10-Q 1 digirad-20230930.htm 10-Q digirad-20230930
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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
September 30, 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

STRR Logo JPEG.jpg
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 GreenwichCT 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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareSTRRNASDAQ Global Market
Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per shareSTRRP
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 fileroAccelerated filero
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 November 3, 2023, the registrant had 15,826,217 shares of Common Stock ($0.0001 par value) outstanding.



STAR EQUITY HOLDINGS, INC.
TABLE OF CONTENTS




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.


PART I. FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS


STAR EQUITY HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In thousands, except for per share amounts)
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Revenues:
Construction$10,435 $11,107 $31,674 $39,544 
Total revenues10,435 11,107 31,674 39,544 
Cost of revenues:
Construction8,187 7,975 22,433 32,341 
Investments45 58 169 221 
Total cost of revenues8,232 8,033 22,602 32,562 
Gross profit2,203 3,074 9,072 6,982 
Operating expenses:
Selling, general and administrative3,434 3,096 11,327 9,981 
Amortization of intangible assets430 430 1,290 1,290 
Total operating expenses3,864 3,526 12,617 11,271 
Income (loss) from continuing operations(1,661)(452)(3,545)(4,289)
Other income (expense):
Other income (expense), net(965)(713)(506)(1,157)
Interest income (expense), net433 (120)569 (400)
Total other income (expense), net(532)(833)63 (1,557)
Income (loss) before income taxes from continuing operations(2,193)(1,285)(3,482)(5,846)
Income tax benefit (provision) from continuing operations(172)299 (233)(861)
Income (loss) from continuing operations, net of tax(2,365)(986)(3,715)(6,707)
Income (loss) from discontinued operations, net of tax (Note 10)(257)(898)27,119 (454)
Net income (loss)(2,622)(1,884)23,404 (7,161)
Deemed dividend on Series A perpetual preferred stock(479)(479)(1,437)(1,437)
Net income (loss) attributable to common shareholders$(3,101)$(2,363)$21,967 $(8,598)
Net income (loss) per share
Net income (loss) per share, continuing operations
Basic*$(0.15)$(0.06)$(0.24)$(0.46)
Diluted$(0.15)$(0.06)$(0.24)$(0.46)
Net income (loss) per share, discontinued operations
Basic*$(0.02)$(0.06)$1.74 $(0.03)
Diluted$(0.02)$(0.06)$1.72 $(0.03)
Net income (loss) per share
Basic*$(0.17)$(0.12)$1.50 $(0.49)
Diluted*$(0.17)$(0.12)$1.49 $(0.49)
Net income (loss) per share, attributable to common shareholders
Basic*$(0.20)$(0.15)$1.41 $(0.59)
Diluted*$(0.20)$(0.15)$1.40 $(0.59)
Weighted-average common shares outstanding
Basic*15,681 15,434 15,573 14,503 
Diluted*15,819 15,434 15,743 14,503 
Dividends declared per share of Series A perpetual preferred stock$0.25 $0.25 $0.75 $0.75 

*Earnings per share may not add due to rounding
See accompanying notes to the unaudited condensed consolidated financial statements.


