SAFEGUARD SCIENTIFICS INC, 10-Q filed on 5/3/2019
Quarterly Report
v3.19.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2019
Apr. 30, 2019
Document Documentand Entity Information [Abstract]    
Entity Registrant Name SAFEGUARD SCIENTIFICS INC  
Entity Central Index Key 0000086115  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Document Type 10-Q  
Document Period End Date Mar. 31, 2019  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q1  
Amendment Flag false  
Entity Emerging Growth Company false  
Entity Small Business true  
Entity Common Stock, Shares Outstanding   20,576,575
Trading Symbol SFE  
v3.19.1
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 31, 2018
Current Assets:    
Cash and cash equivalents $ 44,592 $ 7,703
Restricted cash 525 500
Marketable securities 32,905 37,955
Trading securities 306 0
Prepaid expenses and other current assets 3,380 2,669
Total current assets 81,708 48,827
Property and equipment, net 2,430 808
Ownership interests in and advances to partner companies 85,603 95,585
Other assets 712 517
Total Assets 170,453 145,737
Current Liabilities:    
Accounts payable 110 165
Accrued compensation and benefits 1,652 3,433
Accrued expenses and other current liabilities 2,170 2,182
Credit facility - current 65,687 22,100
Credit facility repayment feature 7,069 5,060
Lease liability - current 250  
Total current liabilities 76,938 32,940
Credit facility - non-current 0 43,014
Lease liability - non-current 2,597  
Other long-term liabilities 2,039 2,804
Total Liabilities 81,574 78,758
Commitments and contingencies (Note 10)
Equity:    
Preferred stock, $0.10 par value; 1,000 shares authorized 0 0
Common stock, $0.10 par value; 83,333 shares authorized; 21,573 shares issued at March 31, 2019 and December 31, 2018 2,157 2,157
Additional paid-in capital 811,352 810,928
Treasury stock, at cost; 998 and 914 shares at March 31, 2019 and December 31, 2018, respectively (15,157) (15,001)
Accumulated deficit (709,442) (731,105)
Accumulated other comprehensive loss (31) 0
Total Equity 88,879 66,979
Total Liabilities and Equity $ 170,453 $ 145,737
v3.19.1
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
shares in Thousands
Mar. 31, 2019
Dec. 31, 2018
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 0.10 $ 0.10
Preferred stock, shares authorized 1,000 1,000
Common stock, par value $ 0.10 $ 0.10
Common stock, shares authorized 83,333 83,333
Common stock, shares issued 21,573 21,573
Treasury stock, at cost; 998 and 914 shares at March 31, 2019 and December 31, 2018, respectively 998 914
v3.19.1
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Income Statement [Abstract]    
General and administrative expense $ 3,057 $ 5,589
Operating loss (3,057) (5,589)
Other loss, net (1,885) (1,435)
Interest income 873 798
Interest expense (2,535) (2,690)
Equity income, net 28,267 2,746
Net income (loss) before income taxes 21,663 (6,170)
Income tax benefit (expense) 0 0
Net income (loss) $ 21,663 $ (6,170)
Net income (loss) per share:    
Basic (in dollars per share) $ 1.05 $ (0.30)
Diluted (in dollars per share) $ 1.05 $ (0.30)
Weighted average shares used in computing income (loss) per share:    
Basic (in shares) 20,585 20,506
Diluted (in shares) 20,585 20,506
v3.19.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Cash Flows from Operating Activities:    
Net cash used in operating activities $ (5,782) $ (6,774)
Cash Flows from Investing Activities:    
Proceeds from sales of and distributions from companies 41,778 3,257
Advances and loans to companies (3,925) (4,036)
Repayment of advances and loans to companies 0 10,500
Purchases of marketable securities (57,243) 0
Proceeds from sales and maturities in marketable securities 62,235 1,410
Net cash provided by investing activities 42,845 11,131
Cash Flows from Financing Activities:    
Tax withholdings related to equity-based awards (149) (150)
Net cash used in financing activities (149) (150)
Net change in cash, cash equivalents and restricted cash 36,914 4,207
Cash, cash equivalents and restricted cash at beginning of period 8,203 27,087
Cash, cash equivalents and restricted cash at end of period $ 45,117 $ 31,294
v3.19.1
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY - USD ($)
shares in Thousands, $ in Thousands
Total
Accumulated Deficit
AOCI Attributable to Parent
Common Stock
Additional Paid-in Capital
Treasury Stock
Balance at Dec. 31, 2017 $ 81,796 $ (715,476) $ (113) $ 2,157 $ 812,536 $ (17,308)
Balance (in shares) at Dec. 31, 2017       21,573    
Balance (in shares) at Dec. 31, 2017           999
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income (6,170) (6,170)        
Cancellations of and restricted stock withheld for taxes (150)       (17) $ (133)
Issuance of restricted stock, net of tax withholdings (in shares)           13
Stock-based compensation expense 277       277  
Other comprehensive loss 82   82      
Balance at Mar. 31, 2018 75,835 (721,646) (31) $ 2,157 812,796 $ (17,441)
Balance (in shares) at Mar. 31, 2018       21,573    
Balance (in shares) at Mar. 31, 2018           1,012
Balance at Dec. 31, 2018 66,979 (731,105) 0 $ 2,157 810,928 $ (15,001)
Balance (in shares) at Dec. 31, 2018       21,573    
Balance (in shares) at Dec. 31, 2018           914
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income 21,663 21,663        
Stock options exercised, net of tax withholdings 0       0 $ 0
Stock options exercised, net of tax withholdings (in shares)           1
Cancellations of and restricted stock withheld for taxes (149)       7 $ (156)
Issuance of restricted stock, net of tax withholdings (in shares)           83
Stock-based compensation expense 417       417  
Other comprehensive loss (31)   (31)      
Balance at Mar. 31, 2019 $ 88,879 $ (709,442) $ (31) $ 2,157 $ 811,352 $ (15,157)
Balance (in shares) at Mar. 31, 2019       21,573    
Balance (in shares) at Mar. 31, 2019           998
v3.19.1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Statement - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Statement of Comprehensive Income [Abstract]    
Net income $ 21,663 $ (6,170)
Share of other comprehensive income (loss) of equity method investments (31) 0
Reclassification adjustment for sale of equity method investments 0 82
Total comprehensive income (loss) $ 21,632 $ (6,088)
v3.19.1
General
3 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
General
General
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 not 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 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-Q and with the Company’s Consolidated Financial Statements and Notes thereto included in the Company’s 2018 Annual Report on Form 10-K.
Liquidity
As of March 31, 2019, the Company had $44.6 million of cash and cash equivalents and $33.2 million of marketable securities and trading securities for a total of $77.8 million. As of March 31, 2019, the Company had $68.6 million of debt outstanding, due in May 2020.
In January 2018, Safeguard announced that, from that date forward, the Company will not deploy any capital into new partner company opportunities and will focus on supporting our existing partner companies and maximizing monetization opportunities to return value to shareholders. In that context, we have, are and will consider initiatives including, among others: the sale of individual partner companies, the sale of certain partner company interests in secondary market transactions, or a combination thereof, as well as other opportunities to maximize shareholder value. We anticipate returning value to shareholders after satisfying our debt obligations and providing for working capital needs.
As of March 31, 2019, the Company had $68.6 million of principal outstanding on the Credit Facility due in May 2020. The Credit Facility requires the Company to maintain (i) a liquidity threshold of at least $20 million of unrestricted cash; (ii) a minimum aggregate appraised value of ownership interests in its partner companies, plus unrestricted cash in excess of the liquidity threshold, of at least $350 million less the aggregate amount of all prepayments, and (iii) limit certain expenses (which shall exclude severance payments, interest expense, depreciation and stock-based compensation) incurred or paid to no more than $11.5 million in any twelve-month period after the date of the amendment (or such shorter period as has elapsed since the date of the amendment). Additionally, the Company is restricted from repurchasing shares of its outstanding common stock and/or issuing dividends until such time as the Credit Facility is repaid in full. As of the date these condensed consolidated financial statements were issued, the Company was in compliance with all of these covenants.
Repayment terms under the Credit Facility include a make-whole interest provision equal to the interest that would have been payable had the principal amount subject to repayment been outstanding through the maturity date. If the aggregated amount of the Company’s qualified cash at any quarter end date exceeds $50.0 million, the Company is required to prepay outstanding principal amounts under the Amended Credit Facility, plus any applicable accrued and make-whole interest, in an amount equal to such excess. The Company exceeded the qualified cash threshold at March 31, 2019 and the Company made the applicable required prepayment, as required, on April 15, 2019.
The Company believes that its cash, cash equivalents and marketable securities at March 31, 2019 will be sufficient to fund operations past one year from the issuance of these financial statements.
Significant Accounting Policies
Property and Equipment
Property and equipment represents a right-of-use asset resulting from the adoption of Accounting Standards Update ("ASU") 2016-02, Leases, and other previously existing leasehold improvements. The leasehold improvements are amortized over the shorter of the estimated useful lives or the expected remaining term of the lease. The right-of-use asset is reduced over the remaining term of the lease (April 2026) in a manner that results in a straight-line lease expense, when combined with the interest factor on the lease liability.     


