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, 2023

☐	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, a 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, 2023, the registrant had 15,196,090 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	24
Item 3. Quantitative and Qualitative Disclosures about Market Risk	32
Item 4. Controls and Procedures	32
PART II. OTHER INFORMATION	34
Item 1. Legal Proceedings	34
Item 1A. Risk Factors	34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3. Defaults Upon Senior Securities	35
Item 4. Mine Safety Disclosures	35
Item 5. Other Information	35
Item 6. Exhibits	36

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, 2022 filed with the U.S. Securities and Exchange Commission on March 15, 2023, as amended on May 1, 2023. 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

5

STAR EQUITY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

	Three Months Ended, March 31,
	2023		2022
Revenues:
Healthcare	$	13,359	$	13,418
Construction	12,346		11,631
Total revenues	25,705		25,049
Cost of revenues:
Healthcare	10,032		10,242
Construction	8,017		10,045
Investments	63		99
Total cost of revenues	18,112		20,386
Gross profit	7,593		4,663
Operating expenses:
Selling, general and administrative	6,433		6,788
Amortization of intangible assets	430		430
Total operating expenses	6,863		7,218
Income (loss) from operations	730		(2,555)
Other income (expense):
Other income (expense), net	(100)		(6)
Interest expense, net	(195)		(190)
Total other income (expense), net	(295)		(196)
Income (loss) before income taxes	435		(2,751)
Income tax benefit (provision)	—		(950)
Net income (loss)	435		(3,701)
Deemed dividend on Series A perpetual preferred stock	(479)		(479)
Net income (loss) attributable to common shareholders	$	(44)	$	(4,180)
Net income (loss) per share
Basic*	$	0.03	$	(0.29)
Diluted*	$	0.03	$	(0.29)
Net income (loss) per share, attributable to common shareholders
Basic*	$	—	$	(0.33)
Diluted*	$	—	$	(0.33)
Weighted-average common shares outstanding
Basic*	15,516		12,669
Diluted*	15,656		12,669
Dividends declared per share of Series A perpetual preferred stock	$	0.25	$	0.25

*Earnings per share may not add due to rounding

See accompanying notes to the unaudited condensed consolidated financial statements.

6

STAR EQUITY HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

	March 31, 2023 (unaudited)		December 31, 2022
Assets:
Current assets:
Cash and cash equivalents	$	5,655	$	4,665
Restricted cash	141		142
Investments in equity securities	3,577		3,490
Accounts receivable, net of allowances of $500 and $714, respectively	15,000		17,756
Inventories, net	10,043		10,627
Other current assets	2,239		2,587
Total current assets	36,655		39,267
Property and equipment, net	8,102		8,348
Operating lease right-of-use assets, net	4,040		4,482
Intangible assets, net	12,922		13,352
Goodwill	6,046		6,046
Other assets	1,736		1,807
Total assets	$	69,501	$	73,302
Liabilities and Stockholders’ Equity:
Current liabilities:
Accounts payable	$	4,125	$	3,430
Accrued liabilities	2,665		3,137
Accrued compensation	4,025		3,701
Accrued warranty	290		291
Lumber derivative contracts	62		104
Deferred revenue	2,926		3,376
Short-term debt	8,394		11,682
Operating lease liabilities	1,371		1,427
Finance lease liabilities	348		397
Total current liabilities	24,206		27,545
Deferred tax liabilities	176		176
Operating lease liabilities, net of current portion	2,749		3,141
Finance lease liabilities, net of current portion	300		386
Deferred Revenue, net of current portion	257		299
Total liabilities	27,688		31,547
Commitments and contingencies (Note 8)
Stockholders’ Equity:
Series A Preferred stock, $0.0001 par value: 10,000,000 shares authorized: 8,000,000 shares authorized, liquidation preference ($10.00 per share), 1,915,637 shares issued and outstanding at March 31, 2023. (Liquidation preference: $18,988,390 as of March 31, 2023.)	18,988		18,988
Series C Preferred stock, $0.0001 par value: 25,000 shares authorized; no shares issued or outstanding	—		—
Common stock, $0.0001 par value: 50,000,000 shares authorized, respectively; 15,192,753 and 15,177,919 shares issued and outstanding (net of treasury shares) at March 31, 2023 and December 31, 2022, respectively	1		1
Treasury stock, at cost; 258,849 shares at March 31, 2023 and December 31, 2022, respectively	(5,728)		(5,728)
Additional paid-in capital	161,338		161,715
Accumulated deficit	(132,786)		(133,221)
Total stockholders’ equity	41,813		41,755
Total liabilities and stockholders’ equity	$	69,501	$	73,302

See accompanying notes to the unaudited condensed consolidated financial statements.

7

STAR EQUITY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)

	Three Months Ended March 31,
	2023		2022
Operating activities
Net (loss) income	$	435	$	(3,701)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation of property and equipment	414		471
Amortization of intangible assets	430		430
Non-cash lease expense	349		199
Provision for bad debt, net	28		300
Stock-based compensation	102		144
Amortization of loan issuance costs	28		37
(Gain) loss on sale of assets	(35)		(96)
Deferred income taxes	—		926
Unrealized (gain) loss of equity securities and lumber derivatives	(45)		584
Changes in operating assets and liabilities:
Accounts receivable	2,729		(397)
Inventories	584		(1,762)
Other assets	413		144
Accounts payable	694		919
Accrued compensation	323		142
Deferred revenue and billings in excess of costs and estimated profit	(449)		220
Operating lease liabilities	(357)		(185)
Other liabilities	(511)		989
Net cash provided (used) by operating activities	5,132		(636)
Investing activities
Purchases of property and equipment	(136)		(366)
Proceeds from sale of property and equipment	3		112
Purchases of equity securities	(85)		(1,070)
Proceeds from sales of equity securities	—		14
Net cash provided (used) by investing activities	(218)		(1,310)
Financing activities
Proceeds from borrowings	23,299		25,186
Repayment of debt	(26,606)		(24,748)
Proceeds from the sale of common stock, warrants, and exercise of over allotment options	—		13,198
Fees paid on issuance of common stock	—		(450)
Taxes paid related to net share settlement of equity awards	—		(3)
Repayment of obligations under finance leases	(139)		(154)
Preferred stock dividends paid	(479)		(479)
Net cash provided (used) by financing activities	(3,925)		12,550
Net increase in cash, cash equivalents, and restricted cash	989		10,604
Cash, cash equivalents, and restricted cash at beginning of period	4,807		4,816
Cash, cash equivalents, and restricted cash at end of period	$	5,796	$	15,420
Reconciliation of cash, cash equivalents, and restricted cash at end of year
Cash and cash equivalents	$	5,655	$	15,035
Restricted cash	141		385
Cash, cash equivalents, and restricted cash at end of period	$	5,796	$	15,420
Supplemental Information
Cash paid during the year for interest	$	328	$	—
Cash paid during the year for income taxes	$	—	$	—

See accompanying notes to the unaudited condensed consolidated financial statements.

8

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

(Unaudited)

(In thousands)

	Perpetual Redeemable Preferred Stock			Perpetual Preferred Stock			Common stock			Treasury Stock		Additional paid-in capital		Accumulated deficit		Total stockholders’ equity
	Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2022	—	—		1,916	$	18,988	15,178	$	1	(5,728)		$	161,715	$	(133,221)	$	41,755
Stock-based compensation	—	—		—	—		—	—		—		102		—		102
Shares issued under stock incentive plans, net of shares withheld for employee taxes	—	—		—	—		15	—		—		—		—		—
Dividends to holders of preferred stock ($0.25 per share)	—	—		—	—		—	—		—		(479)		—		(479)
Net income (loss)	—	—		—	—		—	—		—		—		435		435
Balance at March 31, 2023	—	$	—	1,916	$	18,988	15,193	$	1	$	(5,728)	$	161,338	$	(132,786)	$	41,813

	Perpetual Redeemable Preferred Stock			Perpetual Preferred Stock			Common stock			Treasury Stock		Additional paid-in capital		Accumulated deficit		Total stockholders’ equity
	Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2021	1,916	18,988		—	$	—	5,805	$	—	$	(5,728)	$	150,451	$	(127,969)	$	16,754
Stock-based compensation	—	—		—	—		—	—		—		144		—		144
Shares issued under stock incentive plans, net of shares withheld for employee taxes	—	—		—	—		49	—		—		(3)		—		(3)
Accrued dividend on redeemable preferred stock	—	479		—	—		—	—		—		(479)		—		(479)
Preferred stock dividends paid	—	(479)		—	—		—	—		—		—		—		—
Equity issuance costs	—	—		—	—		—	—		—		(450)		—		(450)
Proceeds from the sale of common stock, warrants, and exercise of over allotment options	—	—		—	—		9,175	1		—		13,197		—		13,198
Net income (loss)	—	—		—	—		—	—		—		—		(3,701)		(3,701)
Balance at March 31, 2022	1,916	$	18,988	—	$	—	15,029	$	1	$	(5,728)	$	162,860	$	(131,670)	$	25,463

See accompanying notes to unaudited condensed consolidated financial statements.

9

STAR EQUITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation and Significant Policies

Basis of Presentation

The unaudited condensed 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 condensed 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, 2022 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, 2022, filed with the SEC on Form 10-K on March 15, 2023, 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

Star Equity Holdings, Inc. (“Star Equity,” the “Company,” “we,” or “our”) is a multi-industry diversified holding company with two divisions: Construction and Investments. The Company previously had a Healthcare division which was sold on May 4, 2023, as further described in Note 16. “Subsequent Events.” Our common stock and preferred stock are listed on the NASDAQ Global Market exchange as “STRR” and “STRRP”, respectively.

Liquidity and Management’s Plan

At December 31, 2022, we identified certain conditions and events which in the aggregate required management to perform an assessment of the Company’s ability to continue as a going concern for one year from the financial statements issuance date. Management’s analysis indicated that there is no substantial doubt regarding the entity’s ability to continue as a going concern for one year from the financial statements issuance date. For the quarter ended March 31, 2023 we achieved net income of $0.4 million and positive cash flow from operations of $5.1 million. As of March 31, 2023, cash and cash equivalents amounted to $5.7 million and our investments in publicly traded companies amounted to $3.6 million. Additionally, as further discussed in Note 16. “Subsequent Events”, we received approximately $27 million in cash from the sale of our Healthcare business on May 4, 2023 and paid the full outstanding balance owed under the Webster Loan Agreement (as defined herein). In addition, we have given notice to eCapital (as defined in Note 7. “Debt”) that we will not be renewing our credit facilities with eCapital upon their June 30, 2023 expiration. We have projected positive cash flow generation for the next 12 months from the issuance date of these financial statements. Our forecasts are dependent on our ability to maintain margins at our operating companies which includes achieving levels of booked orders, minimizing expenses and achieving certain free cash flow benchmarks. We have begun to explore certain financing arrangements, including sale and leaseback opportunities, subsequent to the date of these financial statements.There can be no assurance that the Company will enter into such a financing arrangement or as to the terms of any such financing arrangement.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and disclosures made in the accompanying notes to the condensed consolidated financial statements. Significant estimates and judgments include those related to inventory, revenue recognition, lease accounting, fair value measurements (including contingent considerations), litigation and contingent liabilities, variable interest entities, intangible assets and goodwill valuations, equity classification and transactions, and income taxes. Actual results could materially differ from those estimates.

Concentration of Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents and accounts receivable. We limit our exposure to credit loss by generally placing cash in high credit quality financial institutions. Cash balances are maintained primarily at major financial institutions in the United States, a portion of which exceed the regulatory limit of $250,000 insured by the Federal Deposit Insurance Corporation (FDIC). We have not experienced any credit losses associated with our cash balances. Additionally, we have established guidelines regarding diversification of our investments and their maturities, which are designed to maintain principal and maximize liquidity. As of March 31, 2023 we have $4.4 million of cash in excess of FDIC insured limits

10

Mezzanine Equity

Pursuant to the Certificate of Designations, Rights and Preferences of 10% Series A Cumulative Perpetual Preferred Stock (the “Series A Preferred Stock”) of Star Equity (formerly Digirad Corporation) (the “Certificate of Designations”), upon a Change of Control Triggering Event, as defined in the Certificate of Designations, holders of the Series A Preferred Stock had the ability to require the Company to redeem the Series A 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 was not solely within the control of the Company, the Series A Preferred Stock did not qualify as permanent equity and was classified as mezzanine or temporary equity. The Series A Preferred Stock was not redeemable and it was not probable that our Series A Preferred Stock would become redeemable as of June 2, 2022. Therefore, we were not previously required to accrete the Series A Preferred Stock to its redemption value.

On June 2, 2022, the Certificate of Designations was amended to include a “Special Optional Redemption Right” at the Company’s discretion and to extinguish the option of preferred stockholders to redeem preferred shares upon a Change of Control Triggering Event, as defined in the Certificate of Designations, as amended. As the redemption features of the Series A Preferred Stock are now solely within the control of the Company, the Series A Preferred Stock qualifies as permanent equity and has been reclassified to permanent equity effective June 2, 2022.

In addition to the foregoing redemption features, the Certificate of Designations also provides that we may redeem (at our option, in whole or in part) the Series A Preferred Stock following the fifth anniversary of issuance of the Series A Preferred Stock, at a cash redemption price of $10.00 per share, plus any accumulated and unpaid dividends.

Refer to preferred stock dividends discussed in Note 12. Perpetual Preferred Stock.

New Accounting Standards To Be Adopted

No new accounting standards were issued in the quarter ended March 31, 2023 that are expected to have a material impact on our financial statements.

11

Note 2. Revenue

Disaggregation of Revenue

During the first quarter of 2023 and until May 4, 2023, the Company had three reporting segments (see Note 10. “Segments”) and has five major goods and service lines which are either transferred over time or at a point in time. The following tables present our revenues for the three months ended March 31, 2023 and 2022, disaggregated by major source (in thousands):

	Three Months Ended March 31, 2023
	Healthcare		Construction		Total
Major Goods/Service Lines
Mobile Imaging(1)	$	10,323	$	—	$	10,323
Camera Sales	952		—		952
Camera Support	1,899		—		1,899
Healthcare Revenue from Contracts with Customers	13,174		—		13,174
Lease Income	185		—		185
Construction Revenue from Contracts with Customers	—		12,346		12,346
Total Revenues	$	13,359	$	12,346	$	25,705
Timing of Revenue Recognition
Services and goods transferred over time	$	10,545	$	—	$	10,545
Services and goods transferred at a point in time	2,814		12,346		15,160
Total Revenues	$	13,359	$	12,346	$	25,705

	Three Months Ended March 31, 2022
	Healthcare		Construction		Total
Major Goods/Service Lines
Mobile Imaging(1)	$	10,518	$	—	$	10,518
Camera Sales	1,132		—		1,132
Camera Support	1,679		—		1,679
Healthcare Revenue from Contracts with Customers	13,329		—		13,329
Lease Income	89		—		89
Construction Revenue from Contracts with Customers	—		11,631		11,631
Total Revenues	$	13,418	$	11,631	$	25,049
Timing of Revenue Recognition
Services and goods transferred over time	$	10,854	$	1,897	$	12,751
Services and goods transferred at a point in time	2,564		9,734		12,298
Total Revenues	$	13,418	$	11,631	$	25,049

Deferred Revenue

Changes in deferred revenue for the three months ended March 31, 2023, is as follows (in thousands):

Balance at December 31, 2022	$	3,675
Revenue recognized that was included in balance at beginning of the year	(1,790)
Deferred revenue, net, related to contracts entered into during the year	1,298
Balance at March 31, 2023	$	3,183

12

As of March 31, 2023 and December 31, 2022, non-current deferred revenue was $257 thousand and $299 thousand, respectively, net of the current portion within our condensed Consolidated Balance Sheets, which is expected to be recognized over a period of 2-4 years.

13

Note 3. Basic and Diluted Net Income (Loss) Per Share

We present net income (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 income (loss) attributable to common stockholders to warrants because the holders of our warrants are not contractually obligated to share in our income (loss). Basic net income (loss) per share attributable to common stockholders is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income (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 income (loss) per share for the periods indicated (in thousands):

	Three Months Ended March 31,
	2023		2022
Numerator:
Net income (loss)	435		(3,701)
Deemed dividend on Series A perpetual preferred stock	(479)		(479)
Net income (loss) attributable to common shareholders	$	(44)	$	(4,180)
Denominator:
Weighted average common shares outstanding	15,191		12,434
Weighted average prefunded warrants outstanding	325		235
Weighted average shares outstanding - basic	15,516		12,669
Dilutive potential common shares:
Restricted stock units	140		—
Weighted average shares outstanding - diluted	15,656		12,669
Net income (loss) per share
Basic	$	0.03	$	(0.29)
Diluted	$	0.03	$	(0.29)
Net income (loss) per share, attributable to common shareholders
Basic	$	—	$	(0.33)
Diluted	$	—	$	(0.33)

*Earnings per share may not add due to rounding

Antidilutive common stock equivalents are excluded from the computation of diluted income (loss) per share. The computation of diluted earnings per share excludes stock options, RSUs, and stock warrants that are anti-dilutive. The following common stock equivalents were anti-dilutive (in thousands):

	Three Months Ended March 31,
	2023	2022
Stock options	2	6
Restricted stock units	80	271
Stock warrants	11,865	9,361
Total	11,947	9,638

14

Note 4. Supplementary Balance Sheet Information

Inventories

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

	March 31, 2023		December 31, 2022
Raw materials	$	5,609	$	6,330
Work-in-process	2,772		2,567
Finished goods	1,886		1,946
Total inventories	10,267		10,843
Less reserve for excess and obsolete inventories	(224)		(216)
Total inventories, net	$	10,043	$	10,627

Property and Equipment

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

	March 31, 2023		December 31, 2022
Land	$	805	$	805
Buildings and leasehold improvements	4,843		4,843
Machinery and equipment	24,398		24,648
Computer hardware and software	2,486		2,465
Gross property and equipment	32,532		32,761
Accumulated depreciation	(24,430)		(24,413)
Total property and equipment, net	$	8,102	$	8,348

As of March 31, 2023, the non-operating land and buildings, held for investments, had a carry value of $1.9 million and was included within property and equipment on the condensed Consolidated Balance Sheet.

