Supplementary Balance Sheet Information

6 Months Ended

Jun. 30, 2025

Supplementary Balance Sheet Disclosures [Abstract]

Inventories

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


	June 30, 2025		December 31, 2024
Raw materials	$	4,494	$	2,644
Work-in-process	557		735
Finished goods	4,156		2,018


Total inventories, net	$	9,207	$	5,397

ADT's inventory, amounting to $1.6 million as of June 30, 2025, consists of component equipment, parts and supplies which are classified as raw materials using the weighted average cost method.

Property and Equipment

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


	June 30, 2025		December 31, 2024
Land	$	1,134	$	795
Buildings and leasehold improvements	8,854		5,573
Transportation	296		—
Machinery and equipment	10,306		6,540
Gross property and equipment	20,590		12,908
Accumulated depreciation	(3,937)		(2,701)
Total property and equipment, net	$	16,653	$	10,207

Depreciation expense for the three and six months ended June 30, 2025 was $0.7 million and $1.2 million respectively, and $0.2 million and $0.5 million for the three and six months ended June 30, 2024, respectively.

As of June 30, 2025, we held non-operating land and a building in Oxford, Maine for investment and potential future use which had a carrying value of $0.6 million and was included within property and equipment on the Consolidated Balance Sheets.

Included in machinery and equipment in the above table is rental equipment with a net book value of approximately $3.3 million, related to our energy services segment.

Warranty Reserves

Within our Building Solutions 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. Timber Technologies Solutions, Inc (“TT”) provides a fifty-year limited warranty to the original buyer of its products, qualified by the original buyer’s obligation to ensure that the products are properly handled, stored, and installed. Historical losses related to the Timber Technologies warranty have been insignificant and therefore no reserve has been established. Estimated future warranty costs are accrued and charged to

cost of goods sold in the period that the related revenue is recognized. Within our Energy Services division, we do not provide warranties on our products.

Notes Receivable

Notes receivable consists of the following principal and interest balances as of June 30, 2025 and December 31, 2024 (in thousands):


	June 30, 2025		December 31, 2024
	Principal and interest		Principal and interest
Catalyst Note	$	8,603	$	8,206

MDOS Note	745		894
KBS Customer Note	76		111
Total note receivable	9,424		9,211
Less current portion	300		335
Note receivable, net of current portion	$	9,124	$	8,876

As a part of the sale of Digirad Health in May 2023, we entered into a $7 million promissory note (the “Catalyst Note”) which represents an unsecured note receivable on our balance sheet. The note has a maturity date of May 3, 2029 with payment-in-kind (non-cash) interest on the outstanding principal balance hereof to accrue at the Interest Rate. The full balance is scheduled to be paid at the maturity date. The Interest Rate is defined as (i) during the period from the date of issuance of the note through the third anniversary of the date of issuance of the note, a per annum rate equal to the sum of (x) 5.0% per annum plus (y) the greater of 5.0% per annum and the weighted average term SOFR-based interest rate of outstanding loans under the Senior Loan Agreement (as defined in the Purchase Agreement) during such period, and (ii) during the period following the third anniversary of the date of issuance of the note, a per annum rate equal to the sum of (x) 5.0% per annum plus (y) the greater of 7.0% per annum and the weighted average term SOFR-based interest rate of outstanding loans under the Senior Loan Agreement during such period.

In 2021, we completed the sale of MD Office Solutions in exchange for a secured promissory note (the “MDOS Note”). This note, the principal of which is approximately $0.7 million at June 30, 2025, is included in “Notes receivable, current portion” and “Notes receivable” in our Consolidated Balance Sheet at June 30, 2025 for $0.2 million and $0.5 million, respectively. The MDOS Note requires quarterly installments of $74 thousand and incurs interest at a fixed rate of 5.0% through maturity in 2028.

In 2023, KBS issued a promissory note to a customer, incurring 12% interest per annum (the “KBS Customer Note”). The KBS Customer Note is included in “Notes receivable, current portion” in the Consolidated Balance Sheets at June 30, 2025.

The Company evaluates its notes receivable portfolio under the Current Expected Credit Loss (“CECL”) model and determined that no material allowance for credit losses was necessary as of June 30, 2025.

Long Term Investments

Below are the components of our Long Term Investments as of June 30, 2025 and December 31, 2024 (in thousands):


	Method of Accounting	June 30, 2025		December 31, 2024
Investment in Catalyst	Cost Method	$	953	$	1,385
Investment in Enservco-Common Stock	Fair Value Election	191		496
Investment in Enservco-Preferred Stock	Fair Value Election	73		191
Investment in Enservco-Call Option	Fair Value Election	—		68
Total		$	1,217	$	2,140

Investment in Catalyst

As a part of the sale of Digirad Health, we received $6.0 million in the common equity of Catalyst Parent, which is held in our Investments Segment. We have elected the measurement alternative under ASC 321, Investments-Equity Securities. The measurement alternative election allows for equity securities that do not have readily determinable fair values to be recorded at cost, with adjustments for impairment and certain observable price changes reflected in earnings. Such securities are adjusted to fair value when an observable price change occurs or impairment is identified. As of June 30, 2025, we have recorded a total impairment to the Cost Method Investment in the amount of $5.0 million, including the impairment recorded in 2025 of $0.4 million. We recorded the impairment as we considered the financial performance of Catalyst relative to the average earnings from comparable companies. This impairment is recorded as a part of other income (expense) on the Consolidated Statement of Operations.