STAR EQUITY HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
September 30, 2023 (unaudited)
December 31, 2022
Assets:
Current assets:
Cash and cash equivalents$20,691 $4,377 
Restricted cash561 142 
Investments in equity securities4,309 3,490 
Accounts receivable, net of allowances of $116 and $270, respectively
3,727 7,975 
Note receivable, current portion223 73 
Inventories, net4,243 4,678 
Other current assets859 682 
Current assets – discontinued operations— 17,851 
Total current assets34,613 39,268 
Property and equipment, net5,217 5,665 
Operating lease right-of-use assets, net1,569 1,856 
Intangible assets, net12,062 13,352 
Goodwill4,438 4,438 
Cost method investment
6,000 — 
Notes receivable8,327 1,285 
Other assets36 — 
Non-current assets – discontinued operations— 7,438 
Total assets$72,262 $73,302 
Liabilities and Stockholders’ Equity:
Current liabilities:
Accounts payable$1,141 $1,447 
Accrued liabilities1,386 462 
Accrued compensation1,633 1,838 
Accrued warranty42 38 
Lumber derivative contracts94 104 
Deferred revenue1,479 1,673 
Short-term debt 537 3,383 
Operating lease liabilities395 372 
Finance lease liabilities54 82 
Current liabilities - discontinued operations— 18,146 
Total current liabilities6,761 27,545 
Deferred tax liabilities254 — 
Operating lease liabilities, net of current portion1,208 1,510 
Finance lease liabilities, net of current portion45 96 
Non-current liabilities - discontinued operations— 2,396 
Total liabilities8,268 31,547 
Commitments and contingencies (Note 9)
Stockholders’ Equity:
Preferred stock, $0.0001 par value: 10,000,000 shares authorized: Series A Preferred Stock, 8,000,000 shares authorized, liquidation preference ($10.00 per share), 1,915,637 shares issued and outstanding at September 30, 2023. (Liquidation preference: $18,988,390 as of September 30, 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; 15,826,217 and 15,177,919 shares issued and outstanding (net of treasury shares) at September 30, 2023 and December 31, 2022, respectively
2 1 
Treasury stock, at cost; 258,849 shares at September 30, 2023 and December 31, 2022, respectively
(5,728)(5,728)
Additional paid-in capital160,549 161,715 
Accumulated deficit(109,817)(133,221)


Total stockholders’ equity63,994 41,755 
Total liabilities and stockholders’ equity$72,262 $73,302 
See accompanying notes to the unaudited condensed consolidated financial statements.


STAR EQUITY HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
Nine Months Ended September 30,
20232022
Operating activities
Net (loss) income$23,404 $(7,161)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation of property and equipment762 1,369 
Amortization of intangible assets1,290 1,290 
Non-cash lease expense570 885 
Provision for bad debt, net73 435 
Stock-based compensation284 322 
Amortization of loan issuance costs45 104 
Gain on sale of assets (512)156 
Gain on disposal of discontinued operations(26,680)— 
Deferred income taxes(221)225 
Unrealized (gain) loss of equity securities and lumber derivatives14 2,132 
Changes in operating assets and liabilities:
Accounts receivable5,525 1,466 
Inventories(246)(4,539)
Other assets607 (582)
Accounts payable685 1,821 
Accrued compensation(784)345 
Deferred revenue and billings in excess of costs and estimated profit(460)1,034 
Operating lease liabilities(400)(865)
Other liabilities(1,287)1,329 
Net cash provided (used) by operating activities2,669 (234)
Investing activities
Purchases of property and equipment(568)(1,232)
Proceeds from sale of discontinued operations19,681 — 
Proceeds from sale of property and equipment1,233 217 
Purchases of equity securities(1,090)(3,994)
Proceeds from sales of equity securities247 27 
Net cash provided (used) by investing activities19,503 (4,982)
Financing activities
Proceeds from borrowings35,969 80,061 
Repayment of debt(38,402)(81,152)
Proceeds from the sale of common stock, warrants, and exercise of over allotment options1 13,198 
Fees paid on issuance of common stock— (450)
Proceeds from the exercise of warrants4 — 
Taxes paid related to net share settlement of equity awards(16)(5)
Repayment of obligations under finance leases(178)(466)
Preferred stock dividends paid(1,437)(1,437)
Net cash provided (used) by financing activities(4,059)9,749 
Net increase in cash, cash equivalents, and restricted cash including cash within discontinued operations18,114 4,533 
Less: net increase in cash classified within discontinued operations1,381 (228)
Net increase in cash, cash equivalents, and restricted cash16,733 4,761 
Cash, cash equivalents, and restricted cash at beginning of period4,519 3,928 
Cash, cash equivalents, and restricted cash at end of period$21,252 $8,689 
Reconciliation of cash, cash equivalents, and restricted cash at end of year
Cash and cash equivalents$20,691 $7,895 
Restricted cash561 794 
Cash, cash equivalents, and restricted cash at end of period$21,252 $8,689 