Lease liability
The initial lease liability represents the present value of the fixed escalating lease payments through April 2026 associated with the Company's corporate headquarters operating office lease. The discount rate used to calculate the lease liability is based on the Company's incremental borrowing rate, approximately 12%, at the transition to the guidance of ASU 2016-02, Leases. Subsequent values of the lease liability will reflect the reduction in the lease liability for operating lease payments less an amount representing interest, which is included in the straight-line lease expense. There is no residual value guarantee associated with this operating lease arrangement. The Company has incurred operating lease expenses, and operating cash outflows of $0.1 million and $0.1 million for the three months ended March 31, 2019 and 2018, respectively.

In March 2019, the Company entered into a sublease of its existing corporate headquarters office space beginning in June 2019. The term of the sublease is through April 2026, the same as the Company's underlying existing lease. Fixed sublease payments to the Company are escalating over the term of the lease and aggregate to $3.7 million.

A summary of the Company's operating lease at March 31, 2019 follows:

 
Operating lease payments
Sublease income
 
(Unaudited - In thousands)
2019 (nine months ending December 31)
$
434

$
166

2020
587

509

2021
595

525

2022
601

540

2023
607

556

2024
613

573

Thereafter
826

789

Total future minimum lease payments
4,263

$
3,658

Less imputed interest
(1,416
)
 
Total operating lease liabilities
$
2,847

 
 
 
 


Valuation of Credit Facility repayment feature
The fair value of the Credit Facility repayment feature (a Level 3 measurement) is determined quarterly based on the present value of make-whole interest payments that are expected to be paid based on cash flow estimates that include a probability weighted estimate of exit transactions, estimated follow-on deployments, estimated quarterly operating cash flows and other cash commitments that would result in qualified cash exceeding the $50 million threshold specified in the Credit facility.
Principles of Accounting for Ownership Interests in Companies
The Company accounts for its interests in its partner companies using one 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 partner companies in the form of promissory notes which are included in the Ownership interests in and advances to partner companies line item in the Consolidated Balance Sheets.
Equity Method. The Company accounts for partner companies whose results are not consolidated, but over which it exercises significant influence, under the equity method of accounting. Whether or not the Company exercises significant influence with respect to a partner company depends on an evaluation of several factors including, among others, representation of the Company on the partner company’s board of directors and the Company’s ownership level, which is generally a 20% to 50% interest in the voting securities of a partner 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 not reflect a partner company’s financial statements within the Company’s Consolidated Financial Statements; however, the Company’s share of the income or loss of such partner company is reflected in Equity income (loss) in the Consolidated Statements of Operations. The Company includes the carrying value of equity method partner companies in Ownership interests in and advances to partner companies on the Consolidated Balance Sheets. Any excess of the Company’s cost over its underlying interest in the net assets of equity method partner 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 partner companies on a one quarter lag. This reporting lag could result in a delay in recognition of the impact of changes in the business or operations of these partner companies.
When the Company’s carrying value in an equity method partner company is reduced to zero, the Company records no 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 partner company. When such equity method partner company subsequently reports income, the Company will not record its share of such income until it exceeds the amount of the Company’s share of losses not previously recognized.
Other Method. We account for our equity interests in companies which are not 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 investment of the same issuer. Under this method, our share of the income or losses of such companies is not included in our Consolidated Statements of Operations. We include the carrying value of these investments in Ownership interests in and advances to partner companies on the Consolidated Balance Sheets.
Recently Adopted Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). ASU 2014-09 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 is effective for annual periods beginning after December 15, 2017 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 partner companies. Any change in revenue or cost recognition for partner companies could affect the Company's recognition of its share of the results of its equity method partner 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 not object if a private company equity method investee meeting the definition of a public business entity that otherwise would not 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 partner companies will adopt the new revenue standard for the year ending December 31, 2019.  The impact of adoption of the new revenue standard will be reflected in the Company’s financial results for the interim and annual reporting periods beginning in 2020 on a one quarter-lag basis.
In February 2016, the FASB issued ASU 2016-02, Leases. The guidance in ASU 2016-02 requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. As with previous guidance, there continues to be a differentiation between finance leases and operating leases, however this distinction now primarily relates to differences in the manner of expense recognition over time and in the classification of lease payments in the statement of cash flows. Lease assets and liabilities arising from both finance and operating leases will be recognized in the statement of financial position. The transitional guidance for adopting the requirements of ASU 2016-02 calls for a modified retrospective approach that includes a number of optional practical expedients that entities may elect to apply. The guidance in ASU 2016-02 became effective for the Company on January 1, 2019. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed the Company to carry forward its historical lease classification. In addition, the Company has elected to exempt short term leases that qualify from recognizing right of use assets or lease liabilities, and has elected to not separate lease and non-lease components for all leases of which it is the lessee. The Company’s non-lease components are primarily related to utility and maintenance costs, which are typically variable in nature and are expensed in the period incurred. As of January 1, 2019, the Company's only material long-term lease was for its corporate headquarters in Radnor, PA under a lease expiring in 2026. The Company also has immaterial office equipment leases expiring at various dates through 2020. The Company recorded an initial lease liability of $2.9 million, a right-of-use asset of $2.2 million included in property and equipment and eliminated the deferred rent liability of $0.7 million that was previously included in other long-term liabilities.
v3.19.1
Ownership Interests in and Advances to Partner Companies and Funds
3 Months Ended
Mar. 31, 2019
Investments in and Advances to Affiliates, Schedule of Investments [Abstract]  
Ownership Interests in and Advances to Partner Companies
Ownership Interests in and Advances to Partner Companies
The following summarizes the carrying value of the Company’s ownership interests in and advances to partner companies.   
   