Investment in Enservco

On August 9, 2024, we completed an investment in Enservco pursuant to the Share Exchange Agreement in which we agreed to issue to Enservco 250,000 shares of 10% Series A Cumulative Perpetual Preferred Stock (“STRRP”) representing $2.6 million of value in exchange for 9,023,035 Enservco Common Shares, representing 19.9% of the equity interests of Enservco, and 3,476,965 Enservco Preferred Shares and certain options included in the Share Exchange Agreement. Enservco also agreed to appoint one Company representative to the Enservco board of directors. We also issued a $1 million Note to Enservco to facilitate Enservco’s acquisition of Buckshot Trucking, LLC. The Note was collateralized by the STRRP shares issued to Enservco.

Under the Share Exchange Agreement, we have additional purchase rights (a “call option”), but not obligations, including the 12-month option to participate in any financings to maintain the pro-rata ownership interest in Enservco and the 12-month option to exchange another $2.5 million of STRRP for additional shares of Enservco common stock.

The Investment in Enservco represents an investment in a voting interest entity (“VOE”). Under the voting interest model, for legal entities other than partnerships, the usual condition for control is ownership, directly or indirectly, of more than 50 percent of the outstanding voting shares of an entity. The Company does not have ownership of more than 50 percent of the outstanding voting shares of Enservco. As a result, the results of operations and financial position of Enservco are not included in our consolidated financial statements.

The Investment in Enservco is required to be accounted for using the equity method of accounting under ASC 323, Equity Method Investments and Joint Ventures, as the Company is deemed to have significant influence over Enservco based upon GAAP rules. Pursuant to the guidance in ASC 323, the Company elected the fair value option as allowed pursuant to ASC 825-10-15, wherein the financial instrument is initially measured at estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair value as of each reporting date, with changes in the estimated fair value recognized as other income (expense) in the statement of operations.

Our initial valuation of the Investment in Enservco for the common and preferred shares was based upon the market price at the transaction date. The fair value of the preferred shares on a per-unit basis was determined to approximate the fair value of the common shares after consideration of the features and benefits of the preferred shares. In forming this determination, we considered a number of objective and subjective factors, including third-party valuations and company specific economic outlook. To determine the fair value of the call option, the Company used the Black-Scholes option pricing model taking the stock price of $0.17 at the date of acquisition and $0.04 at June 30, 2025, a twelve-month risk-free yield of 4.0% and a volatility of 179% observed in Enservco’s historical common stock price history. As a result, the preferred shares and call option is included in the Level 3 of the fair value hierarchy.

Because we elected the fair value option to account for our equity method Investment in Enservco, we determined the fair value of the Common Stock using the closing price of Enservco’s common shares as of the end of the period, which is a Level 1 fair value input.

As discussed above, we entered into a $1 million promissory note (the “Enservco Note”) which was secured by 250,000 shares of our Cumulative Perpetual Preferred Stock, par value $.0001 per share, pursuant to the terms of a pledge agreement. The Enservco Note bore interest at a rate of 20% per annum, accruing from the Issuance Date. The Principal Amount of the Enservco Note, together with all accrued but unpaid interest, was due and payable in full three months from the Issuance Date, unless extended in one month increments by mutual agreement between us and Enservco (the “Maturity Date”). The Maturity Date was to be automatically extended to four months from the Issuance Date in the event Enservco repaid a minimum of $600,000 of the Principal Amount by the third month from the Issuance Date and the Maturity Date would be automatically extended to the fifth month from the Issuance Date in the event Enservco repaid a minimum of $800,000 before four months from the Issuance Date. There were no penalties for prepayment of the Enservco Note. We determined the fair value of the Enservco Note using a discounted cash flow model. The discount rate used in the cash flow model was 15.36% and is a Level 3 fair value input, as it is unobservable. After discussions related to repayment stalled and a delay in filing of Enservco’s September 30, 2024 financial statements, in December 2024 we issued a demand for full repayment of the Enservco Note. As the Enservco note went into default we called the 250,000 shares of our Cumulative Perpetual Preferred Stock which had served as collateral for the Enservco Note. As of December 31, 2024, in connection with the collateral call, we had cancelled the issuance of outstanding shares of Cumulative Perpetual Preferred Stock and extinguished the Enservco Note, as it was determined it is no longer collectible. The value of the collateral returned was in excess of the value of the Enservco note and no gain or loss was recorded upon extinguishment.

We hold the Investment in Enservco in the Investments Segment. As of June 30, 2025, we owned 9,023,035 shares of Enservco Common Stock, representing approximately 15.5% of Enservco’s outstanding common stock, and 3,476,965 shares of Mandatorily Convertible Preferred Stock representing approximately 22% of the total outstanding Enservco Common Stock assuming all preferred stock was converted. At June 30, 2025, the total fair value of the Investment in Enservco was approximately $264 thousand. The unrealized loss, included as a component of other income (expense), in our condensed consolidated statements of income related to our Investment in Enservco was $491 thousand for the six months ended June 30, 2025.

See Note 6. “Fair Value Measurements” for further discussion of the fair value hierarchy disclosures.