Supplemental Information
Cash paid during the year for interest$238 $— 
Non-Cash Investing Activities
Noncash note receivable$7,000 $— 
Noncash investment in private company
$6,000 $— 
See accompanying notes to the unaudited condensed consolidated financial statements.


STAR EQUITY HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
(Unaudited) (In thousands)
Perpetual Preferred StockCommon stockTreasury StockAdditional paid-in capitalAccumulated deficitTotal
stockholders’
equity
SharesAmountSharesAmount
Balance at December 31, 20221,916$18,98815,178$1$(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)
Preferred stock dividends paid— — — — — — — — 
Net income (loss)— — — — — — 435 435 
Balance at March 31, 20231,916 18,988 15,193 1 (5,728)161,338 (132,786)41,813 
Stock-based compensation—————104 — 104 
Shares issued under stock incentive plans, net of shares withheld for employee taxes— — 4 — — — — — 
Dividends to holders of preferred stock ($0.25 per share)
— — — — — (479)— (479)
Net income (loss)— — — — — — 25,591 25,591 
Balance at June 30, 20231,916 18,988 15,197 1 (5,728)160,963 (107,195)67,029 
Stock-based compensation— — — — — 78 — 78 
Shares issued under stock incentive plans, net of shares withheld for employee taxes— — 304 0.5 — (16)— (16)
Proceeds received from warrant exercise— — 325 0.5 — 3 — 4 
Dividends to holders of preferred stock ($0.25 per share)
— — — — — (479)— (479)
Net income (loss)— — — — — — (2,622)(2,622)
Balance at September 30, 2023
1,916 $18,988 15,826 $2 $(5,728)$160,549 $(109,817)$63,994 


Perpetual Redeemable Preferred Stock Perpetual Preferred StockCommon stockTreasury StockAdditional paid-in capitalAccumulated deficitTotal
stockholders’
equity
SharesAmountSharesAmountSharesAmount
Balance at December 31, 20211,916 $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, 20221,916 18,988 — — 15,029 1 (5,728)162,860 (131,670)25,463 
Stock-based compensation— — — — — — — 72 — 72 
Shares issued under stock incentive plans, net of shares withheld for employee taxes— — — — 53 — — — — — 
Dividends to holders of preferred stock ($0.25 per share)
— — — — — — — (479)— (479)
Reclassification of preferred stock to permanent equity (See Note 1)
(1,916)(18,988)1,916 18,988 — — — — — 18,988 
Net income (loss)— — — — — — — — (1,576)(1,576)
Balance at June 30, 2022— $— 1,916 18,988 15,082 $1 $(5,728)$162,453 $(133,246)$42,468 
Stock-based compensation— — — — — — — 106 — 106 
Shares issued under stock incentive plans, net of shares withheld for employee taxes— — — — 57 — — (2)— (2)
Dividends to holders of preferred stock ($0.25 per share)
— — — — — — — (479)— (479)
Net income (loss)— — — — — — — — (1,884)(1,884)
Balance at September 30, 2022
— $— 1,916 $18,988 15,139 $1 $(5,728)$162,078 $(135,130)$40,209 
See accompanying notes to unaudited condensed consolidated financial statements.


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 related to continuing operations are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results of continuing 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. We previously had a Healthcare division which was sold on May 4, 2023, as further described in Note 2. “Discontinued Operations”. Our common stock and preferred stock are listed on the NASDAQ Global Market exchange as “STRR” and “STRRP”, respectively.
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 or in major money market mutual funds offered through brokerage firms. Some of our cash balances are maintained at major banking institutions in the United States, a portion of which may from time to time 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 September 30, 2023, we have $0.3 million of cash in excess of FDIC insured limits.
New Accounting Standards To Be Adopted
No new accounting standards were issued in the quarter ended September 30, 2023 that are expected to have a material impact on our financial statements.