Warranty Reserves

In our Healthcare division, we generally provide a 12-month assurance warranty on our gamma cameras. We accrue the estimated cost of this warranty at the time revenue is recorded and charge warranty expense to product and product-related cost of revenues. Warranty reserves are established based on historical experience with failure rates and repair costs and the number of systems covered by warranty. Warranty reserves are depleted as gamma cameras are repaired. The costs consist principally of materials, personnel, overhead, and transportation. We review warranty reserves quarterly and make adjustments, as necessary.

Within our Construction division, KBS Builders, Inc. (“KBS”) provides a limited assurance warranty on its residential homes that covers substantial defects in materials or workmanship for a period of 12 months after delivery to the owner. EdgeBuilder, Inc. (“EdgeBuilder”) provides a limited warranty on the sale of its wood foundation products that covers leaks resulting from defects in workmanship for a period of twenty-five years. Estimated warranty costs are accrued in the period that the related revenue is recognized.

The activities related to our warranty reserve for the period ended March 31, 2023 and year ended December 31, 2022 are as follows (in thousands):

	March 31, 2023		December 31, 2022
Balance at the beginning of year	$	291	$	569
Charges to cost of revenues	85		177
Applied to liability	(86)		(455)
Balance at the end of period	$	290	$	291

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Note 5. 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 and finance leases are included separately in the condensed Consolidated Balance Sheets.

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

	Three Months Ended March 31,
	2023		2022
Operating lease cost	$	390	$	396
Finance lease cost:
Amortization of finance lease assets	$	116	$	123
Interest on finance lease liabilities	11		17
Total finance lease cost	$	127	$	140

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

	Three Months Ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	349	$	199
Operating cash flows from finance leases	$	11	$	17
Financing cash flows from finance leases	$	139	$	157
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	—	$	1,229

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

	March 31, 2023		December 31, 2022
Weighted average remaining lease term (in years)
Operating leases	3.5		3.7
Finance leases	2.1		2.3
Weighted average discount rate
Operating leases	4.68	%	4.66	%
Finance leases	5.98	%	5.98	%

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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, 2023 were as follows (in thousands):

	Operating Leases		Finance Leases
2023 (excludes the three months ended March 31, 2023)	$	1,146	$	292
2024	1,392		266
2025	918		103
2026	591		16
2027	155		1
2028 and thereafter	206		—
Total future minimum lease payments	4,408		678
Less amounts representing interest	288		30
Present value of lease obligations	$	4,120	$	648

Lessor

Prior to the sale of our Healthcare business on May 4, 2023, we generated lease income in the Healthcare segment from equipment rentals to customers. Rental contracts were structured as either a weekly or monthly payment arrangement and were accounted for as operating leases. Revenues were recognized on a straight-line basis over the term of the rental. During the three months ended March 31, 2023 and 2022, our lease contracts were mainly month-to-month contracts.

Note 6. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Financial Accounting Standards Board’s authoritative guidance for fair value measurements establishes a three-level hierarchy based upon the inputs to the valuation model of an asset or liability. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are inputs other than quoted prices that are significant and observable; and Level 3 inputs are significant unobservable inputs to be used in situations where markets do not exist or illiquid. 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, 2023 and December 31, 2022 (in thousands):

	Fair Value as of March 31, 2023
	Level 1		Level 2		Level 3		Total
Assets (Liabilities):
Equity securities	$	3,577	$	—	$	—	$	3,577
Lumber derivative contracts	(62)		—		—		(62)
Total	$	3,515	$	—	$	—	$	3,515

	Fair Value as of December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets (Liabilities):
Equity securities	$	3,490	$	—	$	—	$	3,490
Lumber derivative contracts	(104)		—		—		(104)
Total	$	3,386	$	—	$	—	$	3,386

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, 2023 and December 31, 2022, respectively, and recorded in Investments in the condensed Consolidated Balance Sheets. During the three months ended March 31, 2023 and 2022, we recorded an unrealized gain of $2 thousand and $92 thousand, respectively, recorded in other (expense) income, net in the condensed Consolidated Statements of Operations.

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We may enter into lumber derivative contracts in order to protect our gross profit margins from fluctuations caused by volatility in lumber price, recorded within current assets or liabilities in the condensed Consolidated Balance Sheets. For the three months ended March 31, 2023 and 2022, we recorded a net loss of $46 thousand and $0.2 million, respectively, in the cost of goods sold in the condensed Consolidated Statements of Operations. As of March 31, 2023, we had a net long (buying) position of 5,500,000 board feet under 50 lumber derivatives contracts. As of December 31, 2022, we had a net long (buying) position of 550,000 board feet under 5 lumber derivatives contracts.

Gains and losses from lumber derivative contracts are recorded in cost of goods sold of the condensed Consolidated Statements of Operations and included the following for the three months ended March 31, 2023 and 2022, respectively:

	March 31, 2023		March 31, 2022
Unrealized gain (loss) on lumber derivatives	$	(43)	$	676
Realized gain (loss) on lumber derivatives	89		(448)
Total gain (loss) on lumber derivatives	$	46	$	228

Note 7. Debt

A summary of debt as of March 31, 2023 and December 31, 2022 is as follows (dollars in thousands):

	March 31, 2023			December 31, 2022
	Amount		Weighted-Average Interest Rate	Amount		Weighted-Average Interest Rate
Revolving Credit Facility - eCapital KBS	$	—	10.75%	$	—	10.25%
Revolving Credit Facility - eCapital EBGL	—		10.75%	2,592		10.25%
Revolving Credit Facility - Webster	7,685		7.36%	8,299		6.89%
Total Short-term Revolving Credit Facilities	$	7,685	7.36%	$	10,891	7.69%
eCapital - Star Loan Principal, net	$	709	11.00%	$	791	10.50%
Short Term Loan	$	709	11.00%	$	791	10.50%
Total Short-term debt	$	8,394	7.67%	$	11,682	7.88%

Webster Credit Facility

On March 29, 2019, the Company entered into a Loan and Security Agreement (the “Webster Loan Agreement”) by and among certain subsidiaries of the Company, as borrowers (collectively, the “Webster Borrowers”); the Company, as guarantor; and Sterling National Bank (“Sterling”). On February 1, 2022, Sterling became part of Webster Bank, N.A. (“Webster”), and Webster became the successor in interest to the Webster Loan Agreement. The Webster Loan Agreement was also subject to a limited guarantee by Mr. Eberwein, the Executive Chairman of our board of directors.

The Webster Loan Agreement was a five-year credit facility maturing in March 2024, with a maximum credit amount of $20.0 million for revolving loans (the “Webster Credit Facility”). In connection with the sale of our Healthcare business on May 4, 2023, we paid off the Webster Credit Facility in full, using the proceeds from the sale. Under the Webster Credit Facility, the Webster Borrowers were able to 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 Webster Loan Agreement were classified as short-term obligations under GAAP as the agreement contains 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, 2023, the Company had $0.1 million of letters of credit outstanding and had additional borrowing capacity of $0.5 million under the Webster Credit Facility.

At the Webster Borrowers’ option, the Webster Credit Facility bore interest at either (i) a Floating LIBOR Rate, as defined in the Webster Loan Agreement, plus a margin of 2.50% per annum; or (ii) a Fixed LIBOR Rate, as defined in the Webster Loan Agreement, plus a margin of 2.25% per annum. Our floating rate on this facility at March 31, 2023 was 7.36%. The Webster Loan Agreement also provided for unused line fees and restricts the usage of borrowings under the line solely to support the Healthcare businesses, subject to certain limitations.

The Webster Credit Facility was secured by the assets of the Digirad Health businesses.

Financial covenants required that the Webster Borrowers maintain (a) a Fixed Charge Coverage Ratio as of the last day of a fiscal quarter of not less than 1.25 to 1.0 and (b) a Leverage Ratio as of the last day of such fiscal quarter of no greater than 3.50 to 1.0. As of March 31, 2023, we believe that we were in compliance with the covenants under the Webster Loan Agreement.

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eCapital Credit Facilities

EBGL

EdgeBuilder and Glenbrook Building Supply, Inc. (“Glenbrook” and, together with EdgeBuilder, collectively the “EBGL Borrowers”) are parties to a Loan and Security Agreement (the “EBGL Loan Agreement”) providing the EBGL Borrowers with a credit facility with eCapital Asset Based Lending Corp. formerly known as Gerber Finance, Inc. (“eCapital” for borrowings up to $4.0 million, subject to certain borrowing base limitations (the “EBGL Loan”). As of March 31, 2023, EBGL had additional borrowing capacity of $2.8 million under the facility. Amounts outstanding bear interest, payable monthly, at the prime rate plus 2.75% and payments of outstanding principal are due in full upon maturity. The facility is subject to annual renewal and is currently set to mature on June 30, 2023 or earlier (as amended in the eleventh amendment to the EBGL Loan Agreement).

Financial covenants require that EBGL maintain (a) net income (as defined in the EBGL Loan Agreement) at least equal to no less than $0 for the trailing 6-month period ending June 30, 2022 and no less than $1,000,000 for the trailing fiscal year ending December 31, 2022 and (b) a reduced minimum EBITDA (as defined in the EBGL Loan Agreement) to be no less than $0 as of June 30, 2022 and no less than $1,000,000 as of the fiscal year ending December 31, 2022.

EBGL was in compliance with the bi-annual financial covenants under the EBGL Loan Agreement measured as of December 31, 2022.

KBS

KBS is a party to a revolving credit facility with eCapital (“KBS Loan Agreement”). The facility, as amended, provides for borrowings up to $4.0 million, subject to certain borrowing base limitations. As of March 31, 2023, KBS had additional borrowing capacity of $1.0 million under the facility. Amounts outstanding bear interest, payable monthly, at the prime rate plus 2.75% and payments of outstanding principal are due in full upon maturity. The facility is subject to annual renewal and is currently set to mature on June 30, 2023 or earlier (as amended in the Twenty First Amendment of the KBS Loan Agreement). The facility is secured by the assets of KBS and borrowings under the line are restricted for use to finance the operations of KBS.

Financial covenants require that KBS maintain (a) net income (as defined in the KBS Loan Agreement) of at least equal to no less than $0 for the trailing 6-month period ending June 30, 2022 and be no less than $500,000 for the trailing fiscal year end and (b) a minimum EBITDA (as defined in the KBS Loan Agreement) no less than $0 as of June 30 and no less than $850,000 as of the fiscal year end.

As of December 31, 2022, KBS was in compliance with the bi-annual financial covenants under the KBS Loan Agreement.

The eCapital credit facilities contain cross-default provisions and subjective acceleration clauses which may, in the event of a material adverse event, as determined by eCapital, allow eCapital to declare the loans immediately due and payable or increase the interest rate. The facilities are also subject to a guaranty by the Company and the Company is responsible for certain facility and other fees.

Borrowings under the eCapital credit facilities are classified as short-term obligations as the agreements contain a subjective acceleration clauses and require a lockbox arrangement whereby all receipts within the lockbox are swept daily to reduce borrowings outstanding.

Term Loan

We and certain of our Investments subsidiaries (collectively, the “Star Borrowers”) are party to a Loan and Security Agreement with eCapital, as successor in interest to Gerber Finance, Inc. (as amended, the “Star Loan Agreement”), which provides for a credit facility with borrowing availability of up to $2.5 million, bearing interest at the prime rate plus 3.5% per annum, and matures on January 31, 2025, unless terminated in accordance with the terms therein (the “Star Loan”).

The following table presents the Star Loan balance, net of unamortized debt issuance costs as of March 31, 2023 (in thousands):

	March 31, 2023
	Amount
eCapital - Star Loan Principal	$	770
Unamortized debt issuance costs	(61)
eCapital - Star Loan Principal, net	$	709

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The Star Loan, as amended, requires monthly payments of principal of $33 thousand plus interest at the prime rate plus 3% per annum through the earlier of maturity in January 2025 or the termination, maturity or repayment of any Obligations held with eCapital (as amended in the fourth amendment to the Star Loan Agreement).

The Star Loan is secured by the assets of SRE, 947 Waterford Road, LLC, 300 Park Street, LLC and 56 Mechanic Falls Road, LLC and guaranteed by the Company. The Star loan is subject to certain annual financial covenants. The financial covenants under the Star Loan Agreement include maintenance of a Debt Service Coverage Ratio of not less than 1:00 to 1:00, as defined in the Star Loan Agreement. The occurrence of any event of default under the Star Loan Agreement may result in the obligations of the Star Borrowers becoming immediately due and payable. As of December 31, 2022, no event of default was deemed to have occurred and the Star Borrowers were in compliance with the annual financial covenants under the Star Loan Agreement measured as of December 31, 2022.

The outstanding balance is classified as a short-term obligation as a result of the acceleration clauses within the EBGL and KBS credit facility and the cross-default provisions.

Note 8. 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 compliance with regulatory standards, customer disputes, employment practices, wage and hour disputes, product liability, professional liability, malpractice 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 currently do not expect that the resolution of these matters will have a material adverse effect on our financial position or results of operations.

The outcome of litigation and the amount or range of potential loss at particular points in time may be difficult to ascertain. Among other things, uncertainties can include how trial and appellate courts will apply the law and interpret facts, as well as the contractual and statutory obligations of other indemnifying and insuring parties. The estimated range of reasonably possible losses, and their effect on our financial position is based upon currently available information and is subject to significant judgment and a variety of assumptions, as well as known and unknown uncertainties.

Note 9. 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, 2023, we recorded no income tax expense. For the three months ended March 31, 2022, we recorded $950 thousand income tax expense. The tax expense for the three months ended March 31, 2022 primarily relates to a January 2022 ownership change under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) which required us to establish an additional valuation allowance on net operating losses that the Company cannot utilize in the future.

As of March 31, 2023, we had unrecognized tax benefits of approximately $2.4 million related to uncertain tax positions. Included in the unrecognized tax benefits were $2.0 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 2018; 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.

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Note 10. Segments

Our reportable segments are based upon our internal organizational structure; the manner in which our operations are managed; the criteria used by our Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”), to evaluate segment performance; the availability of separate financial information; and overall materiality considerations. Prior to the sale of our Healthcare business on May 4, 2023, our three business divisions were organized into the following three reportable segments to reflect the manner in which our CODM assesses performance and allocates resources:

1.Healthcare

2.Construction

3.Investments

Segment information for three months ended March 31, 2023 and 2022 is as follows (in thousands):

	Three Months Ended March 31,
	2023		2022
Revenue by segment:
Healthcare	$	13,359	$	13,418
Construction	12,346		11,631
Investments	158		158
Intersegment elimination	(158)		(158)
Consolidated revenue	$	25,705	$	25,049
Gross profit (loss) by segment:
Healthcare	$	3,327	$	3,176
Construction	4,329		1,586
Investments	95		59
Intersegment elimination	(158)		(158)
Consolidated gross profit	$	7,593	$	4,663
Income (loss) from operations by segment:
Healthcare	$	579	$	78
Construction	1,782		(759)
Investments	(19)		59
Corporate, eliminations and other	(1,612)		(1,933)
Segment income (loss) from operations	$	730	$	(2,555)
Depreciation and amortization by segment:
Healthcare	$	272	$	315
Construction	505		487
Investments	63		99
Star Equity corporate	4		—
Total depreciation and amortization	$	844	$	901

Note 11. Related Party Transactions

Star Equity Holdings, Inc.

On December 10, 2021, the Company entered into a securities purchase agreement with its Executive Chairman, Jeffrey E. Eberwein, relating to the issuance and sale of 650,000 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) at a purchase price of $3.25 per share pursuant to a private placement. As of March 31, 2023, Mr. Eberwein owned 2,983,685 shares of Common Stock, representing approximately 19.64% of our outstanding Common Stock. In addition, as of March 31, 2023, Mr. Eberwein owned 1,222,458 shares of Series A Preferred Stock.

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Note 12. Perpetual Preferred Stock

Holders of shares of our Series A 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, by 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 Series A 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 Series A Preferred Stock for the past dividend periods and the dividend for the 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 Series A Preferred Stock may be subject to redemption. The Company may redeem the Series A 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 Series A Preferred Stock on or after September 10, 2024.

On February 17, 2023, our board of directors declared a cash dividend to holders of our Series A Preferred Stock of $0.25 per share, for an aggregate amount of approximately $0.5 million. The record date for this dividend was March 1, 2023, and the payment date was March 10, 2023. As of March 31, 2023, we have no preferred dividends in arrears.

Note 13. Equity Transactions

On January 24, 2022, we closed an underwritten public offering (the “2022 Public Offering”) pursuant to an underwriting agreement with Maxim Group LLC (“Maxim”), as representative of the underwriters. Through the 2022 Public Offering, we issued and sold (A)(i) 9,175,000 shares of the Company’s Common Stock, (ii) an aggregate of 325,000 pre-funded warrants to purchase up to an aggregate of 325,000 shares of Common Stock, and (iii) an aggregate of 9,500,000 common stock purchase warrants (the “Firm Purchase Warrants”) to purchase up to 9,500,000 shares of Common Stock and (B) at the election of Maxim, (i) up to an additional 1,425,000 shares of Common Stock and/or (ii) up to an additional 1,425,000 shares of common stock purchase warrants (the “Option Purchase Warrants”, and together with the Firm Purchase Warrants, the “Warrants”). Maxim partially exercised its over-allotment option for the purchase of 1,425,000 Warrants for a price of $0.01 per Warrant. Each share of common stock (or pre-funded warrant in lieu thereof) was sold together with one common warrant to purchase one share of common stock at a price of $1.50 per share and common warrant. Gross proceeds, before deducting underwriting discounts and offering expenses and excluding any proceeds we may receive upon exercise of the Warrants, were $14.3 million and net proceeds were $12.7 million.

In addition, as part of the 2022 Public Offering, the Company issued to Maxim 237,500 common stock purchase warrants (the “Underwriter’s Warrants”) to purchase up to 237,500 shares of Common Stock at an exercise price of $1.65 per common warrant. The Underwriter’s Warrants have an initial exercise date beginning July 19, 2022.

As of March 31, 2023, of the warrants issued through the public offering we closed on May 28, 2020 (the “2020 Public Offering”), 1.0 million warrants were exercised and 1.4 million warrants remained outstanding, which represents 0.7 million shares of common stock equivalents, at an exercise price of $2.25. As of March 31, 2023, of the Warrants issued through the 2022 Public Offering, there were 10.9 million Warrants and 0.3 million prefunded warrants outstanding at an exercise price of $1.50 and $0.01, respectively. The Underwriter’s Warrants have not been exercised.

