares of the SNB Borrowers.

On March 29, 2019, in connection with the Company’s entry into the SNB Loan Agreement, Jeffery E. Eberwein, the Executive Chairman of the Company’s board of directors, entered into Limited Guaranty Agreement (the “SNB Eberwein Guaranty”) with SNB pursuant to which he guaranteed the prompt performance of all the Borrowers’ obligations under the SNB Loan Agreement. The SNB Eberwein Guaranty is limited in the aggregate to the amount of (a) $1.5 million, plus (b) reasonable costs and expenses of SNB incurred in connection with the SNB Eberwein Guaranty. Mr. Eberwein’s obligations under the SNB Eberwein Guaranty terminate upon the Company and Borrowers achieving certain milestones set forth therein.

On February 1, 2021, in connection with the closing of the Company’s sale of MD Office Solutions, the Company entered into a First Amendment to the SNB Loan Agreement pursuant to which, among other things, Sterling consented to the sale of MD Office Solutions and the Company’s name change from Digirad Corporation to Star Equity Holdings, Inc.

On March 31, 2021, in connection with completing the sale of DMS Health, the Company, certain subsidiaries of the Company, and Sterling entered into a Second Amendment to the SNB Loan Agreement pursuant to which, among other things, Sterling consented to the sale of DMS Health and its subsidiaries, removed DMS Health and its subsidiaries as borrowers under the SNB Loan Agreement, and required the principle to be paid down to $7.0 million.

At March 31, 2021, the Company was in compliance with the covenants under the SNB Loan Agreement.

Construction Loan Agreements

As of March 31, 2021, the Construction division had outstanding revolving lines of credit of approximately $5.4 million. This debt includes: (i) $2.7 million principal outstanding on KBS’s $4.0 million revolving credit facility under a Loan and Security Agreement, dated February 23, 2016, (as amended, the “KBS Loan Agreement”), with Gerber and (ii) $2.0 million principal outstanding on EBGL’s $3.0 million revolving credit facility under a Revolving Credit Loan Agreement, and $0.7 million with Premier, dated June 30, 2017 (as amended, the “Premier Loan Agreement”). The Construction division was at the maximum borrowing capacity under both revolving lines of credit, based on the inventory and accounts receivable on March 31, 2021, which fluctuates weekly.

KBS Loan Agreement

On February 23, 2016, ATRM, KBS and Main Modular Haulers, Inc. (a former subsidiary of ATRM) entered into a Loan and Security Agreement, (as amended, the “KBS Loan Agreement”), with Gerber. The KBS Loan Agreement provides KBS with a revolving line of credit with borrowing availability of up to $4.0 million. Availability under the line of credit is based on a formula tied to KBS’s eligible accounts receivable, inventory and other collateral. The KBS Loan Agreement, which was scheduled to expire on February 22, 2018, has been automatically extended for successive one (1) year periods in accordance with its terms and is now scheduled to expire on February 22, 2022. The KBS Loan Agreement will be automatically extended for another one (1) year period unless a party thereto provides prior written notice of termination. As of March 31, 2021 neither party has provided notice of termination. Upon the final expiration of the term of the KBS Loan Agreement, the outstanding principal balance is payable in full. Borrowings bear interest at the prime rate plus 2.75%, equating to 6.00% at March 31, 2021, with interest payable monthly. The KBS Loan Agreement also provides for certain fees payable to Gerber during its term, including a 1.5% annual facilities fee and a 0.10% monthly collateral monitoring fee. KBS’s obligations under the KBS Loan Agreement are secured by all of its assets and are guaranteed by ATRM. Unsecured promissory notes issued by KBS and ATRM are subordinate to KBS’s obligations under the KBS Loan Agreement. The KBS Loan Agreement contains representations, warranties, affirmative and negative covenants, defined events of default and other provisions customary for financings of this type. Financial covenants require that KBS maintain a maximum leverage ratio (as defined in the KBS Loan Agreement) and KBS not incur a net annual post-tax loss in any fiscal year during the term of the KBS Loan Agreement. The borrowings under the KBS Loan Agreement were classified as short-term obligations under GAAP as the agreement contained a subjective acceleration clause and required a lockbox arrangement whereby certain receipts are swept daily to reduce borrowings outstanding. At March 31, 2021, approximately $2.7 million was outstanding under the KBS Loan Agreement.

During the three months ended, March 31, 2021, the parties to the KBS Loan Agreement have amended the KBS Loan Agreement to provide for increased availability under the KBS Loan Agreement to KBS under certain circumstances, including for new equipment additions, and certain other changes, as well as a waiver of certain covenants.

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As of December 31, 2020 and 2019, KBS was not in compliance with the financial covenants requiring no net annual post-tax loss for KBS or the minimum leverage ratio covenant as of 2020. The occurrence of any event of default under the KBS Loan Agreement may result in KBS’s obligations under the KBS Loan Agreement becoming immediately due and payable. In April 2019, June 2019, February 2020 and February 2021, we obtained a waiver from Gerber for these events.

On September 10, 2019, the parties to the KBS Loan Agreement entered into the twelfth amendment to the KBS Loan Agreement (the “Twelfth KBS Amendment”), pursuant to which the Company agreed to guarantee amounts borrowed by certain ATRM’s subsidiaries from Gerber.

On January 31, 2020, the Company, ATRM, KBS and Gerber entered into a thirteenth amendment to the KBS Loan Agreement (the “Thirteenth KBS Amendment”) to amend the terms of the KBS Loan Agreement, in order to, among other things (a) amend the definitions of “Ancillary Credit Parties,” “Guarantor,” “Obligations,” and “Subordinated Lender” to address the obligations of the Star Borrowers, the EBGL Borrowers, the Star Credit Parties, and the EBGL Credit Parties under the Star Loan Agreement, EBGL Loan Agreement and the Subordination Agreements (each as defined below) to which they are a party and (b) add a new cross default provision.

On March 5, 2020, in connection with the First EBGL Amendment, Gerber, KBS, ATRM and the Company entered into a fourteenth amendment to the KBS Loan Agreement in order to, among other things consent to the First EBGL Amendment and remove cash and cash collateral from the borrowing base.

On April 1, 2020, Gerber and KBS entered into a fifteenth amendment to the KBS Loan Agreement pursuant to which the “Minimum Average Monthly Loan Amount” was decreased to twenty-five percent (25%) of the Maximum Revolving Amount.

On January 5, 2021, Gerber and KBS entered into a sixteenth amendment to the KBS Loan Agreement in order to, among other things, amend certain definitions under the KBS Loan Agreement and to increase the inventory assets against which funds can be borrowed.

On February 26, 2021 Gerber and KBS entered into a seventeenth amendment to the KBS Loan Agreement in order to provide the waiver to the 2020 covenant breach and amended the financial covenants. The financial covenants under the KBS Loan Agreement, as amended, provide that (i) KBS shall make no distribution, transfer, payment, advance, or contribution of cash or property which would constitute a restricted payment; (ii) KBS shall report annual post-tax net income at least equal to (a) $385 thousand for the trailing 6-month period ending June 30, 2021 and (b) $500 thousand for the trailing fiscal year end December 31, 2021; and (iii) a minimum EBITDA at June 30, 2021 of more than $880 thousand or at December 31, 2021 of more than $1.5 million.

EBGL Premier Note

On June 30, 2017, EdgeBuilder and Glenbrook (together, EBGL) entered into a Revolving Credit Loan Agreement (as amended, the “Premier Loan Agreement”) with Premier providing EBGL with a working capital line of credit of up to $3.0 million. The Premier Loan Agreement replaced the prior revolving credit facility.

Availability under the Premier Loan Agreement is based on a formula tied to EBGL’s eligible accounts receivable, inventory and equipment, and borrowings bear interest at the prime rate plus 1.50%, with interest payable monthly and the outstanding principal balance payable upon expiration of the term of the Premier Loan Agreement. The Premier Loan Agreement also provides for certain fees payable to Premier during its term. The initial term of the Premier Loan Agreement was scheduled to expire on June 30, 2018, but was extended multiple times by Premier until January 31, 2023. EBGL’s obligations under the Premier Loan Agreement are secured by all of their inventory, equipment, accounts and other intangibles, fixtures and all proceeds of the foregoing.

On January 31, 2020, Glenbrook and EdgeBuilder entered into an Extension and Modification Agreement (the “Modification Agreement”) with Premier that modified the terms of the Revolving Credit Promissory Note made by Glenbrook and EdgeBuilder. The Modification Agreement reduced the outstanding borrowings to $1.0 million, extended the final maturity date to January 31, 2023, and set the interest rate to at 5.75% per annum. Mr. Eberwein executed a guaranty in favor of Premier, which has been extended through January 1, 2023, under which ATRM and Mr. Eberwein have absolutely and unconditionally guaranteed all of EBGL’s obligations under the Premier Loan Agreement. As of March 31, 2021, approximately $0.7 million was outstanding under the Premier Loan Agreement.

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Gerber Star and EBGL Loans

On January 31, 2020, SRE, 947 Waterford Road, LLC (“947 Waterford”), 300 Park Street, LLC (“300 Park”), and 56 Mechanic Falls Road, LLC (“56 Mechanic” and together with SRE, 947 Waterford, and 300 Park, (the “Star Borrowers”), each an Investments Subsidiary, and the Company, ATRM, KBS, EdgeBuilder, and Glenbrook (collectively, the “Star Credit Parties”), entered into a Loan and Security Agreement (as amended, the “Star Loan Agreement”) with Gerber providing the Star Borrowers with a credit facility with borrowing availability of up to $2.5 million ($2.0 million and $0.5 million to KBS and EBGL, respectively) (the “Star Loan”). The advance of $2.0 million to KBS is to be repaid in monthly installments of sixty (60) consecutive equal payments. The advance of $0.5 million to EBGL, which has been temporarily increased by $0.3 million due to be repaid on April 30, 2020, is to be repaid in monthly installments of twelve (12) consecutive equal payments. On February 20, 2020, the Star Borrowers entered into a first amendment to the Star Loan Agreement (the “First Star Amendment”) in order to (i) temporarily advance $0.3 million to EBGL, which amount is to be repaid to Gerber on or before April 30, 2020; (ii) clarify that Gerber can make multiple advances under the Star Loan Agreement, and (iii) to correct the maturity date of the Star Loan. On April 30, 2020, the Star Borrowers entered into a second amendment to the Star Loan Agreement (the “Second Star Amendment”) to change terms of repayment for the advance of $0.3 million to EBGL to provide for repayment in three consecutive equal monthly installments, commencing on May 30, 2020, with a final installment on or before July 31, 2020. As of March 31, 2021, EBGL repaid approximately $0.5 million and $1.3 million was outstanding under the Star Loan Agreement.

On January 31, 2020, EdgeBuilder and Glenbrook (the “EBGL Borrowers”), each a Construction Subsidiary, and the Company, Star, 947 Waterford, 300 Park, 56 Mechanic, ATRM, and KBS (collectively, the “EBGL Credit Parties”), entered into a Loan and Security Agreement (the “EBGL Loan Agreement”) with Gerber providing the EBGL Borrowers with a credit facility with borrowing availability of up to $3.0 million (the “EBGL Loan”). On March 5, 2020, the EBGL Borrowers entered into a first amendment to the EBGL Loan Agreement (the “First EBGL Amendment”) with Gerber that amended the EBGL Loan Agreement and the KBS Loan Agreement to include a pledge $0.3 million of cash collateral by LSVI under the EBGL Loan Agreement which, prior to the First EBGL Amendment, was pledged by LSVI in connection with the KBS Loan Agreement. On July 1, 2020, the EBGL Borrowers entered into a second amendment to the EBGL Loan Agreement to terminate the pledge of $0.3 million in cash collateral. On February 26, 2021, the EBGL Borrowers entered into a third amendment to the EBGL Loan Agreement (the “Third EBGL Amendment”) pursuant to which the Company and Gerber agreed to, among other things, eliminate the minimum leverage ratio covenant, lower the minimum EBITDA, and require the borrowers to not incur a net operating loss on bi-annual basis. The Third EBGL Amendment also discharged the EBGL Eberwein Guaranty described below. As of March 31, 2021, approximately $2.0 million was outstanding under the EBGL Loan Agreement.

Availability under the Star Loan Agreement is based on a formula tied to the value of real estate owned by the Star Borrowers, and borrowings bear interest at the prime rate plus 3.5% per annum. Availability under the EBGL Loan Agreement is based on a formula tied to the EBGL Borrowers’ eligible accounts receivable and inventory, and borrowings bear interest at the prime rate plus 2.75% per annum. The Loan Agreements also provide for certain fees payable to Gerber during their respective terms. The Star Loan matures on the earlier of (a) January 1, 2025 or (b) the termination, the maturity or repayment of the EBGL Loan. The EBGL Loan matures on the earlier of (a) January 1, 2022, unless extended, or (b) the termination, the maturity or repayment of the Star Loan. The maturity of the EBGL Loan is automatically extended for successive periods of one (1) year each unless terminated by Gerber or the EBGL Borrowers. The borrowings under the EBGL Loan Agreement were classified as short-term obligations under GAAP as the agreement contained a subjective acceleration clause and required a lockbox arrangement whereby all receipts are swept daily to reduce borrowings outstanding.

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The obligations of the EBGL Borrowers under the EBGL Loan Agreement are guaranteed by the EBGL Credit Parties and are secured by substantially all the assets of the EBGL Borrowers and the EBGL Credit Parties. The obligations of the Star Borrowers under the Star Loan Agreement are guaranteed by the Star Credit Parties and are secured by substantially all the assets of the Star Borrowers and the Star Credit Parties. Contemporaneously with the execution and delivery of the Star Loan Agreement, Jeffrey E. Eberwein, the Executive Chairman of the Company’s board of directors, executed and delivered a Guaranty (the “Gerber Eberwein Guaranty”) to Gerber pursuant to which he guaranteed the performance of all the Star Borrowers’ obligations to Gerber under the Star Loan Agreement, including the full payment of all indebtedness owing by the Star Borrowers to Gerber under or in connection with the Star Loan Agreement and related financing documents. Mr. Eberwein’s obligations under the Gerber Eberwein Guaranty are limited in the aggregate to the amount of (a) $2.5 million, plus (b) costs of Gerber incidental to the enforcement of the Gerber Eberwein Guaranty or any guaranteed obligations. On March 5, 2020, contemporaneously with the execution and delivery of the First EBGL Amendment, Mr. Eberwein, the Executive Chairman of the Company’s board of directors, executed and delivered a Guaranty (the “EBGL Eberwein Guaranty”) to Gerber pursuant to which he guaranteed the performance of all the EBGL Borrowers’ obligations to Gerber under the EBGL Loan Agreement, including the full payment of all indebtedness owing by the EBGL Borrowers to Gerber under or in connection with the EBGL Loan Agreement and related financing documents. Mr. Eberwein’s obligations under the EBGL Eberwein Guaranty are limited in the aggregate to the amount of (a) $0.5 million, plus (b) costs of Gerber incidental to the enforcement of the EBGL Eberwein Guaranty or any guaranteed obligations.

On February 26, 2021, the Star Borrowers entered into a third amendment to the Star Loan Agreement (the “Third Star Amendment”) with Gerber that, among other things, amended the contract rate to prime rate plus 3% and discharged the $2.5 million Gerber Eberwein Guaranty.

The Star Loan Agreement and EBGL Loan Agreement contains representations, warranties, affirmative and negative covenants, events of default and other provisions customary for financings of this type. The financial covenants under the EBGL Loan Agreement applicable to the EBGL Borrowers include maintenance of a minimum tangible net worth, a minimum debt service coverage ratio and minimum net income. The Financial covenants under the Star Loan Agreement applicable to the Star Borrowers include a minimum debt service coverage ratio. The occurrence of any event of default under the Loan Agreements may result in the obligations of the Borrowers becoming immediately due and payable. As of December 31, 2020, EBGL was not in compliance with the financial covenants under the Star Loan Agreement and EBGL Loan Agreement as of 2020. The occurrence of any event of default under the EBGL Loan Agreement may result in EBGL’s obligations under the EBGL Loan Agreement becoming immediately due and payable. In February 2021, we obtained a waiver from Gerber for these events and, as part of the Third EBGL Amendment (described above), the Company and Gerber agreed to, among other things, eliminate the minimum leverage ratio covenant, lower the minimum EBITDA, and require the borrowers to not incur a net operating loss on bi-annual basis, as well as discharge the EBGL Eberwein Guaranty.

As a condition to the extension of credit to the Star Borrowers and EBGL Borrowers under the Star Loan Agreement and EBGL Loan Agreement, the holders of certain existing unsecured promissory notes made by ATRM and certain of its subsidiaries entered into subordination agreements (the “Subordination Agreements”) with Gerber pursuant to which such noteholders (including the Company and certain of its subsidiaries) agreed to subordinate the obligations of ATRM and its subsidiaries to such noteholders to the obligations of the Star Borrowers and EBGL Borrowers to Gerber under the loan agreements.

Paycheck Protection Program

From April 2020 through May 2020, the Company and its subsidiaries received $6.7 million, of loans under the Paycheck Protection Program (“PPP”). Total PPP loans received the Construction division and Healthcare division were $5.5 million and $1.2 million, respectively.

The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (“SBA”). PPP loans for the Construction and Healthcare division were made through Bremer Bank and Sterling as lenders, respectively.

The PPP loans have two-year terms and bear interest at a rate of 1.00% per annum. Monthly principal and interest payments under the PPP loans are deferred for ten months, after the end of covered periods. The PPP loans may be prepaid at any time prior to maturity with no prepayment penalties.

The promissory notes issued in connection with the PPP loans (the “PPP Notes”) contain customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the SBA or lender, or breaching the terms of the applicable PPP loan documents. Upon an event of default under a PPP Note, the lender thereunder may, among other things, require immediate payment of all amounts owing under the applicable PPP Note, collect all amounts owing from the applicable borrower, or file suit and obtain judgment.

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Under the terms of the CARES Act, recipients of loans under the PPP can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and certain other eligible costs. However, no assurance is provided that forgiveness for any portion of the PPP loans will be obtained and even if forgiveness is granted the PPP loans may remain subject to review and audit due to all affiliated PPP Notes equaling more than $2 million.

In order to apply for the PPP loans, we certified that the economic uncertainty at the time of application, made the PPP loans request necessary to support ongoing operations of the Company. This certification was made taking into account our then current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that would not be significantly detrimental to the business.

The Company is continuing to evaluate the criteria and new guidance put out by the SBA regarding loan forgiveness criteria and procedures to seek loan forgiveness. During October 2020 and January 2021, the Company applied for forgiveness on all PPP loans. Our PPP loan forgiveness is sought under the belief all entities requesting loan forgiveness have met the stated criteria and guidelines provided by the SBA and terms of the CARES Act; however, no assurance can be provided that forgiveness for any portion of the PPP loans will be obtained.

During Q4 2020, $2.5 million of the Healthcare division PPP Notes were forgiven. As of March 31, 2021, the Company has $3.0 million in PPP loans outstanding for the Healthcare division. During Q1, 2021, all amounts under the Construction division PPP Notes were forgiven.

Off-Balance Sheet Arrangements

On September 10, 2019, the parties to the KBS Loan Agreement entered into the Twelfth KBS Amendment pursuant to which the Company agreed to guarantee amounts borrowed by certain of ATRM’s subsidiaries from Gerber. The Twelfth KBS Amendment requires the Company to serve as an additional guarantor with the existing guarantor, ATRM, with respect to the payment, performance and discharge of each and every obligation of payment and performance by the borrowing subsidiaries with respect to the loans made by Gerber to them. On January 31, 2020, the Company, ATRM, KBS and Gerber entered into the Thirteenth KBS Amendment, in order to, among other things (a) amend the definitions of “Ancillary Credit Parties,” “Guarantor,” “Obligations,” and “Subordinated Lender” to address the obligations of the Star Borrowers, the EBGL Borrowers, the Star Credit Parties, and the EBGL Credit Parties under the Star Loan Agreement, the EBGL Loan Agreement and the Subordination Agreements to which they are a party and (b) add a new cross default provision. On April 1, 2020, Gerber and KBS entered into a Fifteenth KBS Amendment pursuant to which the “Minimum Average Monthly Loan Amount” under the KBS Loan Agreement was decreased to twenty-five percent (25%) of the Maximum Revolving Amount (as defined in the KBS Loan Agreement). See Note 8, Debt, within the notes to our unaudited consolidated financial statements for further detail.

On June 5, 2020, the Company entered into a Guaranty Agreement (the “Tocci Guaranty”) with Tocci Building Corporation (“Tocci”) pursuant to which the Company irrevocably guaranteed all the obligations of KBS under a certain Subcontract Agreement by and between Tocci and KBS in the event of a material breach by KBS under the Subcontract. The Company’s liability under the Tocci Guaranty is limited to $2.0 million.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 (the “Exchange Act”) reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our executive chairman and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

52

As further discussed below, we carried out an evaluation, under the supervision and with the participation of our management, including our executive chairman and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Due to the existence of the material weaknesses as described below, our executive chairman and chief financial officer concluded that our disclosure controls and procedures were not effective as of March 31, 2021.

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2020 due to the material weaknesses as described below.

A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The Company identified material errors in the accounting for debt classification which resulted in the restatement of previously issued consolidated financial statements. These errors resulted from a material weakness related to ineffectively designed controls over review of contracts for new debt agreements and the proper application of GAAP for such agreements.

Plan for Remediation of the Material Weakness in Internal Control Over Financial Reporting

The Company has developed a remediation plan which includes, but is not limited to, a more detailed review over debt contracts and the proper application of GAAP.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all errors and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Control over Financial Reporting

Other than in connection with implementing a plan to remediate the material weakness described above, there has been no change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

53

PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

See Note 9, Commitments and Contingencies, within the notes to our unaudited consolidated financial statements for a summary of legal proceedings.

ITEM 1A.RISK FACTORS

In evaluating us and our common stock, we urge you to carefully consider the risks and other information in this Quarterly Report on Form 10-Q, as well as the risk factors disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which we filed with the SEC on March 29, 2021. The risks and uncertainties described in “Item 1A - Risk Factors” of our Annual Report on Form 10-K have not materially changed. Any of the risks discussed in this Quarterly Report on Form 10-Q or any of the risks disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition.

