The accompanying unaudited interim Consolidated Financial Statements of Safeguard Scientifics, Inc. (“Safeguard” or the “Company”) were prepared in accordance with accounting principles generally accepted in the United States of America and the interim financial statement rules and regulations of the SEC. In the opinion of management, these statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Consolidated Financial Statements. The interim operating results are
necessarily indicative of the results for a full year or for any interim period. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements. The Consolidated Financial Statements included in this Form
-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form
-Q and with the Company’s Consolidated Financial Statements and Notes thereto included in the Company’s
Annual Report on Form
the Company had
million of cash and cash equivalents.
Safeguard announced that, from that date forward, the Company will
deploy any capital into new opportunities and will focus on supporting our existing companies and maximizing monetization opportunities to return value to shareholders. In that context, the Company has, is and will consider initiatives including, among others: the sale of individual ownership interests, the sale of certain or all ownership interests in secondary market transactions, or a combination thereof, as well as other opportunities to maximize shareholder value.
The Company believes that its cash and cash equivalents at
will be sufficient to fund operations past
year from the issuance of these financial statements.
Principles of Accounting for Ownership Interests
The Company accounts for its ownership interests using
of the following methods: Equity or Other. The accounting method applied is generally determined by the degree of the Company's influence over the entity, primarily determined by our voting interest in the entity.
In addition to holding voting and non-voting equity, the Company also periodically makes advances to its companies in the form of promissory notes which are included in the Ownership interests in and advances on the Consolidated Balance Sheets.
The Company accounts for ownership interests whose results are
consolidated, but over which it exercises significant influence, under the equity method of accounting. Whether or
the Company exercises significant influence with respect to an ownership interest depends on an evaluation of several factors including, among others, representation on the board of directors and our ownership level, which is generally a
interest in the voting securities of a company, including voting rights associated with the Company’s holdings in common, preferred and other convertible instruments in the company. Under the equity method of accounting, the Company does
reflect a company’s financial statements within our Consolidated Financial Statements; however, our share of the income or loss of such company is reflected in Equity income (loss) in the Consolidated Statements of Operations. The Company includes the carrying value of equity method companies in Ownership interests in and advances on the Consolidated Balance Sheets. Any excess of the Company’s cost over its underlying interest in the net assets of equity method companies that is allocated to intangible assets is amortized over the estimated useful lives of the related intangible assets. The Company reflects its share of the income or loss of the equity method companies on a
quarter lag. This reporting lag could result in a delay in recognition of the impact of changes in the business or operations of these companies.
When the Company’s carrying value in an equity method company is reduced to zero, the Company records
further losses in its Consolidated Statements of Operations unless the Company has an outstanding guarantee obligation or has committed additional funding to such equity method company. When such equity method company subsequently reports income, the Company will
record its share of such income until it exceeds the amount of the Company’s share of losses
We account for our equity interests in companies which are
accounted for under the equity method as equity securities without readily determinable fair values. We estimate the fair value of these securities based on our original cost less impairments, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar interest of the same issuer. Under this method, our share of the income or losses of such companies is
included in our Consolidated Statements of Operations. We include the carrying value of these interests in Ownership interests and advances on the Consolidated Balance Sheets.
Impairment of Ownership Interests and Advances
On a periodic basis, but
less frequently than quarterly, the Company evaluates the carrying value of its ownership interests and advances for possible impairment based on achievement of business plan objectives and milestones, the estimated fair value of each company relative to its carrying value, the financial condition and prospects of the company and other relevant factors. The business plan objectives and milestones the Company considers include, among others, those related to financial performance, such as achievement of planned financial results or completion of capital raising activities, and those that are
primarily financial in nature, such as hiring of key employees or the establishment of strategic relationships.
Management then determines whether there has been an other than temporary decline in the value of its ownership interest in the company. Impairment is measured as the amount by which the carrying value of an asset exceeds its estimated fair value.
The estimated fair value of privately held companies is generally determined based on the value at which independent
parties have invested or have committed to invest in these companies or based on other valuation methods, including discounted cash flows, valuation of comparable public companies and the valuation of acquisitions of similar companies.
Impairment charges related to equity method companies are included in Equity income (loss) in the Consolidated Statements of Operations. Impairment charges related to non-equity method companies and funds are included in Other income (loss), net in the Consolidated Statements of Operations.
The reduced cost basis of a previously impaired company accounted for using the Equity method are
written-up if circumstances suggest the value of the company has subsequently recovered.
Recently Adopted Accounting Pronouncements
the Financial Accounting Standards Board ("FASB") issued ASU
Revenue from Contracts with Customers (Topic
and related subsequent amendments outline a single comprehensive model to use to account for revenue arising from contracts with customers and supersede most current revenue recognition guidance. For public companies, the guidance was effective for annual periods beginning after
and any interim periods that fall within that reporting period. For nonpublic companies, the guidance was effective for annual periods beginning after
December 15, 2018
and interim periods within annual periods beginning after
December 15, 2019
with early adoption permitted. As the new standard superseded most existing revenue guidance, it could impact revenue and cost recognition for companies in which we hold an ownership interest. Any change in revenue or cost recognition for companies in which we hold an ownership interest could affect the Company's recognition of its share of the results of its equity method companies. On
July 20, 2017,
the SEC staff observer at the FASB’s Emerging Issues Task Force ("EITF") meeting announced that the SEC staff will
object if a private company equity method investee meeting the definition of a public business entity that otherwise would
meet the definition of a public business entity except for the inclusion of its financial statements or financial information in another entity’s filings with the SEC, uses private company adoption dates for the new revenue standard. As a result, the Company's private, calendar year companies adopted the revenue standard for the year ending
December 31, 2019.
The impact of adoption of the new revenue standard is reflected in the Company’s financial results for the interim and annual reporting periods beginning in
quarter-lag basis. The impact during the quarter ended
March 31, 2020