March 31, 2019
 
December 31, 2018
   
(Unaudited - In thousands)
Equity Method Companies:
   
 
 
Partner companies
$
48,342

 
$
64,097

Private equity funds
392

 
392

   
48,734

 
64,489

Other Companies:
   
 
 
Partner companies and other holdings
17,585

 
15,260

Private equity funds
500

 
511

   
18,085

 
15,771

Advances to partner companies
18,784

 
15,325

   
$
85,603

 
$
95,585



In January 2019, Propeller was acquired by another entity for cash. The Company received $41.5 million in cash proceeds in connection with the transaction, excluding $0.8 million of holdbacks and escrows that may be substantially released on various dates on or before January 2020. The Company recognized a gain of $34.9 million, which is included in Equity income (loss) in the Consolidated Statements of Operations for the three months ended March 31, 2019.
In January 2019, Brickwork merged into another privately-held company. The Company received a preferred equity interest in the acquiror and accounts for this interest as an equity interest without a readily determinable fair value. The Company did not recognize a gain or loss in 2019 as a result of this transaction.
Summarized Financial Information
The following table summarizes statement of operations for any partner companies accounted for under the equity method for the three months ended March 31, 2019 and 2018, respectively. These results have been compiled from respective company financial statements, reflect certain historical adjustments, and are reported on a one quarter lag basis. Results of operations of the companies are excluded for periods prior to their acquisition, subsequent to their disposition and subsequent to the discontinuation of equity method of accounting. Historical results are not adjusted when the Company exits, writes-off or discontinues the equity method of accounting. 
   
Three months ended March 31,
   
2019
 
2018
 
(Unaudited - In thousands)
Results of Operations:
 
 
 
Revenue
$
43,868

 
$
110,393

Gross profit
$
24,589

 
$
78,071

Net loss
$
(33,616
)
 
$
(31,805
)
v3.19.1
Acquisitions of Ownership Interests in Partner Companies and Funds
3 Months Ended
Mar. 31, 2019
Equity Method Investments and Joint Ventures [Abstract]  
Acquisitions of Ownership Interests in Partner Companies
Acquisitions of Ownership Interests in Partner Companies
The Company deployed an aggregate of $0.4 million for additional equity interest in Clutch Holdings. The Company had previously deployed an aggregate of $16.3 million in Clutch. Clutch provides customer intelligence and personalized engagements that empower consumer-focused businesses to identify, understand and motivate each segment of their customer base. The Company accounts for its interest in Clutch Holdings under the equity method.
The Company funded an additional $2.0 million of convertible bridge loans to Sonobi, Inc. The Company had previously deployed $11.4 million in Sonobi. Sonobi is an advertising technology developer that designs advertising tools and solutions for the industry's leading media, publishers, brand advertisers, media agencies, DSPs, and media technology providers. The Company accounts for its interest in Sonobi under the equity method.
The Company funded an aggregate of $0.7 million of convertible loans to NovaSom, Inc. The Company had previously deployed an aggregate of $26.4 million in NovaSom. NovaSom is a medical device company focused on obstructive sleep apnea, specifically home testing with its FDA-cleared wireless device called AccuSom® home sleep test. The Company accounts for its interest in NovaSom under the equity method.
The Company funded an aggregate of $0.9 million of convertible bridge loans to WebLinc, Inc. The Company had previously deployed an aggregate of $15.0 million in WebLinc. WebLinc is an e-commerce platform and services provider for fast growing online retailers. The Company accounts for its interest in WebLinc under the equity method.
v3.19.1
Fair Value Measurements
3 Months Ended
Mar. 31, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
The Company categorizes its financial instruments into a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument. Financial instruments recorded at fair value on the Company’s Consolidated Balance Sheets are categorized as follows:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Include other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The following table provides the carrying value and fair value of certain financial assets and liabilities of the Company measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018:
   
Carrying
Value
 
Fair Value Measurement at March 31, 2019
   
Level 1
 
Level 2
 
Level 3
 
(Unaudited - In thousands)
Cash and cash equivalents
$
44,592

 
$
44,592

 
$

 
$

 
 
 
 
 
 
 
 
Restricted cash
$
525

 
$
525

 
$

 
$

 
 
 
 
 
 
 
 
Trading securities
$
306

 
$
306

 
$

 
$

 
 
 
 
 
 
 
 
Marketable securities—held-to-maturity:
   

 
   

 
   

 
   

U.S. Government securities
$
32,905

 
$
32,905

 
$

 
$

 
 
 
 
 
 
 
 
Credit facility repayment feature liability
$
7,069

 
$

 
$

 
$
7,069

 
Carrying
Value
 
Fair Value Measurement at December 31, 2018
   
Level 1
 
Level 2
 
Level 3
 
(Unaudited - In thousands)
Cash and cash equivalents
$
7,703

 
$
7,703

 
$

 
$

 
 
 
 
 
 
 
 
Restricted cash equivalents
$
500

 
$
500

 
$

 
$

 
 
 
 
 
 
 
 
Marketable securities—held-to-maturity:
   