54

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

Holders of shares of the Company Preferred Stock are entitled to receive, when, as and if authorized by the Company’s board of directors (or a duly authorized committee of the Company’s board of directors) and declared by the Company out of funds legally available for the payment of dividends, preferential cumulative cash dividends at the rate of 10.0% per annum of the liquidation preference of $10.00 per share. Dividends are payable quarterly, in arrears, on the last calendar day of March, June, September and December to holders of record at the close of business on the first day of each payment month. As of the date of this Quarterly Report on Form 10-Q, the Company’s board of directors has not declared a dividend on the Company Preferred Stock and the total arrearage of cash dividends due on the Company Preferred Stock is $3.0 million.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

55

ITEM 6.EXHIBITS

Exhibit Number	Description
10.1	First Amendment to Loan and Security Agreement, Consent and Release, dated February 1, 2021, by and among Digirad Health, Inc., Digirad Imaging Solutions, Inc., MD Office Solutions, DMS Health Technologies, Inc., DMS Imaging, Inc., DMS Health Technologies-Canada, Inc., Project Rendezvous Holding Corporation, Project Rendezvous Acquisition Corporation, Digirad Diagnostic Imaging, Inc., Star Equity Holdings, Inc., and Sterling National Bank (incorporated by reference to Exhibit 10.72 to the Company’s Annual Report on Form 10-K filed with the Commission on March 29, 2021).
10.2	Sixteenth Amendment to Loan and Security Agreement, dated January 5, 2021, by and among Gerber Finance Inc., KBS Builders, Inc., ATRM Holdings, Inc., and Star Equity Holdings, Inc. (incorporated by reference to Exhibit 10.73 to the Company’s Annual Report on Form 10-K filed with the Commission on March 29, 2021).
10.3	Seventeenth Amendment to Loan and Security Agreement, dated February 26, 2021, by and among Gerber Finance Inc., KBS Builders, Inc., ATRM Holdings, Inc., and Star Equity Holdings, Inc. (incorporated by reference to Exhibit 10.74 to the Company’s Annual Report on Form 10-K filed with the Commission on March 29, 2021).
10.4	Third Amendment to Loan and Security Agreement, dated January 31, 2020, by and among Gerber Finance Inc., Star Real Estate Holdings USA, Inc., 300 Park Street, LLC, 947 Waterford Road, LLC, and 56 Mechanic Falls Road, LLC (incorporated by reference to Exhibit 10.75 to the Company’s Annual Report on Form 10-K filed with the Commission on March 29, 2021).
10.5	Third Amendment to Loan and Security Agreement, dated January 31, 2020, by and among Gerber Finance Inc., EdgeBuilder, Inc., and Glenbrook Building Supply, Inc. (incorporated by reference to Exhibit 10.76 to the Company’s Annual Report on Form 10-K filed with the Commission on March 29, 2021).
10.6	Amendment to Stock Purchase Agreement dated as of March 26, 2021, by and between Project Rendezvous Acquisition Corporation and Knob Creek Acquisition Corp. (incorporated by reference to Exhibit 10.78 to the Company’s Annual Report on Form 10-K filed with the Commission on March 29, 2021).
10.7	Second Amendment to Loan and Security Agreement, Consent and Release, dated March 31, 2021, by and among Digirad Health, Inc., Digirad Imaging Solutions, Inc., DMS Health Technologies, Inc., DMS Imaging, Inc., DMS Health Technologies-Canada, Inc., Project Rendezvous Holding Corporation, Project Rendezvous Acquisition Corporation, Digirad Diagnostic Imaging, Inc., Star Equity Holdings, Inc., and Sterling National Bank (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on April 1, 2021).
31.1*	Certification of the Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated pursuant to the Securities Exchange Act of 1934, as amended.
31.2*	Certification of the Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated pursuant to the Securities Exchange Act of 1934, as amended.
32.1**	Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*	Inline XBRL Taxonomy Extension Schema
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase
101.LAB*	Inline XBRL Taxonomy Extension Labels Linkbase
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase

_________________ 

*    Filed herewith.

**    This certification is being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of Star Equity Holdings, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

56

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		STAR EQUITY HOLDINGS, INC.
Date:	May 14, 2021	By:	/s/     JEFFREY E. EBERWEIN
			Jeffrey E. Eberwein Executive Chairman (Principal Executive Officer)

/s/     DAVID J. NOBLE

David J. Noble

Chief Financial Officer and Chief Operating Officer

(Principal Financial and Accounting Officer)

57

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF

PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey E. Eberwein, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Star Equity Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

May 14, 2021

/s/ Jeffrey E. Eberwein

Jeffrey E. Eberwein

Executive Chairman
(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF

PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, David J. Noble, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Star Equity Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

May 14, 2021

/s/ David J. Noble

David J. Noble

Chief Financial Officer and Chief Operating Officer
(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF

PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

In connection with the accompanying Quarterly Report on Form 10-Q of Star Equity Holdings, Inc. for the period ended March 31, 2021, I, Jeffrey E. Eberwein, Executive Chairman of Star Equity Holdings, Inc., hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)such Quarterly Report on Form 10-Q of Star Equity Holdings, Inc. for the period ended March 31, 2021, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)the information contained in such Quarterly Report on Form 10-Q of Star Equity Holdings, Inc. for the period ended March 31, 2021, fairly presents, in all material respects, the financial condition and results of operations of Star Equity Holdings, Inc. at the dates and for the periods indicated.

This certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

May 14, 2021

/s/ Jeffrey E. Eberwein

Jeffrey E. Eberwein

Executive Chairman
(Principal Executive Officer)

A signed copy of this written statement required by Section 906 has been provided to Star Equity Holdings, Inc. and will be retained by Star Equity Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF

PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

In connection with the accompanying Quarterly Report on Form 10-Q of Star Equity Holdings, Inc. for the period ended March 31, 2021, I, David J. Noble, Chief Financial Officer of Star Equity Holdings, Inc., hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)such Quarterly Report on Form 10-Q of Star Equity Holdings, Inc. for the period ended March 31, 2021, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)the information contained in such Quarterly Report on Form 10-Q of Star Equity Holdings, Inc. for the period ended March 31, 2021, fairly presents, in all material respects, the financial condition and results of operations of Star Equity Holdings, Inc. at the dates and for the periods indicated.

This certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

May 14, 2021

/s/ David J. Noble

David J. Noble

Chief Financial Officer and Chief Operating Officer
(Principal Financial and Accounting Officer)

A signed copy of this written statement required by Section 906 has been provided to Star Equity Holdings, Inc. and will be retained by Star Equity Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information Document - shares	3 Months Ended
	Mar. 31, 2021	May 07, 2021
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Mar. 31, 2021
Entity File Number	001-35947
Entity Registrant Name	STAR EQUITY HOLDINGS, INC.
Entity Central Index Key	0000707388
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	33-0145723
Entity Address, Address Line One	53 Forest Ave. Suite 101,
Entity Address, City or Town	Old Greenwich
Entity Address, State or Province	CT
Entity Address, Postal Zip Code	06870
City Area Code	203
Local Phone Number	489-9500
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Outstanding (in shares)		5,018,271
Common Stock, par value $0.0001 per share
Entity Information [Line Items]
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	STRR
Security Exchange Name	NASDAQ
Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share
Entity Information [Line Items]
Title of 12(b) Security	Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share
Trading Symbol	STRRP
Security Exchange Name	NASDAQ

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Revenues:
Revenues	$ 22,354	$ 19,190
Cost of revenues:
Cost of revenues	19,277	15,947
Gross profit	3,077	3,243
Operating expenses:
Selling, general and administrative	5,055	4,863
Amortization of intangible assets	438	576
Gain on sale of MD Office Solutions	(847)	0
Total operating expenses	4,646	5,439
Loss from operations	(1,569)	(2,196)
Other income (expense):
Other income, net	1,255	160
Interest expense, net	(272)	(305)
Total other income (expense)	983	(145)
Loss from continuing operations before income taxes	(586)	(2,341)
Income tax expense	(2)	(27)
Loss from continuing operations, net of tax	(588)	(2,368)
Income (loss) from discontinued operations, net of tax	6,020	(585)
Net income (loss)	5,432	(2,953)
Deemed dividend on Series A redeemable preferred stock	(479)	(484)
Net income (loss) attributable to common shareholders	$ 4,953	$ (3,437)
Net income (loss) per share—basic and diluted
Net loss per share, continuing operations, basic (usd per share)	$ (0.12)	$ (1.15)
Net loss per share, continuing operations, diluted (usd per share)	(0.12)	(1.15)
Net income (loss) per share, discontinued operations, basic (usd per share)	1.22	(0.28)
Net income (loss) per share, discontinued operations, diluted (usd per share)	1.22	(0.28)
Net income (loss) per share - basic (usd per share)	1.10	(1.44)
Net income (loss) per share - diluted (usd per share)	1.10	(1.44)
Dividends declared per common share (in usd per share)	(0.10)	(0.24)
Net income (loss) per share, attributable to common shareholders — basic and diluted (usd per share)	$ 1.01	$ (1.67)
Weighted average shares outstanding - basic (in shares)	4,916	2,055
Healthcare
Revenues:
Revenues	$ 13,307	$ 13,675
Cost of revenues:
Cost of revenues	10,709	10,801
Construction
Revenues:
Revenues	9,047	5,484
Cost of revenues:
Cost of revenues	8,503	5,081
Investments
Revenues:
Revenues	0	31
Cost of revenues:
Cost of revenues	$ 65	$ 65

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 13,175	$ 3,225
Restricted cash	168	168
Accounts receivable, net	14,886	12,975
Inventories, net	9,838	9,787
Other current assets	2,738	2,025
Assets held for sale	0	20,756
Total current assets	40,805	48,936
Property and equipment, net	9,383	9,762
Operating lease right-of-use assets, net	2,848	1,769
Intangible assets, net	16,362	16,900
Goodwill	9,405	9,542
Other assets	2,588	1,384
Total assets	81,391	88,293
Current liabilities:
Accounts payable	5,535	4,952
Accrued compensation	3,695	2,825
Accrued warranty	180	214
Deferred revenue	2,352	2,184
Short-term debt and current portion of long-term debt	12,548	18,362
Payable to related parties	2,307	2,307
Operating lease liabilities	1,075	1,011
Other current liabilities	2,859	3,000
Liabilities held for sale	0	7,871
Total current liabilities	30,551	42,726
Long-term debt, net of current portion	1,967	3,700
Deferred tax liabilities	51	51
Operating lease liabilities, net of current portion	1,824	828
Other liabilities	1,018	1,059
Total liabilities	35,411	48,364
Commitments and contingencies (Note 9)
Preferred stock, $0.0001 par value: 10,000,000 shares authorized: 10% Series A Cumulative Redeemable preferred stock, 8,000,000 shares authorized, liquidation preference ($10.00 per share), 1,915,637 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	21,979	21,500
Stockholders’ Equity:
Common stock, $0.0001 par value: 30,000,000 shares authorized; 5,020,969 and 4,798,367 shares issued and outstanding (net of treasury shares) at March 31, 2021 and December 31, 2020, respectively	0	0
Treasury stock, at cost; 258,849 shares at March 31, 2021 and December 31, 2020, respectively	(5,728)	(5,728)
Additional paid-in capital	149,283	149,143
Accumulated deficit	(119,554)	(124,986)
Total stockholders’ equity	24,001	18,429
Total liabilities, mezzanine equity and stockholders’ equity	$ 81,391	$ 88,293

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Preferred stock, par value (in usd per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, dividend rate percentage	10.00%	10.00%
Preferred stock, liquidation preference (in shares)	8,000,000	8,000,000
Liquidation preference (usd per share)	$ 10.00	$ 10.00
Preferred stock, shares issued (in shares)	1,915,637	1,915,637
Preferred stock, outstanding (in shares)	1,915,637	1,915,637
Common stock, par value (in usd per share)	$ 0.0001	$ 0.0001
Common stock, authorized (in shares)	30,000,000	30,000,000
Common stock, issued (in shares)	5,020,969	4,798,367
Common stock, outstanding (in shares)	5,020,969	4,798,367
Treasury stock (in shares)	258,849	258,849

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Operating activities
Net income (loss)	$ 5,432	$ (2,953)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	471	1,593
Amortization of intangible assets	438	814
Non-cash lease expense	584	543
Provision for bad debt, net	359	32
Stock-based compensation	131	109
Amortization of loan issuance costs	50	31
Debt issuance costs write-off	130	0
Gain on disposal of discontinued operations	(5,224)	0
Gain on disposal of MD Office Solutions	(847)	0
Loss on sale of assets	34	180
Gain on Paycheck Protection Program loan forgiveness	(1,220)	0
Deferred income taxes	0	20
Other, net	(23)	26
Changes in operating assets and liabilities:
Accounts receivable	(2,476)	3,606
Inventories	(51)	481
Other assets	(782)	154
Accounts payable	258	(1,525)
Accrued compensation	1,075	(1,123)
Deferred revenue	119	(166)
Operating lease liabilities	(597)	(545)
Other liabilities	(93)	(654)
Net cash (used in) provided by operating activities	(2,232)	623
Investing activities
Purchases of property and equipment	(449)	(158)
Proceeds from sale of discontinued operations	18,750	0
Proceeds from sale of property and equipment	14	23
Net cash provided by (used in) investing activities	18,315	(135)
Financing activities
Proceeds from borrowings	32,088	31,996
Repayment of debt	(38,495)	(32,407)
Loan issuance costs	0	(317)
Proceeds from exercise of warrants	493	0
Taxes paid related to net share settlement of equity awards	(6)	0
Repayment of obligations under finance leases	(260)	(229)
Net cash used in financing activities	(6,180)	(957)
Net increase (decrease) in cash, cash equivalents, and restricted cash including cash classified within current assets held for sale	9,903	(469)
Less: Net (decrease) increase in cash classified within current held for sale	(47)	108
Net increase (decrease) in cash, cash equivalents, and restricted cash	9,950	(577)
Cash, cash equivalents, and restricted cash at beginning of period	3,393	1,987
Cash, cash equivalents, and restricted cash at end of period	13,343	1,410
Non-Cash Investing Activities
MD Office Solutions Promissory Note Receivable	1,385	0
Non-Cash Financing Activities
Gain on Paycheck Protection Program Loan Forgiveness	$ 1,220	$ 0

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CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Perpetual Preferred Stock	Common stock	Treasury Stock	Additional paid-in capital	Accumulated deficit
Beginning balance (shares) at Dec. 31, 2019		1,916	2,050
Beginning balance at Dec. 31, 2019	$ 21,095	$ 19,602	$ 0	$ (5,728)	$ 145,352	$ (118,529)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	109				109
Shares issued under stock incentive plans, net of shares withheld for employee taxes (in shares)			5
Shares issued under stock incentive plans, net of shares withheld for employee taxes	0
Accrued dividend on redeemable preferred stock	(484)	$ 484
Net income (loss)	(2,953)					(2,953)
Ending balance (shares) at Mar. 31, 2020		1,916	2,055
Ending balance at Mar. 31, 2020	17,767	$ 20,086	$ 0	(5,728)	144,977	(121,482)
Beginning balance (shares) at Dec. 31, 2020		1,916	4,798
Beginning balance at Dec. 31, 2020	18,429	$ 21,500	$ 0	(5,728)	149,143	(124,986)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	131				131
Shares issued under stock incentive plans, net of shares withheld for employee taxes (in shares)			3
Shares issued under stock incentive plans, net of shares withheld for employee taxes	(5)				(5)
Accrued dividend on redeemable preferred stock	$ (479)	$ 479
Proceeds received from warrants exercise (in shares)	220
Proceeds from exercise of warrants	$ 493
Net income (loss)	5,432					5,432
Ending balance (shares) at Mar. 31, 2021		1,916	5,021
Ending balance at Mar. 31, 2021	$ 24,001	$ 21,979	$ 0	$ (5,728)	$ 149,283	$ (119,554)

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Basis of Presentation

3 Months Ended

Mar. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

Basis of Presentation

The unaudited consolidated financial statements included in this Form 10-Q have been prepared in accordance with the U.S. Securities and Exchange Commission (the “SEC”) instructions for Quarterly Reports on Form 10-Q. Accordingly, the consolidated financial statements are unaudited and do not contain all the information required by U.S. generally accepted accounting principles (“GAAP”) to be included in a full set of financial statements. The unaudited condensed consolidated balance sheet at December 31, 2020 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for a complete set of financial statements. The audited consolidated financial statements for our fiscal year ended December 31, 2020, filed with the SEC on Form 10-K on March 29, 2021, include a summary of our significant accounting policies and should be read in conjunction with this Form 10-Q. In the opinion of management, all material adjustments necessary to present fairly the results of operations, cash flows, and balance sheets for such periods have been included in this Form 10-Q. All such adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results of operations for the entire year.

The Company and Discontinued Operations

On March 31, 2021, Star Equity Holdings, Inc. (“Star Equity,” the “Company,” “we,” or “our”), a diversified holding company with three divisions: Healthcare, Construction, and Investments, announced the completion of the sale of DMS Health Technologies, Inc., a North Dakota corporation and wholly owned indirect subsidiary of Star Equity (“DMS Health”), for $18.75 million in cash, as originally announced on November 3, 2020 (the “DMS Sale Transaction”). The assets and liabilities of DMS Health were previously classified as held for sale and the results of DMS Health’s operations were presented as a discontinued operations in our previously issued financial statements. Unless otherwise noted, discussion within these notes to the consolidated financial statements relates to continuing operations. Refer to Note 2. Discontinued Operations for additional information.

COVID-19 Pandemic

During the three months ended March 31, 2021, we experienced a $0.4 million decrease in Healthcare division revenue which was offset by a $3.6 million increase, in Construction division revenue, as compared to the same period of the prior year. With the COVID-19 vaccine rollout now well underway, we are hopeful that we will gradually make our way back to pre-COVID levels of business activity. We believe the uncertainty surrounding the pandemic will continue to decrease as we progress through 2021. On the healthcare side, we expect to see imaging volume recover as the pandemic is brought under control. In construction, we expect that continued recovery in employment and a strong housing market will underpin the growth we are seeing. However, we are unsure about the potential impact.

Mezzanine Equity

Pursuant to the Certificate of Designations, Rights and Preferences of 10% Series A Cumulative Perpetual Preferred Stock of Star Equity Holdings, Inc. (formerly Digirad Corporation) (the “Certificate of Designations”), upon a Change of Control Triggering Event, as defined in the Certificate of Designations, holders of the 10% Series A Cumulative Perpetual Preferred Stock (the “Company Preferred Stock”) may require us to redeem the Company Preferred Stock at a price of $10.00 per share, plus any accumulated and unpaid dividends (a “Change of Control Redemption”). As this redemption feature of the shares is not solely within the control of the Company, the Company Preferred Stock does not qualify as permanent equity and has been classified as mezzanine or temporary equity. Accordingly, the Company Preferred Stock is not redeemable and it was not probable that the Company Preferred Stock would become redeemable as of March 31, 2021. Therefore, we are not currently required to accrete the Preferred Stock to its redemption value.

In addition to a Change of Control Redemption, the Certificate of Designations also provides that the Company may redeem (at its option, in whole or in part) the Company Preferred Stock following the fifth anniversary of issuance of the Company Preferred Stock, at a cash redemption price of $10.00 per share, plus any accumulated and unpaid dividends.

Common Stock Equity Offering

On May 28, 2020, we closed a public offering (the “Offering”) of 2,225,000 shares of our common stock, and 2,225,000 warrants (the “Warrants”) to purchase up to 1,112,500 additional shares of our common stock. The Offering price was $2.24 per share of common stock and $0.01 per accompanying Warrant (for a combined Offering price of $2.25), initially raising $5.0 million in gross proceeds before underwriter discounts and offering-related expenses. The underwriting agreement (the “Underwriting Agreement”) we entered into with Maxim Group LLC (“Maxim”), as representative of the underwriters, for the Offering contained customary representations, warranties, and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and Maxim and certain other obligations.

Pursuant to the terms of the Underwriting Agreement, we granted to Maxim an option for a period of 45 days (the “Over-Allotment Option”) to purchase up to 225,000 additional shares of our common stock and 225,000 Warrants to purchase up to an additional 112,500 shares of our common stock. Effective as of the closing of the Offering, Maxim exercised the Over-Allotment Option for the purchase of 225,000 Warrants for a price of $0.01 per Warrant. On June 10, 2020, Maxim exercised the Over-Allotment Option for the purchase of 225,000 shares of our common stock for a price of $2.24 per share, before underwriting discounts. The closing of the sale of the over-allotment shares brought the total number of shares of common stock we sold in the Offering to 2,450,000 shares, and total gross proceeds to approximately $5.5 million. In addition, the Company received $0.5 million from investors in the Offering throughout the balance of 2020 due to the exercise of a portion of the Warrants sold in the Offering, bringing the total gross proceeds from equity issuance to $6.0 million.

The net proceeds to the Company from the Offering and Warrant exercises in 2020 were approximately $5.2 million (inclusive of the exercise of the over-allotment option), after deducting underwriter fees and offering-related expenses estimated at $0.8 million. We used a significant portion of the net proceeds from the Offering to fund working capital needs at our construction businesses, particularly related to modular housing projects which we produced at KBS Builders, Inc. (“KBS”) for the Boston-area projects. The remainder of the net proceeds is being used for working capital and for other general corporate purposes. We have broad discretion in determining how the proceeds of the Offering is used, and our discretion is not limited by the aforementioned possible uses.

As of March 31, 2021, 0.9 million warrants were exercised and 1.5 million warrants remained outstanding at an exercise price of $2.25.

Liquidity Outlook

The accompanying financial statements have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and settlement of obligations in the normal course of business. We incurred net losses from operations of approximately $1.6 million and $2.2 million for the three months ended March 31, 2021 and 2020, respectively. We have an accumulated deficit of $119.6 million and $125.0 million as of March 31, 2021 and December 31, 2020, respectively. Net cash used in operations of $2.2 million for the three months ended March 31, 2021 compared to net cash provided by operations of $0.6 million for the same prior year period in 2020.

Regarding our debt, we had approximately $12.5 million in short term debt due to our borrowings which is classified as short term as disclosed in Note 8. Debt. The $5.0 million SNB debt primarily supports our healthcare business and actually matures in 2024, but GAAP rules require that the outstanding balance be classified as short-term debt, due to the automatic sweep feature embedded in the traditional lockbox arrangement along with a subjective acceleration clause in the SNB Loan and Security Agreement. In practice, we have the ability to immediately borrow back these daily sweeps to fund our working capital. As of March 31, 2021, we were in compliance with all borrowing arrangements related to our Healthcare division. As of March 31, 2021, we had $4.5 million of borrowing capacity to fund the operations of these divisions.

As of March 31, 2021, we have $4.6 million outstanding on our Construction revolvers with Gerber and were in compliance with all borrowing covenants for Gerber, however, we were in breach of our covenants as of December 31, 2020 and may be in breach at our next measurement period at June 30, 2021. While Gerber has historically provided us with waivers, there is no assurance that we will be able to receive waivers for covenant violations in the future, or that we will meet compliance with covenants in the future. Related party notes of $2.3 million was paid off on April 1, 2021 using proceeds from the DMS Sale Transaction. In addition, as of March 31, 2021, we had cash and cash equivalents of $13.3 million.

Management believes that the Company has the liquidity and operations to continue to support the business through the next 12 months from the issuance of this Quarterly Report. Our ability to continue as a going concern is dependent on its ability to execute its plans.

Use of Estimates

Preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from management’s estimates.

Revenue Recognition

We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606 and Topic 842 for the three months ended March 31, 2021 and 2020, which are explained below.