Note 2. Discontinued Operations
On May 4, 2023, we entered into a Stock Purchase and Contribution Agreement (the “Purchase Agreement”), 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 was $40 million, comprised of $19.7 million ($27 million less payoff of debt to Webster Bank (see Note 8. “Debt”) and transaction costs) in cash, a $7 million promissory note (see Note 5. “Supplemental Balance Sheet Information”), and $6 million of New Units in the Parent (see Note 7. “Fair Value Measurements”). The Company completed the sale of Digirad Health simultaneously with entering into the Purchase Agreement.
We deemed the disposition of Digirad Health, which operated our Healthcare business unit, to represent a strategic shift that will have a major effect on our operations and financial results. As of the date of these financial statements, the results of operations of the Healthcare business unit represent “discontinued operations” in accordance with GAAP (ASC 205-20-45-1B). As such, the assets and liabilities, as well as the earnings, of the discontinued operation are presented separately in the unaudited condensed consolidated financial statements for all periods presented. Unless otherwise noted, discussion within the notes to the unaudited condensed consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations relates to continuing operations.
Our variable interest entity (“VIE”), for which we are not the primary beneficiary, was disposed of as part of the sale of our Healthcare division. This VIE was in a small private company that is primarily involved in research related to new heart imaging technologies.
The following table presents financial results of our Healthcare division for the three and nine months ended September 30, 2023 and 2022 (in thousands). Note that we owned this division through May 4, 2023 and that the results for both the three months ended September 30, 2023 and the nine months ended September 30, 2023 reflect that period only:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Total revenues$— $13,137 $17,962 $40,467 
Total cost of revenues— 10,411 12,408 30,887 
Gross profit— 2,726 5,554 9,580 
Operating expenses:
Selling, general and administrative— 3,654 3,369 10,534 
Amortization of intangible assets— 1 — 1 
(Gain) loss on disposal of discontinued operations— — (26,680)— 
Total operating expenses— 3,655 (23,311)10,535 
Income (loss) from discontinued operations— (929)28,865 (955)
Other (expense) income, net— 79 (1,015)160 
Interest expense, net— (116)(173)(264)
Income (loss) from discontinued operations before income taxes— (966)27,677 (1,059)
Income tax benefit (provision)(257)68 (558)605 
Income (loss) from discontinued operations$(257)$(898)$27,119 $(454)


The carrying amounts of the major classes of assets reported as “Assets - discontinued operations” consist of the following as of December 31, 2022 (in thousands):
December 31, 2022
Cash and cash equivalents$288 
Accounts receivable, net9,782 
Inventories, net5,949 
Other current assets1,832 
Property and equipment, net2,683 
Operating lease right-of-use assets, net2,626 
Goodwill1,608 
Other assets521 
$25,289 
The carrying amounts of the major classes of liabilities reported as “Liabilities - discontinued operations” consist of the following as of December 31, 2022 (in thousands):
December 31, 2022
Accounts payable$1,983 
Other accrued liabilities1,863 
Accrued compensation253 
Accrued liabilities2,675 
Deferred revenue1,703 
Operating lease liabilities1,056 
Finance lease liabilities, current portion314 
Short-term debt and current portion of long-term debt8,299 
Deferred tax liabilities176 
Operating lease liabilities, net of current portion1,631 
Finance lease liabilities, net of current portion291 
Other liabilities298 
$20,542 