 
 
 
 
 
 
U.S. Government securities
$
37,955

 
$
37,955

 
$

 
$

 
 
 
 
 
 
 
 
Credit facility repayment feature liability
$
5,060

 
$

 
$

 
$
5,060


As of March 31, 2019, $32.9 million of marketable securities had contractual maturities which were less than one year. Held-to-maturity securities are carried at amortized cost, which, due to the short-term maturity of these instruments, approximates fair value using quoted prices in active markets for identical assets or liabilities defined as Level 1 inputs under the fair value hierarchy. As of March 31, 2019, $7.1 million is recorded as a credit facility repayment feature liability, an increase of $2.0 million from December 31, 2018, due to the provision in the Credit Facility that requires prepayments of outstanding principal amounts when the Company’s qualified cash at any quarter end date exceeds $50.0 million. The prepayment feature is an embedded derivative that is accounted for as a liability separate from the Credit Facility. The liability is adjusted to the fair value of required projected future debt prepayments. The liability may change materially based upon management's probability weighted cash forecast at each balance sheet date. Management's cash forecasts are defined as Level 3 inputs under the fair value hierarchy.
v3.19.1
Credit Facility and Convertible Debentures
3 Months Ended
Mar. 31, 2019
Debt Disclosure [Abstract]  
Credit Facility and Convertible Debentures
Credit Facility and Convertible Debentures
Credit Facility
The Company has a credit facility with HPS Investment Partners, LLC (“Lender”), which was amended in May 2018 ("Credit Facility"). The Credit Facility has a scheduled maturity of May 11, 2020 and bears interest at a rate of either: (A) LIBOR plus 8.5% (subject to a LIBOR floor of 1%), payable on the last day of the one, two or three month interest period applicable to the LIBOR rate advance, or (B) 7.5% plus the greater of: 2%; the Federal Funds Rate plus 0.5%; LIBOR plus 1%; or the U.S. Prime Rate, payable monthly in arrears. The Credit Facility is secured by all of the Company's assets in accordance with the terms of the Credit Facility.
The terms of the Credit Facility include a requirement that if the aggregate amount of the Company’s qualified cash at any quarter end date exceeds $50.0 million, the Company will be required to prepay outstanding principal amounts under the Credit Facility, plus any applicable interest and prepayment fees, in an amount equal to such excess. Based on this requirement, the Company made a principal payment of $24.0 million and a make-whole interest payment of $2.9 million on April 15, 2019 based on the Company's qualified cash at March 31, 2019.
The Company is subject to certain debt covenants under the Credit Facility which require the Company to (i) maintain a liquidity threshold of at least $20 million of unrestricted cash; (ii) maintain a minimum aggregate appraised value of the Company’s ownership interests in its partner companies, plus unrestricted cash in excess of the liquidity threshold, of at least $350 million, less the aggregate amount of all prepayments; (iii) limit deployments to only existing partner companies and such deployments may not exceed, when combined with deployments after January 1, 2018, $40.0 million in the aggregate through the maturity date; and (iv) limit certain expenses (which shall exclude severance payments, interest expense, depreciation and stock-based compensation) incurred or paid to no more than $11.5 million in any twelve-month period after the date of the amendment (or such shorter period as has elapsed since the date of the amendment). Additionally, the Company is restricted from repurchasing shares of its outstanding common stock and/or issuing dividends until such time as the Credit Facility is repaid in full. As of the date these consolidated financial statements were issued, the Company was in compliance with all applicable covenants.
The Credit Facility provides for customary events of default which include (subject in certain cases to customary grace and cure periods), among others, nonpayment of principal or interest; non-compliance with debt covenants; defaults in, or failure to pay, certain other indebtedness; the rendering of judgments to pay certain amounts of money; and certain events of bankruptcy or insolvency. Generally, if an event of default occurs and is not cured within the time periods specified (if any), the Lender may declare the outstanding amount under the Credit Facility to be immediately due and payable.
At March 31, 2019, the principal amount outstanding under the Credit Facility was $68.6 million, the unamortized discount and debt issuance costs were $2.9 million and the net carrying value of the credit facility was $65.7 million.
The Credit Facility requires prepayments of outstanding principal amounts when the Company’s qualified cash at any quarter end date exceeds $50.0 million. This provision in the Credit Facility is an embedded derivative that is accounted for separately from the credit facility. A liability of $0.5 million was recorded on the amendment date for the fair value of potential future prepayments based upon management's probability weighted cash forecast. This amount is also included in debt issuance costs and will be amortized over the remaining term of the credit facility. The liability is adjusted to fair value at each balance sheet date based upon management's updated probability weighted cash forecast. During the three months ended March 31, 2019, the Company recorded an increase in the liability of $2.0 million, which is included in Other loss on the Consolidated Statements of Operations. The increase in the fair value of the credit facility repayment feature liability is due to an increase in the probability of debt prepayments based on the Company's current cash position, projected events that will provide cash, and expected uses of cash during 2019.
The Company recorded interest expense under the credit facility of $2.5 million and $1.8 million for the three months ended March 31, 2019 and 2018, respectively. The effective interest rate on the Credit Facility is 15.3%. The Company made interest payments under the credit facility of $1.9 million and $1.3 million for the three months ended March 31, 2019 and 2018, respectively. During the three months ended March 31, 2018 the Company also recorded $0.9 million of interest expense and made no interest payments related to convertible debentures that were outstanding during that period.
v3.19.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation
Stock-Based Compensation
Stock-based compensation expense was recognized in the Consolidated Statements of Operations as follows:   
   
Three months ended March 31,
   
2019
 
2018
 
(Unaudited - In thousands)
General and administrative expense
$
417

 
$
277

   
$
417

 
$
277


There were no restricted stock or stock options granted during the three months ended March 31, 2019.
v3.19.1
Income Taxes
3 Months Ended
Mar. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The Company’s consolidated income tax benefit (expense) was $0.0 million for the three months ended March 31, 2019 and 2018, respectively. The Company has recorded a valuation allowance to reduce its net deferred tax asset to an amount that is more likely than not to be realized in future years. Accordingly, the tax provision expense that would have been recognized in the three months ended March 31, 2019 was offset by changes in the valuation allowance. During the three months ended March 31, 2019, the Company had no material changes in uncertain tax positions.
v3.19.1
Net Income (Loss) Per Share
3 Months Ended
Mar. 31, 2019
Earnings Per Share [Abstract]  
Net Income (Loss) Per Share
Net Income (Loss) Per Share
The calculations of net income (loss) per share were as follows:
   
Three months ended March 31,
   
2019
 
2018
 
(Unaudited - In thousands, except per share data)
Basic:
   