Note 14. Preferred Stock Rights

On June 2, 2021, the board of directors adopted a tax benefit preservation plan in the form of a Section 382 Rights Agreement (the “382 Agreement”). The 382 Agreement is intended to diminish the risk that our ability to use our net operating loss carryforwards to reduce future federal income tax obligations may become substantially limited due to an “ownership change,” as defined in Section 382 of the Code. The board of directors authorized and declared a dividend distribution of one right for each outstanding share of common stock, par value $0.0001 per share, to stockholders of record as of the close of business on June 14, 2021. Each right entitles the registered holder to purchase from the one one-thousandth of a share of Series C Participating Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock”), at an exercise price of $12.00 per one one-thousandth of a share of Series C Preferred Stock, subject to adjustment.

The rights will become exercisable following (i) 10 days after a public announcement that a person or group has become an Acquiring Person (as defined in the 382 Agreement); and (ii) 10 business days (or a later date determined by the board of directors) after a person or group begins a tender or an exchange offer that, if completed, would result in that person or group becoming an Acquiring Person.

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In addition, upon the occurrence of certain events, the exercise price of the rights would be adjusted and holders of the rights (other than rights owned by an acquiring person or group) would be entitled to purchase common stock at approximately half of market value. Given the potential adjustment of the exercise price of the rights, the rights could cause substantial dilution to a person or group that acquires 4.99% or more of common stock on terms not approved by the board of directors.

No rights were exercisable at March 31, 2023. There is no impact to financial results as a result of the adoption of the 382 Agreement for the three months ended March 31, 2023.

Note 15. Variable Interest Entity

VIE in which we are not the Primary Beneficiary

We have an investment in a variable interest entity (“VIE”) of $0.3 million, recorded in Other Assets, in which we are not the primary beneficiary. This VIE is a small private company that is primarily involved in research related to new heart imaging technologies.

We have determined that the governance structures of this entity do not allow us to direct the activities that would significantly affect its economic performance. Therefore, we are not the primary beneficiary, and the results of operations and financial position of the VIE are not included in our condensed consolidated financial statements. We account for this investment as non-marketable equity securities which is valued at cost less impairment.

The potential maximum exposure of this unconsolidated VIE is generally based on the current carrying value of the investments and any future funding commitments based on the milestone agreement and board approval. We have determined that the single source of our exposure to the VIE is our capital investment in them. The carrying value and maximum exposure of the unconsolidated VIE were $0.3 million as of March 31, 2023. As of March 31, 2023, we performed a qualitative assessment on the carrying value via inquiries with the board of directors and a review of the entity’s financial statements and determined that there have not been any impairment indicators to the carrying value.

Note 16. Subsequent Events

On May 4, 2023, the Company entered into a Stock Purchase and Contribution Agreement (the “Purchase Agreement”), dated as of May 4, 2023 (the “Closing Date”), by and among the Company, Digirad Health Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Digirad Health”), TTG Imaging Solutions, LLC., a Pennsylvania limited liability company (the “Buyer”), and the Buyer’s Parent, Insignia TTG Parent LLC, a Delaware limited liability company (the “Parent”). Pursuant to the Purchase Agreement, (i) the Buyer purchased 85% of the issued and outstanding shares of Digirad Health, on the terms and subject to the conditions set forth therein and (ii) the Company contributed to Parent 15% of the issued and outstanding shares of stock of Digirad Health (the “Contributed Shares”) in exchange for New Units (as defined in the Purchase Agreement) of Parent (the “Transaction”). The total aggregate consideration payable to the Company for the Transaction is $40 million, comprised of $27 million in cash, a $7 million promissory note, and $6 million of New Units in the Parent. The Company completed the sale of Digirad Health simultaneously with entering into the Purchase Agreement. The Purchase Agreement contains representations, warranties and covenants of the Company and Digirad Health that are customary for a transaction of this nature. The Purchase Agreement also contains indemnification obligations of the parties thereto. Pursuant to the Purchase Agreement, the Company has made a 336(e) election under the Code. In accordance with GAAP (ASC 205-20-45-1E), the Company evaluated the requirements needed to record the Digirad Health assets and liabilities as held-for-sale noting that for Q1 2023 “held and used” accounting was appropriate.

Concurrent with the Transaction, the Company terminated its debt with Webster by paying in full all amounts due at the Closing Date of the Transaction, which approximated $8.7 million. As a result of the Transaction, the Company no longer has a Healthcare division as of May 4, 2023.

On April 28, 2023, the Company gave notice to eCapital that it would not be renewing its credit facilities upon the expiry of the current extension to June 30, 2023. The Company paid in full all amounts outstanding on May 9, 2023 totaling approximately $0.8 million. The Company cancelled all eCapital credit facilities on May 9, 2023.

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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, 2022, which were included in our Annual Report on Form 10-K, filed with the SEC on March 15, 2023.

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

Overview

Star Equity Holdings, Inc. (“Star Equity”, the “Company”, “we”, “our”) is a multi-industry diversified holding company with two divisions. Our operating division participates in Construction, a key industry sector of the economy. In addition, we have an internally funded Investments division. On May 4, 2023, we consummated the sale of Digirad Health, Inc. (“Digirad Health”). During the three months ended March 31, 2023 and until the sale of Digirad Health, we also had a Healthcare division in addition to our Construction and Investments divisions.

Our Healthcare division, which operated as Digirad Health until the sale of Digirad Health on May 4, 2023, provided products and services in the area of nuclear medical imaging with a focus on cardiac health. Digirad Health operated across the United States and comprises two lines of business—imaging services offered to healthcare providers using a fleet of our proprietary solid-state gamma cameras and the manufacturing, distribution, and maintenance of our proprietary solid-state gamma cameras.

Our Construction division is made up of three operating businesses: KBS Builders, Inc. (“KBS”), EdgeBuilder, Inc. (“EdgeBuilder”), and Glenbrook Building Supply, Inc. (“Glenbrook”), with the latter two managed together and referred to jointly as “EBGL”. KBS is based in Maine and manufactures modular buildings for installation principally in New England. EBGL is based in the Minneapolis-Saint Paul area and principally serves the Upper Midwest. Together, the EBGL businesses manufacture and deliver structural wall panels and other engineered wood-based products, as well as distribute building materials primarily to professional builder customers.

Currently, our Investments division is an internally funded unit directly supervised by Star Equity management. This entity currently holds our corporate-owned real estate, which currently includes our three manufacturing facilities in Maine that are leased to KBS. Also, this unit holds several minority investments in other small public companies.

As discussed in Note 16. “Subsequent Events”, we entered into a Stock Purchase and Contribution Agreement to sell Digirad Health to TTG Imaging Solutions (“TTG”) for $40 million, comprised of $27 million in cash, a $7 million promissory note and $6 million in common equity interests in the parent entity of TTG. Following the sale of Digirad Health, we are a diversified holding company composed of two divisions, Construction and Investments. The $7 million promissory note and $6 million in common equity of the parent entity of TTG will be assets in the Investments division.

Strategy

Star Equity

We believe our diversified, multi-industry holding company structure allows Star Equity management to focus on capital allocation, strategic leadership, mergers and acquisitions, capital markets transactions, investor relations, as well as management of our Investments division. Our structure frees up our operating company management teams to focus on their respective businesses, look for organic and bolt-on growth opportunities, and improve operations with less distraction and administrative burden associated with running a public company.

We continue to explore strategic alternatives to improve our market position and the profitability of our product offerings, 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 businesses, divestitures of assets or businesses, equity offerings, debt financings, or corporate restructuring.

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Operating Business

We believe that our operating division is well positioned for growth in large addressable markets. The key elements of our growth strategy include the following:

•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 leverage the personnel, infrastructure, and brand recognition we have in these areas.

•Introduction of new services. 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 with our entry into the commercial multi-family segment. Other areas might include logistics, on site installation, and manufacturing of sub-components.

•Acquisition of complementary businesses. We plan to continue to look at complementary businesses that meet our financial criteria for acquisitions to grow our Company. We believe there are many potential small public and private targets that can be acquired over time and integrated into our platform. We will also look at larger, more transformational mergers and acquisitions if we believe the appropriate mix of value, risk, and return is present for our stockholders. The timing of these potential transactions will always depend on market conditions, available capital, and valuation. 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 stockholders.

Current Market Conditions

We expect that the majority of the negative effects of the COVID-19 pandemic are now behind us. Since early 2021, the vaccine rollout has gradually allowed us to return to a more normal operating environment. Prior to our sale of Digirad Health, our Healthcare business had returned to pre-COVID levels. Our Construction business continued to benefit in 2022 and 2023 from a strong housing market on the demand side. Supply chains have improved, but the labor market remains tight.

The target market for our Healthcare products and services was comprised of cardiologists, internal medicine physicians, family practice physicians, hospitals, integrated delivery networks, and federal institutions in the United States that perform or could perform a diagnostic imaging procedure or have interest in purchasing diagnostic imaging products. Our Healthcare businesses operated in approximately 43 states.

The target customers for our Construction division include professional home builders, general contractors, project owners, developers, and design firms. Housing demand remained strong throughout 2022 and into 2023, despite large interest rate increases. Supply chains also improved. While still volatile, materials prices eased beginning in the second half of 2022. We benefited from having implemented both price increases and margin protection language in our contracts and this had a significantly positive effect on our profitability in 2023.

Trends and Drivers

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 in 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, 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 growth of factory built housing.

Risks arising from global economic instability and conflicts, wars, and health crises could impact our business. In addition the inflation caused by such events may impact demand for our products and services and our cost to provide products and services.

Segments

Our reportable segments are based upon our internal organizational structure; the manner in which our operations are managed; the criteria used by our Chief Executive Officer, who is our CODM, to evaluate segment performance; the availability of separate financial information; and overall materiality considerations. Prior to the sale of Digirad Health on May 4, 2023, our three business divisions were organized into the following three reportable segments to reflect the manner in which our CODM assesses performance and allocates resources.

•Healthcare

•Construction

•Investments

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Effective May 4, 2023, we have two reportable segments, Construction and Investments.

Healthcare

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. We offer a convenient and economically efficient cardiac imaging services program as an alternative to purchasing equipment or outsourcing the procedure to an imaging center.

In addition, we manufacture and sell our internally developed solid-state gamma cameras and imaging systems, as well as provide field services through camera maintenance contracts. Our imaging systems include nuclear cardiac imaging systems, as well as general purpose nuclear imaging systems. We sell our imaging systems and service contracts 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).

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 of our current internally-developed cardiac gamma cameras employ SPECT technology.

Construction

Through this segment, we service residential and commercial construction projects through our KBS, EdgeBuilder and Glenbrook brands, through which we manufacture modular housing units, structural wall panels, permanent wood foundation systems and other engineered wood products, as well as supply general contractors with building materials.

KBS is a Maine-based manufacturer that started operations 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. We market our modular homes 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 us exclusively, although some have KBS model homes on display at their retail centers. KBS’s backlog and pipeline, along with its market initiatives to build more workforce housing, are expected to position KBS for continued growth, particularly in the multi-family arena.

EdgeBuilder is a manufacturer of structural wall panels, permanent wood foundation systems and other engineered wood products and conducts its operations in Prescott, Wisconsin. EdgeBuilder 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. EdgeBuilder’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.

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 and Glenbrook operate as one business with a single management team and we refer to them together as EBGL.

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Investments

We have begun to expand our investments activities and have established minority positions in the equity securities of a small number of publicly traded companies. We also hold 3 real estate assets in our portfolio, all of which we lease to our construction subsidiary, KBS. These include their principal production facility in South Paris, ME. Additionally, as discussed in Note 16. Subsequent Events, the $7 million promissory note and $6 million in common equity in the parent entity of TTG will be assets in the Investments division.

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 condensed Consolidated Balance Sheets. 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, 2022 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, 2023 and 2022

The following table summarizes our results for the three months ended March 31, 2023 and 2022 (in thousands): 

	Three Months Ended March 31,
	2023		Percent of  Revenues		2022		Percent of  Revenues		Change from Prior Year
									Dollars		Percent *
Total revenues	$	25,705	100.0	%	$	25,049	100.0	%	$	656	2.6	%
Total cost of revenues	18,112		70.5	%	20,386		81.4	%	(2,274)		(11.2)	%
Gross profit	7,593		29.5	%	4,663		18.6	%	2,930		62.8	%
Total operating expenses	6,863		26.7	%	7,218		28.8	%	(355)		(4.9)	%
Income (loss) from operations	730		2.8	%	(2,555)		10.2	%	3,285		128.6	%
Total other income (expense)	(295)		1.1	%	(196)		0.8	%	(99)		(50.5)	%
Income (loss) before income taxes	435		1.7	%	(2,751)		11.0	%	3,186		115.8	%
Income tax benefit (provision)	—		—	%	(950)		3.8	%	950		100.0	%
Net income (loss)	435		1.7	%	(3,701)		14.8	%	4,136		111.8	%

*Percentage may not add due to rounding

Revenues

Healthcare

Healthcare revenue is summarized as follows (in thousands):

	Three Months Ended March 31,
	2023		2022		Change		% Change
Healthcare Revenue	$	13,359	$	13,418	$	(59)	(0.4)	%

Healthcare revenue decreased 0.4% compared to the prior year quarter, which reflects a slightly different sales mix versus 2022.

Construction

Construction revenue is summarized as follows (in thousands):

	Three Months Ended March 31,
	2023		2022		Change		% Change
Construction Revenue	$	12,346	$	11,631	$	715	6.1	%

The increase in revenue for the Construction division was driven by improved performance at both our KBS and EBGL businesses.

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Gross Profit

Healthcare Gross Profit

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

	Three Months Ended March 31,
	2023			2022			$ Change		% Change
Healthcare gross profit (loss)	$	3,327		$	3,176		$	151	4.8	%
Healthcare gross margin	24.9		%	23.7		%

Healthcare gross margin increased by 1.2 percentage points for the three months ended March 31, 2023, compared to the same period in the prior year and reflects a slightly different business mix versus 2022.

Construction Gross Profit

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

	Three Months Ended March 31,
	2023			2022			$ Change		% Change
Construction gross profit (loss)	$	4,329		$	1,586		$	2,743	173.0	%
Construction gross margin	35.1		%	13.6		%

The increase in Construction gross profit of 173.0% was due to both strong pricing levels and lower input costs that carried over from 2022.

Investments Gross Loss

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

	Three Months Ended March 31,
	2023		2022		$ Change		% Change
Investments gross profit (loss)	$	(63)	$	(99)	$	36	36.4	%

Investment gross profit (loss) principally relates to depreciation expense associated with the three manufacturing facilities acquired in April 2019.

Operating Expenses

Operating expenses are summarized as follows (in thousands):

	Three Months Ended March 31,								Percent of Revenues
	2023		2022		Change				2023		2022
					Dollars		Percent
Selling, general and administrative	$	6,433	$	6,788	$	(355)	(5.2)	%	25.0	%	27.1	%
Amortization of intangible assets	430		430		—		—	%	1.7	%	1.7	%
Total operating expenses	$	6,863	$	7,218	$	(355)	(4.9)	%	26.7	%	28.8	%

On a consolidated basis, there was a $0.4 million decrease in sales, general and administrative expenses (“SG&A”). The major driver of the decrease SG&A was a $0.4 million decrease in audit and tax service expense. SG&A as a percentage of revenue decreased to 25.0% for the three months ended March 31, 2023, versus 27.1% in the prior year period.

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Total Other Income (Expense)

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

	Three Months Ended March 31,
	2023		2022
Other income (expense), net	$	(100)	$	(6)
Interest expense, net	(195)		(190)
Total other income (expense), net	$	(295)	$	(196)

Other income (expenses), net, for the three months ended March 31, 2023 and 2022 are predominately comprised of finance costs as well as interest income and unrealized losses and gains from available for sale securities recorded in our investments division.

Interest expense, net, for the three months ended March 31, 2023 and 2022 is predominantly comprised of interest costs and the related amortization of deferred issuance costs on our debt.

Income Tax Expense

For the three months ended March 31, 2023 and 2022 we recorded no income tax expense and $950 thousand income tax expense respectively, within continuing operations. See Note 9. Income Taxes, within the notes to our condensed consolidated financial statements for further information related to the income taxes.

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Liquidity and Capital Resources

Overview

Summary Cash Flows

The following table shows cash flow information for the three months ended March 31, 2023 and 2022 (in thousands): 

	Three Months Ended March 31,
	2023		2022
Net cash provided by (used in) operating activities	$	5,132	$	(636)
Net cash provided by (used in) investing activities	$	(218)	$	(1,310)
Net cash provided by (used in) financing activities	$	(3,925)	$	12,550

Cash Flows from Operating Activities

For the three months ended March 31, 2023, net cash provided by operating activities was $5.1 million, as compared to $0.6 million in net cash used in operating activities in 2022. The increase in net cash provided by operating activities is attributable to better operating performance, particularly at our Construction Division, higher collections of accounts receivable, and lower working capital expenditures.

Cash Flows from Investing Activities

For the three months ended March 31, 2023, net cash used in investing activities was $0.2 million, which principally consists of purchases of equity securities and investment securities. In 2022, net cash used in investing activities was $1.3 million, which was primarily attributable to the purchases of equity securities in our investments division of $1.1 million.

Cash Flows from Financing Activities

For the three months ended March 31, 2023, net cash used in financing activities was $3.9 million, as compared to net cash provided by financing activities of $12.6 million in 2022. 2023 cash used in financing activities included net debt repayments of $3.3 million. 2022 cash provided by financing activities included net proceeds of $12.7 million raised in our 2022 public equity offering.

Sources of Liquidity

Our principal sources of liquidity are our existing cash and cash equivalents, cash generated from operations, cash available on our revolving lines of credit from our credit facility with Webster Bank, N.A., a national banking association (“Webster”), as successor in interest to Sterling National Bank (“Sterling”), our three credit facilities with eCapital, and cash raised from equity financings. As of March 31, 2023, we had $5.7 million of cash and cash equivalents. The eCapital facilities directly support our Construction businesses. As of March 31, 2023, we have additional borrowing capacity of $1.0 million outstanding on the KBS revolver. We were at $0.0 million outstanding balance and have additional borrowing capacity of $2.8 million on the EBGL revolver. The eCapital facilities have loan limits of $4.0 million each. As of March 31, 2023, we had a $7.7 million outstanding balance and an additional borrowing capacity of $0.5 million on the Webster Credit Facility. In connection with the sale of our Healthcare business on May 4, 2023, we paid the Webster Credit Facility in full, using the proceeds from the sale.