Pursuant to ASC 606, Revenue from Contracts with Customers, we recognize revenue when a customer obtains control of promised goods or services. We record the amount of revenue that reflects the consideration that it expects to receive in exchange for those goods or services. We apply the following five-step model in order to determine this amount: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

Revenue recognition is evaluated on a contract by contract basis. Performance obligations are satisfied over time as work progresses or at a point in time. A performance obligation is satisfied over time if we have an enforceable right to payment. Determining if there is an enforceable right to payment is assessed on a contract by contract basis. For contracts requiring over time revenue recognition, the selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. We use a cost-based input measurement of progress because it best depicts the transfer of assets to the customer, which occurs as costs are incurred during the manufacturing process or as services are rendered. Under the cost-based measure of progress, the extent of progress towards completion is measured based on the costs incurred to date.

Healthcare Services Revenue Recognition. We generate service revenue primarily from providing diagnostic services and cardiac monitoring services to our customers. Service revenue within our Diagnostic Services reportable segments is derived from providing our customers with contract diagnostic services, which includes use of our imaging systems, qualified personnel, radiopharmaceuticals, licensing, logistics and related items required to perform testing in their own offices.  We bill customers either on a per-scan or fixed-payment methodology, depending upon the contract that is negotiated with the customer. Within our Diagnostic Service segment, we also rent cameras to healthcare customers for use in their operations.  Rental revenues are structured as either a weekly or monthly payment arrangement, and are recognized in the month services are provided. Revenue related to provision of our services is recognized at the time services are performed.

Healthcare Product and Product-Related Revenue Recognition. We generate revenue from product and product-related sales, primarily from the sale of gamma cameras and accessories.

Diagnostic Imaging product revenues are generated from the sale of internally developed solid-state gamma camera imaging systems and camera maintenance service contracts. Revenue from sales of imaging systems is generally recognized at point in time upon delivery of systems and acceptance by customers. We also provide installation services and training on cameras sold, primarily in the United States. Installation and initial training is generally performed shortly after delivery and the revenue related to the provision of these services is recognized at the time services are performed. Neither installation nor training is essential to the functionality of the product. Finally, we offer camera maintenance service contracts that are sold beyond the term of the initial warranty, generally one year from the date of purchase. Revenue from these service contracts is deferred and recognized ratably over the period of the obligation.

Construction Revenue Recognition. Within the Construction segment, we service residential and commercial construction projects by manufacturing modular housing units and other products and supplies general contractors with building materials. KBS manufactures modular buildings for both single-family residential homes and larger, commercial building projects. Our EdgeBuilder, Inc. (“EdgeBuilder”) subsidiary manufactures structural wall panels, permanent wood foundation systems and other engineered wood products, and our Glenbrook Building Supply, Inc. (“Glenbrook”) subsidiary is a retail supplier of lumber and other building supplies. Revenue is generally recognized at point in time upon delivery of product. Retail sales at Glenbrook are recognized at the point of sale. For bill and hold sales, we determine when the customer obtains control of the product on a case-by-case basis to determine the amount of revenue to recognize each period.

Leases

Lessee Accounting

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities, and operating lease liabilities, net of current portion in our condensed consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our condensed consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We use the implicit discount rate when readily determinable; however, as most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease valuation may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

We elected not to separate lease and non-lease components of its operating leases in which it is the lessee and lessor. Additionally, we elected not to recognize right-of-use assets and leases liabilities that arise from short-term leases of twelve months or less.

Lessor Accounting

Majority of the lease income of the Healthcare division comes from camera rentals and the lease income of the Construction division comes from the rental of the Waterford facility to a commercial tenant. We determine lease classification at the commencement date. Leases not classified as sales-type or direct financing leases are classified as operating leases. The primary accounting criteria we use for lease classification are (a) review to determine if the lease transfers ownership of the underlying asset to the lessee by the end of the lease term, (b) review to determine if the lease grants the lessee a purchase option that the lessee is reasonably certain to exercise, (c) determine, using a seventy-five percent or more threshold, if the lease term is for a major part of the remaining economic life of the underlying asset (however, we do not use this classification criterion when the lease commencement date falls within the last 25 percent of the total economic life of the underlying asset) and (d) determine, using a ninety percent or more threshold, if the present value of the sum of the lease payments and any residual value guarantees equal or exceeds substantially all of the fair value of the underlying asset. We do not lease equipment of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. Each of the Company’s leases is classified as an operating lease.

We elected the operating lease practical expedient for its leases to not separate non-lease components of regular maintenance services from associated lease components. This practical expedient is available when both of the following are met: (i) the timing and pattern of transfer of the non-lease components and associated lease component are the same and (ii) the lease component, if accounted for separately, would be classified as an operating lease.

Property taxes paid by the lessor that are reimbursed by the lessee are considered to be lessor costs of owning the asset, and are recorded gross with revenue included in other non-interest income and expense recorded in operating expenses. 

We selected a lessor accounting policy election to exclude from revenue and expenses sales taxes and other similar taxes assessed by a governmental authority on lease revenue-producing transactions and collected by the lessor from a lessee.

Operating lease equipment is carried at cost less accumulated depreciation. Operating lease equipment is depreciated to its estimated residual value using the straight-line method over the lease term or estimated useful life of the asset.

Rental revenue on operating leases is recognized on a straight-line basis over the lease term unless collectability is not probable. In these cases, rental revenue is recognized as payments are received.

Recently Adopted Accounting Pronouncements

In December of 2019, the Financial Accounting Standards Board issued ASU No 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 in Generally Accepted Accounting Principles. ASU 2019-12 is effective for public entities for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company adopted the guidance during the three months ended 2021. ASU 2019-12 does not have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

New Accounting Standards To Be Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available-for-sale debt securities. This update is effective for annual periods beginning after December 15, 2022, and interim periods within those periods, and early adoption is permitted. We expect to adopt the standard on its effective date in the first quarter of 2023. We believe the adoption will modify the way we analyze financial instruments, but currently do not expect the adoption to have a material financial impact on our consolidated financial statements.

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848), to temporarily ease the potential burden in accounting for reference rate reform. The standard provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. The guidance generally can be applied through December 31, 2022. We will monitor our contracts and transactions for potential application of this ASU.

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Discontinued Operations

3 Months Ended

Mar. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

On October 30, 2020, Star Equity entered into a Stock Purchase Agreement (the “DMS Purchase Agreement”) by and among the Company, Project Rendezvous Acquisition Corporation, a Delaware corporation and wholly owned subsidiary of the Company (“Seller”), DMS Health, and Knob Creek Acquisition Corp., a Tennessee corporation (“Buyer”) pursuant to which, subject to the satisfaction or waiver of certain conditions, Buyer purchased all of the issued and outstanding common stock of DMS Health from Seller. The purchase price for the DMS Sale Transaction was $18.75 million in cash, subject to certain adjustments, including a working capital adjustment. The DMS Sale Transaction was announced on November 3, 2020, and was subsequently completed on March 31, 2021. We deemed the disposition of the Mobile Healthcare business unit, which was effected upon the closing of the DMS Sale Transaction, to represent a strategic shift that will have a major effect on our operations and financial results. As of December 31, 2020, the Mobile Healthcare business met the criteria to be classified as held for sale. This segment is reported on the Consolidated Statement of Operations as discontinued operations and on the Consolidated Balance Sheet as Assets and Liabilities held for sale.

We allocated a portion of interest expense to discontinued operations since the proceeds received from the sale were required to be used to pay down outstanding borrowings under our revolving credit facility with Sterling National Bank. The allocation was based on the ratio of assets generated based on the borrowing capacity to total borrowings capacity for the period. In addition, certain general and administrative costs related to corporate and shared service functions previously allocated to the mobile healthcare reportable segment are included in discontinued operations.

The following table presents financial results of DMS Health for the three months ended March 31, 2021 and 2020 business (in thousands):

	Three Months Ended March 31,
	2021		2020
Total revenues	$	9,490	$	9,667
Total cost of revenues	6,973		8,469
Gross profit	2,517		1,198
Operating expenses:
Selling, general and administrative	1,469		1,366
Amortization of intangible assets	—		241
Total operating expenses	1,469		1,607
Income (loss) from discontinued operations	1,048		(409)
Interest expense	(180)		(169)
Gain on sale of discontinued operations	5,224		—
Income (loss) from discontinuing operations before income taxes	6,092		(578)
Income tax expense	(72)		(7)
Income (loss) from discontinuing operations	$	6,020	$	(585)

The following represents the carrying amounts of the major classes of assets reported as “Assets held for sale” as of twelve months ended December 31, 2020 (in thousands):

	December 31, 2020
Cash and cash equivalents	$	443
Accounts receivable, net	4,305
Inventories, net	50
Other current assets	459
Property and equipment, net	7,721
Operating lease right-of-use assets, net	4,863
Intangible assets, net	2,915
	$	20,756

The following represents the carrying amounts of the major classes of liabilities reported as “Liabilities held for sale” as of December 31, 2020 (in thousands):

	December 31, 2020
Accounts payable	$	1,597
Accrued compensation	645
Deferred revenue	96
Operating lease liabilities	4,863
Other current liabilities	560
Deferred tax liabilities	16
Other liabilities	94
	$	7,871

The following table presents the significant non-cash operating, investing and financing activities from discontinued operations for the three months ended March 31, 2021 and 2020 (in thousands):

	Three Months Ended March 31,
	2021		2020
Operating activities
Depreciation	$	8	$	1,137
Amortization of intangible assets	—		241
Non-cash lease expense	256		192
Loss on extinguishment of debt	130		—
Gain on sale of DMS discontinued operations	(5,224)		—
Share-based compensation	2		4
Loss on disposal of assets	1		130
Provision for bad debt	—		2
Investing activities
Purchase of property and equipment	(154)		(243)
Proceeds from sale of discontinued operations	18,750		—
Proceeds from sale of property and equipment	3		15
Financing activities
Repayment of obligations under finance leases	(60)		(80)
Non-Cash Investing Activities
Fixed asset purchases in accounts payable	—		150
Lease assets obtained in exchange for new operating lease liabilities	—		564

Following is the reconciliation of purchase price to the gain recognized in income from discontinued operations for the three months ended March 31, 2021 (in thousands):

Estimated proceeds of the disposition, net of transaction costs	$	18,750
Assets of the businesses	(20,920)
Liabilities of the businesses	7,712
Transaction expenses	(318)
Pre-tax gain on the disposition	$	5,224

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Revenue

3 Months Ended

Mar. 31, 2021

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

Healthcare Product and Product-Related Revenues and Services Revenue

Healthcare product and product-related services revenue are generated from the sale of gamma cameras, accessories and post-warranty maintenance service contracts within our Diagnostic Imaging reportable segment.

Healthcare Imaging services revenue are generated from providing diagnostic imaging services to customers within our Diagnostic Services reportable segment. Services revenue also includes lease income generated from camera rentals of imaging systems to our customers.

Construction

Construction revenue is generated from selling modular buildings for both single-family residential homes, larger commercial building projects and selling structural wall panels, permanent wood foundation systems and other engineered wood products.

Investments

Star Real Estate Holdings USA, Inc. (“SRE”) generates revenue from the lease of commercial properties and equipment and Lone Star Value Management, LLC (“LSVM”), a Connecticut based exempt reporting advisor through March 31, 2021, provided services that included investment advisory services, and the servicing of pooled investment vehicles.

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Taxes collected from customers, which are subsequently remitted to governmental authorities, are excluded from revenue.

The majority of our contracts have a single performance obligation, as we provide a series of distinct goods or services that are substantially the same and are transferred with the same pattern to the customer. For contracts with multiple performance obligations, we allocate the total transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. We use an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. For bill and hold sales, we determine when the customer obtains control of the product on a case-by-case basis to determine the amount of revenue to recognize each period.

Revenue recognition is evaluated on a contract by contract basis. Performance obligations are satisfied over time as work progresses or at a point-in-time. A performance obligation is satisfied over time if the Company has an enforceable right to payment. Determining if there is an enforceable right to is assessed on a contract by contract basis. For contracts requiring over time revenue recognition, the selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. The Company uses a cost-based input measurement of progress because it best depicts the transfer of assets to the customer, which occurs as costs are incurred during the manufacturing process or as services are rendered. Under the cost-based measure of progress, the extent of progress towards completion is measured based on the costs incurred to date.

Our products are generally not sold with a right of return and the Company does not provide significant credits or incentives, which may be a variable consideration when estimating the amount of revenue to be recognized.

Disaggregation of Revenue

The following tables present our revenues for the three months ended March 31, 2021 and 2020, disaggregated by major source (in thousands):

	Three Months Ended March 31, 2021
	Diagnostic Services		Diagnostic Imaging		Construction		Total
Major Goods/Service Lines
Mobile Imaging	$	10,181	$	—	$	—	$	10,181
Camera	—		1,422		—		1,422
Camera Support	—		1,646		—		1,646
Healthcare Revenue from Contracts with Customers	10,181		3,068		—		13,249
Lease Income	58		—		38		96
Construction	—		—		9,009		9,009
Total Revenues	$	10,239	$	3,068	$	9,047	$	22,354
Timing of Revenue Recognition
Services and goods transferred over time	$	10,239	$	1,490	$	2,731	$	14,460
Services and goods transferred at a point in time	—		1,578		6,316		7,894
Total Revenues	$	10,239	$	3,068	$	9,047	$	22,354

	Three Months Ended March 31, 2020
	Diagnostic Services		Diagnostic Imaging		Construction		Investments		Total
Major Goods/Service Lines
Mobile Imaging	$	10,602	$	—	$	—	$	—	$	10,602
Camera	—		1,339		—		—		1,339
Camera Support	—		1,522		—		—		1,522
Healthcare Revenue from Contracts with Customers	10,602		2,861		—		—		13,463
Lease Income	212		—		84		—		296
Construction	—		—		5,400		—		5,400
Investments	—		—		—		31		31
Total Revenues	$	10,814	$	2,861	$	5,484	$	31	$	19,190
Timing of Revenue Recognition
Services and goods transferred over time	$	10,814	$	1,487	$	84	$	—	$	12,385
Services and goods transferred at a point in time	—		1,374		5,400		31		6,805
Total Revenues	$	10,814	$	2,861	$	5,484	$	31	$	19,190

Nature of Goods and Services

Mobile Imaging

Within our Diagnostic Services segment, our sales are derived from providing services and materials to our customers, primarily physician practices and hospitals that allow them to perform diagnostic imaging services at their site. We typically bundle our services in providing staffing, our imaging systems, licensing, radiopharmaceuticals, and supplies depending on our customers’ needs. Our contracts with customers are typically entered into annually and are billed on a fixed rate per-day or per-scan basis, depending on terms of the contract. For the majority of these contracts, the Company has the right to invoice the customer in an amount that directly corresponds with the value to the customer as the Company performs the services. The Company uses the practical expedient to recognize revenue corresponding with amounts we have the right to invoice for services performed.

Camera

Within our Diagnostic Imaging segment, camera revenues are generated from the sale of internally developed solid-state gamma camera imaging systems and accessories. We recognize revenue upon transfer of control to the customer at a point-in-time, which is generally upon delivery and acceptance. We also provide installation services and training on cameras we sell, primarily in the United States. Installation and initial training is generally performed shortly after delivery. The Company recognizes revenues for installation and training over time as the customer receives and consumes benefits provided as the Company performs the installation services.

Our sale of imaging systems includes a one-year assurance-type warranty. The estimated costs associated with our standard warranties and field service actions continue to be recognized as expense when cameras are sold. Maintenance service contracts sold beyond the term of our standard warranties are accounted for as a service-type warranty and revenue is deferred and recognized ratably over the period of the warranty obligation.

Camera Support

Within our Diagnostic Imaging segment, camera support revenue is derived from the sale of separately-priced extended maintenance contracts to camera owners, training, and the sale of parts to customers that do not have an extended warranty. Our separately priced service contracts range from 12 to 48 months. Service contracts are usually billed at the beginning of the contract period or at periodic intervals (e.g., monthly, quarterly, or annually) and revenue is recognized ratably over the term of the agreement.

Services and training revenues are recognized in the period the services and training are performed. Revenue for sales of parts are recognized when the parts are delivered to the customer and control is transferred.

Lease Income

Within our Diagnostic Service segment, we also generate income from rentals of state-of-the-art equipment including cameras and ultrasound machines to customers. Rental contracts are structured as either a weekly or monthly payment arrangement and are accounted for as operating leases. Revenues are recognized on a straight-line basis over the term of the rental.

Construction

Within the Construction segment, we service residential and commercial construction projects by manufacturing modular housing units and other products and supply general contractors with building materials. KBS manufactures modular buildings for both single-family residential homes and larger, commercial building projects. EdgeBuilder manufactures structural wall panels, permanent wood foundation systems and other engineered wood products, and Glenbrook is a retail supplier of lumber and other building supplies. Revenues are evaluated on a contract by contract basis. In general, construction revenues are recognized upon transfer of control to the customer at a point-in-time, which is generally upon delivery and acceptance. However, construction revenues are recognized over time for arrangements with customers for which: (i) performance does not create an asset with an alternative use, and (ii) we have an enforceable right to payment for performance completed to date.

Deferred Revenues

We record deferred revenues when cash payments are received in advance of our performance. We have determined our contracts do not include a significant financing component. The majority of our deferred revenue relates to payments received on camera support post-warranty service contracts, which are billed at the beginning of the contract period or at periodic intervals (e.g., monthly, quarterly, or annually).

Changes in the deferred revenues for continuing operations for three months ended March 31, 2021, is as follows (in thousands):

Balance at December 31, 2020	$	2,352
Revenue recognized that was included in balance at beginning of the year	(1,019)
Deferred revenue, net, related to contracts entered into during the year	1,327
Balance at March 31, 2021	$	2,660

Included in the balances above as of March 31, 2021 and December 31, 2020 is non-current deferred revenue included in other liabilities of $308 thousand and $168 thousand, respectively.

The Company has elected to use the practical expedient under ASC 606 to exclude disclosures of unsatisfied remaining performance obligations for (i) contracts having an original expected length of one year or less or (ii) contracts for which the practical expedient has been applied to recognize revenue at the amount for which it has a right to invoice.

Contract Costs

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less. These costs mainly include the Company’s internal sales commissions; under the terms of these programs these are generally earned and the costs are recognized at the time the revenue is recognized.

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Basic and Diluted Net Income (Loss) Per Share

3 Months Ended

Mar. 31, 2021

Earnings Per Share, Basic and Diluted [Abstract]

Basic and Diluted Net Income (Loss) Per Share

Basic and Diluted Net Income (Loss) Per Share

We present net loss per share attributable to common stockholders in conformity with the two-class method required for participating securities, as the warrants are considered participating securities. We have not allocated net loss attributable to common stockholders to warrants because the holders of our warrants are not contractually obligated to share in our losses. Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per share attributable to common stockholders is calculated to give effect to all potential shares of common stock, including common stock issuable upon exercise of warrants, stock options, and restricted stock units (“RSUs”). In periods for which there is a net loss, diluted loss per common share is equal to basic loss per common share, since the effect of including any common stock equivalents would be antidilutive.

The following table sets forth the reconciliation of shares used to compute basic and diluted net loss income per share for the periods indicated (in thousands):

	Three Months Ended March 31
	2021		2020
Numerator:
Loss from continuing operations, net of tax	$	(588)	$	(2,368)
Income (loss) from discontinued operations, net of tax	6,020		(585)
Net income (loss)	5,432		(2,953)
Deemed dividend on Series A redeemable preferred stock	(479)		(484)
Net income (loss) attributable to common shareholders	$	4,953	$	(3,437)
Denominator:
Weighted average shares outstanding - basic and diluted	4,916		2,055
Net loss per common share - basic and diluted
Net loss per share, continuing operations	$	(0.12)	$	(1.15)
Net income (loss) per share, discontinued operations	$	1.22	$	(0.28)
Net income (loss) per share	$	1.10	$	(1.44)
Deemed dividend on Series A perpetual preferred stock per share	$	(0.10)	$	(0.24)
Net income (loss) per share, attributable to common shareholders - basic and diluted	$	1.01	$	(1.67)

Antidilutive common stock equivalents are excluded from the computation of diluted loss per share. Stock options and restricted stock units are antidilutive when the assumed proceeds per share are greater than the average market price of the common shares. In addition, in periods where net losses are incurred, stock options and restricted stock units with assumed proceeds per share less than the average market price of the common shares become antidilutive as well. The computation of diluted earnings per share excludes stock options and stock units that are anti-dilutive. The following common stock equivalents were anti-dilutive (in thousands):

	Three Months Ended March 31
	2021	2020
Stock options	25	54
Restricted stock units	68	13
Stock warrants	866	—
Total	959	67

As of March 31, 2021, 0.9 million warrants were exercised and 1.5 million warrants remained outstanding at an exercise price of $2.25.

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Supplementary Balance Sheet Information

3 Months Ended

Mar. 31, 2021

Inventory Disclosure [Abstract]

Supplementary Balance Sheet Information

Supplementary Balance Sheet Information

The components of inventories are as follows (in thousands):

	March 31, 2021		December 31, 2020
Raw materials	$	6,170	$	5,489
Work-in-process	2,879		2,821
Finished goods	1,108		1,876
Total inventories	10,157		10,186
Less reserve for excess and obsolete inventories	(319)		(399)
Total inventories, net	$	9,838	$	9,787

Property and equipment consist of the following (in thousands):

	March 31, 2021		December 31, 2020
Land	$	805	$	805
Buildings and leasehold improvements	4,771		4,771
Machinery and equipment	28,635		29,375
Total property and equipment	34,211		34,951
Less accumulated depreciation	(24,828)		(25,189)
Total property and equipment, net	$	9,383	$	9,762

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Leases

3 Months Ended

Mar. 31, 2021

Leases [Abstract]

Leases

Leases

Lessee

We have operating and finance leases for corporate offices, vehicles, and certain equipment. Our leases have remaining lease terms of 1 year to 10 years, some of which include options to extend the leases and some of which include options to terminate the leases within 1 year. Operating leases are included separately in the unaudited condensed consolidated balance sheets and finance lease assets are included in property and equipment with the related liabilities included in other current liabilities and other liabilities in the unaudited consolidated balance sheets.

The components of lease expense are as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Operating lease cost	$	334	$	328
Finance lease cost:
Amortization of finance lease assets	$	106	$	124
Interest on finance lease liabilities	21		24
Total finance lease cost	$	127	$	148

Supplemental cash flow information related to leases from continuing operations was as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	317	$	282
Operating cash flows from finance leases	$	21	$	24
Financing cash flows from finance leases	$	149	$	148
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	1,537	$	596

Supplemental balance sheet information related to leases was as follows (in thousands):

	March 31, 2021			December 31, 2020
Operating lease right-of-use assets, net	$	2,848		$	1,769
Operating lease liabilities	$	1,075		$	1,011
Operating lease liabilities, net of current	1,824			828
Total operating lease liabilities	$	2,899		$	1,839
Finance lease assets	$	2,567		$	2,765
Finance lease accumulated amortization	(1,130)			(791)
Finance lease assets, net	$	1,437		$	1,974
Finance lease liabilities	$	580		$	594
Finance lease liabilities, net of current	722			937
Total finance lease liabilities	$	1,302		$	1,531
Weighted average remaining lease term (in years)
Operating leases	3.1			2.3
Finance leases	2.7			2.8
Weighted average discount rate
Operating leases	4.54		%	5.53		%
Finance leases	6.44		%	6.44		%

We are committed to making future cash payments on non-cancelable operating leases and finance leases (including interest). The future minimum lease payments due under both non-cancelable operating leases and finance leases having initial or remaining lease terms in excess of one year as of March 31, 2021 were as follows (in thousands):

	Operating Leases		Finance Leases
2021 (excludes the three-months ended March 31, 2021)	$	931	$	507
2022	831		515
2023	330		273
2024	606		118
2025 and thereafter	373		2
Total future minimum lease payments	3,071		1,415
Less amounts representing interest	172		113
Present value of lease obligations	$	2,899	$	1,302

Lessor

In the Healthcare division, we generate lease income in the Diagnostic Services segment, from equipment rentals to customers. Rental contracts are structured as either a weekly or monthly payment arrangement and are accounted for as operating leases. Revenues are recognized on a straight-line basis over the term of the rental. During the three months ended March 31, 2021 and 2020, our lease contracts are mainly month to month contracts.