 
   
Net income (loss)
$
21,663

 
$
(6,170
)
 
 
 
 
Weighted average common shares outstanding
20,585

 
20,506

 
 
 
 
Net income (loss) per share
$
1.05

 
$
(0.30
)
 
 
 
 
Diluted:
 
 
 
Net income (loss) for dilutive share computation
$
21,663

 
$
(6,170
)
 
 
 
 
Number of shares used in basic per share computation
20,585

 
20,506

Unvested restricted stock and DSU's

 

Employee stock options

 

Weighted average common shares outstanding
20,585

 
20,506

 
 
 
 
Net income (loss) per dilutive share
$
1.05

 
$
(0.30
)
 
 
 
 

Basic and diluted average common shares outstanding for purposes of computing net income (loss) per share includes outstanding common shares and vested deferred stock units (DSUs).
If a consolidated or equity method partner company has dilutive stock options, unvested restricted stock, DSUs or warrants, diluted net income (loss) per share is computed by first deducting the income attributable to the potential exercise of the dilutive securities of the partner company from net income (loss). Any impact is shown as an adjustment to net income (loss) for purposes of calculating diluted net income (loss) per share.
Diluted earnings per share do not reflect the following potential shares of common stock that would have an anti-dilutive effect or have unsatisfied performance or market conditions:
At March 31, 2019 and 2018, options to purchase 0.3 million and 0.6 million shares of common stock, respectively, at prices ranging from $9.83 to $19.41 and $9.83 to $19.95, respectively, were excluded from the calculations.
At March 31, 2019 and 2018, unvested restricted stock, performance-based stock units and DSUs convertible into 0.7 million and 1.0 million shares of stock, respectively, were excluded from the calculations.
At March 31, 2018, 2.3 million shares of common stock representing the effect of the assumed conversion of the 2018 Debentures, were excluded from the calculations.
v3.19.1
Segment Reporting
3 Months Ended
Mar. 31, 2019
Segment Reporting [Abstract]  
Segment Reporting
Segment Reporting
The Company operates as one operating segment based upon the similar nature of its technology-driven partner companies, the functional alignment of the organizational structure, and the reports that are regularly reviewed by the chief operating decision maker for the purpose of assessing performance and allocating resources. As of March 31, 2019, the Company held interests in 19 non-consolidated partner companies. The Company’s active partner companies were as follows as of March 31, 2019:
Partner Company
Safeguard Primary Ownership as of March 31, 2019
 
Accounting Method
Aktana, Inc.
18.9%
 
Equity
Clutch Holdings, Inc.
41.2%
 
Equity
Flashtalking
10.1%
 
Other
Hoopla Software, Inc.
25.5%
 
Equity
InfoBionic, Inc.
25.4%
 
Equity
Lumesis, Inc.
43.6%
 
Equity
MediaMath, Inc.
13.4%
 
Other
meQuilibrium
33.1%
 
Equity
Moxe Health Corporation
32.4%
 
Equity
NovaSom, Inc.
31.7%
 
Equity
Prognos Health Inc.
28.7%
 
Equity
QuanticMind, Inc.
24.2%
 
Equity
Sonobi, Inc.
21.6%
 
Equity
Syapse, Inc.
20.0%
 
Equity
T-REX Group, Inc.
17.8%
 
Equity
Transactis, Inc.
23.6%
 
Equity
Trice Medical, Inc.
16.7%
 
Equity
WebLinc, Inc.
38.5%
 
Equity
Zipnosis, Inc.
34.7%
 
Equity
As of March 31, 2019 and December 31, 2018, all of the Company’s assets were located in the United States.
v3.19.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
The Company and its partner companies are involved in various claims and legal actions arising in the ordinary course of business. In the current opinion of the Company, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position or results of operations, however, no assurance can be given as to the outcome of these actions, and one or more adverse rulings could have a material adverse effect on the Company’s consolidated financial position and results of operations or that of its partner companies. The Company records costs associated with legal fees as such services are rendered.
The Company had outstanding guarantees of $3.8 million at March 31, 2019 which related to one of the Company's private equity holdings. Escrow funds to satisfy this guarantee are held at the private equity fund.
The Company is required to return a portion or all the distributions it received as a general partner of a private equity fund for further distribution to such fund's limited partners (“clawback”). The Company’s ownership in the fund is 19%. The clawback liability is joint and several, such that the Company may be required to fund the clawback for other general partners should they default. The Company was notified by the fund's manager that the fund was being dissolved and $1.0 million of the Company's clawback liability was paid in the first quarter of 2017. The maximum additional clawback liability is $0.3 million which was reflected in Other long-term liabilities on the Consolidated Balance Sheet at March 31, 2019.
 