The following table presents the significant non-cash operating, investing and financing activities from discontinued operations for the nine months ended September 30, 2023 and 2022 (in thousands):
Nine Months Ended September 30,
20232022
Operating activities
Net income (loss) from discontinued operations$27,119 $(454)
Depreciation332 966 
Amortization of intangible assets— 1 
Non-cash lease expense273 606 
Write-off of borrowing costs16 30 
(Gain) loss on disposal of discontinued operations(26,680)— 
Share-based compensation1 5 
(Gain )Loss on disposal of assets135 (253)
Provision for bad debt17 30 
Deferred income taxes(176)(672)
Accounts receivable1,333 (385)
Inventory(681)(1,357)
Other assets1,044 (95)
Accounts payable994 1,387 
Accrued compensation(580)4 
Deferred revenue(101)26 
Operating lease liabilities(283)18 
Other liabilities(1,730)683 
Net cash provided by (used in) operating activities1,033 540 
Net cash provided by (used in) investing activities— (345)
Net cash provided by (used in) financing activities347 78 
Net increase (decrease) in cash and cash equivalents and restricted cash$1,380 $273 
Following is the reconciliation of purchase price to the gain recognized in income from discontinued operations for the nine months ended September 30, 2023 (in thousands), prior to any proposed working capital adjustments:
Estimated proceeds of the disposition, net of transaction costs and indebtedness payoff$32,682 
Assets of the businesses(24,071)
Liabilities of the businesses18,069 
Pre-tax gain on the disposition$26,680 
Note 3. Revenue
Disaggregation of Revenue
The following tables present our continuing revenues disaggregated by major source for the three and nine months ended September 30, 2023 and 2022 (in thousands):
Three Months Ended September 30, 2023Three Months Ended September 30, 2022
ConstructionTotalConstructionTotal
Major Goods/Service Lines
Construction Revenue from Contracts with Customers$10,435 $10,435 $11,107 $11,107 
Total Revenues$10,435 $10,435 $11,107 $11,107 
Timing of Revenue Recognition
Services and goods transferred over time$— $— $3,816 $3,816 
Services and goods transferred at a point in time10,435 10,435 7,291 7,291 
Total Revenues$10,435 $10,435 $11,107 $11,107 


Nine Months Ended September 30, 2023Nine Months Ended September 30, 2022
ConstructionTotalConstructionTotal
Major Goods/Service Lines
Construction Revenue from Contracts with Customers$31,674 $31,674 $39,544 $39,544 
Total Revenues$31,674 $31,674 $39,544 $39,544 
Timing of Revenue Recognition
Services and goods transferred over time$— $— $11,569 $11,569 
Services and goods transferred at a point in time31,674 31,674 27,975 27,975 
Total Revenues$31,674 $31,674 $39,544 $39,544 
Deferred Revenue
Changes in deferred revenue, which consist primarily of customer deposits, for the nine months ended September 30, 2023 are as follows (in thousands):
Balance at December 31, 2022
$1,673 
Revenue recognized that was included in balance at beginning of the year(1,548)
Deferred revenue, net, related to contracts entered into during the year1,354 
Balance at September 30, 2023
$1,479 
Note 4. Basic and Diluted Net Income (Loss) Per Share
We present net income (loss) per share attributable to common stockholders in conformity with the two-class method required for participating securities, as the warrants are considered participating securities. We have not allocated net income (loss) attributable to common stockholders to warrants because the holders of our warrants are not contractually obligated to share in our income (loss). Basic net income (loss) per share attributable to common stockholders is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share attributable to common stockholders is calculated to give effect to all potential shares of common stock, including common stock issuable upon exercise of warrants, stock options, and restricted stock units (“RSUs”). In periods for which there is a net loss, diluted loss per common share is equal to basic loss per common share, since the effect of including any common stock equivalents would be antidilutive.
The following table sets forth the reconciliation of shares used to compute basic and diluted net income (loss) per share for the periods indicated (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Numerator:
Income (loss) from continuing operations, net of tax$(2,365)$(986)$(3,715)$(6,707)
Income (loss) from discontinued operations, net of tax (Note 10)(257)(898)27,119 (454)
Net income (loss)(2,622)(1,884)23,404 (7,161)
Deemed dividend on Series A perpetual preferred stock(479)(479)(1,437)(1,437)
Net income (loss) attributable to common shareholders$(3,101)$(2,363)$21,967 $(8,598)
Denominator:
Weighted average common shares outstanding15,642 15,109 15,344 14,208 
Weighted average prefunded warrants outstanding39 325 229 295 
Weighted average shares outstanding - basic15,681 15,434 15,573 14,503 
Dilutive potential common shares:
Restricted stock units138 — 170 — 
Weighted average shares outstanding - diluted15,819 15,434 15,743 14,503 
Net income (loss) per share
Continuing operations
Basic$(0.15)$(0.06)$(0.24)$(0.46)
Diluted$(0.15)$(0.06)$(0.24)$(0.46)
Discontinued operations
Basic$(0.02)$(0.06)$1.74 $(0.03)
Diluted$(0.02)$(0.06)$1.72 $(0.03)
Net income (loss) per share
Basic$(0.17)$(0.12)$1.50 $(0.49)
Diluted$(0.17)$(0.12)$1.49 $(0.49)
Net income (loss) per share, attributable to common shareholders
Basic$(0.20)$(0.15)$1.41 $(0.59)
Diluted$(0.20)$(0.15)$1.40 $(0.59)
*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 September 30,Nine Months Ended September 30,
2023202220232022
Stock options2 3 2 5 
Restricted stock units60 109 70 128 
Stock warrants11,865 11,865 11,865 10,843 
Total11,927 11,977 11,937 10,976 