Leases

Leases

Lessee

We have operating and finance leases for corporate offices, vehicles, and certain equipment. Our leases have remaining lease terms of 1 year to 10 years, some of which include options to extend the leases and some of which include options to terminate the leases within 1 year. Operating leases are included separately in the unaudited condensed consolidated balance sheets and finance lease assets are included in property and equipment with the related liabilities included in other current liabilities and other liabilities in the unaudited consolidated balance sheets.

The components of lease expense are as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Operating lease cost	$	334	$	328
Finance lease cost:
Amortization of finance lease assets	$	106	$	124
Interest on finance lease liabilities	21		24
Total finance lease cost	$	127	$	148

Supplemental cash flow information related to leases from continuing operations was as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	317	$	282
Operating cash flows from finance leases	$	21	$	24
Financing cash flows from finance leases	$	149	$	148
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	1,537	$	596

Supplemental balance sheet information related to leases was as follows (in thousands):

	March 31, 2021			December 31, 2020
Operating lease right-of-use assets, net	$	2,848		$	1,769
Operating lease liabilities	$	1,075		$	1,011
Operating lease liabilities, net of current	1,824			828
Total operating lease liabilities	$	2,899		$	1,839
Finance lease assets	$	2,567		$	2,765
Finance lease accumulated amortization	(1,130)			(791)
Finance lease assets, net	$	1,437		$	1,974
Finance lease liabilities	$	580		$	594
Finance lease liabilities, net of current	722			937
Total finance lease liabilities	$	1,302		$	1,531
Weighted average remaining lease term (in years)
Operating leases	3.1			2.3
Finance leases	2.7			2.8
Weighted average discount rate
Operating leases	4.54		%	5.53		%
Finance leases	6.44		%	6.44		%

We are committed to making future cash payments on non-cancelable operating leases and finance leases (including interest). The future minimum lease payments due under both non-cancelable operating leases and finance leases having initial or remaining lease terms in excess of one year as of March 31, 2021 were as follows (in thousands):

	Operating Leases		Finance Leases
2021 (excludes the three-months ended March 31, 2021)	$	931	$	507
2022	831		515
2023	330		273
2024	606		118
2025 and thereafter	373		2
Total future minimum lease payments	3,071		1,415
Less amounts representing interest	172		113
Present value of lease obligations	$	2,899	$	1,302

Lessor

In the Healthcare division, we generate lease income in the Diagnostic Services segment, from equipment rentals to customers. Rental contracts are structured as either a weekly or monthly payment arrangement and are accounted for as operating leases. Revenues are recognized on a straight-line basis over the term of the rental. During the three months ended March 31, 2021 and 2020, our lease contracts are mainly month to month contracts.

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Financial Instruments

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Financial Instruments

Financial Instruments

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents information about our financial assets that are measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation techniques we utilize to determine such fair value at March 31, 2021 and December 31, 2020 (in thousands).

	Fair Value as of March 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Equity securities	$	65	$	49	$	—	$	114
Total	$	65	$	49	$	—	$	114

	Fair Value as of December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Equity securities	$	35	$	55	$	—	$	90
Total	$	35	$	55	$	—	$	90

The investment in equity securities consists of common stock of publicly traded companies. The fair value of these securities is based on the closing prices observed on March 31, 2021 and December 31, 2020, respectively. During the three months ended March 31, 2021 and 2020, the Company recorded net unrealized loss and gain of $23 thousand and $26 thousand, respectively, in the other income (expenses) of condensed unaudited consolidated statement of operations.

The Company occasionally enters into lumber derivative contracts in order to protect its gross profit margins from fluctuations caused by volatility in lumber prices. At March 31, 2021 and December 31, 2020, the Company had no lumber derivative contracts.

We did not reclassify any investments between levels in the fair value hierarchy during the three months ended March 31, 2021.The fair values of the Company’s revolving credit facility approximate carrying value due to the variable rate nature of these borrowings.

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Debt

3 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Debt

Debt

A summary of debt as of March 31, 2021 and December 31, 2020 are as follows (dollars in thousands):

	March 31, 2021			December 31, 2020
	Amount		Weighted-Average Interest Rate	Amount		Weighted-Average Interest Rate
Revolving Credit Facility - Gerber KBS	$	2,672	6.00%	$	1,099	6.00%
Revolving Credit Facility - Gerber EBGL	1,969		6.00%	2,016		6.00%
Revolving Credit Facility - SNB	5,000		2.61%	12,710		2.64%
Total Short-term Revolving Credit Facility	$	9,641	4.24%	$	15,825	3.30%
Gerber - Star Term Loan	$	271	6.25%	$	262	6.75%
Premier - Term Loan	335		5.75%	419		5.75%
Total Short Term Debt	$	606	5.97%	$	681	6.13%
Short-term Paycheck Protection Program Notes	$	2,301	1.00%	$	1,856	1.00%
Short-term debt and current portion of long-term debt	$	12,548	3.73%	$	18,362	3.17%
Gerber - Star Term Loan	$	985	6.25%	$	1,058	6.75%
Premier - Term Loan	324		5.75%	321		5.75%
Total Long Term Debt	$	1,309	6.13%	$	1,379	6.52%
Long-term Paycheck Protection Program Notes	$	658	1.00%	$	2,321	1.00%
Long-term debt, net of current portion	$	1,967	4.41%	$	3,700	3.06%
LSV Co-Invest I Promissory Note (“January Note”)	$	709	12.00%	$	709	12.00%
LSV Co-Invest I Promissory Note (“June Note”)	1,220		12.00%	1,220		12.00%
LSVM Note	378		12.00%	378		12.00%
Total Notes Payable To Related Parties (1)	$	2,307	12.00%	$	2,307	12.00%
Total Debt	$	16,822	4.94%	$	24,369	3.99%

(1) See Note 12. Related Party Transactions, for information regarding certain ATRM promissory notes that are outstanding.

Term Loan Facilities

As of March 31, 2021, the short-term debt and current portion of long-term debt included $0.3 million of the Gerber Star term loan, net of issuance costs, and $0.3 million of the Premier term loan. Long-term debt, net of current portion, included $1.0 million of the Gerber Star term loan, net of issuance costs, and $0.3 million of the Premier term loan.

The following table presents the Star and Premier term loans balance net of unamortized debt issuance costs as of March 31, 2021 (in thousands):

	March 31, 2021
	Amount
Gerber - Star Term Loan	$	1,533
Premier - Term Loan	659
Total Principal	2,192
Unamortized debt issuance costs	(277)
Total	$	1,915

Sterling Credit Facility

On March 29, 2019, the Company entered into a Loan and Security Agreement (the “SNB Loan Agreement”) by and among certain subsidiaries of the Company, as borrowers (collectively, the “SNB Borrowers”); the Company, as guarantor; and Sterling National Bank, a national banking association, as lender (“Sterling” or “SNB”).

The SNB Loan Agreement is a five-year credit facility maturing in March 2024, with a maximum credit amount of $20.0 million for revolving loans (the “SNB Credit Facility”). Under the SNB Credit Facility, the SNB Borrowers can request the issuance of letters of credit in an aggregate amount not to exceed $0.5 million at any one time outstanding. The borrowings under the SNB Loan Agreement were classified as short-term obligations under GAAP as the agreement contained a subjective acceleration clause and required a lockbox arrangement whereby all receipts within the lockbox are swept daily to reduce borrowings outstanding. As of March 31, 2021, the Company had $0.2 million of letters of credit outstanding and had additional borrowing capacity of $4.5 million.

At the Borrowers’ option, the SNB Credit Facility will bear interest at either (i) a Floating LIBOR Rate, as defined in the Loan Agreement, plus a margin of 2.50% per annum; or (ii) a Fixed LIBOR Rate, as defined in the Loan Agreement, plus a margin of 2.25% per annum. As our largest single debt outstanding, our floating rate on this facility at March 31, 2021 was 2.61%.

The SNB Loan Agreement includes certain representations, warranties of SNB Borrowers, as well as events of default and certain affirmative and negative covenants by the SNB Borrowers that are customary for loan agreements of this type. These covenants include restrictions on borrowings, investments and dispositions by SNB Borrowers, as well as limitations on the SNB Borrowers’ ability to make certain distributions. Upon the occurrence and during the continuation of an event of default under the SNB Loan Agreement, SNB may, among other things, declare the loans and all other obligations under the SNB Loan Agreement immediately due and payable and increase the interest rate at which loans and obligations under the SNB Loan Agreement bear interest. The SNB Credit Facility is secured by a first-priority security interest in substantially all of the assets of the Company and the SNB Borrowers and a pledge of all shares of the SNB Borrowers.

On March 29, 2019, in connection with the Company’s entry into the SNB Loan Agreement, Jeffery E. Eberwein, the Executive Chairman of the Company’s board of directors, entered into Limited Guaranty Agreement (the “SNB Eberwein Guaranty”) with SNB pursuant to which he guaranteed the prompt performance of all the Borrowers’ obligations under the SNB Loan Agreement. The SNB Eberwein Guaranty is limited in the aggregate to the amount of (a) $1.5 million, plus (b) reasonable costs and expenses of SNB incurred in connection with the SNB Eberwein Guaranty. Mr. Eberwein’s obligations under the SNB Eberwein Guaranty terminate upon the Company and Borrowers achieving certain milestones set forth therein.

On February 1, 2021, in connection with the closing of the Company’s sale of MD Office Solutions, the Company entered into a First Amendment to the SNB Loan Agreement pursuant to which, among other things, Sterling consented to the sale of MD Office Solutions and the Company’s name change from Digirad Corporation to Star Equity Holdings, Inc.

On March 31, 2021, in connection with completing the sale of DMS Health, the Company, certain subsidiaries of the Company, and Sterling entered into a Second Amendment to the SNB Loan Agreement pursuant to which, among other things, Sterling consented to the sale of DMS Health and its subsidiaries, removed DMS Health and its subsidiaries as borrowers under the SNB Loan Agreement, and required the principle to be paid down to $7.0 million.

At March 31, 2021, the Company was in compliance with the covenants under the SNB Loan Agreement.

Construction Loan Agreements

As of March 31, 2021, the Construction division had outstanding revolving lines of credit and term loans of approximately $5.4 million. This debt includes: (i) $2.7 million principal outstanding on KBS’s $4.0 million revolving credit facility under a Loan and Security Agreement, dated February 23, 2016, (as amended, the “KBS Loan Agreement”), with Gerber and (ii) $2.0 million principal outstanding on EBGL’s $3.0 million revolving credit facility under a Revolving Credit Loan Agreement, and $0.7 million with Premier term loan, dated June 30, 2017 (as amended, the “Premier Loan Agreement”). The Construction division was at the maximum borrowing capacity under both revolving lines of credit, based on the inventory and accounts receivable on March 31, 2021 which fluctuates weekly.

KBS Loan Agreement

On February 23, 2016, ATRM, KBS and Main Modular Haulers, Inc. (a former subsidiary of ATRM) entered into a Loan and Security Agreement, (as amended, the “KBS Loan Agreement”), with Gerber. The KBS Loan Agreement provides KBS with a revolving line of credit with borrowing availability of up to $4.0 million. Availability under the line of credit is based on a formula tied to KBS’s eligible accounts receivable, inventory and other collateral. The KBS Loan Agreement, which was scheduled to expire on February 22, 2018, has been automatically extended for successive one (1) year periods in accordance with its terms and is now scheduled to expire on February 22, 2022. The KBS Loan Agreement will be automatically extended for another one (1) year period unless a party thereto provides prior written notice of termination. As of March 31, 2021 neither party has provided notice of termination. Upon the final expiration of the term of the KBS Loan Agreement, the outstanding principal balance is payable in full. Borrowings bear interest at the prime rate plus 2.75%, equating to 6.00% at March 31, 2021, with interest payable monthly. The KBS Loan Agreement also provides for certain fees payable to Gerber during its term, including a 1.5% annual facilities fee and a 0.10% monthly collateral monitoring fee. KBS’s obligations under the KBS Loan Agreement are secured by all of its assets and are guaranteed by ATRM. Unsecured promissory notes issued by KBS and ATRM are subordinate to KBS’s obligations under the KBS Loan Agreement. The KBS Loan Agreement contains representations, warranties, affirmative and negative covenants, defined events of default and other provisions customary for financings of this type. Financial covenants require that KBS maintain a maximum leverage ratio (as defined in the KBS Loan Agreement) and KBS not incur a net annual post-tax loss in any fiscal year during the term of the KBS Loan Agreement. The borrowings under the KBS Loan Agreement were classified as short-term obligations under GAAP as the agreement contained a subjective acceleration clause and required a lockbox arrangement whereby certain receipts are swept daily to reduce borrowings outstanding. At March 31, 2021, approximately $2.7 million was outstanding under the KBS Loan Agreement.

During the three months ended, March 31, 2021, the parties to the KBS Loan Agreement have amended the KBS Loan Agreement to provide for increased availability under the KBS Loan Agreement to KBS under certain circumstances, including for new equipment additions, and certain other changes, as well as a waiver of certain covenants.

As of December 31, 2020 and 2019, KBS was not in compliance with the financial covenants requiring no net annual post-tax loss for KBS or the minimum leverage ratio covenant as of 2020. The occurrence of any event of default under the KBS Loan Agreement may result in KBS’s obligations under the KBS Loan Agreement becoming immediately due and payable. In April 2019, June 2019, February 2020 and February 2021, we obtained a waiver from Gerber for these events.

On September 10, 2019, the parties to the KBS Loan Agreement entered into the twelfth amendment to the KBS Loan Agreement (the “Twelfth KBS Amendment”), pursuant to which the Company agreed to guarantee amounts borrowed by certain ATRM’s subsidiaries from Gerber.

On January 31, 2020, the Company, ATRM, KBS and Gerber entered into a thirteenth amendment to the KBS Loan Agreement (the “Thirteenth KBS Amendment”) to amend the terms of the KBS Loan Agreement, in order to, among other things (a) amend the definitions of “Ancillary Credit Parties,” “Guarantor,” “Obligations,” and “Subordinated Lender” to address the obligations of the Star Borrowers, the EBGL Borrowers, the Star Credit Parties, and the EBGL Credit Parties under the Star Loan Agreement, EBGL Loan Agreement and the Subordination Agreements (each as defined below) to which they are a party and (b) add a new cross default provision.

On March 5, 2020, in connection with the First EBGL Amendment, Gerber, KBS, ATRM and the Company entered into a fourteenth amendment to the KBS Loan Agreement in order to, among other things consent to the First EBGL Amendment and remove cash and cash collateral from the borrowing base.

On April 1, 2020, Gerber and KBS entered into a fifteenth amendment to the KBS Loan Agreement pursuant to which the “Minimum Average Monthly Loan Amount” was decreased to twenty-five percent (25%) of the Maximum Revolving Amount.

On January 5, 2021, Gerber and KBS entered into a sixteenth amendment to the KBS Loan Agreement in order to, among other things, amend certain definitions under the KBS Loan Agreement and to increase the inventory assets against which funds can be borrowed.

On February 26, 2021 Gerber and KBS entered into a seventeenth amendment to the KBS Loan Agreement in order to provide the waiver to the 2020 covenant breach and amended the financial covenants. The financial covenants under the KBS Loan Agreement, as amended, provide that (i) KBS shall make no distribution, transfer, payment, advance, or contribution of cash or property which would constitute a restricted payment; (ii) KBS shall report annual post-tax net income at least equal to (a) $385 thousand for the trailing 6-month period ending June 30, 2021 and (b) $500 thousand for the trailing fiscal year end December 31, 2021; and (iii) a minimum EBITDA at June 30, 2021 of more than $880 thousand or at December 31, 2021 of more than $1.5 million.

EBGL Premier Note

On June 30, 2017, EdgeBuilder and Glenbrook (together, EBGL) entered into a Revolving Credit Loan Agreement (as amended, the “Premier Loan Agreement”) with Premier providing EBGL with a working capital line of credit of up to $3.0 million. The Premier Loan Agreement replaced the prior revolving credit facility.

Availability under the Premier Loan Agreement is based on a formula tied to EBGL’s eligible accounts receivable, inventory and equipment, and borrowings bear interest at the prime rate plus 1.50%, with interest payable monthly and the outstanding principal balance payable upon expiration of the term of the Premier Loan Agreement. The Premier Loan Agreement also provides for certain fees payable to Premier during its term. The initial term of the Premier Loan Agreement was scheduled to expire on June 30, 2018, but was extended multiple times by Premier until January 31, 2023. EBGL’s obligations under the Premier Loan Agreement are secured by all of their inventory, equipment, accounts and other intangibles, fixtures and all proceeds of the foregoing.

On January 31, 2020, Glenbrook and EdgeBuilder entered into an Extension and Modification Agreement (the “Modification Agreement”) with Premier that modified the terms of the Revolving Credit Promissory Note made by Glenbrook and EdgeBuilder. The Modification Agreement reduced the outstanding borrowings to $1.0 million, extended the final maturity date to January 31, 2023, and set the interest rate to at 5.75% per annum. Mr. Eberwein executed a guaranty in favor of Premier, which has been extended through January 1, 2023, under which ATRM and Mr. Eberwein have absolutely and unconditionally guaranteed all of EBGL’s obligations under the Premier Loan Agreement. As of March 31, 2021, approximately $0.7 million was outstanding under the Premier Loan Agreement.

Gerber Star and EBGL Loans

On January 31, 2020, SRE, 947 Waterford Road, LLC (“947 Waterford”), 300 Park Street, LLC (“300 Park”), and 56 Mechanic Falls Road, LLC (“56 Mechanic” and together with SRE, 947 Waterford, and 300 Park, (the “Star Borrowers”), each an Investments Subsidiary, and the Company, ATRM, KBS, EdgeBuilder, and Glenbrook (collectively, the “Star Credit Parties”), entered into a Loan and Security Agreement (as amended, the “Star Loan Agreement”) with Gerber providing the Star Borrowers with a credit facility with borrowing availability of up to $2.5 million ($2.0 million and $0.5 million to KBS and EBGL, respectively) (the “Star Loan”). The advance of $2.0 million to KBS is to be repaid in monthly installments of sixty (60) consecutive equal payments. The advance of $0.5 million to EBGL, which has been temporarily increased by $0.3 million due to be repaid on April 30, 2020, is to be repaid in monthly installments of twelve (12) consecutive equal payments. On February 20, 2020, the Star Borrowers entered into a first amendment to the Star Loan Agreement (the “First Star Amendment”) in order to (i) temporarily advance $0.3 million to EBGL, which amount is to be repaid to Gerber on or before April 30, 2020; (ii) clarify that Gerber can make multiple advances under the Star Loan Agreement, and (iii) to correct the maturity date of the Star Loan. On April 30, 2020, the Star Borrowers entered into a second amendment to the Star Loan Agreement (the “Second Star Amendment”) to change terms of repayment for the advance of $0.3 million to EBGL to provide for repayment in three consecutive equal monthly installments, commencing on May 30, 2020, with a final installment on or before July 31, 2020. As of March 31, 2021, EBGL repaid approximately $0.5 million and $1.3 million was outstanding, net with deferred financing costs, under the Star Loan Agreement.

On January 31, 2020, EdgeBuilder and Glenbrook (the “EBGL Borrowers”), each a Construction Subsidiary, and the Company, Star, 947 Waterford, 300 Park, 56 Mechanic, ATRM, and KBS (collectively, the “EBGL Credit Parties”), entered into a Loan and Security Agreement (the “EBGL Loan Agreement”) with Gerber providing the EBGL Borrowers with a credit facility with borrowing availability of up to $3.0 million (the “EBGL Loan”). On March 5, 2020, the EBGL Borrowers entered into a first amendment to the EBGL Loan Agreement (the “First EBGL Amendment”) with Gerber that amended the EBGL Loan Agreement and the KBS Loan Agreement to include a pledge $0.3 million of cash collateral by LSVI under the EBGL Loan Agreement which, prior to the First EBGL Amendment, was pledged by LSVI in connection with the KBS Loan Agreement. On July 1, 2020, the EBGL Borrowers entered into a second amendment to the EBGL Loan Agreement to terminate the pledge of $0.3 million in cash collateral. On February 26, 2021, the EBGL Borrowers entered into a third amendment to the EBGL Loan Agreement (the “Third EBGL Amendment”) pursuant to which the Company and Gerber agreed to, among other things, eliminate the minimum leverage ratio covenant, lower the minimum EBITDA, and require the borrowers to not incur a net operating loss on bi-annual basis. The Third EBGL Amendment also discharged the EBGL Eberwein Guaranty described below. As of March 31, 2021, approximately $2.0 million was outstanding under the EBGL Loan Agreement.

Availability under the Star Loan Agreement is based on a formula tied to the value of real estate owned by the Star Borrowers, and borrowings bear interest at the prime rate plus 3.5% per annum. Availability under the EBGL Loan Agreement is based on a formula tied to the EBGL Borrowers’ eligible accounts receivable and inventory, and borrowings bear interest at the prime rate plus 2.75% per annum. The Loan Agreements also provide for certain fees payable to Gerber during their respective terms. The Star Loan matures on the earlier of (a) January 1, 2025 or (b) the termination, the maturity or repayment of the EBGL Loan. The EBGL Loan matures on the earlier of (a) January 1, 2022, unless extended, or (b) the termination, the maturity or repayment of the Star Loan. The maturity of the EBGL Loan is automatically extended for successive periods of one (1) year each unless terminated by Gerber or the EBGL Borrowers. The borrowings under the EBGL Loan Agreement were classified as short-term obligations under GAAP as the agreement contained a subjective acceleration clause and required a lockbox arrangement whereby all receipts are swept daily to reduce borrowings outstanding.

