Note 2 - Ownership Interests and Advances

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Investments in and Advances to Affiliates, Schedule of Investments [Text Block]

2. Ownership Interests and Advances

The following summarizes the carrying value of the Company’s ownership interests and advances.

	December 31, 2021		December 31, 2020
	(In thousands)
Equity Method:
Companies	$	21,091	$	27,550
Private equity funds		117		271
		21,208		27,821
Other Method:
Companies, fair value		4,549		—
Companies, fair value measurement alternative		514		19,683
Private equity funds, fair value measurement alternative		250		268
		5,313		19,951
Advances to companies		—		2,626
	$	26,521	$	50,398

In March 2021, Zipnosis, Inc. was acquired by another entity, Bright Health.  The Company received $3.5 million in cash proceeds, including escrows, and $15.3 million in preferred equity in the acquiror in connection with this transaction.  This ownership interest represented a security that did not have a readily determinable fair value.  Due to the inherent uncertainty of determining the fair value of ownership interests that do not have a readily determinable fair value, this estimated value  may differ significantly from the value that would have been reported had a ready market for the security existed, and it is reasonably possible that the difference could be material.  The Company recognized a $17.3 million gain on the sale, which is included in Equity income (loss), net in the Consolidated Statements of Operations.  The fair value of the ownership interest received as a result of the acquisition was estimated based on evaluating several valuation methods available, including the value at which independent third parties have recently invested, the valuation of comparable public companies, and the present value of our expected outcomes.  Assumptions considered within these methods include determining which public companies are comparable, projecting forward revenues, selecting an appropriate valuation multiple, discounts to apply for the lack of marketability or lack of comparability, other factors and the relative weight to apply to each valuation method available.  Due to the unobservable nature of some of these inputs, we have determined this initial estimate to be a Level 3 fair value measurement.  During the three months ended June 30, 2021, Bright Health completed an initial public offering that resulted in our ownership interest converting into approximately 1.3 million common shares.  Accordingly, the Bright Health common shares represent an ownership interest with a readily determinable fair value (Level 1), which will subsequently be measured at fair value with unrealized gains (losses) being reported as a component of Other income (loss), net.  As a result, the Company recognized a $10.8 million unrealized loss, net, on Bright Health subsequent to the initial public offering during the year-ended December 31, 2021. Subsequent to December 31, 2021, the fair value of our Bright Health ownership interest declined to approximately $2.3 million as of March 7, 2022.

In August 2021, Flashtalking was acquired by another entity.  The Company has received $45.0 million in cash proceeds, including escrows, and included a $32.5 million gain in Other income (loss), net, during the year ended December 31, 2021.  The Company may receive additional amounts of up to approximately $0.5 million over the next 24 months from the resolution of escrow contingencies.  

In January 2021, WebLinc, Inc. was acquired by another entity.  The Company has received $3.6 million in cash proceeds to-date and may receive additional amounts over the next 12 months based on certain transactional performance activities, which could be partially offset by indemnifiable claims.  The Company has recognized a $0.1 million loss on the sale during the year ended December 31, 2021, which is included in Equity income (loss), as certain contingencies were resolved.  To the extent additional amounts are collected as contingencies are resolved, those amounts will be recorded as gain on the sale and included within Equity income (loss). 

QuanticMind and Hoopla were acquired in separate transactions during the first quarter of 2021 by other entities, however there were no resultant proceeds to the Company.  There was no resulting gain or loss due to this equity method ownership interest being impaired during the prior year.

In March 2021, the Company's ownership interest in T-REX Group, Inc., which was accounted for using the fair value measurement alternative, was acquired for $3.0 million in cash.  The Company recognized a $0.9 million gain, which is included in Other income (loss), net.  

In April 2021, Velano Vascular was acquired by another entity.  The Company has received $3.5 million in cash proceeds, including escrows, and included a $1.9 million gain in Other income (loss), net, for the year ended December 31, 2021.  The Company  may receive additional amounts over the next 12 months from the resolution of escrow contingencies.

In December 2021, the Company received $2 million of contingent proceeds resulting from resolution of certain valuation thresholds remaining from the 2018 sale of AdvantEdge Healthcare Solutions.

During the year ended December 31, 2021, the Company recorded an impairment of $2.5 million related to reduced expectations for certain Other ownership interests, which is included in Other income (loss), net. 