Liquidity and Management’s Plan

At December 31, 2022, we identified certain conditions and events which in the aggregate required management to perform an assessment of the Company’s ability to continue as a going concern for one year from the financial statements issuance date. Management’s analysis indicated that we would be able to continue as a going concern for one year from the financial statements issuance date. For the quarter ended March 31, 2023 we have achieved net income of $0.4 million and positive cash flow from operations of $5.1 million. As of March 31, 2023, cash and cash equivalents amounted to $5.7 million and our investments in publicly traded companies amounted to $3.6 million. We believe that we were in compliance with all financial covenants under the Webster Loan Agreement as of March 31, 2023. Additionally, as further discussed in Note 16. Subsequent Events, we received approximately $27 million in cash from the sale of our Healthcare business on May 4, 2023 and paid the outstanding balance of $8.7 million owed under the Webster Loan Agreement. We have given notice to eCapital that we will not be renewing our credit facilities with eCapital upon their June 30, 2023 expiration. We project positive cash flow generation for the next 12 months from the issuance date of these financial statements. Our forecasts are dependent on our ability to maintain margins at our operating companies which includes achieving levels of booked orders, minimizing expenses and generating certain free cash flow benchmarks. We have begun to explore certain financing arrangements, including sale and leaseback opportunities, subsequent to the date of these financial statements. There can be no assurance that the Company will enter into such a financing arrangement or as to the terms of any such financing arrangement.

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Common Stock Equity Offering

On May 28, 2020, we closed an underwritten public offering (the “2020 Public Offering”) pursuant to an underwriting agreement with Maxim Group LLC, as representative of the underwriters. The 2020 Public Offering was for 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 2020 Public Offering price was $2.24 per share of common stock and $0.01 per accompanying Warrant (for a combined offering price of $2.25). Gross proceeds, before deducting underwriting discounts and offering expenses and excluding any proceeds we may receive upon exercise of the common warrants, were $5.5 million and net proceeds were $5.2 million.

As noted above, on January 24, 2022, we closed an underwritten public offering (the “2022 Public Offering”) pursuant to an underwriting agreement with Maxim Group LLC, as representative of the underwriters. The 2022 Public Offering was for 9,500,000 shares of common stock (or pre-funded warrants to purchase shares of common stock in lieu thereof) and warrants to purchase up to 9,500,000 shares of common stock (the “common warrants”). Each share of common stock (or pre-funded warrant in lieu thereof) was sold together with one common warrant to purchase one share of common stock at a price of $1.50 per share and common warrant. Additionally, Company issued to Maxim 237,500 common stock purchase warrants (the “Underwriter’s Warrants”) to purchase up to 237,500 shares of Common Stock at an exercise price of $1.65 per common warrant. Gross proceeds, before deducting underwriting discounts and offering expenses and excluding any proceeds we may receive upon exercise of the common warrants, were $14.3 million and net proceeds were $12.7 million.

As of March 31, 2023, of the warrants issued through the 2020 Public Offering, 1.0 million warrants were exercised and 1.4 million warrants remained outstanding, which represents 0.7 million shares of common stock equivalents, at an exercise price of $2.25. As of March 31, 2023, of the Warrants issued through the 2022 Public Offering, there were 10.9 million Warrants and 0.3 million prefunded warrants outstanding at an exercise price of $1.50 and $0.01, respectively. The Underwriter’s Warrants have not been exercised.

See Note 13. Equity Transactions in the accompanying notes to the condensed consolidated financial statements for further details.

Credit Facilities

Webster Credit Facility

On March 29, 2019, the Company entered into a Loan and Security Agreement (the “Webster Loan Agreement”) by and among certain subsidiaries of the Company, as borrowers (collectively, the “Webster Borrowers”); the Company, as guarantor; and Sterling. On February 1, 2022, Sterling became part of Webster, and Webster became the successor in interest to the Webster Loan Agreement. The Webster Loan Agreement was also subject to a limited guarantee by Mr. Eberwein, the Executive Chairman of our board of directors.

The Webster Loan Agreement was a five-year credit facility maturing in March 2024, with a maximum credit amount of $20.0 million for revolving loans (the “Webster Credit Facility”). In connection with the sale of our Healthcare business on May 4, 2023, we paid off the Webster Credit Facility in full, using the proceeds from the sale. As of March 31, 2023, the Company had $0.1 million of letters of credit outstanding and had additional borrowing capacity of $0.5 million under the Webster Credit Facility. Financial covenants required that the borrowers under the Webster Loan Agreement maintain (a) a fixed charge coverage ratio as of the last day of a fiscal quarter of not less than 1.25 to 1.0 and (b) a leverage ratio as of the last day of such fiscal quarter of no greater than 3.50 to 1.0. As of March 31, 2023,we believe we were in compliance with the Webster loan covenants. The Webster Credit Facility was subsequently paid in full with the proceeds from the sale of our Healthcare business.

eCapital Credit Facilities

EdgeBuilder and Glenbrook (the “EBGL Borrowers”) are parties to a Loan and Security Agreement with eCapital (the “EBGL Loan Agreement”), providing for a $4.0 million credit facility which matures in June 2023 with an auto-renewal for a period of one year thereafter (the “EBGL Loan”). As of March 31, 2023, EBGL had additional borrowing capacity of $2.8 million under the facility. As of December 31, 2022, the most recent measurement period, EBGL was in compliance with the bi-annual financial covenants under the EBGL Loan Agreement.

Financial covenants require that EBGL maintain (a) net income (as defined in the EBGL Loan Agreement) at least equal to no less than $0 for the trailing 6-month period ending June 30, 2022 and no less than $1,000,000 for the trailing fiscal year ending December 31, 2022 and (b) a reduced minimum EBITDA (as defined in the EBGL Loan Agreement) to be no less than $0 as of June 30, 2022 and no less than $1,000,000 as of the fiscal year ending December 31, 2022.

KBS has a $4.0 million credit facility with eCapital (the “KBS Loan Agreement”), which matures in June 2023 with an auto-renewal for a period of one year thereafter. As of March 31, 2023, KBS had additional borrowing capacity in excess of $1.0 million under the facility. As of March 31, 2023, no amounts were outstanding under the KBS Loan Agreement. As of

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December 31, 2022, KBS was in compliance with the bi-annual financial covenants under the KBS Loan Agreement.

Financial covenants require that KBS maintain (a) net income (as defined in the KBS Loan Agreement) of at least equal to no less than $0 for the trailing 6-month period ending June 30, 2022 and be no less than $500,000 for the trailing fiscal year end and (b) a minimum EBITDA (as defined in the KBS Loan Agreement) no less than $0 as of June 30 and no less than $850,000 as of the fiscal year end.

Term Loan

We and certain of our Investments subsidiaries (collectively, the “Star Borrowers”) are party to a Loan and Security Agreement with eCapital, as successor in interest to Gerber Finance, Inc. (as amended, the “Star Loan Agreement”), which provides for a credit facility with borrowing availability of up to $2.5 million, bearing interest at the prime rate plus 3.5% per annum, and matures on January 1, 2025, unless terminated in accordance with the terms therein (the “Star Loan”). As of March 31, 2023, the short term loan includes $0.7 million of the Star Loan, net of issuance costs.

The Star Loan is secured by the assets of SRE, 947 Waterford Road, LLC, 300 Park Street, LLC and 56 Mechanic Falls Road, LLC and guaranteed by the Company. The Star loan is subject to certain annual financial covenants. The financial covenants under the Star Loan Agreement include maintenance of a Debt Service Coverage Ratio of not less than 1:00 to 1:00, as defined in the Star Loan Agreement. The occurrence of any event of default under the Star Loan Agreement may result in the obligations of the Star Borrowers becoming immediately due and payable. As of December 31, 2022, no event of default was deemed to have occurred and the Star Borrowers were in compliance with the annual financial covenants under the Star Loan Agreement measured as of December 31, 2022.

Off-Balance Sheet Arrangements

As of March 31, 2023, there were no off balance sheet arrangements.

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 chief executive officer 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.

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of our management, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

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Management’s Report on Internal Control over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Management conducted an assessment of the effectiveness of the Company's internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013 Framework). Based on this assessment, our management concluded that, as of December 31, 2022, our internal control over financial reporting was effective based on those criteria.

Changes in Internal Control over Financial Reporting

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.

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PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

See Note 8. Commitments and Contingencies, within the notes to our condensed 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, 2022, which we filed with the SEC on March 15, 2023. Except as noted below, 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, 2022, 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.

Our business strategy includes acquisitions, and acquisitions entail numerous risks, including the risk of management diversion and increased costs and expenses, all of which could negatively affect the Company’s profitability.

Our business strategy includes, among other things, strategic acquisitions, as well as potential opportunistic acquisitions and strategic actions with respect to our existing investments, such as restructurings, strategic partnerships and collaborations, and activist activity. This overall acquisition and investment strategy entails several risks, including the diversion of management’s attention from other business concerns, the incurrence of substantial legal and other advisory fees (including, in the case of activist activity, proxy solicitation fees) and the potential need to finance such acquisitions with additional equity and/or debt. Additionally, to the extent that we are already invested in the entities that are the subject of our acquisitions and other activities, our actions may be temporarily disruptive to the value of the investments, which could adversely affect our financial condition.

In addition, once completed, acquisitions may entail further risks, including: unanticipated costs and liabilities of the acquired businesses, including environmental liabilities, that could materially adversely affect our results of operations. These include: increased regulatory compliance relating to the acquired business; difficulties in assimilating acquired businesses, their personnel and their financial reporting systems, which would prevent the expected benefits from the transaction from being realized within the anticipated timeframe; negative effects on existing business relationships with suppliers and customers; and loss of key employees of the acquired businesses. In addition, any future acquisitions could result in the incurrence of additional debt and related interest expense, contingent liabilities and amortization expense related to intangible assets, which could have a material adverse effect on our business, financial condition, operating results and cash flows, or the issuance of additional equity, which could dilute our stockholder’s equity interests.

There can be no assurance that we will be able to negotiate any pending acquisition successfully, receive the required approvals for any acquisition or otherwise conclude any acquisition successfully, or that any acquisition will achieve the anticipated synergies or other positive results. Overall, if our acquisition strategy is not successful or if acquisitions are not well integrated into our existing operations, the Company’s profitability, business, and financial condition could be negatively affected.

We may sustain losses in our investment portfolio, which could have an adverse effect on our results of operations, financial condition and liquidity.

A portion of our assets consists of equity securities which are adjusted to fair value each period, as well as other investments. An adverse change in economic conditions or setbacks to such companies, their operations or business models may result in a decline in the value of these investments. Such declines in value are principally recognized in net income or loss in accordance with GAAP. Any adverse changes in the financial markets and declines in value of our investments may result in additional losses and could have an adverse effect on our results of operations, financial condition and liquidity.

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

None.

34

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

35

ITEM 6.EXHIBITS

Exhibit Number	Description
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
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
104.1	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

_________________ 

*    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.

36

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 15, 2023	By:	/s/     RICHARD K. COLEMAN, JR.
			Richard K. Coleman, Jr. Chief Executive Officer (Principal Executive Officer)

/s/     DAVID J. NOBLE

David J. Noble

Chief Financial Officer

(Principal Financial and Accounting Officer)

37

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF

PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Richard K. Coleman, Jr., 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 15, 2023

/s/ Richard K. Coleman, Jr.

Richard K. Coleman, Jr.

Chief Executive Officer

(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 15, 2023

/s/ David J. Noble

David J. Noble

Chief Financial 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, 2023, I, Richard K. Coleman, Jr., Chief Executive 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, 2023, 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, 2023, 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 15, 2023

/s/ Richard K. Coleman, Jr.

Richard K. Coleman, Jr.

Chief Executive Officer

(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, 2023, 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, 2023, 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, 2023, 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 15, 2023

/s/ David J. Noble

David J. Noble

Chief Financial 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

Cover Page - shares	3 Months Ended
	Mar. 31, 2023	May 07, 2023
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	001-35947
Entity Registrant Name	Star Equity Holdings, Inc.
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		15,196,090
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Central Index Key	0000707388
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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenues:
Total revenues	$ 25,705	$ 25,049
Cost of revenues:
Total cost of revenues	18,112	20,386
Gross profit	7,593	4,663
Operating expenses:
Selling, general and administrative	6,433	6,788
Amortization of intangible assets	430	430
Total operating expenses	6,863	7,218
Income (loss) from operations	730	(2,555)
Other income (expense):
Other income (expense), net	(100)	(6)
Interest expense, net	(195)	(190)
Total other income (expense), net	(295)	(196)
Income (loss) before income taxes	435	(2,751)
Income tax benefit (provision)	0	(950)
Net income (loss)	435	(3,701)
Deemed dividend on Series A perpetual preferred stock	(479)	(479)
Net income (loss) attributable to common shareholders	(44)	(4,180)
Net income (loss) attributable to common shareholders	$ (44)	$ (4,180)
Net income (loss) per share
Net income (loss) per share - basic (in usd per share)	$ 0.03	$ (0.29)
Net income (loss) per share - diluted (in usd per share)	0.03	(0.29)
Net income (loss) per share, attributable to common shareholders— basic (in usd per share)	0	(0.33)
Net income (loss) per share, attributable to common shareholders— diluted (in usd per share)	$ 0	$ (0.33)
Weighted-average common shares outstanding—basic (in shares)	15,516	12,669
Weighted-average common shares outstanding - diluted (in shares)	15,656	12,669
Dividends declared per share of Series A perpetual preferred stock (in usd per share)	$ 0.25	$ 0.25
Healthcare
Revenues:
Total revenues	$ 13,359	$ 13,418
Cost of revenues:
Total cost of revenues	10,032	10,242
Construction
Revenues:
Total revenues	12,346	11,631
Cost of revenues:
Total cost of revenues	8,017	10,045
Investments
Cost of revenues:
Total cost of revenues	$ 63	$ 99

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 5,655	$ 4,665
Restricted cash	141	142
Investments in equity securities	3,577	3,490
Accounts receivable, net of allowances of $500 and $714, respectively	15,000	17,756
Inventories, net	10,043	10,627
Other current assets	2,239	2,587
Total current assets	36,655	39,267
Property and equipment, net	8,102	8,348
Operating lease right-of-use assets, net	4,040	4,482
Intangible assets, net	12,922	13,352
Goodwill	6,046	6,046
Other assets	1,736	1,807
Total assets	69,501	73,302
Current liabilities:
Accounts payable	4,125	3,430
Accrued liabilities	2,665	3,137
Accrued compensation	4,025	3,701
Accrued warranty	290	291
Lumber derivative contracts	62	104
Deferred revenue	2,926	3,376
Short-term debt	8,394	11,682
Operating lease liabilities	1,371	1,427
Finance lease liabilities	348	397
Total current liabilities	24,206	27,545
Deferred tax liabilities	176	176
Operating lease liabilities, net of current portion	2,749	3,141
Finance lease liabilities, net of current portion	300	386
Deferred Revenue, net of current portion	257	299
Total liabilities	27,688	31,547
Commitments and contingencies (Note 8)
Stockholders’ Equity:
Common stock, $0.0001 par value: 50,000,000 shares authorized, respectively; 15,192,753 and 15,177,919 shares issued and outstanding (net of treasury shares) at March 31, 2023 and December 31, 2022, respectively	1	1
Treasury stock, at cost; 258,849 shares at March 31, 2023 and December 31, 2022, respectively	(5,728)	(5,728)
Additional paid-in capital	161,338	161,715
Accumulated deficit	(132,786)	(133,221)
Total stockholders’ equity	41,813	41,755
Total liabilities and stockholders’ equity	69,501	73,302
Series A Preferred Stock
Stockholders’ Equity:
Preferred stock, $0.0001 par value	18,988	18,988
Series C Preferred Stock
Stockholders’ Equity:
Preferred stock, $0.0001 par value	$ 0	$ 0

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Accounts receivable, allowance for credit loss, current	$ 500,000	$ 714,000
Liquidation preference (in usd per share)	$ 10.00
Common stock, par value (in usd per share)	$ 0.0001	$ 0.0001
Common stock, authorized (in shares)		50,000,000
Common stock, issued (in shares)	15,192,753	15,177,919
Common stock, outstanding (in shares)	15,192,753	15,177,919
Treasury stock (in shares)	258,849	258,849
Series A Preferred Stock
Preferred stock, par value (in usd per share)	$ 0.0001
Preferred stock, shares authorized (in shares)	10,000,000
Preferred stock, liquidation preference shares authorized (in shares)	8,000,000
Liquidation preference (in usd per share)	$ 10.00
Preferred stock, shares issued (in shares)	1,915,637
Preferred stock, outstanding (in shares)	1,915,637
Preferred stock, liquidation preference	$ 18,988,390
Series C Preferred Stock
Preferred stock, par value (in usd per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized (in shares)	25,000	25,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Operating activities
Net (loss) income	$ 435	$ (3,701)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation of property and equipment	414	471
Amortization of intangible assets	430	430
Non-cash lease expense	349	199
Provision for bad debt, net	28	300
Stock-based compensation	102	144
Amortization of loan issuance costs	28	37
(Gain) loss on sale of assets	(35)	(96)
Deferred income taxes	0	926
Unrealized (gain) loss of equity securities and lumber derivatives	(45)	584
Changes in operating assets and liabilities:
Accounts receivable	2,729	(397)
Inventories	584	(1,762)
Other assets	413	144
Accounts payable	694	919
Accrued compensation	323	142
Deferred revenue and billings in excess of costs and estimated profit	(449)	220
Operating lease liabilities	(357)	(185)
Other liabilities	(511)	989
Net cash provided (used) by operating activities	5,132	(636)
Investing activities
Purchases of property and equipment	(136)	(366)
Proceeds from sale of property and equipment	3	112
Purchases of equity securities	(85)	(1,070)
Proceeds from sales of equity securities	0	14
Net cash provided (used) by investing activities	(218)	(1,310)
Financing activities
Proceeds from borrowings	23,299	25,186
Repayment of debt	(26,606)	(24,748)
Proceeds from the sale of common stock, warrants, and exercise of over allotment options	0	13,198
Fees paid on issuance of common stock	0	(450)
Taxes paid related to net share settlement of equity awards	0	(3)
Repayment of obligations under finance leases	(139)	(154)
Preferred stock dividends paid	(479)	(479)
Net cash provided (used) by financing activities	(3,925)	12,550
Net increase in cash, cash equivalents, and restricted cash	989	10,604
Cash, cash equivalents, and restricted cash at beginning of period	4,807	4,816
Cash, cash equivalents, and restricted cash at end of period	5,796	15,420
Reconciliation of cash, cash equivalents, and restricted cash at end of year
Cash and cash equivalents	5,655	15,035
Restricted cash	141	385
Cash, cash equivalents, and restricted cash at end of period	5,796	15,420
Supplemental Information
Cash paid during the year for interest	328	0
Cash paid during the year for income taxes	$ 0	$ 0