The obligations of the EBGL Borrowers under the EBGL Loan Agreement are guaranteed by the EBGL Credit Parties and are secured by substantially all the assets of the EBGL Borrowers and the EBGL Credit Parties. The obligations of the Star Borrowers under the Star Loan Agreement are guaranteed by the Star Credit Parties and are secured by substantially all the assets of the Star Borrowers and the Star Credit Parties. Contemporaneously with the execution and delivery of the Star Loan Agreement, Jeffrey E. Eberwein, the Executive Chairman of the Company’s board of directors, executed and delivered a Guaranty (the “Gerber Eberwein Guaranty”) to Gerber pursuant to which he guaranteed the performance of all the Star Borrowers’ obligations to Gerber under the Star Loan Agreement, including the full payment of all indebtedness owing by the Star Borrowers to Gerber under or in connection with the Star Loan Agreement and related financing documents. Mr. Eberwein’s obligations under the Gerber Eberwein Guaranty are limited in the aggregate to the amount of (a) $2.5 million, plus (b) costs of Gerber incidental to the enforcement of the Gerber Eberwein Guaranty or any guaranteed obligations. On March 5, 2020, contemporaneously with the execution and delivery of the First EBGL Amendment, Mr. Eberwein, the Executive Chairman of the Company’s board of directors, executed and delivered a Guaranty (the “EBGL Eberwein Guaranty”) to Gerber pursuant to which he guaranteed the performance of all the EBGL Borrowers’ obligations to Gerber under the EBGL Loan Agreement, including the full payment of all indebtedness owing by the EBGL Borrowers to Gerber under or in connection with the EBGL Loan Agreement and related financing documents. Mr. Eberwein’s obligations under the EBGL Eberwein Guaranty are limited in the aggregate to the amount of (a) $0.5 million, plus (b) costs of Gerber incidental to the enforcement of the EBGL Eberwein Guaranty or any guaranteed obligations.

On February 26, 2021, the Star Borrowers entered into a third amendment to the Star Loan Agreement (the “Third Star Amendment”) with Gerber that, among other things, amended the contract rate to prime rate plus 3% and discharged the $2.5 million Gerber Eberwein Guaranty.

The Star Loan Agreement and EBGL Loan Agreement contains representations, warranties, affirmative and negative covenants, events of default and other provisions customary for financings of this type. The financial covenants under the EBGL Loan Agreement applicable to the EBGL Borrowers include maintenance of a minimum tangible net worth, a minimum debt service coverage ratio and minimum net income. The Financial covenants under the Star Loan Agreement applicable to the Star Borrowers include a minimum debt service coverage ratio. The occurrence of any event of default under the Loan Agreements may result in the obligations of the Borrowers becoming immediately due and payable. As of December 31, 2020, EBGL was not in compliance with the financial covenants under the Star Loan Agreement and EBGL Loan Agreement as of 2020. The occurrence of any event of default under the EBGL Loan Agreement may result in EBGL’s obligations under the EBGL Loan Agreement becoming immediately due and payable. In February 2021, we obtained a waiver from Gerber for these events and, as part of the Third EBGL Amendment (described above), the Company and Gerber agreed to, among other things, eliminate the minimum leverage ratio covenant, lower the minimum EBITDA, and require the borrowers to not incur a net operating loss on bi-annual basis, as well as discharge the EBGL Eberwein Guaranty.

As a condition to the extension of credit to the Star Borrowers and EBGL Borrowers under the Star Loan Agreement and EBGL Loan Agreement, the holders of certain existing unsecured promissory notes made by ATRM and certain of its subsidiaries entered into subordination agreements (the “Subordination Agreements”) with Gerber pursuant to which such noteholders (including the Company and certain of its subsidiaries) agreed to subordinate the obligations of ATRM and its subsidiaries to such noteholders to the obligations of the Star Borrowers and EBGL Borrowers to Gerber under the loan agreements.

Paycheck Protection Program

From April 2020 through May 2020, the Company and its subsidiaries received $6.7 million, of loans under the Paycheck Protection Program (“PPP”). Total PPP loans received the Construction division and Healthcare division were $5.5 million and $1.2 million, respectively.

The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (“SBA”). PPP loans for the Construction and Healthcare division were made through Bremer Bank and Sterling as lenders, respectively.

The PPP loans have two-year terms and bear interest at a rate of 1.00% per annum. Monthly principal and interest payments under the PPP loans are deferred for ten months, after the end of covered periods. The PPP loans may be prepaid at any time prior to maturity with no prepayment penalties.

The promissory notes issued in connection with the PPP loans (the “PPP Notes”) contain customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the SBA or lender, or breaching the terms of the applicable PPP loan documents. Upon an event of default under a PPP Note, the lender thereunder may, among other things, require immediate payment of all amounts owing under the applicable PPP Note, collect all amounts owing from the applicable borrower, or file suit and obtain judgment.

Under the terms of the CARES Act, recipients of loans under the PPP can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and certain other eligible costs. However, no assurance is provided that forgiveness for any portion of the PPP loans will be obtained. and even if forgiveness is granted the PPP loans may remain subject to review and audit due to all affiliated PPP Notes equaling more than $2 million.

In order to apply for the PPP loans, we certified that the economic uncertainty at the time of application, made the PPP loans request necessary to support ongoing operations of the Company. This certification was made taking into account our then current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that would not be significantly detrimental to the business.

The Company is continuing to evaluate the criteria and new guidance put out by the SBA regarding loan forgiveness criteria and procedures to seek loan forgiveness. During October 2020 and January 2021, the Company applied for forgiveness on all PPP loans. Our PPP loan forgiveness is sought under the belief all entities requesting loan forgiveness have met the stated criteria and guidelines provided by the SBA and terms of the CARES Act; however, no assurance can be provided that forgiveness for any portion of the PPP loans will be obtained.

During Q4 2020, $2.5 million of the Healthcare division PPP Notes were forgiven. As of March 31, 2021, the Company has $3.0 million in PPP loans outstanding for the Healthcare division. During Q1, 2021, all amounts under the Construction division PPP Notes were forgiven.

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Commitments and Contingencies	3 Months Ended
	Mar. 31, 2021
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and ContingenciesIn the normal course of business, we have been, and will likely continue to be, subject to other litigation or administrative proceedings incidental to our business, such as claims related to customer disputes, employment practices, wage and hour disputes, product liability, professional liability, commercial disputes, licensure restrictions or denials, and warranty or patent infringement. Responding to litigation or administrative proceedings, regardless of whether they have merit, can be expensive and disruptive to normal business operations. We are not able to predict the timing or outcome of these matters and do not expect that the resolution of these matters will have a material adverse effect on our financial position or results of operations.

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Income Taxes

3 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

We provide for income taxes under the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of differences between the tax basis of assets or liabilities and their carrying amounts in the financial statements. We provide a valuation allowance for deferred tax assets if it is more likely than not that these items will expire before we are able to realize their benefit. We calculate the valuation allowance in accordance with the authoritative guidance relating to income taxes, which requires an assessment of both positive and negative evidence regarding the realizability of these deferred tax assets, when measuring the need for a valuation allowance. Significant judgment is required in determining any valuation allowance against deferred tax assets. We continue to record a full valuation allowance against our deferred tax assets and intend to maintain a valuation allowance until sufficient positive evidence exists to support its reversal.

Intraperiod tax allocation rules require us to allocate our provision for income taxes between continuing operations and other categories of comprehensive income, such as discontinued operations.

For the three months ended March 31, 2021, the Company recorded an income tax expense of $2 thousand within continuing operations and an income tax expense of $72 thousand within discontinued operations. For the three months ended March 31, 2020, the Company recorded an income tax expense of $27 thousand within continuing operations and an income tax expense of $7 thousand within discontinued operations.

As of March 31, 2021, we had unrecognized tax benefits of approximately $2.6 million related to uncertain tax positions. Included in the unrecognized tax benefits were $2.1 million of tax benefits that, if recognized, would reduce our annual effective tax rate, subject to the valuation allowance.

We file income tax returns in the U.S. and in various state jurisdictions with varying statutes of limitations. We are no longer subject to income tax examination by tax authorities for years prior to 2016; however, our net operating loss carryforwards and research credit carryforwards arising prior to that year are subject to adjustment. Our policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense.                                 

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). There were several income tax provisions included in the CARES Act, as well as other non-tax matters incorporated into law as a result of the enactment of the CARES Act.

Under the CARES Act, net operating losses generated in tax years 2018, 2019, and 2020 can be carried back five years, allowing corporate taxpayers to amend earlier tax returns and potentially obtain a tax refund. In addition, losses generated and utilized prior to January 1, 2021 are not subject to the 80 percent limitation that was previously applied to losses generated after December 31, 2017 under the Tax Cuts and Jobs Act of 2017. The Company doesn’t currently estimate that any tax will be recoverable from these tax provisions and therefore does not anticipate there to be a material impact from these provisions on the Company’s income tax balances in its current year financial statements.

The Tax Cuts and Jobs Act of 2017 limited interest deductions to 30% of adjusted taxable income ("ATI"). The CARES Act increases the limitation to 50 percent of adjusted taxable income for tax years 2019 or 2020, thereby raising the limitation ceiling and potentially allowing for increased interest deductions. In addition, companies have the option of using 2019 ATI to compute the limitation for 2020. The Company tentatively plans to take advantage of certain of these provisions to eliminate any potential section 163(j) interest carryovers from its inventory of deferred tax assets for the year ending December 31, 2020.

The CARES Act adopts a technical correction to the Tax Cuts and Jobs Act's apparent oversight in excluding the eligibility of qualified improvement property (e.g., real estate/leasehold improvements) from eligibility for bonus depreciation for tax years after 2017. Companies are allowed to amend 2018 income tax or file accounting method changes in 2019 to claim the additional deductions. The Company is still evaluating the impact of this provision; however, the Company does not anticipate that this provision will have any impact on the Company’s tax expense or payable balances. If pursued, this provision may have an impact on the Company’s allocation of its deferred tax assets related to property, plant, and equipment and net operating losses, which are substantially offset by the Company’s full valuation allowance.

Certain other provisions of the CARES Act, such as the ability to obtain a refund of alternative minimum taxes (“AMT”) previously paid to the IRS and the increased ability to deduct charitable contributions by corporations are not expected to be applicable to the Company. Overall, we do not expect the income tax provisions of the CARES Act to have a material impact to the Company’s financial statements.On December 21, 2020, Congress passed the $2.3 trillion Consolidated Appropriations Act, 2021, H.R. 133 (the “Act”), which combined the $1.4 trillion omnibus spending bill for the 2021 federal fiscal year with the $900 billion stimulus relief package aimed to respond to the economic fallout caused by the COVID-19 pandemic. On December 27, 2020, President Trump signed the Act, which enhanced and expanded certain provisions of the previous relief package—the Coronavirus Aid, Relief, and Economic Security Act, H.R. 748 (the “Cares Act”) into law. The Company does not expect the Act to have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

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Segments

3 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

Segments

Segments

Our business is organized into four reportable segments:

1. Diagnostic Services

2. Diagnostic Imaging

3. Construction

4. Investments

Effective January 1, 2020, the Company revised the allocation methodology used to allocate corporate costs to each of the operating segments. “Loss (income) by operating segment” for the historical period has been recast to conform to our current allocation methodology. Segment information is as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Revenue by segment:
Diagnostic Services	$	10,239	$	10,814
Diagnostic Imaging	3,068		2,861
Construction	9,047		5,484
Investments	—		31
Consolidated revenue	$	22,354	$	19,190
Gross profit by segment:
Diagnostic Services	$	1,608	$	2,005
Diagnostic Imaging	990		869
Construction	544		403
Investments	(65)		(34)
Consolidated gross profit	$	3,077	$	3,243
Income (loss) from operations by segment:
Diagnostic Services	$	859	$	59
Diagnostic Imaging	(22)		(267)
Construction	(1,547)		(1,300)
Investments	76		(54)
Unallocated corporate and other expenses	(935)		(634)
Segment loss from operations	$	(1,569)	$	(2,196)
Depreciation and amortization by segment:
Diagnostic Services	$	290	$	329
Diagnostic Imaging	67		63
Construction	479		572
Investments	65		65
Total depreciation and amortization	$	901	$	1,029

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Related Party Transactions

3 Months Ended

Mar. 31, 2021

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Eberwein Guarantees

SNB

On March 29, 2019, in connection with the Company’s entry into the SNB Loan Agreement, Mr. Eberwein, the Executive Chairman of the Company’s board of directors, entered into the Limited Guaranty Agreement (the SNB Eberwein Guaranty) with SNB pursuant to which he guaranteed to SNB the prompt performance of all the Borrowers’ obligations to SNB under the SNB Loan Agreement, including the full payment of all indebtedness owing by Borrowers to SNB under or in connection with the SNB Loan Agreement and related SNB Credit Facility documents. Mr. Eberwein’s obligations under the SNB Eberwein Guaranty are limited in the aggregate to the amount of (a) $1.5 million, plus (b) reasonable costs and expenses of SNB incurred in connection with the SNB Eberwein Guaranty. Mr. Eberwein’s obligations under the SNB Eberwein Guaranty terminate upon the Company and SNB Borrowers achieving certain milestones set forth therein.

Gerber

On March 5, 2020, contemporaneously with the execution and delivery of the First EBGL Amendment, Mr. Eberwein, the Executive Chairman of the Company’s board of directors, executed and delivered a Guaranty (the EBGL Eberwein Guaranty) to Gerber pursuant to which he guaranteed the performance of all the EBGL Borrowers’ obligations to Gerber under the EBGL Loan Agreement, including the full payment of all indebtedness owing by the EBGL Borrowers to Gerber under or in connection with the EBGL Loan Agreement and related financing documents. Mr. Eberwein’s obligations under the EBGL Eberwein Guaranty were limited in the aggregate to the amount of (a) $0.5 million, plus (b) costs of Gerber incidental to the enforcement of the EBGL Eberwein Guaranty or any guaranteed obligations.

On February 26, 2021, the Third EBGL Amendment discharged the EBGL Eberwein Guaranty and removed Mr. Eberwein as an ancillary guarantor from the EBGL Loan Agreement. On February 26, 2021, the Third Star Amendment discharged the $2.5 million Gerber Eberwein Guaranty.

Premier

As a condition to the Premier Loan Agreement, Mr. Eberwein entered into a guaranty in favor of Premier, absolutely and unconditionally guaranteeing all of the borrowers’ obligations thereunder.

Premier Participation

Pursuant to a certain Participation Agreement by and between Mr. Eberwein and Premier, which was signed on March 31, 2020 and was effective as of March 26, 2020, Mr. Eberwein purchased a ratable participation in, and assumed a ratable part of, the aggregate maximum principal amount of the outstanding balance of the loan under the Premier Loan Agreement in the amount of $0.3 million.

ATRM

Jeffrey E. Eberwein, the Executive Chairman of our board of directors is also the Chief Executive Officer of Lone Star Value Management, LLC (“LSVM”), which is the investment manager of Lone Star Value Investors, LP (“LSVI”) and Lone Star Value Co-Invest I, LP (“LSV Co-Invest I”). Mr. Eberwein is also the sole manager of Lone Star Value Investors GP, LLC (“LSV GP”), the general partner of LSVI and LSV Co-Invest I, and is the sole owner of LSV Co-Invest I. LSVM was a wholly owned subsidiary of ATRM on the ATRM Acquisition Date (see Acquisition of LSVM below). Prior to the closing of the ATRM Merger, Mr. Eberwein was also Chairman of the board of directors of ATRM. On October 25, 2019, ATRM distributed its interest in LSVM to Star Equity, resulting in LSVM becoming a wholly owned direct subsidiary of Star Equity.

Prior to the closing of the ATRM Merger, Mr. Eberwein and his affiliates owned approximately 4.3% of the outstanding Company common stock and 17.4% of the outstanding ATRM common stock. In addition, LSVI owned 222,577 shares of ATRM’s 10.0% Series B Cumulative Preferred Stock (the “ATRM Preferred Stock”) and another 374,562 shares of ATRM Preferred Stock were owned directly by LSV Co-Invest I. Through these relationships and other relationships with affiliated entities, Mr. Eberwein may be deemed the beneficial owner of the securities owned by LSVI and LSV Co-Invest I. Mr. Eberwein disclaimed beneficial ownership of ATRM Preferred Stock, except to the extent of his pecuniary interest therein. At the effective time of the ATRM Merger, (i) each share of ATRM common stock converted into the right to receive three one-hundredths (0.03) of a share of Company Preferred Stock and (ii) each share of ATRM Preferred Stock converted into the right to receive two and one-half (2.5) shares of Company Preferred Stock.

As of March 31, 2021, Mr. Eberwein owned approximately 3.1% of the outstanding Star Equity common stock. In addition, as of March 31, 2021, Mr. Eberwein owned 1,310,036 shares of Company Preferred Stock. Mr. Eberwein as the CEO of LSVM, which is the investment advisor of LSVI, and as the sole manager of LSV GP, which is the general partner of LSVI Mr. Eberwein may be deemed the beneficial owner of the securities held by LSVI. Mr. Eberwein disclaims beneficial ownership of Company Preferred Stock, except to the extent of his pecuniary interest therein.

On July 10, 2020, Star Equity authorized LSVI to initiate a pro-rata distribution to its partners of an aggregate of 300,000 shares of Company Preferred Stock at $10 per share, which was finalized by the Company's transfer agent on July 22, 2020 (the "Distribution"), which includes 114,624 shares of Company Preferred Stock consisting of (i) 113,780 shares of Company Preferred Stock received by the Jeffrey E. Eberwein Revocable Trust (the “Eberwein Trust”) as a result of the Distribution and (ii) 844 shares of Company Preferred Stock acquired by the Eberwein Trust as a result of shares of Company Preferred Stock distributable to LSV GP in the Distribution being transferred directly to the Eberwein Trust contemporaneously with the Distribution. At the time of the Distribution, the Eberwein Trust was a limited partner of LSVI and LSV GP was the general partner of LSVI. Mr. Eberwein, as the trustee of the Eberwein Trust, may be deemed to beneficially own the securities held in the Eberwein Trust. Mr. Eberwein expressly disclaims beneficial ownership of such securities held in the Eberwein Trust except to the extent of his pecuniary interest therein. Mr. Eberwein, by virtue of his position as the manager and sole beneficial owner of LSV GP, the general partner of LSVI, may be deemed to beneficially own the securities owned by LSVI and LSV GP. Mr. Eberwein expressly disclaims beneficial ownership of such securities owned by LSVI and the securities owned by LSV GP, except to the extent of his pecuniary interest therein.

Private Placement

Immediately prior to the closing of the ATRM Merger, the Company issued 300,000 shares of Company Preferred Stock in a private placement (the “Private Placement”) to LSVI for a price of $10.00 per share for total proceeds to the Company of $3.0 million.

At the closing of the Private Placement, the Company and LSVI entered into a Registration Rights Agreement.

On September 17, 2020, in connection with satisfying the Company’s obligations under the Registration Rights Agreement, the Company filed a registration statement 1,492,321 shares of Company Preferred Stock.

Put Option Agreement

In addition, prior to the effective time of the ATRM Merger, the Company entered into a put option purchase agreement with Mr. Eberwein, pursuant to which the Company has the right to require Mr. Eberwein to acquire up to 100,000 shares of Company Preferred Stock at a price of $10.00 per share for aggregate proceeds of up to $1.0 million at any time, in the Company’s discretion, during the 12 months following the effective time of the ATRM Merger. In March 2020, Mr. Eberwein extended the put option agreement through June 30, 2021.

ATRM Notes Payable

ATRM, had the following related party promissory notes (the “ATRM Notes”) outstanding as of March 31, 2021, which were repaid in full during April 2021 using proceeds from the DMS Sale Transaction:

(i) Unsecured promissory note (principal amount of $0.7 million payable to LSV Co-Invest I), with interest payable semi-annually at a rate of 10.0% per annum (LSV Co-Invest I may elect to receive interest in-kind at a rate of 12.0% per annum), with any unpaid principal and interest previously due on January 12, 2020 (the “January Note”). On November 13, 2019, LSV Co-Invest I extended the maturity date of the January Note from January 12, 2020, to the earlier of (i) October 1, 2020 and (ii) the date when the January Note is no longer subject to a certain Subordinate Agreement dated January 12, 2018, as amended, in favor of Gerber. As described below, in November 2020 and March 2021, Mr. Eberwein signed the second and third extension letter to extend the maturity date of the January Note.

(ii) Unsecured promissory note (principal amount of $1.2 million payable to LSV Co-Invest I), with interest payable semi-annually at a rate of 10.0% per annum (LSV Co-Invest I may elect to receive interest in-kind at a rate of 12.0% per annum), with any unpaid principal and interest previously due on June 1, 2020 (the “June Note”). On November 13, 2019 LSV Co-Invest I also extended the maturity date of the June Note from June 1, 2020, to the earlier of (i) October 1, 2020 and (ii) the date when the January Note is no longer subject to a certain Subordinate Agreement dated June 1, 2018, as amended, in favor of Gerber. As described below, in November 2020 and March 2021, Mr. Eberwein signed the second and third extension letter to extend the maturity date of the June Note.

(iii) Unsecured promissory note (principal amount of $0.4 million payable to LSVM), with interest payable annually at a rate of 10.0% per annum (LSVM may elect to receive any interest payment entirely in-kind at a rate of 12.0% per annum), with any unpaid principal and interest previously due on November 30, 2020 (the “LSVM Note”). As described below, in November 2020, Mr. Eberwein signed the second and third extension letter to extend the maturity date of the LSVM Note.

LSVM and LSV Co-Invest I on July 17, 2019, waived any right to accelerate payment with respect to the ATRM Merger under the ATRM Notes. In March 2020, Mr. Eberwein, sole manager of LSV Co-Invest I and LSVM, provided the Company a Letter of Support of the ATRM Notes indicating that he will take no adverse action against ATRM for failure to pay the principal due on the ATRM Notes by the maturity date and intends to work with the Company and ATRM to assure the financial success of the Company. In November 2020, Mr. Eberwein signed the second extension letter to extend the maturity date of the ATRM Notes to the earlier of (i) the date that is 5 business days after the Closing Date defined within the DMS stock Purchase Agreement dated October 30, 2020 between the Company and Knob Creek Acquisition Corp. or (ii) the date when the Note is no longer subject to a certain subordinate letter agreement dated January 12, 2018, as amended in favor of Gerber. In March 2021, Mr. Eberwein signed the third extension letter to extend the maturity dates of the ATRM Notes to aforementioned two conditions or to June 30, 2022. The ATRM Notes were paid off in full in April 2021, upon the completion of DMS Sale Transaction.

Subordination Agreement

LSVM and LSV Co-Invest I are party to subordination agreements with ATRM and Gerber pursuant to which LSVM and LSV Co-Invest I agreed to subordinate the obligations of ATRM under their unsecured promissory notes to the obligations of the borrowers to Gerber.

Acquisitions and Leases of Maine Facilities

Through its SRE subsidiary, and prior to the completion of the ATRM Merger, the Company purchased two plants in Maine that manufacture modular buildings from KBS, a wholly-owned subsidiary of ATRM. SRE then leased these properties back to KBS, as further described below.

Waterford

On April 3, 2019, 947 Waterford, a wholly-owned subsidiary of SRE, entered into a Purchase and Sale Agreement (the “Waterford Purchase Agreement”) with KBS pursuant to which 947 Waterford closed on the purchase of certain real property and related improvements (including buildings) located in Waterford, Maine (the “Waterford Facility”) from KBS, and acquired the Waterford Facility. The purchase price of the Waterford Facility was $1.0 million, subject to adjustment for taxes and other charges and assessments.