In September 2020, Sonobi, Inc. was acquired by another entity for cash. The Company received $6.6 million in cash proceeds in connection with this transaction, excluding holdbacks and escrows. The Company recognized an insignificant gain on the sale, which is included in Equity income (loss), net in the Consolidated Statements of Operations.

During the year ended December 31, 2020, the Company recorded impairments of $11.3 million related to the ownership interests of WebLinc, Inc., QuanticMind, Inc. and Sonobi, Inc. accounted for under the equity method, which are reflected in Equity income (loss), net in the Consolidated Statement of Operations.  During the year ended December 31, 2020, the Company also recorded impairments of $8.8 million related to the ownership interests of T-REX Group, Inc., b8ta and others accounted for under the Other method, which are reflected in Other income (loss), net in the Consolidated Statement of Operations. The impairments were determined based on declines in the fair value of our ownership interests resulting from reduced valuation expectations and extended exit timelines resulting from the more challenging mergers and acquisitions environment related to COVID-19 and the related uncertain economic impact. The measurement of fair value for these impairments was estimated based on evaluating several valuation inputs available for each of the applicable ownership interests, primarily including the value at which independent third parties have invested, the valuation of comparable public companies, the valuation of acquisitions of similar companies and the present value of our expected outcomes. Assumptions considered within these methods include determining which public companies are comparable, projecting forward revenues for the measured ownership interest, discounts to apply for the lack of marketability or lack of comparability, other factors and the relative weight to apply to each valuation input available. Due to the unobservable nature of some of these inputs, we have determined these fair value estimates to be non-recurring Level 3 fair value measurements.

During the year ended December 31, 2020, the Company recorded a $1.5 million non-cash gain based upon an observable price change related to our ownership interest in Flashtalking Inc. accounted for under the Other method, which is reflected in Other income (loss), net in the Consolidated Statement of Operations. During the year ended December 31, 2020, the Company also recorded a $0.3 million non-cash Other loss based on an observable price change for another ownership interest accounted for under the Other method.

As of December 31, 2021, the Company held ownership interests accounted for using the equity method in 9 non-consolidated companies. 

Certain of the Company’s ownership interests as of December 31, 2021 and 2020 included the following:

	Safeguard Primary Ownership as of December 31,
Company Name	2021	2020	Accounting Method
Aktana, Inc.	13.4%	15.1%	Equity
Clutch Holdings, Inc.	41.7%	42.3%	Equity
InfoBionic, Inc.	25.2%	25.2%	Equity
Lumesis, Inc.	43.2%	43.4%	Equity
MediaMath, Inc.	13.2%	13.3%	Other
meQuilibrium	31.9%	32.0%	Equity
Moxe Health Corporation	27.6%	27.6%	Equity
Prognos Health Inc.	28.5%	28.5%	Equity
Syapse, Inc.	11.1%	18.9%	Equity
Trice Medical, Inc.	12.6%	16.6%	Equity

Summarized Financial Information

The following table provides summarized financial information for ownership interests accounted for under the equity method for the periods presented and has been compiled from respective company financial statements, reflect certain historical adjustments, and are reported on a one quarter lag. Results of operations are excluded for periods prior to their acquisition and subsequent to their disposition. Historical results are not adjusted when the Company exits or writes-off a company. 

	As of December 31,
	2021			2020
	(In thousands)
Balance Sheets:
Current assets	$	127,651		$	104,024
Non-current assets		53,220			26,352
Total assets	$	180,871		$	130,376
Current liabilities	$	62,538		$	72,972
Non-current liabilities		158,975			105,506
Shareholders’ deficit		(40,642	)		(48,102	)
Total liabilities and shareholders’ deficit	$	180,871		$	130,376
Number of equity method ownership interests		9			12

	Year Ended December 31,
	2021			2020
	(In thousands)
Results of Operations:
Revenue	$	140,670		$	153,875
Gross profit	$	90,388		$	92,039
Net loss	$	(106,363	)	$	(82,216	)

As of December 31, 2021, the Company’s carrying value in equity method companies, in the aggregate, exceeded the Company’s share of the net assets of such companies by approximately $11.4 million. Of this excess, $10.4 million was allocated to goodwill and $1.0 million was allocated to intangible assets.