XML

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY - USD ($) $ in Thousands	Total	Perpetual Preferred Stock	Common stock	Treasury Stock	Additional paid-in capital	Accumulated deficit
Perpetual redeemable preferred stock, beginning balance (in shares) at Dec. 31, 2021	1,916,000
Perpetual redeemable preferred stock, beginning balance at Dec. 31, 2021	$ 18,988
Increase (Decrease) in Temporary Equity [Roll Forward]
Accrued dividend on redeemable preferred stock	479
Preferred stock dividends paid	$ (479)
Perpetual redeemable preferred stock, ending balance (in shares) at Mar. 31, 2022	1,916,000
Perpetual redeemable preferred stock, ending balance at Mar. 31, 2022	$ 18,988
Preferred stock, beginning balance (in shares) at Dec. 31, 2021		0
Common stock, beginning balance (in shares) at Dec. 31, 2021			5,805,000
Beginning balance at Dec. 31, 2021	16,754	$ 0	$ 0	$ (5,728)	$ 150,451	$ (127,969)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	144				144
Shares issued under stock incentive plans, net of shares withheld for employee taxes (in shares)			49,000
Shares issued under stock incentive plans, net of shares withheld for employee taxes	(3)				(3)
Dividends to holders of preferred stock ($0.25 per share)	(479)				(479)
Equity issuance costs	(450)				(450)
Proceeds from the sale of common stock, warrants, and exercise of over allotment options (in shares)			9,175,000
Proceeds from the sale of common stock, warrants, and exercise of over allotment options	13,198		$ 1		13,197
Net income (loss)	(3,701)					(3,701)
Preferred stock, ending balance (in shares) at Mar. 31, 2022		0
Common stock, ending balance (in shares) at Mar. 31, 2022			15,029,000
Ending balance at Mar. 31, 2022	$ 25,463	$ 0	$ 1	(5,728)	162,860	(131,670)
Perpetual redeemable preferred stock, beginning balance (in shares) at Dec. 31, 2022	0
Perpetual redeemable preferred stock, beginning balance at Dec. 31, 2022	$ 0
Perpetual redeemable preferred stock, ending balance (in shares) at Mar. 31, 2023	0
Perpetual redeemable preferred stock, ending balance at Mar. 31, 2023	$ 0
Preferred stock, beginning balance (in shares) at Dec. 31, 2022		1,916,000
Common stock, beginning balance (in shares) at Dec. 31, 2022	15,177,919		15,178,000
Beginning balance at Dec. 31, 2022	$ 41,755	$ 18,988	$ 1	(5,728)	161,715	(133,221)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	102				102
Shares issued under stock incentive plans, net of shares withheld for employee taxes (in shares)			15,000
Shares issued under stock incentive plans, net of shares withheld for employee taxes	0				0
Dividends to holders of preferred stock ($0.25 per share)	(479)				(479)
Net income (loss)	$ 435					435
Preferred stock, ending balance (in shares) at Mar. 31, 2023		1,916,000
Common stock, ending balance (in shares) at Mar. 31, 2023	15,192,753		15,193,000
Ending balance at Mar. 31, 2023	$ 41,813	$ 18,988	$ 1	$ (5,728)	$ 161,338	$ (132,786)

XML

CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUIT YAND STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares		3 Months Ended
	Feb. 17, 2023	Mar. 31, 2023	Mar. 31, 2022
Statement of Stockholders' Equity [Abstract]
Dividends declared per Series A perpetual preferred stock (in usd per share)	$ 0.25	$ 0.25	$ 0.25

XML

Basis of Presentation and Significant Policies

3 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Significant Policies

Basis of Presentation and Significant Policies

Basis of Presentation

The unaudited condensed 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 condensed 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, 2022 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, 2022, filed with the SEC on Form 10-K on March 15, 2023, 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

Star Equity Holdings, Inc. (“Star Equity,” the “Company,” “we,” or “our”) is a multi-industry diversified holding company with two divisions: Construction and Investments. The Company previously had a Healthcare division which was sold on May 4, 2023, as further described in Note 16. “Subsequent Events.” Our common stock and preferred stock are listed on the NASDAQ Global Market exchange as “STRR” and “STRRP”, respectively.

Liquidity and Management’s Plan

At December 31, 2022, we identified certain conditions and events which in the aggregate required management to perform an assessment of the Company’s ability to continue as a going concern for one year from the financial statements issuance date. Management’s analysis indicated that there is no substantial doubt regarding the entity’s ability to continue as a going concern for one year from the financial statements issuance date. For the quarter ended March 31, 2023 we achieved net income of $0.4 million and positive cash flow from operations of $5.1 million. As of March 31, 2023, cash and cash equivalents amounted to $5.7 million and our investments in publicly traded companies amounted to $3.6 million. Additionally, as further discussed in Note 16. “Subsequent Events”, we received approximately $27 million in cash from the sale of our Healthcare business on May 4, 2023 and paid the full outstanding balance owed under the Webster Loan Agreement (as defined herein). In addition, we have given notice to eCapital (as defined in Note 7. “Debt”) that we will not be renewing our credit facilities with eCapital upon their June 30, 2023 expiration. We have projected positive cash flow generation for the next 12 months from the issuance date of these financial statements. Our forecasts are dependent on our ability to maintain margins at our operating companies which includes achieving levels of booked orders, minimizing expenses and achieving certain free cash flow benchmarks. We have begun to explore certain financing arrangements, including sale and leaseback opportunities, subsequent to the date of these financial statements.There can be no assurance that the Company will enter into such a financing arrangement or as to the terms of any such financing arrangement.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and disclosures made in the accompanying notes to the condensed consolidated financial statements. Significant estimates and judgments include those related to inventory, revenue recognition, lease accounting, fair value measurements (including contingent considerations), litigation and contingent liabilities, variable interest entities, intangible assets and goodwill valuations, equity classification and transactions, and income taxes. Actual results could materially differ from those estimates.

Concentration of Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents and accounts receivable. We limit our exposure to credit loss by generally placing cash in high credit quality financial institutions. Cash balances are maintained primarily at major financial institutions in the United States, a portion of which exceed the regulatory limit of $250,000 insured by the Federal Deposit Insurance Corporation (FDIC). We have not experienced any credit losses associated with our cash balances. Additionally, we have established guidelines regarding diversification of our investments and their maturities, which are designed to maintain principal and maximize liquidity. As of March 31, 2023 we have $4.4 million of cash in excess of FDIC insured limits

Mezzanine Equity

Pursuant to the Certificate of Designations, Rights and Preferences of 10% Series A Cumulative Perpetual Preferred Stock (the “Series A Preferred Stock”) of Star Equity (formerly Digirad Corporation) (the “Certificate of Designations”), upon a Change of Control Triggering Event, as defined in the Certificate of Designations, holders of the Series A Preferred Stock had the ability to require the Company to redeem the Series A 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 was not solely within the control of the Company, the Series A Preferred Stock did not qualify as permanent equity and was classified as mezzanine or temporary equity. The Series A Preferred Stock was not redeemable and it was not probable that our Series A Preferred Stock would become redeemable as of June 2, 2022. Therefore, we were not previously required to accrete the Series A Preferred Stock to its redemption value.

On June 2, 2022, the Certificate of Designations was amended to include a “Special Optional Redemption Right” at the Company’s discretion and to extinguish the option of preferred stockholders to redeem preferred shares upon a Change of Control Triggering Event, as defined in the Certificate of Designations, as amended. As the redemption features of the Series A Preferred Stock are now solely within the control of the Company, the Series A Preferred Stock qualifies as permanent equity and has been reclassified to permanent equity effective June 2, 2022.

In addition to the foregoing redemption features, the Certificate of Designations also provides that we may redeem (at our option, in whole or in part) the Series A Preferred Stock following the fifth anniversary of issuance of the Series A Preferred Stock, at a cash redemption price of $10.00 per share, plus any accumulated and unpaid dividends.

Refer to preferred stock dividends discussed in Note 12. Perpetual Preferred Stock.

New Accounting Standards To Be Adopted

No new accounting standards were issued in the quarter ended March 31, 2023 that are expected to have a material impact on our financial statements.

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Revenue

3 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

Disaggregation of Revenue

During the first quarter of 2023 and until May 4, 2023, the Company had three reporting segments (see Note 10. “Segments”) and has five major goods and service lines which are either transferred over time or at a point in time. The following tables present our revenues for the three months ended March 31, 2023 and 2022, disaggregated by major source (in thousands):

	Three Months Ended March 31, 2023
	Healthcare		Construction		Total
Major Goods/Service Lines
Mobile Imaging(1)	$	10,323	$	—	$	10,323
Camera Sales	952		—		952
Camera Support	1,899		—		1,899
Healthcare Revenue from Contracts with Customers	13,174		—		13,174
Lease Income	185		—		185
Construction Revenue from Contracts with Customers	—		12,346		12,346
Total Revenues	$	13,359	$	12,346	$	25,705
Timing of Revenue Recognition
Services and goods transferred over time	$	10,545	$	—	$	10,545
Services and goods transferred at a point in time	2,814		12,346		15,160
Total Revenues	$	13,359	$	12,346	$	25,705

	Three Months Ended March 31, 2022
	Healthcare		Construction		Total
Major Goods/Service Lines
Mobile Imaging(1)	$	10,518	$	—	$	10,518
Camera Sales	1,132		—		1,132
Camera Support	1,679		—		1,679
Healthcare Revenue from Contracts with Customers	13,329		—		13,329
Lease Income	89		—		89
Construction Revenue from Contracts with Customers	—		11,631		11,631
Total Revenues	$	13,418	$	11,631	$	25,049
Timing of Revenue Recognition
Services and goods transferred over time	$	10,854	$	1,897	$	12,751
Services and goods transferred at a point in time	2,564		9,734		12,298
Total Revenues	$	13,418	$	11,631	$	25,049

Deferred Revenue

Changes in deferred revenue for the three months ended March 31, 2023, is as follows (in thousands):

Balance at December 31, 2022	$	3,675
Revenue recognized that was included in balance at beginning of the year	(1,790)
Deferred revenue, net, related to contracts entered into during the year	1,298
Balance at March 31, 2023	$	3,183

As of March 31, 2023 and December 31, 2022, non-current deferred revenue was $257 thousand and $299 thousand, respectively, net of the current portion within our condensed Consolidated Balance Sheets, which is expected to be recognized over a period of 2-4 years.

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Basic and Diluted Net Income (Loss) Per Share

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Basic and Diluted Net Income (Loss) Per Share

Basic and Diluted Net Income (Loss) Per Share

We present net income (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 income (loss) attributable to common stockholders to warrants because the holders of our warrants are not contractually obligated to share in our income (loss). Basic net income (loss) per share attributable to common stockholders is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income (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 income (loss) per share for the periods indicated (in thousands):

	Three Months Ended March 31,
	2023		2022
Numerator:
Net income (loss)	435		(3,701)
Deemed dividend on Series A perpetual preferred stock	(479)		(479)
Net income (loss) attributable to common shareholders	$	(44)	$	(4,180)
Denominator:
Weighted average common shares outstanding	15,191		12,434
Weighted average prefunded warrants outstanding	325		235
Weighted average shares outstanding - basic	15,516		12,669
Dilutive potential common shares:
Restricted stock units	140		—
Weighted average shares outstanding - diluted	15,656		12,669
Net income (loss) per share
Basic	$	0.03	$	(0.29)
Diluted	$	0.03	$	(0.29)
Net income (loss) per share, attributable to common shareholders
Basic	$	—	$	(0.33)
Diluted	$	—	$	(0.33)

*Earnings per share may not add due to rounding

Antidilutive common stock equivalents are excluded from the computation of diluted income (loss) per share. The computation of diluted earnings per share excludes stock options, RSUs, and stock warrants that are anti-dilutive. The following common stock equivalents were anti-dilutive (in thousands):

	Three Months Ended March 31,
	2023	2022
Stock options	2	6
Restricted stock units	80	271
Stock warrants	11,865	9,361
Total	11,947	9,638

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Supplementary Balance Sheet Information

3 Months Ended

Mar. 31, 2023

Inventory Disclosure [Abstract]

Supplementary Balance Sheet Information

Supplementary Balance Sheet Information

Inventories

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

	March 31, 2023		December 31, 2022
Raw materials	$	5,609	$	6,330
Work-in-process	2,772		2,567
Finished goods	1,886		1,946
Total inventories	10,267		10,843
Less reserve for excess and obsolete inventories	(224)		(216)
Total inventories, net	$	10,043	$	10,627

Property and Equipment

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

	March 31, 2023		December 31, 2022
Land	$	805	$	805
Buildings and leasehold improvements	4,843		4,843
Machinery and equipment	24,398		24,648
Computer hardware and software	2,486		2,465
Gross property and equipment	32,532		32,761
Accumulated depreciation	(24,430)		(24,413)
Total property and equipment, net	$	8,102	$	8,348

As of March 31, 2023, the non-operating land and buildings, held for investments, had a carry value of $1.9 million and was included within property and equipment on the condensed Consolidated Balance Sheet.

Warranty Reserves

In our Healthcare division, we generally provide a 12-month assurance warranty on our gamma cameras. We accrue the estimated cost of this warranty at the time revenue is recorded and charge warranty expense to product and product-related cost of revenues. Warranty reserves are established based on historical experience with failure rates and repair costs and the number of systems covered by warranty. Warranty reserves are depleted as gamma cameras are repaired. The costs consist principally of materials, personnel, overhead, and transportation. We review warranty reserves quarterly and make adjustments, as necessary.

Within our Construction division, KBS Builders, Inc. (“KBS”) provides a limited assurance warranty on its residential homes that covers substantial defects in materials or workmanship for a period of 12 months after delivery to the owner. EdgeBuilder, Inc. (“EdgeBuilder”) provides a limited warranty on the sale of its wood foundation products that covers leaks resulting from defects in workmanship for a period of twenty-five years. Estimated warranty costs are accrued in the period that the related revenue is recognized.

The activities related to our warranty reserve for the period ended March 31, 2023 and year ended December 31, 2022 are as follows (in thousands):

	March 31, 2023		December 31, 2022
Balance at the beginning of year	$	291	$	569
Charges to cost of revenues	85		177
Applied to liability	(86)		(455)
Balance at the end of period	$	290	$	291

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Leases

3 Months Ended

Mar. 31, 2023

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 and finance leases are included separately in the condensed Consolidated Balance Sheets.

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

	Three Months Ended March 31,
	2023		2022
Operating lease cost	$	390	$	396
Finance lease cost:
Amortization of finance lease assets	$	116	$	123
Interest on finance lease liabilities	11		17
Total finance lease cost	$	127	$	140

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

	Three Months Ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	349	$	199
Operating cash flows from finance leases	$	11	$	17
Financing cash flows from finance leases	$	139	$	157
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	—	$	1,229

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

	March 31, 2023		December 31, 2022
Weighted average remaining lease term (in years)
Operating leases	3.5		3.7
Finance leases	2.1		2.3
Weighted average discount rate
Operating leases	4.68	%	4.66	%
Finance leases	5.98	%	5.98	%

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, 2023 were as follows (in thousands):

	Operating Leases		Finance Leases
2023 (excludes the three months ended March 31, 2023)	$	1,146	$	292
2024	1,392		266
2025	918		103
2026	591		16
2027	155		1
2028 and thereafter	206		—
Total future minimum lease payments	4,408		678
Less amounts representing interest	288		30
Present value of lease obligations	$	4,120	$	648

Lessor

Prior to the sale of our Healthcare business on May 4, 2023, we generated lease income in the Healthcare segment from equipment rentals to customers. Rental contracts were structured as either a weekly or monthly payment arrangement and were accounted for as operating leases. Revenues were recognized on a straight-line basis over the term of the rental. During the three months ended March 31, 2023 and 2022, our lease contracts were 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 and finance leases are included separately in the condensed Consolidated Balance Sheets.

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

	Three Months Ended March 31,
	2023		2022
Operating lease cost	$	390	$	396
Finance lease cost:
Amortization of finance lease assets	$	116	$	123
Interest on finance lease liabilities	11		17
Total finance lease cost	$	127	$	140

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

	Three Months Ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	349	$	199
Operating cash flows from finance leases	$	11	$	17
Financing cash flows from finance leases	$	139	$	157
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	—	$	1,229

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

	March 31, 2023		December 31, 2022
Weighted average remaining lease term (in years)
Operating leases	3.5		3.7
Finance leases	2.1		2.3
Weighted average discount rate
Operating leases	4.68	%	4.66	%
Finance leases	5.98	%	5.98	%

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, 2023 were as follows (in thousands):

	Operating Leases		Finance Leases
2023 (excludes the three months ended March 31, 2023)	$	1,146	$	292
2024	1,392		266
2025	918		103
2026	591		16
2027	155		1
2028 and thereafter	206		—
Total future minimum lease payments	4,408		678
Less amounts representing interest	288		30
Present value of lease obligations	$	4,120	$	648

Lessor

Prior to the sale of our Healthcare business on May 4, 2023, we generated lease income in the Healthcare segment from equipment rentals to customers. Rental contracts were structured as either a weekly or monthly payment arrangement and were accounted for as operating leases. Revenues were recognized on a straight-line basis over the term of the rental. During the three months ended March 31, 2023 and 2022, our lease contracts were mainly month-to-month contracts.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Financial Accounting Standards Board’s authoritative guidance for fair value measurements establishes a three-level hierarchy based upon the inputs to the valuation model of an asset or liability. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are inputs other than quoted prices that are significant and observable; and Level 3 inputs are significant unobservable inputs to be used in situations where markets do not exist or illiquid. 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, 2023 and December 31, 2022 (in thousands):

	Fair Value as of March 31, 2023
	Level 1		Level 2		Level 3		Total
Assets (Liabilities):
Equity securities	$	3,577	$	—	$	—	$	3,577
Lumber derivative contracts	(62)		—		—		(62)
Total	$	3,515	$	—	$	—	$	3,515

	Fair Value as of December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets (Liabilities):
Equity securities	$	3,490	$	—	$	—	$	3,490
Lumber derivative contracts	(104)		—		—		(104)
Total	$	3,386	$	—	$	—	$	3,386

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, 2023 and December 31, 2022, respectively, and recorded in Investments in the condensed Consolidated Balance Sheets. During the three months ended March 31, 2023 and 2022, we recorded an unrealized gain of $2 thousand and $92 thousand, respectively, recorded in other (expense) income, net in the condensed Consolidated Statements of Operations.