Paris

On April 3, 2019, 300 Park, a wholly-owned subsidiary of SRE, entered into a Purchase and Sale Agreement (the “Park Purchase Agreement”) with KBS, pursuant to which 300 Park closed on the purchase of certain real property and related improvements and personal property (including buildings, machinery and equipment) located in Paris, Maine (the “Park Facility”) from KBS, and acquired the Park Facility. The purchase price of the Park Facility was $2.9 million, subject to adjustment for taxes and other charges and assessments.

Lease of Maine Facilities

On April 3, 2019, KBS entered into a separate lease agreement with each of 947 Waterford (the “Waterford Lease”) and 300 Park (the “Park Lease”). The Waterford Lease has an initial term of 120 months, which is subject to extension. The base rental payments associated with the initial term under the Waterford Lease were estimated to be between $1.2 million and $1.3 million in the aggregate. The Park Lease had an initial term of 120 months, which is subject to extension. The base rental payments associated with the initial term under the Park Lease are estimated to be between $3.3 million and $3.6 million in the aggregate. ATRM had unconditionally guaranteed the performance of all obligations under the Waterford Lease and Park Lease to be performed by KBS under each lease, including, without limitation, the payment of all required rent.

On March 27, 2019, 56 Mechanic, a wholly-owned subsidiary of SRE, purchased from a third party certain property and equipment located in Oxford, Maine (the “Oxford Facility”). The transaction closed on April 25, 2019. The purchase price of the Oxford Facility was $1.2 million, subject to adjustment for taxes and other charges and assessments. On April 3rd and 18th of 2019, KBS signed a lease and an amendment, respectively, with 56 Mechanic (the “Oxford Lease”), which became effective upon the closing of the transaction. The initial term under the Oxford Lease will commence upon delivery of the Oxford Facility to KBS. The Oxford Lease had an initial term of 120 months, which is subject to extension. The base rental payments associated with the initial term under the Oxford Lease are estimated to be between $1.4 million and $1.5 million in the aggregate. ATRM had unconditionally guaranteed the performance of all obligations under the Oxford Lease to be performed by KBS, including, without limitation, the payment of all required rent. As of March 31, 2021 and upon the completion of the ATRM Merger, the Waterford Lease, the Park Lease and the Oxford Lease are treated as intercompany transactions and eliminated

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Perpetual Preferred Stock

3 Months Ended

Mar. 31, 2021

Equity [Abstract]

Perpetual Preferred Stock

Perpetual Preferred Stock

Holders of shares of Series A Preferred Stock (the Company Preferred Stock) are entitled to receive, when, as and if, authorized by the Company’s board of directors (or a duly authorized committee of the Company’s board of directors) and declared by the Company out of funds legally available for the payment of dividends, preferential cumulative cash dividends at the rate of 10.0% per annum of the liquidation preference of $10.00 per share. Dividends are payable quarterly, in arrears, on the last calendar day of March, June, September and December to holders of record at the close of business on the first day of each payment month. The Company Preferred Stock is not convertible and does not have any voting rights, except when dividends are in arrears for six or more consecutive quarters, then the holders of those shares together with holders of all other series of preferred stock equal in rank will be entitled to vote separately as a class for the election of two additional directors to board of directors, until all dividends accumulated on such shares of Company Preferred Stock for the past dividend periods and the dividend for the then current dividend period shall have been fully paid or declared and a sum sufficient for the payment thereof set apart for payment. Under change of control or other conditions, the Company Preferred Stock may be subject to redemption. The Company may redeem the Company Preferred Stock upon the occurrence of a change of control, subject to certain conditions. The Company may also voluntarily redeem some or all of the Company Preferred Stock on or after September 10, 2024.

As of March 31, 2021, the Company’s board has not declared a dividend on the Company Preferred Stock and the aggregate and per-share amounts of cumulative preferred dividends in arrears are $3.0 million and $0.60 per share, respectively.

A roll forward of the balance of Company Preferred Stock for the quarter ended March 31, 2021 is as follows (in thousands):

Balance at December 31, 2020	$	21,500
Deemed dividend on redeemable convertible preferred stock	479
Balance at March 31, 2021	$	21,979

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Subsequent Events	3 Months Ended
	Mar. 31, 2021
Subsequent Events [Abstract]
Subsequent Events	Subsequent EventsNone.

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Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation The unaudited consolidated financial statements included in this Form 10-Q have been prepared in accordance with the U.S. Securities and Exchange Commission (the “SEC”) instructions for Quarterly Reports on Form 10-Q. Accordingly, the consolidated financial statements are unaudited and do not contain all the information required by U.S. generally accepted accounting principles (“GAAP”) to be included in a full set of financial statements. The unaudited condensed consolidated balance sheet at December 31, 2020 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for a complete set of financial statements. The audited consolidated financial statements for our fiscal year ended December 31, 2020, filed with the SEC on Form 10-K on March 29, 2021, include a summary of our significant accounting policies and should be read in conjunction with this Form 10-Q. In the opinion of management, all material adjustments necessary to present fairly the results of operations, cash flows, and balance sheets for such periods have been included in this Form 10-Q. All such adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results of operations for the entire year.

Use of Estimates

Use of Estimates

Preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from management’s estimates.

Revenue

Revenue Recognition

We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606 and Topic 842 for the three months ended March 31, 2021 and 2020, which are explained below.

Pursuant to ASC 606, Revenue from Contracts with Customers, we recognize revenue when a customer obtains control of promised goods or services. We record the amount of revenue that reflects the consideration that it expects to receive in exchange for those goods or services. We apply the following five-step model in order to determine this amount: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

Revenue recognition is evaluated on a contract by contract basis. Performance obligations are satisfied over time as work progresses or at a point in time. A performance obligation is satisfied over time if we have an enforceable right to payment. Determining if there is an enforceable right to payment is assessed on a contract by contract basis. For contracts requiring over time revenue recognition, the selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. We use a cost-based input measurement of progress because it best depicts the transfer of assets to the customer, which occurs as costs are incurred during the manufacturing process or as services are rendered. Under the cost-based measure of progress, the extent of progress towards completion is measured based on the costs incurred to date.

Healthcare Services Revenue Recognition. We generate service revenue primarily from providing diagnostic services and cardiac monitoring services to our customers. Service revenue within our Diagnostic Services reportable segments is derived from providing our customers with contract diagnostic services, which includes use of our imaging systems, qualified personnel, radiopharmaceuticals, licensing, logistics and related items required to perform testing in their own offices.  We bill customers either on a per-scan or fixed-payment methodology, depending upon the contract that is negotiated with the customer. Within our Diagnostic Service segment, we also rent cameras to healthcare customers for use in their operations.  Rental revenues are structured as either a weekly or monthly payment arrangement, and are recognized in the month services are provided. Revenue related to provision of our services is recognized at the time services are performed.

Healthcare Product and Product-Related Revenue Recognition. We generate revenue from product and product-related sales, primarily from the sale of gamma cameras and accessories.

Diagnostic Imaging product revenues are generated from the sale of internally developed solid-state gamma camera imaging systems and camera maintenance service contracts. Revenue from sales of imaging systems is generally recognized at point in time upon delivery of systems and acceptance by customers. We also provide installation services and training on cameras sold, primarily in the United States. Installation and initial training is generally performed shortly after delivery and the revenue related to the provision of these services is recognized at the time services are performed. Neither installation nor training is essential to the functionality of the product. Finally, we offer camera maintenance service contracts that are sold beyond the term of the initial warranty, generally one year from the date of purchase. Revenue from these service contracts is deferred and recognized ratably over the period of the obligation.

Construction Revenue Recognition. Within the Construction segment, we service residential and commercial construction projects by manufacturing modular housing units and other products and supplies general contractors with building materials. KBS manufactures modular buildings for both single-family residential homes and larger, commercial building projects. Our EdgeBuilder, Inc. (“EdgeBuilder”) subsidiary manufactures structural wall panels, permanent wood foundation systems and other engineered wood products, and our Glenbrook Building Supply, Inc. (“Glenbrook”) subsidiary is a retail supplier of lumber and other building supplies. Revenue is generally recognized at point in time upon delivery of product. Retail sales at Glenbrook are recognized at the point of sale. For bill and hold sales, we determine when the customer obtains control of the product on a case-by-case basis to determine the amount of revenue to recognize each period.

Healthcare Product and Product-Related Revenues and Services Revenue

Healthcare product and product-related services revenue are generated from the sale of gamma cameras, accessories and post-warranty maintenance service contracts within our Diagnostic Imaging reportable segment.

Healthcare Imaging services revenue are generated from providing diagnostic imaging services to customers within our Diagnostic Services reportable segment. Services revenue also includes lease income generated from camera rentals of imaging systems to our customers.

Construction

Construction revenue is generated from selling modular buildings for both single-family residential homes, larger commercial building projects and selling structural wall panels, permanent wood foundation systems and other engineered wood products.

Investments

Star Real Estate Holdings USA, Inc. (“SRE”) generates revenue from the lease of commercial properties and equipment and Lone Star Value Management, LLC (“LSVM”), a Connecticut based exempt reporting advisor through March 31, 2021, provided services that included investment advisory services, and the servicing of pooled investment vehicles.

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Taxes collected from customers, which are subsequently remitted to governmental authorities, are excluded from revenue.

The majority of our contracts have a single performance obligation, as we provide a series of distinct goods or services that are substantially the same and are transferred with the same pattern to the customer. For contracts with multiple performance obligations, we allocate the total transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. We use an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. For bill and hold sales, we determine when the customer obtains control of the product on a case-by-case basis to determine the amount of revenue to recognize each period.

Revenue recognition is evaluated on a contract by contract basis. Performance obligations are satisfied over time as work progresses or at a point-in-time. A performance obligation is satisfied over time if the Company has an enforceable right to payment. Determining if there is an enforceable right to is assessed on a contract by contract basis. For contracts requiring over time revenue recognition, the selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. The Company uses a cost-based input measurement of progress because it best depicts the transfer of assets to the customer, which occurs as costs are incurred during the manufacturing process or as services are rendered. Under the cost-based measure of progress, the extent of progress towards completion is measured based on the costs incurred to date.

Our products are generally not sold with a right of return and the Company does not provide significant credits or incentives, which may be a variable consideration when estimating the amount of revenue to be recognized.

Nature of Goods and Services

Mobile Imaging

Within our Diagnostic Services segment, our sales are derived from providing services and materials to our customers, primarily physician practices and hospitals that allow them to perform diagnostic imaging services at their site. We typically bundle our services in providing staffing, our imaging systems, licensing, radiopharmaceuticals, and supplies depending on our customers’ needs. Our contracts with customers are typically entered into annually and are billed on a fixed rate per-day or per-scan basis, depending on terms of the contract. For the majority of these contracts, the Company has the right to invoice the customer in an amount that directly corresponds with the value to the customer as the Company performs the services. The Company uses the practical expedient to recognize revenue corresponding with amounts we have the right to invoice for services performed.

Camera

Within our Diagnostic Imaging segment, camera revenues are generated from the sale of internally developed solid-state gamma camera imaging systems and accessories. We recognize revenue upon transfer of control to the customer at a point-in-time, which is generally upon delivery and acceptance. We also provide installation services and training on cameras we sell, primarily in the United States. Installation and initial training is generally performed shortly after delivery. The Company recognizes revenues for installation and training over time as the customer receives and consumes benefits provided as the Company performs the installation services.

Our sale of imaging systems includes a one-year assurance-type warranty. The estimated costs associated with our standard warranties and field service actions continue to be recognized as expense when cameras are sold. Maintenance service contracts sold beyond the term of our standard warranties are accounted for as a service-type warranty and revenue is deferred and recognized ratably over the period of the warranty obligation.

Camera Support

Within our Diagnostic Imaging segment, camera support revenue is derived from the sale of separately-priced extended maintenance contracts to camera owners, training, and the sale of parts to customers that do not have an extended warranty. Our separately priced service contracts range from 12 to 48 months. Service contracts are usually billed at the beginning of the contract period or at periodic intervals (e.g., monthly, quarterly, or annually) and revenue is recognized ratably over the term of the agreement.

Services and training revenues are recognized in the period the services and training are performed. Revenue for sales of parts are recognized when the parts are delivered to the customer and control is transferred.

Lease Income

Within our Diagnostic Service segment, we also generate income from rentals of state-of-the-art equipment including cameras and ultrasound machines to customers. Rental contracts are structured as either a weekly or monthly payment arrangement and are accounted for as operating leases. Revenues are recognized on a straight-line basis over the term of the rental.

Construction

Within the Construction segment, we service residential and commercial construction projects by manufacturing modular housing units and other products and supply general contractors with building materials. KBS manufactures modular buildings for both single-family residential homes and larger, commercial building projects. EdgeBuilder manufactures structural wall panels, permanent wood foundation systems and other engineered wood products, and Glenbrook is a retail supplier of lumber and other building supplies. Revenues are evaluated on a contract by contract basis. In general, construction revenues are recognized upon transfer of control to the customer at a point-in-time, which is generally upon delivery and acceptance. However, construction revenues are recognized over time for arrangements with customers for which: (i) performance does not create an asset with an alternative use, and (ii) we have an enforceable right to payment for performance completed to date.

Deferred Revenues

We record deferred revenues when cash payments are received in advance of our performance. We have determined our contracts do not include a significant financing component. The majority of our deferred revenue relates to payments received on camera support post-warranty service contracts, which are billed at the beginning of the contract period or at periodic intervals (e.g., monthly, quarterly, or annually).

The Company has elected to use the practical expedient under ASC 606 to exclude disclosures of unsatisfied remaining performance obligations for (i) contracts having an original expected length of one year or less or (ii) contracts for which the practical expedient has been applied to recognize revenue at the amount for which it has a right to invoice.

Contract Costs

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less. These costs mainly include the Company’s internal sales commissions; under the terms of these programs these are generally earned and the costs are recognized at the time the revenue is recognized.

Lessee Accounting

Lessee Accounting

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities, and operating lease liabilities, net of current portion in our condensed consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our condensed consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We use the implicit discount rate when readily determinable; however, as most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease valuation may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

We elected not to separate lease and non-lease components of its operating leases in which it is the lessee and lessor. Additionally, we elected not to recognize right-of-use assets and leases liabilities that arise from short-term leases of twelve months or less.

Lessor Accounting

Lessor Accounting

Majority of the lease income of the Healthcare division comes from camera rentals and the lease income of the Construction division comes from the rental of the Waterford facility to a commercial tenant. We determine lease classification at the commencement date. Leases not classified as sales-type or direct financing leases are classified as operating leases. The primary accounting criteria we use for lease classification are (a) review to determine if the lease transfers ownership of the underlying asset to the lessee by the end of the lease term, (b) review to determine if the lease grants the lessee a purchase option that the lessee is reasonably certain to exercise, (c) determine, using a seventy-five percent or more threshold, if the lease term is for a major part of the remaining economic life of the underlying asset (however, we do not use this classification criterion when the lease commencement date falls within the last 25 percent of the total economic life of the underlying asset) and (d) determine, using a ninety percent or more threshold, if the present value of the sum of the lease payments and any residual value guarantees equal or exceeds substantially all of the fair value of the underlying asset. We do not lease equipment of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. Each of the Company’s leases is classified as an operating lease.

We elected the operating lease practical expedient for its leases to not separate non-lease components of regular maintenance services from associated lease components. This practical expedient is available when both of the following are met: (i) the timing and pattern of transfer of the non-lease components and associated lease component are the same and (ii) the lease component, if accounted for separately, would be classified as an operating lease.

Property taxes paid by the lessor that are reimbursed by the lessee are considered to be lessor costs of owning the asset, and are recorded gross with revenue included in other non-interest income and expense recorded in operating expenses. 

We selected a lessor accounting policy election to exclude from revenue and expenses sales taxes and other similar taxes assessed by a governmental authority on lease revenue-producing transactions and collected by the lessor from a lessee.

Operating lease equipment is carried at cost less accumulated depreciation. Operating lease equipment is depreciated to its estimated residual value using the straight-line method over the lease term or estimated useful life of the asset.

Rental revenue on operating leases is recognized on a straight-line basis over the lease term unless collectability is not probable. In these cases, rental revenue is recognized as payments are received.

Recently Adopted Accounting Pronouncements and New Accounting Standards To Be Adopted

Recently Adopted Accounting Pronouncements

In December of 2019, the Financial Accounting Standards Board issued ASU No 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 in Generally Accepted Accounting Principles. ASU 2019-12 is effective for public entities for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company adopted the guidance during the three months ended 2021. ASU 2019-12 does not have a material effect on the Company’s current financial position, results of operations or financial statement disclosures.

New Accounting Standards To Be Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available-for-sale debt securities. This update is effective for annual periods beginning after December 15, 2022, and interim periods within those periods, and early adoption is permitted. We expect to adopt the standard on its effective date in the first quarter of 2023. We believe the adoption will modify the way we analyze financial instruments, but currently do not expect the adoption to have a material financial impact on our consolidated financial statements.

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848), to temporarily ease the potential burden in accounting for reference rate reform. The standard provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. The guidance generally can be applied through December 31, 2022. We will monitor our contracts and transactions for potential application of this ASU.

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Discontinued Operations (Tables)

3 Months Ended

Mar. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations Information

The following table presents financial results of DMS Health for the three months ended March 31, 2021 and 2020 business (in thousands):

	Three Months Ended March 31,
	2021		2020
Total revenues	$	9,490	$	9,667
Total cost of revenues	6,973		8,469
Gross profit	2,517		1,198
Operating expenses:
Selling, general and administrative	1,469		1,366
Amortization of intangible assets	—		241
Total operating expenses	1,469		1,607
Income (loss) from discontinued operations	1,048		(409)
Interest expense	(180)		(169)
Gain on sale of discontinued operations	5,224		—
Income (loss) from discontinuing operations before income taxes	6,092		(578)
Income tax expense	(72)		(7)
Income (loss) from discontinuing operations	$	6,020	$	(585)

The following represents the carrying amounts of the major classes of assets reported as “Assets held for sale” as of twelve months ended December 31, 2020 (in thousands):

	December 31, 2020
Cash and cash equivalents	$	443
Accounts receivable, net	4,305
Inventories, net	50
Other current assets	459
Property and equipment, net	7,721
Operating lease right-of-use assets, net	4,863
Intangible assets, net	2,915
	$	20,756

The following represents the carrying amounts of the major classes of liabilities reported as “Liabilities held for sale” as of December 31, 2020 (in thousands):

	December 31, 2020
Accounts payable	$	1,597
Accrued compensation	645
Deferred revenue	96
Operating lease liabilities	4,863
Other current liabilities	560
Deferred tax liabilities	16
Other liabilities	94
	$	7,871

The following table presents the significant non-cash operating, investing and financing activities from discontinued operations for the three months ended March 31, 2021 and 2020 (in thousands):

	Three Months Ended March 31,
	2021		2020
Operating activities
Depreciation	$	8	$	1,137
Amortization of intangible assets	—		241
Non-cash lease expense	256		192
Loss on extinguishment of debt	130		—
Gain on sale of DMS discontinued operations	(5,224)		—
Share-based compensation	2		4
Loss on disposal of assets	1		130
Provision for bad debt	—		2
Investing activities
Purchase of property and equipment	(154)		(243)
Proceeds from sale of discontinued operations	18,750		—
Proceeds from sale of property and equipment	3		15
Financing activities
Repayment of obligations under finance leases	(60)		(80)
Non-Cash Investing Activities
Fixed asset purchases in accounts payable	—		150
Lease assets obtained in exchange for new operating lease liabilities	—		564

Following is the reconciliation of purchase price to the gain recognized in income from discontinued operations for the three months ended March 31, 2021 (in thousands):

Estimated proceeds of the disposition, net of transaction costs	$	18,750
Assets of the businesses	(20,920)
Liabilities of the businesses	7,712
Transaction expenses	(318)
Pre-tax gain on the disposition	$	5,224

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Revenue (Tables)

3 Months Ended

Mar. 31, 2021

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The following tables present our revenues for the three months ended March 31, 2021 and 2020, disaggregated by major source (in thousands):

	Three Months Ended March 31, 2021
	Diagnostic Services		Diagnostic Imaging		Construction		Total
Major Goods/Service Lines
Mobile Imaging	$	10,181	$	—	$	—	$	10,181
Camera	—		1,422		—		1,422
Camera Support	—		1,646		—		1,646
Healthcare Revenue from Contracts with Customers	10,181		3,068		—		13,249
Lease Income	58		—		38		96
Construction	—		—		9,009		9,009
Total Revenues	$	10,239	$	3,068	$	9,047	$	22,354
Timing of Revenue Recognition
Services and goods transferred over time	$	10,239	$	1,490	$	2,731	$	14,460
Services and goods transferred at a point in time	—		1,578		6,316		7,894
Total Revenues	$	10,239	$	3,068	$	9,047	$	22,354

	Three Months Ended March 31, 2020
	Diagnostic Services		Diagnostic Imaging		Construction		Investments		Total
Major Goods/Service Lines
Mobile Imaging	$	10,602	$	—	$	—	$	—	$	10,602
Camera	—		1,339		—		—		1,339
Camera Support	—		1,522		—		—		1,522
Healthcare Revenue from Contracts with Customers	10,602		2,861		—		—		13,463
Lease Income	212		—		84		—		296
Construction	—		—		5,400		—		5,400
Investments	—		—		—		31		31
Total Revenues	$	10,814	$	2,861	$	5,484	$	31	$	19,190
Timing of Revenue Recognition
Services and goods transferred over time	$	10,814	$	1,487	$	84	$	—	$	12,385
Services and goods transferred at a point in time	—		1,374		5,400		31		6,805
Total Revenues	$	10,814	$	2,861	$	5,484	$	31	$	19,190

Changes in Deferred Revenue

Changes in the deferred revenues for continuing operations for three months ended March 31, 2021, is as follows (in thousands):

Balance at December 31, 2020	$	2,352
Revenue recognized that was included in balance at beginning of the year	(1,019)
Deferred revenue, net, related to contracts entered into during the year	1,327
Balance at March 31, 2021	$	2,660

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Basic and Diluted Net Income (Loss) Per Share (Tables)

3 Months Ended

Mar. 31, 2021

Earnings Per Share, Basic and Diluted [Abstract]

Reconciliation of Shares Used to Compute Basic and Diluted Net Income (Loss) Per Share

The following table sets forth the reconciliation of shares used to compute basic and diluted net loss income per share for the periods indicated (in thousands):