In October 2001, the Company entered into an agreement with a former Chairman and Chief Executive Officer of the Company, to provide for annual payments of $0.65 million per year and certain health care and other benefits for life. The related current liability of $0.8 million is included in Accrued expenses and other current liabilities and the long-term portion of $1.2 million is included in Other long-term liabilities on the Consolidated Balance Sheet at March 31, 2019.
In 2018, the Company announced a change in strategy and implemented a series of initiatives to generate annual cost savings. The Company has incurred $3.9 million of severance costs to terminated employees, of which $0.5 million remains to be paid during 2019.
The Company has agreements with certain remaining employees that provide for severance payments to the employee in the event the employee is terminated without cause or an employee terminates his employment for “good reason.” The maximum aggregate exposure under employment and severance agreements for remaining employees was approximately $4.8 million at March 31, 2019.
In 2018, the Board of Directors (the “Board”) of the Company adopted a long-term incentive plan, which was amended in February 2019, the Amended and Restated Safeguard Scientifics Transaction Bonus Plan, (the “LTIP”). The purpose of the LTIP is to promote the interests of the Company and its shareholders by providing an additional incentive to employees to maximize the value of the Company in connection with the execution of the business strategy that the Company adopted and announced in January 2018. Under the LTIP, participants have received awards that may result in cash payments in connection with sales of the Company’s partner company assets (“Sale Transaction(s)”). The LTIP provides for a bonus pool corresponding to: (i) specified vesting thresholds or (ii) specified events. In the first case, the bonus pool will range from an amount equal to 1% of received proceeds at the first threshold to 1.333% at higher thresholds and no bonus pool will be created if the transaction consideration is less than certain minimum thresholds. In the second case, a minimum pool will be created and paid under specified circumstances. The bonus pool will be allocated and paid to participants in the LTIP based on the product of (i) the participant’s applicable bonus pool percentage and (ii) the bonus pool calculated as of the vesting date, minus any previously paid portion of the bonus pool. Any portion of the bonus pool available as of the applicable vesting date that is reserved will be allocated in connection with each vesting date so that the entire bonus pool available as of such vesting date is allocated and payable to participants. Subject to the terms of the LTIP, payments under the LTIP will be paid in cash not later than March 15th of the calendar year following the calendar year of the applicable vesting date. All current officers and employees of the Company are eligible to participate in the LTIP. The Board, in its sole discretion, will determine the participants to whom awards are granted under the LTIP. There are no amounts accrued or payable under the LTIP as of March 31, 2019.
In June 2011, the Company's former partner company, Advanced BioHealing, Inc. (“ABH”) was acquired by Shire plc (“Shire”).  Prior to the expiration of the escrow period in March 2012, Shire filed a claim against all amounts held in escrow related to the sale based principally upon a United States Department of Justice (“DOJ”) false claims act investigation relating to ABH (the “Investigation”). In connection with the Investigation, in July 2015 the Company received a Civil Investigation Demand-Documentary Material (“CID”) from the DOJ regarding ABH and Safeguard’s relationship with ABH. Pursuant to the CID, the Company provided the requested materials and information.  To the Company’s knowledge, the CID was related to multiple qui tam (“whistleblower”) actions, one of which was filed in 2014 by an ex-employee of ABH that named the Company and one of the Company’s employees along with other entities and individuals as defendants.  At this time, the DOJ has declined to pursue the qui tam action as it relates to the Company and such Company employee. In addition, in connection with the above matters, the Company and other former equity holders in ABH entered into a settlement and release with Shire, which resulted in the release to Shire of all amounts held in escrow related to the sale of ABH.
v3.19.1
Equity
3 Months Ended
Mar. 31, 2019
Equity [Abstract]  
Equity
Equity
In July 2015, the Company's Board of Directors authorized the Company, from time to time and depending on market conditions, to repurchase up to $25.0 million of the Company's outstanding common stock. The Company has not repurchased any shares under the existing authorization during 2018 or the quarter ended March 31, 2019.
In February 2018, the Company's Board of Directors adopted a tax benefits preservation plan (the "Plan") designed to protect and preserve the Company's ability to utilize its net operating loss carryforwards ("NOLs"). The Company submitted the Plan for shareholder ratification at its 2018 Annual Meeting of Shareholders and the Plan was ratified by shareholders. The purpose of the Plan is to preserve the Company's ability to use its NOLs, which would be substantially limited if the Company experienced an "ownership change" as defined under Section 382 of the Internal Revenue Code. In general, an ownership change would be deemed to have occurred if the Company's shareholders who are treated as owning five percent or more of the outstanding shares of Safeguard for purposes of Section 382 ("five-percent shareholders") collectively increase their aggregate ownership in the Company's overall shares outstanding by more than 50 percentage points. Whether this change has occurred would be measured by comparing each five-percent shareholder's current ownership as of the measurement date to such shareholders' lowest ownership percentage during the three-year period preceding the measurement date. To protect the Company's NOLs from being limited or permanently lost under Section 382, the Plan is intended to deter any person or group from acquiring beneficial ownership of 4.99% or more of the Company's outstanding common stock without the approval of the Board, reducing the likelihood of an unintended ownership change. Under the Plan, the Company will issue one preferred stock purchase right (the "Rights") for each share of Safeguard's common stock held by shareholders as of the applicable date of record. The issuance of the Rights will not be taxable to Safeguard or its shareholders and will not affect Safeguard's reported earnings per share. The Rights will trade with Safeguard's common shares and will expire no later than February 19, 2021. The Rights and the Plan may also expire on an earlier date upon the occurrence of other events, including a determination by the Company's Board that the Plan is no longer necessary or desirable for the preservation of the Company's tax attributes or that no tax attributes may be carried forward (with such expiration occurring as of the beginning of the applicable taxable year). There can be no assurance that the Plan will prevent the Company from experiencing an ownership change.
v3.19.1
Subsequent Events
3 Months Ended
Mar. 31, 2019
Subsequent Events [Abstract]  
Subsequent Events
Subsequent Events

During April 2019, the Company made a $27.4 million payment to its Lender consisting of $24.0 million of principal, $2.9 million of interest and $0.5 million of accrued interest.

During April 2019, the Company deployed an additional $1.5 million into Zipnosis, Inc. The Company has previously deployed $8.5 million into Zipnosis. Zipnosis provides health systems with a white-labeled, fully integrated virtual care platform.

During April 2019, the Company deployed an additional $3.0 million into Syapse, Inc. The Company has previously deployed an aggregate of $15.6 million into Syapse. Syapse drives healthcare transformation through precision medicine, enabling provider systems to improve clinical outcomes, streamline operations, and shift to new payment models.

During April 2019, the Company deployed an additional $1.5 million into meQuilibrium. The Company had previously deployed $11.5 million in meQuilibrium. meQuilibrium is a digital coaching platform that delivers clinically validated and highly personalized resilience solutions to employers, health plans, wellness providers, and consumers increasing engagement, productivity and performance, as well as improving outcomes in managing stress, health and well-being.

In April 2019, the Company entered into a sublease for replacement office space with a related party, a partner company, beginning in June 2019. The term of the sublease is 18 months with three conditional six month renewals based on mutual agreement with the sublessor. The aggregate payments expected under this sublease are not material.
v3.19.1
General General (Policies)
3 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). ASU 2014-09 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 is effective for annual periods beginning after December 15, 2017 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 partner companies. Any change in revenue or cost recognition for partner companies could affect the Company's recognition of its share of the results of its equity method partner 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 not object if a private company equity method investee meeting the definition of a public business entity that otherwise would not 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 partner companies will adopt the new revenue standard for the year ending December 31, 2019.  The impact of adoption of the new revenue standard will be reflected in the Company’s financial results for the interim and annual reporting periods beginning in 2020 on a one quarter-lag basis.
In February 2016, the FASB issued ASU 2016-02, Leases. The guidance in ASU 2016-02 requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. As with previous guidance, there continues to be a differentiation between finance leases and operating leases, however this distinction now primarily relates to differences in the manner of expense recognition over time and in the classification of lease payments in the statement of cash flows. Lease assets and liabilities arising from both finance and operating leases will be recognized in the statement of financial position. The transitional guidance for adopting the requirements of ASU 2016-02 calls for a modified retrospective approach that includes a number of optional practical expedients that entities may elect to apply. The guidance in ASU 2016-02 became effective for the Company on January 1, 2019. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed the Company to carry forward its historical lease classification. In addition, the Company has elected to exempt short term leases that qualify from recognizing right of use assets or lease liabilities, and has elected to not separate lease and non-lease components for all leases of which it is the lessee. The Company’s non-lease components are primarily related to utility and maintenance costs, which are typically variable in nature and are expensed in the period incurred. As of January 1, 2019, the Company's only material long-term lease was for its corporate headquarters in Radnor, PA under a lease expiring in 2026. The Company also has immaterial office equipment leases expiring at various dates through 2020. The Company recorded an initial lease liability of $2.9 million, a right-of-use asset of $2.2 million included in property and equipment and eliminated the deferred rent liability of $0.7 million that was previously included in other long-term liabilities.
v3.19.1
General General (Tables)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]    
Lessor, Operating Lease, Payments to be Received, Maturity
A summary of the Company's operating lease at March 31, 2019 follows:

 
Operating lease payments
Sublease income
 
(Unaudited - In thousands)
2019 (nine months ending December 31)
$
434

$
166

2020
587

509

2021
595

525

2022
601

540

2023
607

556

2024
613

573

Thereafter
826

789

Total future minimum lease payments
4,263

$
3,658

Less imputed interest
(1,416
)
 
Total operating lease liabilities
$
2,847

 
 
 
 
 
Lessee, Operating Lease, Liability, Maturity  
A summary of the Company's operating lease at March 31, 2019 follows:

 
Operating lease payments
Sublease income
 
(Unaudited - In thousands)
2019 (nine months ending December 31)
$
434

$
166

2020
587

509

2021
595

525

2022
601

540

2023
607

556

2024
613

573

Thereafter
826

789

Total future minimum lease payments
4,263

$
3,658

Less imputed interest
(1,416
)
 
Total operating lease liabilities
$
2,847

 
 
 
 
v3.19.1
Ownership Interests in and Advances to Partner Companies and Funds (Tables)
3 Months Ended
Mar. 31, 2019
Investments in and Advances to Affiliates, Schedule of Investments [Abstract]  
Ownership Interests in and Advances to Partner Companies and Private Equity Funds
The following summarizes the carrying value of the Company’s ownership interests in and advances to partner companies.   
   
March 31, 2019
 
December 31, 2018
   
(Unaudited - In thousands)
Equity Method Companies:
   
 
 
Partner companies
$
48,342

 
$
64,097

Private equity funds
392

 
392

   
48,734

 
64,489

Other Companies:
   
 
 
Partner companies and other holdings
17,585

 
15,260

Private equity funds
500

 
511

   
18,085

 
15,771

Advances to partner companies
18,784

 
15,325

   
$
85,603

 
$
95,585

The Company’s active partner companies were as follows as of March 31, 2019:
Partner Company
Safeguard Primary Ownership as of March 31, 2019
 
Accounting Method
Aktana, Inc.
18.9%
 
Equity
Clutch Holdings, Inc.
41.2%
 
Equity
Flashtalking
10.1%
 
Other
Hoopla Software, Inc.
25.5%
 
Equity
InfoBionic, Inc.
25.4%
 
Equity
Lumesis, Inc.
43.6%
 
Equity
MediaMath, Inc.
13.4%
 
Other
meQuilibrium
33.1%
 
Equity
Moxe Health Corporation
32.4%
 
Equity
NovaSom, Inc.
31.7%
 
Equity
Prognos Health Inc.
28.7%
 
Equity
QuanticMind, Inc.
24.2%
 
Equity
Sonobi, Inc.
21.6%
 
Equity
Syapse, Inc.
20.0%
 
Equity
T-REX Group, Inc.
17.8%
 
Equity
Transactis, Inc.
23.6%
 
Equity
Trice Medical, Inc.
16.7%
 
Equity
WebLinc, Inc.
38.5%
 
Equity
Zipnosis, Inc.
34.7%
 
Equity
Equity Method Investment Partner Company Results Of Operation
   
Three months ended March 31,
   
2019
 
2018
 
(Unaudited - In thousands)
Results of Operations:
 
 
 
Revenue
$
43,868

 
$
110,393

Gross profit
$
24,589

 
$
78,071

Net loss
$
(33,616
)
 
$
(31,805
)
v3.19.1
Fair Value Measurements (Tables)
3 Months Ended
Mar. 31, 2019
Fair Value Disclosures [Abstract]  
Carrying Value and Fair Value of Certain Financial Assets and Liabilities Measured at Fair Value on Recurring Basis
The following table provides the carrying value and fair value of certain financial assets and liabilities of the Company measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018:
   
Carrying
Value
 
Fair Value Measurement at March 31, 2019
   
Level 1
 
Level 2
 
Level 3
 
(Unaudited - In thousands)
Cash and cash equivalents
$
44,592

 
$
44,592

 
$

 
$

 
 
 
 
 
 
 
 
Restricted cash
$
525

 
$
525

 
$

 
$

 
 
 
 
 
 
 
 
Trading securities
$
306

 
$
306

 
$

 
$

 
 
 
 
 
 
 
 
Marketable securities—held-to-maturity:
   

 
   

 
   

 
   

U.S. Government securities
$
32,905

 
$
32,905

 
$

 
$

 
 
 
 
 
 
 
 
Credit facility repayment feature liability
$
7,069

 
$

 
$

 
$
7,069

 
Carrying
Value
 
Fair Value Measurement at December 31, 2018
   
Level 1
 
Level 2
 
Level 3
 
(Unaudited - In thousands)
Cash and cash equivalents
$
7,703

 
$
7,703

 
$

 
$

 
 
 
 
 
 
 
 
Restricted cash equivalents
$
500

 
$
500

 
$

 
$

 
 
 
 
 
 
 
 
Marketable securities—held-to-maturity:
   
 
 
 
 
 
 
U.S. Government securities
$
37,955

 
$
37,955

 
$

 
$

 
 
 
 
 
 
 
 
Credit facility repayment feature liability
$
5,060

 
$

 
$

 
$
5,060

v3.19.1
Stock-Based Compensation (Tables)
3 Months Ended
Mar. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation Expense
Stock-based compensation expense was recognized in the Consolidated Statements of Operations as follows:   
   
Three months ended March 31,
   
2019
 
2018
 
(Unaudited - In thousands)
General and administrative expense
$
417

 
$
277

   
$
417

 
$
277

v3.19.1
Net Income (Loss) Per Share (Tables)
3 Months Ended
Mar. 31, 2019
Earnings Per Share [Abstract]  
Calculations of Net Loss Per Share
The calculations of net income (loss) per share were as follows:
   
Three months ended March 31,
   
2019
 
2018
 
(Unaudited - In thousands, except per share data)
Basic:
   
 
   
Net income (loss)
$
21,663

 
$
(6,170
)
 
 
 
 
Weighted average common shares outstanding
20,585

 
20,506

 
 
 
 
Net income (loss) per share
$
1.05

 
$
(0.30
)
 
 
 
 
Diluted:
 
 
 
Net income (loss) for dilutive share computation
$
21,663

 
$
(6,170
)
 
 
 
 
Number of shares used in basic per share computation
20,585

 
20,506

Unvested restricted stock and DSU's

 

Employee stock options

 

Weighted average common shares outstanding
20,585

 
20,506

 
 
 
 
Net income (loss) per dilutive share
$
1.05

 
$
(0.30
)
 
 
 
 
v3.19.1
Segment Reporting (Tables)
3 Months Ended
Mar. 31, 2019
Segment Reporting [Abstract]  
Active Partner Companies by Segment
The following summarizes the carrying value of the Company’s ownership interests in and advances to partner companies.   
   