We may enter into lumber derivative contracts in order to protect our gross profit margins from fluctuations caused by volatility in lumber price, recorded within current assets or liabilities in the condensed Consolidated Balance Sheets. For the three months ended March 31, 2023 and 2022, we recorded a net loss of $46 thousand and $0.2 million, respectively, in the cost of goods sold in the condensed Consolidated Statements of Operations. As of March 31, 2023, we had a net long (buying) position of 5,500,000 board feet under 50 lumber derivatives contracts. As of December 31, 2022, we had a net long (buying) position of 550,000 board feet under 5 lumber derivatives contracts.

Gains and losses from lumber derivative contracts are recorded in cost of goods sold of the condensed Consolidated Statements of Operations and included the following for the three months ended March 31, 2023 and 2022, respectively:

	March 31, 2023		March 31, 2022
Unrealized gain (loss) on lumber derivatives	$	(43)	$	676
Realized gain (loss) on lumber derivatives	89		(448)
Total gain (loss) on lumber derivatives	$	46	$	228

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Debt

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Debt

Debt

A summary of debt as of March 31, 2023 and December 31, 2022 is as follows (dollars in thousands):

	March 31, 2023			December 31, 2022
	Amount		Weighted-Average Interest Rate	Amount		Weighted-Average Interest Rate
Revolving Credit Facility - eCapital KBS	$	—	10.75%	$	—	10.25%
Revolving Credit Facility - eCapital EBGL	—		10.75%	2,592		10.25%
Revolving Credit Facility - Webster	7,685		7.36%	8,299		6.89%
Total Short-term Revolving Credit Facilities	$	7,685	7.36%	$	10,891	7.69%
eCapital - Star Loan Principal, net	$	709	11.00%	$	791	10.50%
Short Term Loan	$	709	11.00%	$	791	10.50%
Total Short-term debt	$	8,394	7.67%	$	11,682	7.88%

Webster Credit Facility

On March 29, 2019, the Company entered into a Loan and Security Agreement (the “Webster Loan Agreement”) by and among certain subsidiaries of the Company, as borrowers (collectively, the “Webster Borrowers”); the Company, as guarantor; and Sterling National Bank (“Sterling”). On February 1, 2022, Sterling became part of Webster Bank, N.A. (“Webster”), and Webster became the successor in interest to the Webster Loan Agreement. The Webster Loan Agreement was also subject to a limited guarantee by Mr. Eberwein, the Executive Chairman of our board of directors.

The Webster Loan Agreement was a five-year credit facility maturing in March 2024, with a maximum credit amount of $20.0 million for revolving loans (the “Webster Credit Facility”). In connection with the sale of our Healthcare business on May 4, 2023, we paid off the Webster Credit Facility in full, using the proceeds from the sale. Under the Webster Credit Facility, the Webster Borrowers were able to 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 Webster Loan Agreement were classified as short-term obligations under GAAP as the agreement contains 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, 2023, the Company had $0.1 million of letters of credit outstanding and had additional borrowing capacity of $0.5 million under the Webster Credit Facility.

At the Webster Borrowers’ option, the Webster Credit Facility bore interest at either (i) a Floating LIBOR Rate, as defined in the Webster Loan Agreement, plus a margin of 2.50% per annum; or (ii) a Fixed LIBOR Rate, as defined in the Webster Loan Agreement, plus a margin of 2.25% per annum. Our floating rate on this facility at March 31, 2023 was 7.36%. The Webster Loan Agreement also provided for unused line fees and restricts the usage of borrowings under the line solely to support the Healthcare businesses, subject to certain limitations.

The Webster Credit Facility was secured by the assets of the Digirad Health businesses.

Financial covenants required that the Webster Borrowers maintain (a) a Fixed Charge Coverage Ratio as of the last day of a fiscal quarter of not less than 1.25 to 1.0 and (b) a Leverage Ratio as of the last day of such fiscal quarter of no greater than 3.50 to 1.0. As of March 31, 2023, we believe that we were in compliance with the covenants under the Webster Loan Agreement.

eCapital Credit Facilities

EBGL

EdgeBuilder and Glenbrook Building Supply, Inc. (“Glenbrook” and, together with EdgeBuilder, collectively the “EBGL Borrowers”) are parties to a Loan and Security Agreement (the “EBGL Loan Agreement”) providing the EBGL Borrowers with a credit facility with eCapital Asset Based Lending Corp. formerly known as Gerber Finance, Inc. (“eCapital” for borrowings up to $4.0 million, subject to certain borrowing base limitations (the “EBGL Loan”). As of March 31, 2023, EBGL had additional borrowing capacity of $2.8 million under the facility. Amounts outstanding bear interest, payable monthly, at the prime rate plus 2.75% and payments of outstanding principal are due in full upon maturity. The facility is subject to annual renewal and is currently set to mature on June 30, 2023 or earlier (as amended in the eleventh amendment to the EBGL Loan Agreement).

Financial covenants require that EBGL maintain (a) net income (as defined in the EBGL Loan Agreement) at least equal to no less than $0 for the trailing 6-month period ending June 30, 2022 and no less than $1,000,000 for the trailing fiscal year ending December 31, 2022 and (b) a reduced minimum EBITDA (as defined in the EBGL Loan Agreement) to be no less than $0 as of June 30, 2022 and no less than $1,000,000 as of the fiscal year ending December 31, 2022.

EBGL was in compliance with the bi-annual financial covenants under the EBGL Loan Agreement measured as of December 31, 2022.

KBS

KBS is a party to a revolving credit facility with eCapital (“KBS Loan Agreement”). The facility, as amended, provides for borrowings up to $4.0 million, subject to certain borrowing base limitations. As of March 31, 2023, KBS had additional borrowing capacity of $1.0 million under the facility. Amounts outstanding bear interest, payable monthly, at the prime rate plus 2.75% and payments of outstanding principal are due in full upon maturity. The facility is subject to annual renewal and is currently set to mature on June 30, 2023 or earlier (as amended in the Twenty First Amendment of the KBS Loan Agreement). The facility is secured by the assets of KBS and borrowings under the line are restricted for use to finance the operations of KBS.

Financial covenants require that KBS maintain (a) net income (as defined in the KBS Loan Agreement) of at least equal to no less than $0 for the trailing 6-month period ending June 30, 2022 and be no less than $500,000 for the trailing fiscal year end and (b) a minimum EBITDA (as defined in the KBS Loan Agreement) no less than $0 as of June 30 and no less than $850,000 as of the fiscal year end.

As of December 31, 2022, KBS was in compliance with the bi-annual financial covenants under the KBS Loan Agreement.

The eCapital credit facilities contain cross-default provisions and subjective acceleration clauses which may, in the event of a material adverse event, as determined by eCapital, allow eCapital to declare the loans immediately due and payable or increase the interest rate. The facilities are also subject to a guaranty by the Company and the Company is responsible for certain facility and other fees.

Borrowings under the eCapital credit facilities are classified as short-term obligations as the agreements contain a subjective acceleration clauses and require a lockbox arrangement whereby all receipts within the lockbox are swept daily to reduce borrowings outstanding.

Term Loan

We and certain of our Investments subsidiaries (collectively, the “Star Borrowers”) are party to a Loan and Security Agreement with eCapital, as successor in interest to Gerber Finance, Inc. (as amended, the “Star Loan Agreement”), which provides for a credit facility with borrowing availability of up to $2.5 million, bearing interest at the prime rate plus 3.5% per annum, and matures on January 31, 2025, unless terminated in accordance with the terms therein (the “Star Loan”).

The following table presents the Star Loan balance, net of unamortized debt issuance costs as of March 31, 2023 (in thousands):

	March 31, 2023
	Amount
eCapital - Star Loan Principal	$	770
Unamortized debt issuance costs	(61)
eCapital - Star Loan Principal, net	$	709

The Star Loan, as amended, requires monthly payments of principal of $33 thousand plus interest at the prime rate plus 3% per annum through the earlier of maturity in January 2025 or the termination, maturity or repayment of any Obligations held with eCapital (as amended in the fourth amendment to the Star Loan Agreement).

The Star Loan is secured by the assets of SRE, 947 Waterford Road, LLC, 300 Park Street, LLC and 56 Mechanic Falls Road, LLC and guaranteed by the Company. The Star loan is subject to certain annual financial covenants. The financial covenants under the Star Loan Agreement include maintenance of a Debt Service Coverage Ratio of not less than 1:00 to 1:00, as defined in the Star Loan Agreement. The occurrence of any event of default under the Star Loan Agreement may result in the obligations of the Star Borrowers becoming immediately due and payable. As of December 31, 2022, no event of default was deemed to have occurred and the Star Borrowers were in compliance with the annual financial covenants under the Star Loan Agreement measured as of December 31, 2022.

The outstanding balance is classified as a short-term obligation as a result of the acceleration clauses within the EBGL and KBS credit facility and the cross-default provisions.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

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 compliance with regulatory standards, customer disputes, employment practices, wage and hour disputes, product liability, professional liability, malpractice 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 currently do not expect that the resolution of these matters will have a material adverse effect on our financial position or results of operations.

The outcome of litigation and the amount or range of potential loss at particular points in time may be difficult to ascertain. Among other things, uncertainties can include how trial and appellate courts will apply the law and interpret facts, as well as the contractual and statutory obligations of other indemnifying and insuring parties. The estimated range of reasonably possible losses, and their effect on our financial position is based upon currently available information and is subject to significant judgment and a variety of assumptions, as well as known and unknown uncertainties.

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Income Taxes

3 Months Ended

Mar. 31, 2023

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, 2023, we recorded no income tax expense. For the three months ended March 31, 2022, we recorded $950 thousand income tax expense. The tax expense for the three months ended March 31, 2022 primarily relates to a January 2022 ownership change under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) which required us to establish an additional valuation allowance on net operating losses that the Company cannot utilize in the future.

As of March 31, 2023, we had unrecognized tax benefits of approximately $2.4 million related to uncertain tax positions. Included in the unrecognized tax benefits were $2.0 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 2018; 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.

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Segments

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Segments

Segments

Our reportable segments are based upon our internal organizational structure; the manner in which our operations are managed; the criteria used by our Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”), to evaluate segment performance; the availability of separate financial information; and overall materiality considerations. Prior to the sale of our Healthcare business on May 4, 2023, our three business divisions were organized into the following three reportable segments to reflect the manner in which our CODM assesses performance and allocates resources:

1.Healthcare

2.Construction

3.Investments

Segment information for three months ended March 31, 2023 and 2022 is as follows (in thousands):

	Three Months Ended March 31,
	2023		2022
Revenue by segment:
Healthcare	$	13,359	$	13,418
Construction	12,346		11,631
Investments	158		158
Intersegment elimination	(158)		(158)
Consolidated revenue	$	25,705	$	25,049
Gross profit (loss) by segment:
Healthcare	$	3,327	$	3,176
Construction	4,329		1,586
Investments	95		59
Intersegment elimination	(158)		(158)
Consolidated gross profit	$	7,593	$	4,663
Income (loss) from operations by segment:
Healthcare	$	579	$	78
Construction	1,782		(759)
Investments	(19)		59
Corporate, eliminations and other	(1,612)		(1,933)
Segment income (loss) from operations	$	730	$	(2,555)
Depreciation and amortization by segment:
Healthcare	$	272	$	315
Construction	505		487
Investments	63		99
Star Equity corporate	4		—
Total depreciation and amortization	$	844	$	901

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Related Party Transactions	3 Months Ended
	Mar. 31, 2023
Related Party Transactions [Abstract]
Related Party Transactions	Related Party TransactionsStar Equity Holdings, Inc.On December 10, 2021, the Company entered into a securities purchase agreement with its Executive Chairman, Jeffrey E. Eberwein, relating to the issuance and sale of 650,000 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) at a purchase price of $3.25 per share pursuant to a private placement. As of March 31, 2023, Mr. Eberwein owned 2,983,685 shares of Common Stock, representing approximately 19.64% of our outstanding Common Stock. In addition, as of March 31, 2023, Mr. Eberwein owned 1,222,458 shares of Series A Preferred Stock.

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Perpetual Preferred Stock

3 Months Ended

Mar. 31, 2023

Equity [Abstract]

Perpetual Preferred Stock

Perpetual Preferred Stock

Holders of shares of our Series A 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, by 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 Series A 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 Series A Preferred Stock for the past dividend periods and the dividend for the 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 Series A Preferred Stock may be subject to redemption. The Company may redeem the Series A 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 Series A Preferred Stock on or after September 10, 2024.

On February 17, 2023, our board of directors declared a cash dividend to holders of our Series A Preferred Stock of $0.25 per share, for an aggregate amount of approximately $0.5 million. The record date for this dividend was March 1, 2023, and the payment date was March 10, 2023. As of March 31, 2023, we have no preferred dividends in arrears.

Preferred Stock Rights

On June 2, 2021, the board of directors adopted a tax benefit preservation plan in the form of a Section 382 Rights Agreement (the “382 Agreement”). The 382 Agreement is intended to diminish the risk that our ability to use our net operating loss carryforwards to reduce future federal income tax obligations may become substantially limited due to an “ownership change,” as defined in Section 382 of the Code. The board of directors authorized and declared a dividend distribution of one right for each outstanding share of common stock, par value $0.0001 per share, to stockholders of record as of the close of business on June 14, 2021. Each right entitles the registered holder to purchase from the one one-thousandth of a share of Series C Participating Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock”), at an exercise price of $12.00 per one one-thousandth of a share of Series C Preferred Stock, subject to adjustment.

The rights will become exercisable following (i) 10 days after a public announcement that a person or group has become an Acquiring Person (as defined in the 382 Agreement); and (ii) 10 business days (or a later date determined by the board of directors) after a person or group begins a tender or an exchange offer that, if completed, would result in that person or group becoming an Acquiring Person.

In addition, upon the occurrence of certain events, the exercise price of the rights would be adjusted and holders of the rights (other than rights owned by an acquiring person or group) would be entitled to purchase common stock at approximately half of market value. Given the potential adjustment of the exercise price of the rights, the rights could cause substantial dilution to a person or group that acquires 4.99% or more of common stock on terms not approved by the board of directors.

No rights were exercisable at March 31, 2023. There is no impact to financial results as a result of the adoption of the 382 Agreement for the three months ended March 31, 2023.

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Equity Transactions

3 Months Ended

Mar. 31, 2023

Equity [Abstract]

Equity Transactions

Equity Transactions

On January 24, 2022, we closed an underwritten public offering (the “2022 Public Offering”) pursuant to an underwriting agreement with Maxim Group LLC (“Maxim”), as representative of the underwriters. Through the 2022 Public Offering, we issued and sold (A)(i) 9,175,000 shares of the Company’s Common Stock, (ii) an aggregate of 325,000 pre-funded warrants to purchase up to an aggregate of 325,000 shares of Common Stock, and (iii) an aggregate of 9,500,000 common stock purchase warrants (the “Firm Purchase Warrants”) to purchase up to 9,500,000 shares of Common Stock and (B) at the election of Maxim, (i) up to an additional 1,425,000 shares of Common Stock and/or (ii) up to an additional 1,425,000 shares of common stock purchase warrants (the “Option Purchase Warrants”, and together with the Firm Purchase Warrants, the “Warrants”). Maxim partially exercised its over-allotment option for the purchase of 1,425,000 Warrants for a price of $0.01 per Warrant. Each share of common stock (or pre-funded warrant in lieu thereof) was sold together with one common warrant to purchase one share of common stock at a price of $1.50 per share and common warrant. Gross proceeds, before deducting underwriting discounts and offering expenses and excluding any proceeds we may receive upon exercise of the Warrants, were $14.3 million and net proceeds were $12.7 million.

In addition, as part of the 2022 Public Offering, the Company issued to Maxim 237,500 common stock purchase warrants (the “Underwriter’s Warrants”) to purchase up to 237,500 shares of Common Stock at an exercise price of $1.65 per common warrant. The Underwriter’s Warrants have an initial exercise date beginning July 19, 2022.

As of March 31, 2023, of the warrants issued through the public offering we closed on May 28, 2020 (the “2020 Public Offering”), 1.0 million warrants were exercised and 1.4 million warrants remained outstanding, which represents 0.7 million shares of common stock equivalents, at an exercise price of $2.25. As of March 31, 2023, of the Warrants issued through the 2022 Public Offering, there were 10.9 million Warrants and 0.3 million prefunded warrants outstanding at an exercise price of $1.50 and $0.01, respectively. The Underwriter’s Warrants have not been exercised.

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Preferred Stock Rights

3 Months Ended

Mar. 31, 2023

Equity [Abstract]

Preferred Stock Rights

Perpetual Preferred Stock

Holders of shares of our Series A 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, by 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 Series A 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 Series A Preferred Stock for the past dividend periods and the dividend for the 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 Series A Preferred Stock may be subject to redemption. The Company may redeem the Series A 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 Series A Preferred Stock on or after September 10, 2024.

On February 17, 2023, our board of directors declared a cash dividend to holders of our Series A Preferred Stock of $0.25 per share, for an aggregate amount of approximately $0.5 million. The record date for this dividend was March 1, 2023, and the payment date was March 10, 2023. As of March 31, 2023, we have no preferred dividends in arrears.