	Three Months Ended March 31
	2021		2020
Numerator:
Loss from continuing operations, net of tax	$	(588)	$	(2,368)
Income (loss) from discontinued operations, net of tax	6,020		(585)
Net income (loss)	5,432		(2,953)
Deemed dividend on Series A redeemable preferred stock	(479)		(484)
Net income (loss) attributable to common shareholders	$	4,953	$	(3,437)
Denominator:
Weighted average shares outstanding - basic and diluted	4,916		2,055
Net loss per common share - basic and diluted
Net loss per share, continuing operations	$	(0.12)	$	(1.15)
Net income (loss) per share, discontinued operations	$	1.22	$	(0.28)
Net income (loss) per share	$	1.10	$	(1.44)
Deemed dividend on Series A perpetual preferred stock per share	$	(0.10)	$	(0.24)
Net income (loss) per share, attributable to common shareholders - basic and diluted	$	1.01	$	(1.67)

Schedule of Antidilutive Securities Excluded from Computation of Net Income (Loss) Per Share

The computation of diluted earnings per share excludes stock options and stock units that are anti-dilutive. The following common stock equivalents were anti-dilutive (in thousands):

	Three Months Ended March 31
	2021	2020
Stock options	25	54
Restricted stock units	68	13
Stock warrants	866	—
Total	959	67

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Supplementary Balance Sheet Information (Tables)

3 Months Ended

Mar. 31, 2021

Inventory Disclosure [Abstract]

Schedule of Inventory

The components of inventories are as follows (in thousands):

	March 31, 2021		December 31, 2020
Raw materials	$	6,170	$	5,489
Work-in-process	2,879		2,821
Finished goods	1,108		1,876
Total inventories	10,157		10,186
Less reserve for excess and obsolete inventories	(319)		(399)
Total inventories, net	$	9,838	$	9,787

Schedule of Property and Equipment

Property and equipment consist of the following (in thousands):

	March 31, 2021		December 31, 2020
Land	$	805	$	805
Buildings and leasehold improvements	4,771		4,771
Machinery and equipment	28,635		29,375
Total property and equipment	34,211		34,951
Less accumulated depreciation	(24,828)		(25,189)
Total property and equipment, net	$	9,383	$	9,762

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Leases (Tables)

3 Months Ended

Mar. 31, 2021

Leases [Abstract]

Schedule of Lease Cost and Other Information

The components of lease expense are as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Operating lease cost	$	334	$	328
Finance lease cost:
Amortization of finance lease assets	$	106	$	124
Interest on finance lease liabilities	21		24
Total finance lease cost	$	127	$	148

Supplemental cash flow information related to leases from continuing operations was as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	317	$	282
Operating cash flows from finance leases	$	21	$	24
Financing cash flows from finance leases	$	149	$	148
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	1,537	$	596

Schedule of Balance Sheet Information

Supplemental balance sheet information related to leases was as follows (in thousands):

	March 31, 2021			December 31, 2020
Operating lease right-of-use assets, net	$	2,848		$	1,769
Operating lease liabilities	$	1,075		$	1,011
Operating lease liabilities, net of current	1,824			828
Total operating lease liabilities	$	2,899		$	1,839
Finance lease assets	$	2,567		$	2,765
Finance lease accumulated amortization	(1,130)			(791)
Finance lease assets, net	$	1,437		$	1,974
Finance lease liabilities	$	580		$	594
Finance lease liabilities, net of current	722			937
Total finance lease liabilities	$	1,302		$	1,531
Weighted average remaining lease term (in years)
Operating leases	3.1			2.3
Finance leases	2.7			2.8
Weighted average discount rate
Operating leases	4.54		%	5.53		%
Finance leases	6.44		%	6.44		%

Schedule of Future Minimum Finance Lease Payments

The future minimum lease payments due under both non-cancelable operating leases and finance leases having initial or remaining lease terms in excess of one year as of March 31, 2021 were as follows (in thousands):

	Operating Leases		Finance Leases
2021 (excludes the three-months ended March 31, 2021)	$	931	$	507
2022	831		515
2023	330		273
2024	606		118
2025 and thereafter	373		2
Total future minimum lease payments	3,071		1,415
Less amounts representing interest	172		113
Present value of lease obligations	$	2,899	$	1,302

Schedule of Future Minimum Operating Lease Payments, Lessee

The future minimum lease payments due under both non-cancelable operating leases and finance leases having initial or remaining lease terms in excess of one year as of March 31, 2021 were as follows (in thousands):

	Operating Leases		Finance Leases
2021 (excludes the three-months ended March 31, 2021)	$	931	$	507
2022	831		515
2023	330		273
2024	606		118
2025 and thereafter	373		2
Total future minimum lease payments	3,071		1,415
Less amounts representing interest	172		113
Present value of lease obligations	$	2,899	$	1,302

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Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Financial Assets Measured at Fair Value on a Recurring Basis

The following table presents information about our financial assets that are measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation techniques we utilize to determine such fair value at March 31, 2021 and December 31, 2020 (in thousands).

	Fair Value as of March 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Equity securities	$	65	$	49	$	—	$	114
Total	$	65	$	49	$	—	$	114

	Fair Value as of December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Equity securities	$	35	$	55	$	—	$	90
Total	$	35	$	55	$	—	$	90

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Debt (Tables)

3 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Schedule of Short-term Debt

A summary of debt as of March 31, 2021 and December 31, 2020 are as follows (dollars in thousands):

	March 31, 2021			December 31, 2020
	Amount		Weighted-Average Interest Rate	Amount		Weighted-Average Interest Rate
Revolving Credit Facility - Gerber KBS	$	2,672	6.00%	$	1,099	6.00%
Revolving Credit Facility - Gerber EBGL	1,969		6.00%	2,016		6.00%
Revolving Credit Facility - SNB	5,000		2.61%	12,710		2.64%
Total Short-term Revolving Credit Facility	$	9,641	4.24%	$	15,825	3.30%
Gerber - Star Term Loan	$	271	6.25%	$	262	6.75%
Premier - Term Loan	335		5.75%	419		5.75%
Total Short Term Debt	$	606	5.97%	$	681	6.13%
Short-term Paycheck Protection Program Notes	$	2,301	1.00%	$	1,856	1.00%
Short-term debt and current portion of long-term debt	$	12,548	3.73%	$	18,362	3.17%
Gerber - Star Term Loan	$	985	6.25%	$	1,058	6.75%
Premier - Term Loan	324		5.75%	321		5.75%
Total Long Term Debt	$	1,309	6.13%	$	1,379	6.52%
Long-term Paycheck Protection Program Notes	$	658	1.00%	$	2,321	1.00%
Long-term debt, net of current portion	$	1,967	4.41%	$	3,700	3.06%
LSV Co-Invest I Promissory Note (“January Note”)	$	709	12.00%	$	709	12.00%
LSV Co-Invest I Promissory Note (“June Note”)	1,220		12.00%	1,220		12.00%
LSVM Note	378		12.00%	378		12.00%
Total Notes Payable To Related Parties (1)	$	2,307	12.00%	$	2,307	12.00%
Total Debt	$	16,822	4.94%	$	24,369	3.99%

(1) See Note 12. Related Party Transactions, for information regarding certain ATRM promissory notes that are outstanding.

Summary of Long-Term Debt

A summary of debt as of March 31, 2021 and December 31, 2020 are as follows (dollars in thousands):

	March 31, 2021			December 31, 2020
	Amount		Weighted-Average Interest Rate	Amount		Weighted-Average Interest Rate
Revolving Credit Facility - Gerber KBS	$	2,672	6.00%	$	1,099	6.00%
Revolving Credit Facility - Gerber EBGL	1,969		6.00%	2,016		6.00%
Revolving Credit Facility - SNB	5,000		2.61%	12,710		2.64%
Total Short-term Revolving Credit Facility	$	9,641	4.24%	$	15,825	3.30%
Gerber - Star Term Loan	$	271	6.25%	$	262	6.75%
Premier - Term Loan	335		5.75%	419		5.75%
Total Short Term Debt	$	606	5.97%	$	681	6.13%
Short-term Paycheck Protection Program Notes	$	2,301	1.00%	$	1,856	1.00%
Short-term debt and current portion of long-term debt	$	12,548	3.73%	$	18,362	3.17%
Gerber - Star Term Loan	$	985	6.25%	$	1,058	6.75%
Premier - Term Loan	324		5.75%	321		5.75%
Total Long Term Debt	$	1,309	6.13%	$	1,379	6.52%
Long-term Paycheck Protection Program Notes	$	658	1.00%	$	2,321	1.00%
Long-term debt, net of current portion	$	1,967	4.41%	$	3,700	3.06%
LSV Co-Invest I Promissory Note (“January Note”)	$	709	12.00%	$	709	12.00%
LSV Co-Invest I Promissory Note (“June Note”)	1,220		12.00%	1,220		12.00%
LSVM Note	378		12.00%	378		12.00%
Total Notes Payable To Related Parties (1)	$	2,307	12.00%	$	2,307	12.00%
Total Debt	$	16,822	4.94%	$	24,369	3.99%

(1) See Note 12. Related Party Transactions, for information regarding certain ATRM promissory notes that are outstanding.

The following table presents the Star and Premier term loans balance net of unamortized debt issuance costs as of March 31, 2021 (in thousands):

	March 31, 2021
	Amount
Gerber - Star Term Loan	$	1,533
Premier - Term Loan	659
Total Principal	2,192
Unamortized debt issuance costs	(277)
Total	$	1,915

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Segments (Tables)

3 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

Segment information is as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Revenue by segment:
Diagnostic Services	$	10,239	$	10,814
Diagnostic Imaging	3,068		2,861
Construction	9,047		5,484
Investments	—		31
Consolidated revenue	$	22,354	$	19,190
Gross profit by segment:
Diagnostic Services	$	1,608	$	2,005
Diagnostic Imaging	990		869
Construction	544		403
Investments	(65)		(34)
Consolidated gross profit	$	3,077	$	3,243
Income (loss) from operations by segment:
Diagnostic Services	$	859	$	59
Diagnostic Imaging	(22)		(267)
Construction	(1,547)		(1,300)
Investments	76		(54)
Unallocated corporate and other expenses	(935)		(634)
Segment loss from operations	$	(1,569)	$	(2,196)
Depreciation and amortization by segment:
Diagnostic Services	$	290	$	329
Diagnostic Imaging	67		63
Construction	479		572
Investments	65		65
Total depreciation and amortization	$	901	$	1,029

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Perpetual Preferred Stock (Tables)

3 Months Ended

Mar. 31, 2021

Equity [Abstract]

Schedule of Stockholders Equity

A roll forward of the balance of Company Preferred Stock for the quarter ended March 31, 2021 is as follows (in thousands):

Balance at December 31, 2020	$	21,500
Deemed dividend on redeemable convertible preferred stock	479
Balance at March 31, 2021	$	21,979

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Basis of Presentation - Narrative (Details) $ / shares in Units, $ in Thousands					3 Months Ended		7 Months Ended
	Mar. 31, 2021 USD ($) $ / shares shares	Jun. 10, 2020 USD ($) $ / shares shares	May 28, 2020 USD ($) $ / shares shares	Sep. 09, 2019 USD ($)	Mar. 31, 2021 USD ($) segment $ / shares shares	Mar. 31, 2020 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of operating segments | segment					3
Proceeds from sale of discontinued operations					$ 18,750	$ 0
Series A Cumulative Perpetual Preferred Stock, dividend rate					0.10
Preferred stock, liquidation preference per share (USD per share) | $ / shares	$ 10.00				$ 10.00
Gross proceeds from private placement				$ 3,000
Exercise price of warrants (usd per share) | $ / shares	$ 2.25				$ 2.25
Proceeds from exercise of warrants					$ 493	0
Warrants exercised (in shares) | shares	900,000				900,000
Warrants outstanding (in shares) | shares	1,500,000				1,500,000
(Loss) income from operations by segment					$ (1,569)	(2,196)
Accumulated deficit	$ (119,554)				(119,554)		$ (124,986)
Net cash provided by (used in) operating activities					(2,232)	623
Payable to related parties	2,307				2,307		2,307
Cash and restricted cash	13,343				$ 13,343	$ 1,410	3,393	$ 1,987
Extended warranty period					1 year
Short-term debt and current portion of long-term debt
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Short-term debt and current portion of long-term debt	12,548				$ 12,548		18,362
Revolving Credit Facility | Line of Credit
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Short-term debt	4,600				4,600
Revolving Credit Facility | Revolving Credit Facility - SNB | SNB | Line of Credit
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Borrowing availability	4,500				4,500
Revolving Credit Facility | Revolving Credit Facility - SNB
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Short-term debt	12,500				12,500
DMS Health
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Proceeds from sale of discontinued operations	$ 18,750
Equity Offering
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of shares issued in transaction (in shares) | shares		2,450,000	2,225,000
Number of securities called by warrants (in shares) | shares			1,112,500
Price of stock sold (in dollars per share) | $ / shares			$ 2.25
Gross proceeds from private placement		$ 5,500	$ 5,000				6,000
Option to buy term for stocks and warrants			45 days
Proceeds from exercise of warrants							$ 500
Net proceeds from sale of common stock and warrants					5,200
Payments issuance costs					800
Equity Offering | Common stock
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Price of stock sold (in dollars per share) | $ / shares			$ 2.24
Equity Offering | Stock warrants
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of warrants issued in transaction (in shares) | shares			2,225,000
Price of stock sold (in dollars per share) | $ / shares			$ 0.01
Over-Allotment Option
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of securities called by warrants (in shares) | shares		225,000	225,000
Price of stock sold (in dollars per share) | $ / shares		$ 2.24
Exercise price of warrants (usd per share) | $ / shares			$ 0.01
Over-Allotment Option | Stock warrants
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of warrants issued in transaction (in shares) | shares			225,000
Number of securities called by warrants (in shares) | shares			112,500
Healthcare
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Increase (decrease) in revenue					(400)
Construction
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Increase (decrease) in revenue					$ 3,600

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Discontinued Operations - Narrative (Details) $ in Thousands	Mar. 31, 2021 USD ($)
DMS Health | Discontinued Operations, Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total consideration	$ 18,750

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Discontinued Operations - Financial Results (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain on sale of discontinued operations	$ 847	$ 0
Income (loss) from discontinuing operations before income taxes	5,224
Income (loss) from discontinuing operations	6,020	(585)
DMS Health | Discontinued Operations, Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total revenues	9,490	9,667
Total cost of revenues	6,973	8,469
Gross profit	2,517	1,198
Selling, general and administrative	1,469	1,366
Amortization of intangible assets	0	241
Total operating expenses	1,469	1,607
Income (loss) from discontinued operations	1,048	(409)
Interest expense	(180)	(169)
Gain on sale of discontinued operations	5,224	0
Income (loss) from discontinuing operations before income taxes	6,092	(578)
Income tax expense	(72)	(7)
Income (loss) from discontinuing operations	$ 6,020	$ (585)

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Discontinued Operations - Major Classes of Assets and Liabilities Included in Company's Balance Sheet (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets held for sale	$ 0	$ 20,756
Liabilities held for sale	$ 0	7,871
DMS Health | Discontinued Operations, Held-for-sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Cash and cash equivalents		443
Accounts receivable, net		4,305
Inventories, net		50
Other current assets		459
Property and equipment, net		7,721
Operating lease right-of-use assets, net		4,863
Intangible assets, net		2,915
Assets held for sale		20,756
Accounts payable		1,597
Accrued compensation		645
Deferred revenue		96
Operating lease liabilities		4,863
Other current liabilities		560
Deferred tax liabilities		16
Other liabilities		94
Liabilities held for sale		$ 7,871

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Discontinued Operations - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Operating activities
Gain on disposal of discontinued operations	$ (5,224)	$ 0
Loss on disposal of assets	(847)	0
Non-Cash Investing Activities
Lease assets obtained in exchange for new operating lease liabilities	1,537	596
DMS Health | Discontinued Operations, Held-for-sale
Operating activities
Depreciation	8	1,137
Amortization of intangible assets	0	241
Non-cash lease expense	256	192
Loss on extinguishment of debt	130	0
Gain on disposal of discontinued operations	(5,224)	0
Share-based compensation	2	4
Loss on disposal of assets	1	130
Provision for bad debt	0	2
Investing activities
Purchase of property and equipment	(154)	(243)
Proceeds from sale of discontinued operations	18,750	0
Proceeds from sale of property and equipment	3	15
Financing activities
Repayment of obligations under finance leases	(60)	(80)
Non-Cash Investing Activities
Fixed asset purchases in accounts payable	0	150
Lease assets obtained in exchange for new operating lease liabilities	$ 0	$ 564

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Discontinued Operations - Reconciliation (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets of the businesses	$ (20,920)
Liabilities of the businesses	7,712
Transaction expenses	(318)
Pre-tax gain on the disposition	5,224
Discontinued Operations, Disposed of by Sale | DMS Health
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Estimated proceeds of the disposition, net of transaction costs	18,750
Pre-tax gain on the disposition	$ 6,092	$ (578)

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Revenue - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Disaggregation of Revenue [Line Items]
Lease Income	$ 96	$ 296
Total revenues	22,354	19,190
Services and goods transferred over time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	14,460	12,385
Services and goods transferred at a point in time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	7,894	6,805
Mobile Imaging
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	10,181	10,602
Camera
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	1,422	1,339
Camera Support
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	1,646	1,522
Healthcare
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	13,249	13,463
Total revenues	13,307	13,675
Construction
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	9,009	5,400
Total revenues	9,047	5,484
Investments
Disaggregation of Revenue [Line Items]
Revenue from contract with customer		31
Total revenues	0	31
Diagnostic Services
Disaggregation of Revenue [Line Items]
Lease Income	58	212
Total revenues	10,239	10,814
Diagnostic Services | Services and goods transferred over time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	10,239	10,814
Diagnostic Services | Services and goods transferred at a point in time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	0	0
Diagnostic Services | Mobile Imaging
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	10,181	10,602
Diagnostic Services | Camera
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	0	0
Diagnostic Services | Camera Support
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	0	0
Diagnostic Services | Healthcare
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	10,181	10,602
Diagnostic Services | Construction
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	0	0
Diagnostic Services | Investments
Disaggregation of Revenue [Line Items]
Revenue from contract with customer		0
Diagnostic Imaging
Disaggregation of Revenue [Line Items]
Lease Income	0	0
Total revenues	3,068	2,861
Diagnostic Imaging | Services and goods transferred over time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	1,490	1,487
Diagnostic Imaging | Services and goods transferred at a point in time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	1,578	1,374
Diagnostic Imaging | Mobile Imaging
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	0	0
Diagnostic Imaging | Camera
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	1,422	1,339
Diagnostic Imaging | Camera Support
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	1,646	1,522
Diagnostic Imaging | Healthcare
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	3,068	2,861
Diagnostic Imaging | Construction
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	0	0
Diagnostic Imaging | Investments
Disaggregation of Revenue [Line Items]
Revenue from contract with customer		0
Construction
Disaggregation of Revenue [Line Items]
Lease Income	38	84
Total revenues	9,047	5,484
Construction | Services and goods transferred over time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	2,731	84
Construction | Services and goods transferred at a point in time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	6,316	5,400
Construction | Mobile Imaging
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	0	0
Construction | Camera
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	0	0
Construction | Camera Support
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	0	0
Construction | Healthcare
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	0	0
Construction | Construction
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	9,009	5,400
Construction | Investments
Disaggregation of Revenue [Line Items]
Revenue from contract with customer		0
Investments
Disaggregation of Revenue [Line Items]
Lease Income		0
Total revenues	$ 0	31
Investments | Services and goods transferred over time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer		0
Investments | Services and goods transferred at a point in time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer		31
Investments | Mobile Imaging
Disaggregation of Revenue [Line Items]
Revenue from contract with customer		0
Investments | Camera
Disaggregation of Revenue [Line Items]
Revenue from contract with customer		0
Investments | Camera Support
Disaggregation of Revenue [Line Items]
Revenue from contract with customer		0
Investments | Healthcare
Disaggregation of Revenue [Line Items]
Revenue from contract with customer		0
Investments | Construction
Disaggregation of Revenue [Line Items]
Revenue from contract with customer		0
Investments | Investments
Disaggregation of Revenue [Line Items]
Revenue from contract with customer		$ 31

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Revenue - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Disaggregation of Revenue [Line Items]
Non-current deferred revenue	$ 308	$ 168
Camera
Disaggregation of Revenue [Line Items]
Warranty term	1 year
Diagnostic Imaging | Camera Support | Minimum
Disaggregation of Revenue [Line Items]
Service contract term	12 months
Diagnostic Imaging | Camera Support | Maximum
Disaggregation of Revenue [Line Items]
Service contract term	48 months

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Revenue - Schedule of Changes in Deferred Revenue (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($)
Change In Contract With Customer, Liability [Roll Forward]
Balance at December 31, 2020	$ 2,352
Revenue recognized that was included in balance at beginning of the year	(1,019)
Deferred revenue, net, related to contracts entered into during the year	1,327
Balance at March 31, 2021	$ 2,660

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Basic and Diluted Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Numerator:
Loss from continuing operations, net of tax	$ (588)	$ (2,368)
Income (loss) from discontinued operations, net of tax	6,020	(585)
Net income (loss)	5,432	(2,953)
Deemed dividend on Series A redeemable preferred stock	(479)	(484)
Net income (loss) attributable to common shareholders	$ 4,953	$ (3,437)
Denominator:
Weighted average shares outstanding - basic (in shares)	4,916	2,055
Net loss per common share - basic and diluted
Net loss per share, continuing operations, basic (usd per share)	$ (0.12)	$ (1.15)
Net loss per share, continuing operations, diluted (usd per share)	(0.12)	(1.15)
Net income (loss) per share, discontinued operations, basic (usd per share)	1.22	(0.28)
Net income (loss) per share, discontinued operations, diluted (usd per share)	1.22	(0.28)
Net income (loss) per share - basic (usd per share)	1.10	(1.44)
Net income (loss) per share - diluted (usd per share)	1.10	(1.44)
Deemed dividend on Series A redeemable preferred stock per share (in usd per share)	(0.10)	(0.24)
Net income (loss) per share, attributable to common shareholders — basic and diluted (usd per share)	$ 1.01	$ (1.67)

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Basic and Diluted Net Income (Loss) Per Share - Anti-dilutive Shares (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	959	67
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	25	54
Restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	68	13
Stock warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	866	0

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Basic and Diluted Net Income (Loss) Per Share (Narrative) (Details) shares in Millions	Mar. 31, 2021 $ / shares shares
Earnings Per Share [Abstract]
Warrants exercised (in shares)	0.9
Warrants outstanding (in shares)	1.5
Exercise price of warrants (usd per share) | $ / shares	$ 2.25

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Supplementary Balance Sheet Information - Schedule of Inventory (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Inventory Disclosure [Abstract]
Raw materials	$ 6,170	$ 5,489
Work-in-process	2,879	2,821
Finished goods	1,108	1,876
Total inventories	10,157	10,186
Less reserve for excess and obsolete inventories	(319)	(399)
Total inventories, net	$ 9,838	$ 9,787

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Supplementary Balance Sheet Information - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Property, Plant and Equipment [Line Items]
Property, and equipment, gross	$ 34,211	$ 34,951
Less accumulated depreciation	(24,828)	(25,189)
Total property and equipment, net	9,383	9,762
Land
Property, Plant and Equipment [Line Items]
Property, and equipment, gross	805	805
Buildings and leasehold improvements
Property, Plant and Equipment [Line Items]
Property, and equipment, gross	4,771	4,771
Machinery and equipment
Property, Plant and Equipment [Line Items]
Property, and equipment, gross	$ 28,635	$ 29,375