Note 5. Supplementary Balance Sheet Information
Inventories
The components of inventories are as follows (in thousands):
September 30, 2023December 31, 2022
Raw materials$2,609 $2,838 
Work-in-process413 571 
Finished goods1,221 1,269 
Total inventories4,243 4,678 
Less reserve for excess and obsolete inventories— — 
Total inventories, net$4,243 $4,678 
Property and Equipment
Property and equipment consist of the following (in thousands):
September 30, 2023December 31, 2022
Land$753 $805 
Buildings and leasehold improvements3,223 4,185 
Machinery and equipment3,237 2,509 
Gross property and equipment7,213 7,499 
Accumulated depreciation(1,996)(1,834)
Total property and equipment, net$5,217 $5,665 
We sold our Waterford, Maine facility on June 30, 2023 for approximately $1.2 million after closing costs and recognized a gain of $386 thousand which we have recorded in other income/expense.
Warranty Reserves
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.
Note Receivable
As a part of the Transaction described further in Note 2. “Discontinued Operations”, a $7 million promissory note was entered into 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 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. This note, the principal of which is approximately $1.3 million at September 30,2023, is included in “Notes receivable, current portion” and “Notes receivable” in our Consolidated Balance Sheet at September 30, 2023 for $0.2 million and $1.1 million, respectively.
Cost Method Investment
As a part of the sale of Digirad Health, we received $6.0 million in the common equity of TTG Parent LLC. We have elected the measurement alternative under ASC 321. 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.


Note 6. Leases
Lessee
We have operating and finance leases for corporate offices, vehicles, and certain equipment. Our leases have remaining lease terms of 1 year to 10 years, some of which include options to extend the leases and some of which include options to terminate the leases within 1 year. Operating leases 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 September 30,Nine Months Ended September 30,
2023202220232022
Operating lease cost$98 $117 $311 $334 
Finance lease cost:
Amortization of finance lease assets$17 $24 $62 $71 
Interest on finance lease liabilities2 4 9 13 
Total finance lease cost$19 $28 $71 $84 
Supplemental cash flow information related to leases from continuing operations was as follows (in thousands):
Nine Months Ended September 30,
20232022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$288 $273 
Operating cash flows from finance leases$9