Preferred Stock Rights

On June 2, 2021, the board of directors adopted a tax benefit preservation plan in the form of a Section 382 Rights Agreement (the “382 Agreement”). The 382 Agreement is intended to diminish the risk that our ability to use our net operating loss carryforwards to reduce future federal income tax obligations may become substantially limited due to an “ownership change,” as defined in Section 382 of the Code. The board of directors authorized and declared a dividend distribution of one right for each outstanding share of common stock, par value $0.0001 per share, to stockholders of record as of the close of business on June 14, 2021. Each right entitles the registered holder to purchase from the one one-thousandth of a share of Series C Participating Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock”), at an exercise price of $12.00 per one one-thousandth of a share of Series C Preferred Stock, subject to adjustment.

The rights will become exercisable following (i) 10 days after a public announcement that a person or group has become an Acquiring Person (as defined in the 382 Agreement); and (ii) 10 business days (or a later date determined by the board of directors) after a person or group begins a tender or an exchange offer that, if completed, would result in that person or group becoming an Acquiring Person.

In addition, upon the occurrence of certain events, the exercise price of the rights would be adjusted and holders of the rights (other than rights owned by an acquiring person or group) would be entitled to purchase common stock at approximately half of market value. Given the potential adjustment of the exercise price of the rights, the rights could cause substantial dilution to a person or group that acquires 4.99% or more of common stock on terms not approved by the board of directors.

No rights were exercisable at March 31, 2023. There is no impact to financial results as a result of the adoption of the 382 Agreement for the three months ended March 31, 2023.

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Variable Interest Entity

3 Months Ended

Mar. 31, 2023

Variable Interest Entity, Not Primary Beneficiary, Disclosures [Abstract]

Variable Interest Entity

Variable Interest Entity

VIE in which we are not the Primary Beneficiary

We have an investment in a variable interest entity (“VIE”) of $0.3 million, recorded in Other Assets, in which we are not the primary beneficiary. This VIE is a small private company that is primarily involved in research related to new heart imaging technologies.

We have determined that the governance structures of this entity do not allow us to direct the activities that would significantly affect its economic performance. Therefore, we are not the primary beneficiary, and the results of operations and financial position of the VIE are not included in our condensed consolidated financial statements. We account for this investment as non-marketable equity securities which is valued at cost less impairment.

The potential maximum exposure of this unconsolidated VIE is generally based on the current carrying value of the investments and any future funding commitments based on the milestone agreement and board approval. We have determined that the single source of our exposure to the VIE is our capital investment in them. The carrying value and maximum exposure of the unconsolidated VIE were $0.3 million as of March 31, 2023. As of March 31, 2023, we performed a qualitative assessment on the carrying value via inquiries with the board of directors and a review of the entity’s financial statements and determined that there have not been any impairment indicators to the carrying value.

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Subsequent Events

3 Months Ended

Mar. 31, 2023

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

On May 4, 2023, the Company entered into a Stock Purchase and Contribution Agreement (the “Purchase Agreement”), dated as of May 4, 2023 (the “Closing Date”), by and among the Company, Digirad Health Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Digirad Health”), TTG Imaging Solutions, LLC., a Pennsylvania limited liability company (the “Buyer”), and the Buyer’s Parent, Insignia TTG Parent LLC, a Delaware limited liability company (the “Parent”). Pursuant to the Purchase Agreement, (i) the Buyer purchased 85% of the issued and outstanding shares of Digirad Health, on the terms and subject to the conditions set forth therein and (ii) the Company contributed to Parent 15% of the issued and outstanding shares of stock of Digirad Health (the “Contributed Shares”) in exchange for New Units (as defined in the Purchase Agreement) of Parent (the “Transaction”). The total aggregate consideration payable to the Company for the Transaction is $40 million, comprised of $27 million in cash, a $7 million promissory note, and $6 million of New Units in the Parent. The Company completed the sale of Digirad Health simultaneously with entering into the Purchase Agreement. The Purchase Agreement contains representations, warranties and covenants of the Company and Digirad Health that are customary for a transaction of this nature. The Purchase Agreement also contains indemnification obligations of the parties thereto. Pursuant to the Purchase Agreement, the Company has made a 336(e) election under the Code. In accordance with GAAP (ASC 205-20-45-1E), the Company evaluated the requirements needed to record the Digirad Health assets and liabilities as held-for-sale noting that for Q1 2023 “held and used” accounting was appropriate.

Concurrent with the Transaction, the Company terminated its debt with Webster by paying in full all amounts due at the Closing Date of the Transaction, which approximated $8.7 million. As a result of the Transaction, the Company no longer has a Healthcare division as of May 4, 2023.

On April 28, 2023, the Company gave notice to eCapital that it would not be renewing its credit facilities upon the expiry of the current extension to June 30, 2023. The Company paid in full all amounts outstanding on May 9, 2023 totaling approximately $0.8 million. The Company cancelled all eCapital credit facilities on May 9, 2023.

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Basis of Presentation and Significant Policies (Policies)

3 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation The unaudited condensed 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 condensed 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, 2022 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, 2022, filed with the SEC on Form 10-K on March 15, 2023, 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

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and disclosures made in the accompanying notes to the condensed consolidated financial statements. Significant estimates and judgments include those related to inventory, revenue recognition, lease accounting, fair value measurements (including contingent considerations), litigation and contingent liabilities, variable interest entities, intangible assets and goodwill valuations, equity classification and transactions, and income taxes. Actual results could materially differ from those estimates.

Concentration of Credit Risk

Concentration of Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents and accounts receivable. We limit our exposure to credit loss by generally placing cash in high credit quality financial institutions. Cash balances are maintained primarily at major financial institutions in the United States, a portion of which exceed the regulatory limit of $250,000 insured by the Federal Deposit Insurance Corporation (FDIC). We have not experienced any credit losses associated with our cash balances. Additionally, we have established guidelines regarding diversification of our investments and their maturities, which are designed to maintain principal and maximize liquidity. As of March 31, 2023 we have $4.4 million of cash in excess of FDIC insured limits

New Accounting Standards To Be Adopted

New Accounting Standards To Be Adopted

No new accounting standards were issued in the quarter ended March 31, 2023 that are expected to have a material impact on our financial statements.

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 compliance with regulatory standards, customer disputes, employment practices, wage and hour disputes, product liability, professional liability, malpractice 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 currently do not expect that the resolution of these matters will have a material adverse effect on our financial position or results of operations.

The outcome of litigation and the amount or range of potential loss at particular points in time may be difficult to ascertain. Among other things, uncertainties can include how trial and appellate courts will apply the law and interpret facts, as well as the contractual and statutory obligations of other indemnifying and insuring parties. The estimated range of reasonably possible losses, and their effect on our financial position is based upon currently available information and is subject to significant judgment and a variety of assumptions, as well as known and unknown uncertainties.

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Revenue (Tables)

3 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The following tables present our revenues for the three months ended March 31, 2023 and 2022, disaggregated by major source (in thousands):

	Three Months Ended March 31, 2023
	Healthcare		Construction		Total
Major Goods/Service Lines
Mobile Imaging(1)	$	10,323	$	—	$	10,323
Camera Sales	952		—		952
Camera Support	1,899		—		1,899
Healthcare Revenue from Contracts with Customers	13,174		—		13,174
Lease Income	185		—		185
Construction Revenue from Contracts with Customers	—		12,346		12,346
Total Revenues	$	13,359	$	12,346	$	25,705
Timing of Revenue Recognition
Services and goods transferred over time	$	10,545	$	—	$	10,545
Services and goods transferred at a point in time	2,814		12,346		15,160
Total Revenues	$	13,359	$	12,346	$	25,705

	Three Months Ended March 31, 2022
	Healthcare		Construction		Total
Major Goods/Service Lines
Mobile Imaging(1)	$	10,518	$	—	$	10,518
Camera Sales	1,132		—		1,132
Camera Support	1,679		—		1,679
Healthcare Revenue from Contracts with Customers	13,329		—		13,329
Lease Income	89		—		89
Construction Revenue from Contracts with Customers	—		11,631		11,631
Total Revenues	$	13,418	$	11,631	$	25,049
Timing of Revenue Recognition
Services and goods transferred over time	$	10,854	$	1,897	$	12,751
Services and goods transferred at a point in time	2,564		9,734		12,298
Total Revenues	$	13,418	$	11,631	$	25,049

Changes in Deferred Revenue

Changes in deferred revenue for the three months ended March 31, 2023, is as follows (in thousands):

Balance at December 31, 2022	$	3,675
Revenue recognized that was included in balance at beginning of the year	(1,790)
Deferred revenue, net, related to contracts entered into during the year	1,298
Balance at March 31, 2023	$	3,183

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

3 Months Ended

Mar. 31, 2023

Earnings Per Share [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 income (loss) per share for the periods indicated (in thousands):

	Three Months Ended March 31,
	2023		2022
Numerator:
Net income (loss)	435		(3,701)
Deemed dividend on Series A perpetual preferred stock	(479)		(479)
Net income (loss) attributable to common shareholders	$	(44)	$	(4,180)
Denominator:
Weighted average common shares outstanding	15,191		12,434
Weighted average prefunded warrants outstanding	325		235
Weighted average shares outstanding - basic	15,516		12,669
Dilutive potential common shares:
Restricted stock units	140		—
Weighted average shares outstanding - diluted	15,656		12,669
Net income (loss) per share
Basic	$	0.03	$	(0.29)
Diluted	$	0.03	$	(0.29)
Net income (loss) per share, attributable to common shareholders
Basic	$	—	$	(0.33)
Diluted	$	—	$	(0.33)

*Earnings per share may not add due to rounding

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

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

	Three Months Ended March 31,
	2023	2022
Stock options	2	6
Restricted stock units	80	271
Stock warrants	11,865	9,361
Total	11,947	9,638

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Supplementary Balance Sheet Information (Tables)

3 Months Ended

Mar. 31, 2023

Inventory Disclosure [Abstract]

Schedule of Inventory

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

	March 31, 2023		December 31, 2022
Raw materials	$	5,609	$	6,330
Work-in-process	2,772		2,567
Finished goods	1,886		1,946
Total inventories	10,267		10,843
Less reserve for excess and obsolete inventories	(224)		(216)
Total inventories, net	$	10,043	$	10,627

Schedule of Property and Equipment

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

	March 31, 2023		December 31, 2022
Land	$	805	$	805
Buildings and leasehold improvements	4,843		4,843
Machinery and equipment	24,398		24,648
Computer hardware and software	2,486		2,465
Gross property and equipment	32,532		32,761
Accumulated depreciation	(24,430)		(24,413)
Total property and equipment, net	$	8,102	$	8,348

Schedule of Product Warranty Liability

The activities related to our warranty reserve for the period ended March 31, 2023 and year ended December 31, 2022 are as follows (in thousands):

	March 31, 2023		December 31, 2022
Balance at the beginning of year	$	291	$	569
Charges to cost of revenues	85		177
Applied to liability	(86)		(455)
Balance at the end of period	$	290	$	291

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Leases (Tables)

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Schedule of Lease Cost and Other Information

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

	Three Months Ended March 31,
	2023		2022
Operating lease cost	$	390	$	396
Finance lease cost:
Amortization of finance lease assets	$	116	$	123
Interest on finance lease liabilities	11		17
Total finance lease cost	$	127	$	140

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

	Three Months Ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	349	$	199
Operating cash flows from finance leases	$	11	$	17
Financing cash flows from finance leases	$	139	$	157
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	—	$	1,229

Schedule of Balance Sheet Information

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

	March 31, 2023		December 31, 2022
Weighted average remaining lease term (in years)
Operating leases	3.5		3.7
Finance leases	2.1		2.3
Weighted average discount rate
Operating leases	4.68	%	4.66	%
Finance leases	5.98	%	5.98	%

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, 2023 were as follows (in thousands):

	Operating Leases		Finance Leases
2023 (excludes the three months ended March 31, 2023)	$	1,146	$	292
2024	1,392		266
2025	918		103
2026	591		16
2027	155		1
2028 and thereafter	206		—
Total future minimum lease payments	4,408		678
Less amounts representing interest	288		30
Present value of lease obligations	$	4,120	$	648

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, 2023 were as follows (in thousands):

	Operating Leases		Finance Leases
2023 (excludes the three months ended March 31, 2023)	$	1,146	$	292
2024	1,392		266
2025	918		103
2026	591		16
2027	155		1
2028 and thereafter	206		—
Total future minimum lease payments	4,408		678
Less amounts representing interest	288		30
Present value of lease obligations	$	4,120	$	648

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2023

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, 2023 and December 31, 2022 (in thousands):

	Fair Value as of March 31, 2023
	Level 1		Level 2		Level 3		Total
Assets (Liabilities):
Equity securities	$	3,577	$	—	$	—	$	3,577
Lumber derivative contracts	(62)		—		—		(62)
Total	$	3,515	$	—	$	—	$	3,515

	Fair Value as of December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets (Liabilities):
Equity securities	$	3,490	$	—	$	—	$	3,490
Lumber derivative contracts	(104)		—		—		(104)
Total	$	3,386	$	—	$	—	$	3,386

Derivative Instruments, Gain (Loss)

Gains and losses from lumber derivative contracts are recorded in cost of goods sold of the condensed Consolidated Statements of Operations and included the following for the three months ended March 31, 2023 and 2022, respectively:

	March 31, 2023		March 31, 2022
Unrealized gain (loss) on lumber derivatives	$	(43)	$	676
Realized gain (loss) on lumber derivatives	89		(448)
Total gain (loss) on lumber derivatives	$	46	$	228

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Debt (Tables)

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Schedule of Short-term Debt

A summary of debt as of March 31, 2023 and December 31, 2022 is as follows (dollars in thousands):

	March 31, 2023			December 31, 2022
	Amount		Weighted-Average Interest Rate	Amount		Weighted-Average Interest Rate
Revolving Credit Facility - eCapital KBS	$	—	10.75%	$	—	10.25%
Revolving Credit Facility - eCapital EBGL	—		10.75%	2,592		10.25%
Revolving Credit Facility - Webster	7,685		7.36%	8,299		6.89%
Total Short-term Revolving Credit Facilities	$	7,685	7.36%	$	10,891	7.69%
eCapital - Star Loan Principal, net	$	709	11.00%	$	791	10.50%
Short Term Loan	$	709	11.00%	$	791	10.50%
Total Short-term debt	$	8,394	7.67%	$	11,682	7.88%

The following table presents the Star Loan balance, net of unamortized debt issuance costs as of March 31, 2023 (in thousands):

	March 31, 2023
	Amount
eCapital - Star Loan Principal	$	770
Unamortized debt issuance costs	(61)
eCapital - Star Loan Principal, net	$	709

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Segments (Tables)

3 Months Ended

Mar. 31, 2023

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

Segment information for three months ended March 31, 2023 and 2022 is as follows (in thousands):

	Three Months Ended March 31,
	2023		2022
Revenue by segment:
Healthcare	$	13,359	$	13,418
Construction	12,346		11,631
Investments	158		158
Intersegment elimination	(158)		(158)
Consolidated revenue	$	25,705	$	25,049
Gross profit (loss) by segment:
Healthcare	$	3,327	$	3,176
Construction	4,329		1,586
Investments	95		59
Intersegment elimination	(158)		(158)
Consolidated gross profit	$	7,593	$	4,663
Income (loss) from operations by segment:
Healthcare	$	579	$	78
Construction	1,782		(759)
Investments	(19)		59
Corporate, eliminations and other	(1,612)		(1,933)
Segment income (loss) from operations	$	730	$	(2,555)
Depreciation and amortization by segment:
Healthcare	$	272	$	315
Construction	505		487
Investments	63		99
Star Equity corporate	4		—
Total depreciation and amortization	$	844	$	901

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Basis of Presentation and Significant Policies - Narrative (Details) $ / shares in Units, $ in Thousands			3 Months Ended
	May 04, 2023 USD ($)	Mar. 31, 2021 segment	Mar. 31, 2023 USD ($) $ / shares	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Number of operating segments | segment		2
Net (loss) income			$ 435	$ (3,701)
Net cash provided by (used in) operating activities			5,132	(636)
Cash and cash equivalents			5,655	$ 15,035	$ 4,665
Investments in equity securities			3,577		$ 3,490
Cash, FDIC insured amount			250
Cash in excess of FDIC limit			$ 4,400
Preferred stock, liquidation preference per share (in usd per share) | $ / shares			$ 10.00
Subsequent Event | TTG Imaging Solutions, LLC And Insignia Parent, LLC | Digirad Health Inc.
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cash proceeds from sale of equity	$ 27,000

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Revenue - Narrative (Details) $ in Thousands	3 Months Ended	4 Months Ended
	Mar. 31, 2023 USD ($) segment	May 04, 2023 segment	Dec. 31, 2022 USD ($)
Disaggregation of Revenue [Line Items]
Number of reportable segments	3
Non-current deferred revenue | $	$ 257		$ 299
Subsequent Event
Disaggregation of Revenue [Line Items]
Number of reportable segments		3
Minimum
Disaggregation of Revenue [Line Items]
Deferred revenue, recognition period	2 years
Maximum
Disaggregation of Revenue [Line Items]
Deferred revenue, recognition period	4 years

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Revenue - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Disaggregation of Revenue [Line Items]
Lease Income	$ 185	$ 89
Total Revenues	25,705	25,049
Services and goods transferred over time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	10,545	12,751
Services and goods transferred at a point in time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	15,160	12,298
Mobile Imaging
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	10,323	10,518
Camera Sales
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	952	1,132
Camera Support
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	1,899	1,679
Healthcare
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	13,174	13,329
Total Revenues	13,359	13,418
Construction Revenue from Contracts with Customers
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	12,346	11,631
Total Revenues	12,346	11,631
Healthcare
Disaggregation of Revenue [Line Items]
Lease Income	185	89
Total Revenues	13,359	13,418
Healthcare | Services and goods transferred over time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	10,545	10,854
Healthcare | Services and goods transferred at a point in time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	2,814	2,564
Healthcare | Mobile Imaging
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	10,323	10,518
Healthcare | Camera Sales
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	952	1,132
Healthcare | Camera Support
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	1,899	1,679
Healthcare | Healthcare
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	13,174	13,329
Healthcare | Construction Revenue from Contracts with Customers
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	0	0
Construction
Disaggregation of Revenue [Line Items]
Lease Income	0	0
Total Revenues	12,346	11,631
Construction | Services and goods transferred over time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	0	1,897
Construction | Services and goods transferred at a point in time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	12,346	9,734
Construction | Mobile Imaging
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	0	0
Construction | Camera Sales
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 Revenue from Contracts with Customers
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	$ 12,346	$ 11,631