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Leases - Narrative (Details)	3 Months Ended
	Mar. 31, 2021
Lessee, Lease, Description [Line Items]
Option to terminate period	1 year
Minimum
Lessee, Lease, Description [Line Items]
Remaining lease term	1 year
Maximum
Lessee, Lease, Description [Line Items]
Remaining lease term	10 years

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Leases - Schedule of Lease Expenses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Leases [Abstract]
Operating lease cost	$ 334	$ 328
Finance lease cost:
Amortization of finance lease assets	106	124
Interest on finance lease liabilities	21	24
Total finance lease cost	$ 127	$ 148

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Leases - Schedule of Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$ 317	$ 282
Operating cash flows from finance leases	21	24
Financing cash flows from finance leases	149	148
Right-of-use assets obtained in exchange for lease obligations
Right-of-use assets obtained in exchange for lease obligations, operating lease	$ 1,537	$ 596

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Leases - Schedule of Supplemental Balance Sheet Information (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Leases [Abstract]
Operating lease right-of-use assets, net	$ 2,848	$ 1,769
Operating lease liabilities	1,075	1,011
Operating lease liabilities, net of current portion	1,824	828
Total operating lease liabilities	2,899	1,839
Finance lease assets	2,567	2,765
Finance lease accumulated amortization	(1,130)	(791)
Finance lease assets, net	1,437	1,974
Finance lease liabilities	580	594
Finance lease liabilities, net of current	722	937
Total finance lease liabilities	$ 1,302	$ 1,531
Operating lease, weighted-Average Remaining Lease Term (in years)	3 years 1 month 6 days	2 years 3 months 18 days
Financing leases, weighted-Average Remaining Lease Term (in years)	2 years 8 months 12 days	2 years 9 months 18 days
Operating leases, weighted-Average Discount Rate	4.54%	5.53%
Financing leases, weighted-Average Discount Rate	6.44%	6.44%
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List]	us-gaap:PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortization	us-gaap:PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortization
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Other current liabilities	Other current liabilities
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Other liabilities	Other liabilities

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Leases - Schedule of Future Minimum Lease Payments, Lessee (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Lessee, Operating Lease, Liability, Payment, Due [Abstract]
2021 (excludes the three-months ended March 31, 2021)	$ 931
2022	831
2023	330
2024	606
2025 and thereafter	373
Total future minimum lease payments	3,071
Less amounts representing interest	172
Present value of lease obligations	2,899	$ 1,839
Finance Lease, Liability, Payment, Due [Abstract]
2021 (excludes the three-months ended March 31, 2021)	507
2022	515
2023	273
2024	118
2025 and thereafter	2
Total future minimum lease payments	1,415
Less amounts representing interest	113
Present value of lease obligations	$ 1,302	$ 1,531

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Financial Instruments - Financial Assets Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	$ 114	$ 90
Total	114	90
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	65	35
Total	65	35
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	49	55
Total	49	55
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	0	0
Total	$ 0	$ 0

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Financial Instruments - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Fair Value Disclosures [Abstract]
Equity securities, unrealized gain	$ 23	$ 26

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Debt - Schedule of Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Total Short Term Revolving Credit Facility	$ 12,548	$ 18,362
Total Long Term Revolving Credit Facility	1,967	3,700
Total Notes Payable To Related Parties	2,307	2,307
Total Debt	$ 16,822	$ 24,369
Weighted-Average Interest Rate	4.94%	3.99%
Short-term debt and current portion of long-term debt
Debt Instrument [Line Items]
Short-term debt and current portion of long-term debt	$ 12,548	$ 18,362
Weighted-Average Interest Rate	3.73%	3.17%
Short Term Paycheck Protection Program Notes
Debt Instrument [Line Items]
Total Short Term Revolving Credit Facility	$ 2,301	$ 1,856
Weighted-Average Interest Rate	1.00%	1.00%
Short-term Debt
Debt Instrument [Line Items]
Total Short Term Revolving Credit Facility	$ 606	$ 681
Weighted-Average Interest Rate	5.97%	6.13%
Debt Noncurrent
Debt Instrument [Line Items]
Total Long Term Revolving Credit Facility	$ 1,967	$ 3,700
Weighted-Average Interest Rate	4.41%	3.06%
Long-term Debt
Debt Instrument [Line Items]
Total Long Term Revolving Credit Facility	$ 1,309	$ 1,379
Weighted-Average Interest Rate	6.13%	6.52%
Gerber - Star Term Loan
Debt Instrument [Line Items]
Total Short Term Revolving Credit Facility	$ 271	$ 262
Total Long Term Revolving Credit Facility	$ 985	$ 1,058
Weighted-Average Interest Rate	6.25%	6.75%
Premier - Term Loan
Debt Instrument [Line Items]
Total Short Term Revolving Credit Facility	$ 335	$ 419
Total Long Term Revolving Credit Facility	$ 324	$ 321
Weighted-Average Interest Rate	5.75%	5.75%
Long Term Paycheck Protection Program Notes
Debt Instrument [Line Items]
Total Long Term Revolving Credit Facility	$ 658	$ 2,321
Weighted-Average Interest Rate	1.00%	1.00%
Total Notes Payable To Related Parties
Debt Instrument [Line Items]
Total Notes Payable To Related Parties	$ 2,307	$ 2,307
Weighted-Average Interest Rate	12.00%	12.00%
LSV Co-Invest I Promissory Note (“January Note”)
Debt Instrument [Line Items]
Total Notes Payable To Related Parties	$ 709	$ 709
Weighted-Average Interest Rate	12.00%	12.00%
LSV Co-Invest I Promissory Note (“June Note”)
Debt Instrument [Line Items]
Total Notes Payable To Related Parties	$ 1,220	$ 1,220
Weighted-Average Interest Rate	12.00%	12.00%
LSVM Note
Debt Instrument [Line Items]
Total Notes Payable To Related Parties	$ 378	$ 378
Weighted-Average Interest Rate	12.00%	12.00%
Revolving Credit Facility | Total Short Term Revolving Credit Facility
Debt Instrument [Line Items]
Total Short Term Revolving Credit Facility	$ 9,641	$ 15,825
Weighted-Average Interest Rate	4.24%	3.30%
Revolving Credit Facility | Revolving Credit Facility - Gerber KBS
Debt Instrument [Line Items]
Total Short Term Revolving Credit Facility	$ 2,672	$ 1,099
Weighted-Average Interest Rate	6.00%	6.00%
Revolving Credit Facility | Revolving Credit Facility - Gerber EBGL
Debt Instrument [Line Items]
Total Short Term Revolving Credit Facility	$ 1,969	$ 2,016
Weighted-Average Interest Rate	6.00%	6.00%
Revolving Credit Facility | Revolving Credit Facility - SNB
Debt Instrument [Line Items]
Total Short Term Revolving Credit Facility	$ 5,000	$ 12,710
Weighted-Average Interest Rate	2.61%	2.64%

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Debt - Term Loans (Details) $ in Thousands	Mar. 31, 2021 USD ($)
Debt Instrument [Line Items]
Total Principal	$ 2,192
Unamortized debt issuance costs	(277)
Total	1,915
Gerber - Star Term Loan
Debt Instrument [Line Items]
Debt, short term and current portion of long-term debt, net of issuance costs	300
Long term debt, net of current portion, net of issuance costs	1,000
Premier - Term Loan
Debt Instrument [Line Items]
Debt, short term and current portion of long-term debt, net of issuance costs	300
Long term debt, net of current portion, net of issuance costs	300
Total Principal	659
Star Loan Agreement
Debt Instrument [Line Items]
Total Principal	$ 1,533

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Debt - Sterling Credit Facility (Details) - USD ($)	Mar. 29, 2019	Mar. 31, 2021	Feb. 26, 2021	Mar. 05, 2020
Revolving Credit Facility
Debt Instrument [Line Items]
Interest rate			3.00%
Revolving Credit Facility | SNB | Line of Credit | Revolving Credit Facility - SNB
Debt Instrument [Line Items]
Debt term	5 years
Maximum borrowing capacity	$ 20,000,000.0	$ 7,000,000.0
Letters of credit (not to exceed)	$ 500,000
Borrowing availability		4,500,000
Revolving Credit Facility | SNB | Line of Credit | Revolving Credit Facility - SNB | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Interest rate	2.50%
Additional margin rate	2.25%
Revolving Credit Facility | SNB | Letter of Credit
Debt Instrument [Line Items]
Letters of credit (not to exceed)		$ 200,000
Board of Directors Chairman
Debt Instrument [Line Items]
Obligations under the Limited Guaranty	$ 1,500,000			$ 500,000
Board of Directors Chairman | Revolving Credit Facility | Revolving Credit Facility - SNB
Debt Instrument [Line Items]
Obligations under the Limited Guaranty	$ 1,500,000

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Debt - Construction Loan Agreements (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Long-term debt	$ 1,915,000
Short-term debt and current portion of long-term debt	12,548,000	$ 18,362,000
Total Principal	2,192,000
Premier - Term Loan
Debt Instrument [Line Items]
Short-term debt and current portion of long-term debt	335,000	419,000
Total Principal	659,000
Revolving Credit Facility | Revolving Credit Facility - Gerber KBS
Debt Instrument [Line Items]
Short-term debt and current portion of long-term debt	2,672,000	1,099,000
Revolving Credit Facility | Revolving Credit Facility - Gerber EBGL
Debt Instrument [Line Items]
Short-term debt and current portion of long-term debt	1,969,000	$ 2,016,000
Revolving Credit Facility | Line of Credit
Debt Instrument [Line Items]
Long-term debt	5,400,000
Revolving Credit Facility | Line of Credit | Revolving Credit Facility - Gerber KBS
Debt Instrument [Line Items]
Maximum credit amount	4,000,000.0
Revolving Credit Facility | Line of Credit | Revolving Credit Facility - Gerber EBGL
Debt Instrument [Line Items]
Maximum credit amount	$ 3,000,000.0

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Debt - KBS Loan Agreement (Details) - USD ($)		3 Months Ended	9 Months Ended
	Feb. 23, 2016	Mar. 31, 2022	Sep. 30, 2021	Mar. 31, 2021	Feb. 26, 2021	Dec. 31, 2020	Apr. 01, 2020
Debt Instrument [Line Items]
Weighted average interest rate				4.94%		3.99%
Short-term debt and current portion of long-term debt				$ 12,548,000		$ 18,362,000
KBS Loan Agreement
Debt Instrument [Line Items]
Decrease of maximum revolving amount							25.00%
Revolving Credit Facility - Gerber KBS | Forecast
Debt Instrument [Line Items]
Debt covenant for income		$ 500,000	$ 385,000
Debt covenant, minimum earnings before interest tax and depreciation		$ 1,500,000	$ 880,000
Revolving Credit Facility
Debt Instrument [Line Items]
Interest rate					3.00%
Revolving Credit Facility | Revolving Credit Facility - Gerber KBS
Debt Instrument [Line Items]
Weighted average interest rate				6.00%		6.00%
Short-term debt and current portion of long-term debt				$ 2,672,000		$ 1,099,000
Revolving Credit Facility | Line of Credit | KBS Loan Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 4,000,000.0
Automatic extension period	1 year
Commitment fee percentage	1.50%
Monthly collateral monitoring fee percentage				0.10%
Revolving Credit Facility | Line of Credit | KBS Loan Agreement | Prime Rate
Debt Instrument [Line Items]
Interest rate				2.75%
Revolving Credit Facility | Line of Credit | Revolving Credit Facility - Gerber KBS
Debt Instrument [Line Items]
Maximum borrowing capacity				$ 4,000,000.0

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Debt - EBGL Premier Note (Details) - USD ($)	Mar. 31, 2021	Feb. 26, 2021	Dec. 31, 2020	Jan. 31, 2020	Dec. 31, 2017
Debt Instrument [Line Items]
Short-term debt and current portion of long-term debt	$ 12,548,000		$ 18,362,000
Revolving Credit Facility
Debt Instrument [Line Items]
Stated rate		3.00%
Revolving Credit Facility | Line of Credit | EBGL Premier Note
Debt Instrument [Line Items]
Maximum borrowing capacity				$ 1,000,000.0	$ 3,000,000.0
Stated rate				5.75%
Short-term debt and current portion of long-term debt	$ 700,000
Revolving Credit Facility | Line of Credit | EBGL Premier Note | Prime Rate
Debt Instrument [Line Items]
Stated rate					1.50%

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Debt - Gerber Star and EBGL Loans (Details)		3 Months Ended
	Jan. 31, 2020 USD ($) installment	Mar. 31, 2021 USD ($)	Feb. 26, 2021 USD ($)	Dec. 31, 2020 USD ($)	Apr. 30, 2020 USD ($)	Mar. 05, 2020 USD ($)
Debt Instrument [Line Items]
Debt outstanding		$ 2,192,000
Long-term debt, net of current portion		1,967,000		$ 3,700,000
Star Loan Agreement
Debt Instrument [Line Items]
Debt outstanding		1,533,000
Revolving Credit Facility
Debt Instrument [Line Items]
Stated rate			3.00%
Revolving Credit Facility | Board of Directors Chairman | Star Credit Parties
Debt Instrument [Line Items]
Contractual obligation discharged			$ 2,500,000
Revolving Credit Facility | Star Loan Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 2,500,000
Debt outstanding		$ 1,300,000
Automatic extension period		1 year
Repayments of debt		$ 500,000
Revolving Credit Facility | Star Loan Agreement | Board of Directors Chairman
Debt Instrument [Line Items]
Contractual obligation	2,500,000					$ 500,000
Revolving Credit Facility | Star Loan Agreement | Prime Rate
Debt Instrument [Line Items]
Basis spread		3.50%
Revolving Credit Facility | Star Loan Agreement | KBS Builders
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 2,000,000.0
Number of monthly installments | installment	60
Revolving Credit Facility | Star Loan Agreement | Gerber EBGL
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 500,000				$ 300,000
Line of credit facility increase	300,000
Revolving Credit Facility | Star Loan Agreement | Gerber EBGL | Prime Rate
Debt Instrument [Line Items]
Basis spread		2.75%
Revolving Credit Facility | EBGL Loan Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 3,000,000.0
Revolving Credit Facility | EBGL Loan Agreement | Collateral Pledged | LSVI
Debt Instrument [Line Items]
Cash						$ 300,000

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Debt - Paycheck Protection Program (Details) - PPP Loans - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2020	Mar. 31, 2021	May 31, 2020
Debt Instrument [Line Items]
Notes payable		$ 3.0	$ 6.7
Debt forgiveness	$ 2.5
Construction Division
Debt Instrument [Line Items]
Notes payable			5.5
Healthcare Division
Debt Instrument [Line Items]
Notes payable			$ 1.2

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Income Tax (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Income Tax Disclosure [Abstract]
Income tax expense	$ (2)	$ (27)
Income tax expense discontinued operations	(72)	$ (7)
Unrecognized tax benefits	2,600
Unrecognized tax benefits that would impact effective tax rate	$ 2,100

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Segments (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Segment Reporting Information [Line Items]
Consolidated revenue	$ 22,354	$ 19,190
Consolidated gross profit	3,077	3,243
(Loss) income from operations by segment	(1,569)	(2,196)
Segment loss from operations	(1,569)	(2,196)
Total depreciation and amortization	901	1,029
Diagnostic Services
Segment Reporting Information [Line Items]
Consolidated revenue	10,239	10,814
Total depreciation and amortization	290	329
Diagnostic Imaging
Segment Reporting Information [Line Items]
Consolidated revenue	3,068	2,861
Total depreciation and amortization	67	63
Construction
Segment Reporting Information [Line Items]
Consolidated revenue	9,047	5,484
Total depreciation and amortization	479	572
Investments
Segment Reporting Information [Line Items]
Consolidated revenue	0	31
Consolidated gross profit	(65)	(34)
(Loss) income from operations by segment	76	(54)
Total depreciation and amortization	65	65
Operating Segments | Diagnostic Services
Segment Reporting Information [Line Items]
Consolidated revenue	10,239	10,814
Consolidated gross profit	1,608	2,005
(Loss) income from operations by segment	859	59
Operating Segments | Diagnostic Imaging
Segment Reporting Information [Line Items]
Consolidated revenue	3,068	2,861
Consolidated gross profit	990	869
(Loss) income from operations by segment	(22)	(267)
Operating Segments | Construction
Segment Reporting Information [Line Items]
Consolidated revenue	9,047	5,484
Consolidated gross profit	544	403
(Loss) income from operations by segment	(1,547)	(1,300)
Segment Reconciling Items
Segment Reporting Information [Line Items]
(Loss) income from operations by segment	$ (935)	$ (634)

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Related Party Transaction (Details) - USD ($)					3 Months Ended	12 Months Ended
	Jul. 10, 2020	Sep. 09, 2019	Apr. 03, 2019	Mar. 27, 2019	Mar. 31, 2021	Dec. 31, 2020	Feb. 26, 2021	Sep. 17, 2020	Mar. 05, 2020	Mar. 29, 2019
Related Party Transaction [Line Items]
Long-term debt					$ 1,915,000
Common stock, outstanding (in shares)					5,020,969	4,798,367
Preferred stock, dividend rate percentage					10.00%	10.00%
Preferred stock, outstanding (in shares)					1,915,637	1,915,637
Gross proceeds from private placement		$ 3,000,000.0
Board of Directors Chairman
Related Party Transaction [Line Items]
Guarantor obligations, maximum exposure, undiscounted									$ 500,000	$ 1,500,000
Guaranty discharged							$ 2,500,000
Board of Directors Chairman | Put Option
Related Party Transaction [Line Items]
Price of stock sold (in dollars per share)					$ 10.00
Indexed shares (in shares)					100,000
Option indexed, fair value					$ 1,000,000.0
Board of Directors Chairman | Perpetual Preferred Stock
Related Party Transaction [Line Items]
Stock issued during period (in shares)	114,624
Board of Directors Chairman | Digirad Corporation
Related Party Transaction [Line Items]
Percentage of outstanding shares		4.30%			3.10%
Preferred stock, outstanding (in shares)					1,310,036
Board of Directors Chairman | ATRM Holdings, Inc.
Related Party Transaction [Line Items]
Percentage of outstanding shares		17.40%
LSVM
Related Party Transaction [Line Items]
Stock issued during period (in shares)	300,000
Price of stock sold (in dollars per share)	$ 10
Series B Preferred Stock | Lone Star Value Investors, LP | ATRM Holdings, Inc.
Related Party Transaction [Line Items]
Common stock, outstanding (in shares)		222,577
Series B Preferred Stock | Lone Star Value Co-Invest I, LP | ATRM Holdings, Inc.
Related Party Transaction [Line Items]
Common stock, outstanding (in shares)		374,562
Series B Preferred Stock | ATRM Holdings, Inc.
Related Party Transaction [Line Items]
Preferred stock, dividend rate percentage		10.00%
Affiliated Entity | Board of Directors Chairman
Related Party Transaction [Line Items]
Long-term debt					$ 300,000
Eberwein Trust | Board of Directors Chairman | Perpetual Preferred Stock
Related Party Transaction [Line Items]
Stock issued during period (in shares)	113,780
LSV GP | Board of Directors Chairman | Perpetual Preferred Stock
Related Party Transaction [Line Items]
Stock issued during period (in shares)	844
Series A Preferred Stock
Related Party Transaction [Line Items]
Equity interests issued (per share)		0.03
Shares reserved for future issuance (in shares)								1,492,321
ATRM Holdings, Inc. | Series B Preferred Stock
Related Party Transaction [Line Items]
Equity interests issued (per share)		2.5
Private Placement
Related Party Transaction [Line Items]
Stock issued during period (in shares)		300,000
Price of stock sold (in dollars per share)		$ 10.00
ATRM Unsecured Promissory Note, Due January 12, 2020 | Notes Payable, Other Payables
Related Party Transaction [Line Items]
Debt instrument, face amount					$ 700,000
ATRM Unsecured Promissory Note, Due January 12, 2020 | Notes Payable, Other Payables | Minimum
Related Party Transaction [Line Items]
Stated rate					10.00%
ATRM Unsecured Promissory Note, Due January 12, 2020 | Notes Payable, Other Payables | Maximum
Related Party Transaction [Line Items]
Stated rate					12.00%
ATRM Unsecured Promissory Note, Due June 1, 2020 | Notes Payable, Other Payables
Related Party Transaction [Line Items]
Debt instrument, face amount					$ 1,200,000
ATRM Unsecured Promissory Note, Due June 1, 2020 | Notes Payable, Other Payables | Minimum
Related Party Transaction [Line Items]
Stated rate					10.00%
ATRM Unsecured Promissory Note, Due June 1, 2020 | Notes Payable, Other Payables | Maximum
Related Party Transaction [Line Items]
Stated rate					12.00%
ATRM Unsecured Promissory Note, Due November 30, 2020 | Notes Payable, Other Payables
Related Party Transaction [Line Items]
Debt instrument, face amount					$ 400,000
ATRM Unsecured Promissory Note, Due November 30, 2020 | Notes Payable, Other Payables | Minimum
Related Party Transaction [Line Items]
Stated rate					10.00%
ATRM Unsecured Promissory Note, Due November 30, 2020 | Notes Payable, Other Payables | Maximum
Related Party Transaction [Line Items]
Stated rate					12.00%
300 Park Street, LLC
Related Party Transaction [Line Items]
Purchase price			$ 2,900,000
Sale leaseback transaction, lease period			120 months
300 Park Street, LLC | Minimum
Related Party Transaction [Line Items]
Base rent payments			$ 3,300,000
300 Park Street, LLC | Maximum
Related Party Transaction [Line Items]
Base rent payments			3,600,000
947 Waterford Road, LLC
Related Party Transaction [Line Items]
Purchase price			$ 1,000,000.0
Sale leaseback transaction, lease period			120 months
947 Waterford Road, LLC | Minimum
Related Party Transaction [Line Items]
Base rent payments			$ 1,200,000
947 Waterford Road, LLC | Maximum
Related Party Transaction [Line Items]
Base rent payments			$ 1,300,000
Oxford Lease
Related Party Transaction [Line Items]
Purchase price				$ 1,200,000
Sale leaseback transaction, lease period				120 months
Oxford Lease | Minimum
Related Party Transaction [Line Items]
Base rent payments				$ 1,400,000
Oxford Lease | Maximum
Related Party Transaction [Line Items]
Base rent payments				$ 1,500,000

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Perpetual Preferred Stock - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Equity [Abstract]
Preferred stock, dividend rate percentage	10.00%	10.00%
Liquidation preference (usd per share)	$ 10.00	$ 10.00
Preferred stock dividends in arrears	$ 3.0
Preferred stock dividends in arrears (usd per share)	$ 0.60

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Perpetual Preferred Stock - Activity (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at December 31, 2020	$ 21,500
Deemed dividend on redeemable convertible preferred stock	479	$ 484
Balance at March 31, 2021	$ 21,979