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Revenue - Schedule of Changes in Deferred Revenue (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Deferred Revenue
Beginning balance	$ 3,675
Revenue recognized that was included in balance at beginning of the year	(1,790)
Deferred revenue, net, related to contracts entered into during the year	1,298
Ending balance	$ 3,183

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Basic and Diluted Net Income (Loss) Per Share - Reconciliation of Shares Used to Compute Basic and Diluted Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Numerator:
Net income (loss)	$ 435	$ (3,701)
Deemed dividend on Series A perpetual preferred stock	(479)	(479)
Net income (loss) attributable to common shareholders	(44)	(4,180)
Net income (loss) attributable to common shareholders	$ (44)	$ (4,180)
Denominator:
Weighted average common shares outstanding (in shares)	15,191	12,434
Weighted average prefunded warrants outstanding (in shares)	325	235
Weighted-average shares outstanding - basic (in shares)	15,516	12,669
Weighted-average common shares outstanding - diluted (in shares)	15,656	12,669
Net income (loss) per share
Net income (loss) per share - basic (in usd per share)	$ 0.03	$ (0.29)
Net income (loss) per share - diluted (in usd per share)	0.03	(0.29)
Net income (loss) per share, attributable to common shareholders— basic (in usd per share)	0	(0.33)
Net income (loss) per share, attributable to common shareholders— diluted (in usd per share)	$ 0	$ (0.33)
Restricted stock units
Denominator:
Dilutive potential common shares (in shares)	140	0

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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, 2023	Mar. 31, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	11,947	9,638
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	2	6
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)	80	271
Stock warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	11,865	9,361

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Supplementary Balance Sheet Information - Schedule of Inventory (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Inventory Disclosure [Abstract]
Raw materials	$ 5,609	$ 6,330
Work-in-process	2,772	2,567
Finished goods	1,886	1,946
Total inventories	10,267	10,843
Less reserve for excess and obsolete inventories	(224)	(216)
Total inventories, net	$ 10,043	$ 10,627

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Supplementary Balance Sheet Information - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Gross property and equipment	$ 32,532	$ 32,761
Accumulated depreciation	(24,430)	(24,413)
Total property and equipment, net	8,102	8,348
Land
Property, Plant and Equipment [Line Items]
Gross property and equipment	805	805
Buildings and leasehold improvements
Property, Plant and Equipment [Line Items]
Gross property and equipment	4,843	4,843
Machinery and equipment
Property, Plant and Equipment [Line Items]
Gross property and equipment	24,398	24,648
Computer hardware and software
Property, Plant and Equipment [Line Items]
Gross property and equipment	$ 2,486	$ 2,465

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Supplementary Balance Sheet Information - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Gross property and equipment	$ 32,532	$ 32,761
Building And Construction
Property, Plant and Equipment [Line Items]
Standard warranty period	12 months
EBGL
Property, Plant and Equipment [Line Items]
Standard warranty period	25 years
Land and Building
Property, Plant and Equipment [Line Items]
Gross property and equipment	$ 1,900

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Supplementary Balance Sheet Information - Warranty Reserve (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Movement in Standard Product Warranty Accrual [Roll Forward]
Balance at the beginning of year	$ 291	$ 569
Charges to cost of revenues	85	177
Applied to liability	(86)	(455)
Balance at the end of period	$ 290	$ 291

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Leases - Narrative (Details)	3 Months Ended
	Mar. 31, 2023
Lessee, Lease, Description [Line Items]
Option to terminate period (in years)	1 year
Minimum
Lessee, Lease, Description [Line Items]
Remaining lease term (in years)	1 year
Maximum
Lessee, Lease, Description [Line Items]
Remaining lease term (in years)	10 years

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Leases - Schedule of Lease Expenses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Leases [Abstract]
Operating lease cost	$ 390	$ 396
Finance lease cost:
Amortization of finance lease assets	116	123
Interest on finance lease liabilities	11	17
Total finance lease cost	$ 127	$ 140

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Leases - Schedule of Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$ 349	$ 199
Operating cash flows from finance leases	11	17
Financing cash flows from finance leases	139	157
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$ 0	$ 1,229

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Leases - Schedule of Supplemental Balance Sheet Information (Details)	Mar. 31, 2023	Dec. 31, 2022
Leases [Abstract]
Operating lease, weighted average remaining lease term (in years)	3 years 6 months	3 years 8 months 12 days
Financing leases, weighted average remaining lease term (in years)	2 years 1 month 6 days	2 years 3 months 18 days
Operating leases, weighted average discount rate (percent)	4.68%	4.66%
Financing leases, weighted average discount rate (percent)	5.98%	5.98%

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Leases - Schedule of Future Minimum Lease Payments, Lessee (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Operating Leases
2023 (excludes the three months ended March 31, 2023)	$ 1,146
2024	1,392
2025	918
2026	591
2027000	155
2028 and thereafter	206
Total future minimum lease payments	4,408
Less amounts representing interest	288
Present value of lease obligations	4,120
Finance Leases
2023 (excludes the three months ended March 31, 2023)	292
2024	266
2025	103
2026	16
2027000	1
2028 and thereafter	0
Total future minimum lease payments	678
Less amounts representing interest	30
Present value of lease obligations	$ 648

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Fair Value Measurements - Financial Assets Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	$ 3,577	$ 3,490
Lumber derivative contracts	(62)	(104)
Total	3,515	3,386
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	3,577	3,490
Lumber derivative contracts	(62)	(104)
Total	3,515	3,386
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	0	0
Lumber derivative contracts	0	0
Total	0	0
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	0	0
Lumber derivative contracts	0	0
Total	$ 0	$ 0

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Fair Value Measurements - Narrative (Details) boardFeet in Thousands, $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2023 USD ($) boardFeet derivative	Mar. 31, 2022 USD ($)	Dec. 31, 2022 boardFeet derivative
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities, unrealized gain	$ 2	$ 92
Long
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative, nonmonetary notional amount (board feet) | boardFeet	5,500		550
Number of derivative instruments held | derivative	50		5
Commodity Contract
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loss on derivatives	$ 46	$ 228

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Fair Value Measurements - Derivative Instruments, Gain (Loss) (Details) - Commodity Contract - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Unrealized gain (loss) on lumber derivatives	$ (43)	$ 676
Realized gain (loss) on lumber derivatives	89	(448)
Total gain (loss) on lumber derivatives	$ 46	$ 228

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Debt - Schedule of Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Total Short-term debt	$ 8,394	$ 11,682
Weighted-Average Interest Rate	7.67%	7.88%
eCapital - Star Loan Principal, net
Debt Instrument [Line Items]
Total Short-term Revolving Credit Facilities	$ 709	$ 791
Weighted-Average Interest Rate	11.00%	10.50%
Short Term Loan
Debt Instrument [Line Items]
Total Short-term Revolving Credit Facilities	$ 709	$ 791
Weighted-Average Interest Rate	11.00%	10.50%
Revolving Credit Facility | Revolving Credit Facility - eCapital KBS
Debt Instrument [Line Items]
Total Short-term Revolving Credit Facilities	$ 0	$ 0
Weighted-Average Interest Rate	10.75%	10.25%
Revolving Credit Facility | Revolving Credit Facility - eCapital EBGL
Debt Instrument [Line Items]
Total Short-term Revolving Credit Facilities	$ 0	$ 2,592
Weighted-Average Interest Rate	10.75%	10.25%
Revolving Credit Facility | Revolving Credit Facility - Webster
Debt Instrument [Line Items]
Total Short-term Revolving Credit Facilities	$ 7,685	$ 8,299
Weighted-Average Interest Rate	7.36%	6.89%
Revolving Credit Facility | Total Short-term Revolving Credit Facilities
Debt Instrument [Line Items]
Total Short-term Revolving Credit Facilities	$ 7,685	$ 10,891
Weighted-Average Interest Rate	7.36%	7.69%

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Debt - Webster Credit Facility (Details) - USD ($) $ in Millions	Mar. 29, 2019	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Weighted average interest rate (percent)		7.67%	7.88%
Revolving Credit Facility | Revolving Credit Facility - Webster
Debt Instrument [Line Items]
Weighted average interest rate (percent)		7.36%	6.89%
Revolving Credit Facility | SNB | Line of Credit | Revolving Credit Facility - Webster
Debt Instrument [Line Items]
Debt term (in years)	5 years
Maximum borrowing capacity	$ 20.0
Letters of credit (not to exceed)	$ 0.5
Borrowing availability		$ 0.5
Revolving Credit Facility | SNB | Line of Credit | Revolving Credit Facility - Webster | Minimum
Debt Instrument [Line Items]
Fixed charge coverage ratio	1.25
Revolving Credit Facility | SNB | Line of Credit | Revolving Credit Facility - Webster | Maximum
Debt Instrument [Line Items]
Leverage ratio	3.50
Revolving Credit Facility | SNB | Line of Credit | Revolving Credit Facility - Webster | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Interest rate (percent)	2.50%
Basis spread (percent)	2.25%
Revolving Credit Facility | SNB | Letter of Credit
Debt Instrument [Line Items]
Letters of credit (not to exceed)		$ 0.1

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Debt - eCapital Credit Facilities (Details) - USD ($)	3 Months Ended	6 Months Ended	12 Months Ended
	Mar. 31, 2023	Jun. 30, 2022	Dec. 31, 2022
EBGL Loan Agreement
Debt Instrument [Line Items]
Debt covenant for income		$ 0	$ 1,000,000
Revolving Credit Facility | EBGL Loan Agreement | EBGL Credit Parties | Prime Rate
Debt Instrument [Line Items]
Basis spread (percent)	2.75%
Revolving Credit Facility | EBGL Loan Agreement | Line of Credit
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 4,000,000
Additional borrowing capacity	2,800,000
Revolving Credit Facility | eCapital KBS Loan Agreement | Line of Credit
Debt Instrument [Line Items]
Maximum borrowing capacity	4,000,000
Debt covenant for income		0	500,000
Additional borrowing capacity	$ 1,000,000
Debt covenant, minimum earnings before interest tax and depreciation		$ 0	$ 850,000
Revolving Credit Facility | eCapital KBS Loan Agreement | Line of Credit | Prime Rate
Debt Instrument [Line Items]
Stated rate (percent)	2.75%

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Debt - Term Loans (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
eCapital - Star Loan Principal, net
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 2,500
eCapital - Star Loan Principal	770
Unamortized debt issuance costs	(61)
eCapital - Star Loan Principal, net	$ 709
eCapital - Star Loan Principal, net | Minimum
Debt Instrument [Line Items]
Debt service coverage ratio	1
eCapital - Star Loan Principal, net | Prime Rate
Debt Instrument [Line Items]
Basis spread (percent)	3.50%
Amended Star Loan Agreement
Debt Instrument [Line Items]
Debt instrument, monthly payment	$ 33
Amended Star Loan Agreement | Prime Rate
Debt Instrument [Line Items]
Basis spread (percent)	3.00%

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Income Tax Disclosure [Abstract]
Income tax expense (benefit)	$ 0	$ 950
Unrecognized tax benefits	2,400
Unrecognized tax benefits that would impact effective tax rate	$ 2,000

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Segments - Narrative (Details)	3 Months Ended
	Mar. 31, 2023 segment
Segment Reporting [Abstract]
Number of reportable segments	3

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Segments - Schedule of Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Segment Reporting Information [Line Items]
Consolidated revenue	$ 25,705	$ 25,049
Consolidated gross profit	7,593	4,663
Income (loss) from operations by segment	730	(2,555)
Segment income (loss) from operations	730	(2,555)
Total depreciation and amortization	844	901
Healthcare
Segment Reporting Information [Line Items]
Consolidated revenue	13,359	13,418
Total depreciation and amortization	272	315
Construction
Segment Reporting Information [Line Items]
Consolidated revenue	12,346	11,631
Total depreciation and amortization	505	487
Investments
Segment Reporting Information [Line Items]
Total depreciation and amortization	63	99
Operating Segments | Healthcare
Segment Reporting Information [Line Items]
Consolidated revenue	13,359	13,418
Consolidated gross profit	3,327	3,176
Income (loss) from operations by segment	579	78
Operating Segments | Construction
Segment Reporting Information [Line Items]
Consolidated revenue	12,346	11,631
Consolidated gross profit	4,329	1,586
Income (loss) from operations by segment	1,782	(759)
Operating Segments | Investments
Segment Reporting Information [Line Items]
Consolidated revenue	158	158
Consolidated gross profit	95	59
Income (loss) from operations by segment	(19)	59
Intersegment elimination
Segment Reporting Information [Line Items]
Consolidated revenue	(158)	(158)
Consolidated gross profit	(158)	(158)
Income (loss) from operations by segment	(1,612)	(1,933)
Corporate, Non-Segment
Segment Reporting Information [Line Items]
Total depreciation and amortization	$ 4	$ 0

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Related Party Transaction (Details) - $ / shares	Dec. 10, 2021	Mar. 31, 2023	Dec. 31, 2022	Jun. 14, 2021
Related Party Transaction [Line Items]
Common stock, par value (in usd per share)	$ 0.0001	$ 0.0001	$ 0.0001	$ 0.0001
Common stock, outstanding (in shares)		15,192,753	15,177,919
Series A Preferred Stock
Related Party Transaction [Line Items]
Preferred stock, outstanding (in shares)		1,915,637
Board of Directors Chairman | Digirad Corporation
Related Party Transaction [Line Items]
Common stock, outstanding (in shares)		2,983,685
Percentage of outstanding shares		19.64%
Board of Directors Chairman | Digirad Corporation | Series A Preferred Stock
Related Party Transaction [Line Items]
Preferred stock, outstanding (in shares)		1,222,458
Board of Directors Chairman | Private Placement
Related Party Transaction [Line Items]
Number of shares issued in transaction (in shares)	650,000
Price of stock sold (in usd per share)	$ 3.25

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Perpetual Preferred Stock - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended
	Feb. 17, 2023	Mar. 31, 2023	Mar. 31, 2022
Class of Stock [Line Items]
Preferred stock, dividend rate (in percent)		10.00%
Liquidation preference (in usd per share)		$ 10.00
Dividends declared per Series A perpetual preferred stock (in usd per share)	$ 0.25	$ 0.25	$ 0.25
Series A Cumulative Perpetual Preferred Stock
Class of Stock [Line Items]
Preferred stock dividends paid	$ 0.5

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Equity Transactions (Details) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended
	Jan. 24, 2022	Mar. 31, 2023
2022 Public Offering
Schedule of Equity Method Investments [Line Items]
Number of shares issued in transaction (in shares)	9,175,000
Number of warrants exercised (in shares)	1,425,000
Exercise price of warrants (in usd per share)	$ 0.01
Price of stock sold (in usd per share)	$ 1.50
Consideration received	$ 14.3
Net proceeds	$ 12.7
2022 Public Offering | Prefunded Warrant
Schedule of Equity Method Investments [Line Items]
Number of warrants issued in transaction (in shares)	325,000
Class of warrant or right, number of securities called by warrants or rights (in shares)	325,000
Exercise price of warrants (in usd per share)		$ 0.01
Warrants outstanding (in shares)		300,000
2022 Public Offering | Firm Purchase Warrants
Schedule of Equity Method Investments [Line Items]
Number of warrants issued in transaction (in shares)	9,500,000
Class of warrant or right, number of securities called by warrants or rights (in shares)	9,500,000
2022 Public Offering | Firm Purchase Warrants | Maxim Group LLC
Schedule of Equity Method Investments [Line Items]
Class of warrant or right, number of securities called by warrants or rights (in shares)	237,500
Number of warrants exercised (in shares)	237,500
Exercise price of warrants (in usd per share)	$ 1.65
2022 Public Offering | Option Shares
Schedule of Equity Method Investments [Line Items]
Number of shares issued in transaction (in shares)	1,425,000
2022 Public Offering | Option Purchase Warrants
Schedule of Equity Method Investments [Line Items]
Number of warrants issued in transaction (in shares)	1,425,000
2022 Public Offering | Stock Warrants
Schedule of Equity Method Investments [Line Items]
Exercise price of warrants (in usd per share)		$ 1.50
Warrants outstanding (in shares)		10,900,000
2020 Public Offering
Schedule of Equity Method Investments [Line Items]
Class of warrant or right, number of securities called by warrants or rights (in shares)		700,000
Number of warrants exercised (in shares)		1,000,000
Exercise price of warrants (in usd per share)		$ 2.25
Warrants outstanding (in shares)		1,400,000

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Preferred Stock Rights (Details) - $ / shares	Mar. 31, 2023	Dec. 31, 2022	Dec. 10, 2021	Jun. 14, 2021
Class of Stock [Line Items]
Common stock, par value (in usd per share)	$ 0.0001	$ 0.0001	$ 0.0001	$ 0.0001
Number of days for stock rights to become exercisable (in days)				10 days
Acquisition of common stock, threshold (percent)				4.99%
Dividend rights exercisable (in shares)	0
Series C Preferred Stock
Class of Stock [Line Items]
Preferred stock, par value (in usd per share)	$ 0.0001	$ 0.0001		$ 0.0001
Cash redemption price (in usd per share)				$ 12.00

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Variable Interest Entity (Details) $ in Millions	Mar. 31, 2023 USD ($)
Variable Interest Entity, Not Primary Beneficiary, Disclosures [Abstract]
Other investments	$ 0.3

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Subsequent Events (Details) - Subsequent Event - USD ($) $ in Millions	May 09, 2023	May 04, 2023
Revolving Credit Facility | Line of Credit | Revolving Credit Facility - Webster | SNB
Subsequent Event [Line Items]
Extinguishment of debt		$ 8.7
Revolving Credit Facility | Line of Credit | Revolving Credit Facility - eCapital EBGL
Subsequent Event [Line Items]
Extinguishment of debt	$ 0.8
TTG Imaging Solutions, LLC And Insignia Parent, LLC | Digirad Health Inc.
Subsequent Event [Line Items]
Percentage of subsidiary stock sold		85.00%
Percentage of shares contributed		15.00%
Net proceeds		$ 40.0
Cash proceeds from sale of equity		27.0
Notes issued in sale transaction		7.0
Value of shares issued in transaction		$ 6.0