March 31, 2019
 
December 31, 2018
   
(Unaudited - In thousands)
Equity Method Companies:
   
 
 
Partner companies
$
48,342

 
$
64,097

Private equity funds
392

 
392

   
48,734

 
64,489

Other Companies:
   
 
 
Partner companies and other holdings
17,585

 
15,260

Private equity funds
500

 
511

   
18,085

 
15,771

Advances to partner companies
18,784

 
15,325

   
$
85,603

 
$
95,585

The Company’s active partner companies were as follows as of March 31, 2019:
Partner Company
Safeguard Primary Ownership as of March 31, 2019
 
Accounting Method
Aktana, Inc.
18.9%
 
Equity
Clutch Holdings, Inc.
41.2%
 
Equity
Flashtalking
10.1%
 
Other
Hoopla Software, Inc.
25.5%
 
Equity
InfoBionic, Inc.
25.4%
 
Equity
Lumesis, Inc.
43.6%
 
Equity
MediaMath, Inc.
13.4%
 
Other
meQuilibrium
33.1%
 
Equity
Moxe Health Corporation
32.4%
 
Equity
NovaSom, Inc.
31.7%
 
Equity
Prognos Health Inc.
28.7%
 
Equity
QuanticMind, Inc.
24.2%
 
Equity
Sonobi, Inc.
21.6%
 
Equity
Syapse, Inc.
20.0%
 
Equity
T-REX Group, Inc.
17.8%
 
Equity
Transactis, Inc.
23.6%
 
Equity
Trice Medical, Inc.
16.7%
 
Equity
WebLinc, Inc.
38.5%
 
Equity
Zipnosis, Inc.
34.7%
 
Equity
v3.19.1
General - Additional Information (Details) - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Jan. 01, 2019
Dec. 31, 2018
May 31, 2018
Debt Instrument [Line Items]          
Cash and cash equivalents $ 44,592,000     $ 7,703,000  
Cash and cash equivalents 44,592,000     $ 7,703,000  
Marketable securities 33,200,000        
Cash, cash equivalents, and marketable securities $ 77,800,000        
Discount rate 12.00%        
Operating lease, payments $ 100,000 $ 100,000      
Payments to be received 3,658,000        
Operating lease, liability 2,847,000        
Revolving Credit Facility          
Debt Instrument [Line Items]          
Long-term debt, gross         $ 68,600,000
Liquidity threshold         20,000,000
Minimum aggregate appraised value plus liquidity threshold         350,000,000
Expense threshold         11,500,000
Cash and cash equivalent threshold         50,000,000
Amended Credit Facility          
Debt Instrument [Line Items]          
Long-term line of credit outstanding 68,600,000        
Liquidity threshold         20,000,000
Minimum aggregate appraised value plus liquidity threshold         350,000,000
Expense threshold         11,500,000.0
Cash and cash equivalent threshold $ 50,000,000       $ 50,000,000
Accounting Standards Update 2016-02          
Debt Instrument [Line Items]          
Right-of-use asset     $ 2,200,000    
Operating lease, liability     2,900,000    
Deferred rent credit     $ 700,000    
v3.19.1
General - Operating Lease Maturity (Details)
$ in Thousands
Mar. 31, 2019
USD ($)
Operating Lease Liabilities, Payments Due [Abstract]  
2019 (nine months ending December 31) $ 434
2020 587
2021 595
2022 601
2023 607
2024 613
Thereafter 826
Total future minimum lease payments 4,263
Sublease income  
2019 (nine months ending December 31) 166
2020 509
2021 525
2022 540
2023 556
2024 573
Thereafter 789
Total future minimum lease payments 3,658
Less imputed interest (1,416)
Total operating lease liabilities $ 2,847
v3.19.1
Ownership Interests in and Advances to Partner Companies and Funds - Carrying Value (Detail) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 31, 2018
Investments In And Advances To Affiliates [Line Items]    
Equity method investments $ 48,734 $ 64,489
Cost method investments 18,085 15,771
Advances to partner companies 18,784 15,325
Investments in and advance to affiliates, subsidiaries, associates, and joint ventures 85,603 95,585
Partner companies    
Investments In And Advances To Affiliates [Line Items]    
Equity method investments 48,342 64,097
Cost method investments 17,585 15,260
Private equity funds    
Investments In And Advances To Affiliates [Line Items]    
Equity method investments 392 392
Cost method investments $ 500 $ 511
v3.19.1
Ownership Interests in and Advances to Partner Companies and Funds - Narrative (Detail) - Cask Data - USD ($)
$ in Millions
1 Months Ended 3 Months Ended
May 31, 2018
Mar. 31, 2019
Investment [Line Items]    
Proceeds from sale of equity method investments $ 41.5  
Amount in holdbacks and escrows $ 0.8  
Realized gain (loss) on disposal   $ 34.9
v3.19.1
Ownership Interests in and Advances to Partner Companies and Funds - Schedule of Results of Operations (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Investments in and Advances to Affiliates [Abstract]    
Revenue $ 43,868 $ 110,393
Gross profit 24,589 78,071
Net loss $ (33,616) $ (31,805)
v3.19.1
Acquisitions of Ownership Interests in Partner Companies and Funds (Detail) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2019
Dec. 31, 2018
Schedule of Equity Method Investments [Line Items]    
Equity method investments $ 48,734 $ 64,489
InfoBionic    
Schedule of Equity Method Investments [Line Items]    
Convertible bridge loan 400  
Equity method investments   16,300
Sonobi    
Schedule of Equity Method Investments [Line Items]    
Convertible bridge loan 2,000  
Equity method investments   11,400
Novasom, Inc.    
Schedule of Equity Method Investments [Line Items]    
Convertible bridge loan 700  
Equity method investments   26,400
WebLinc    
Schedule of Equity Method Investments [Line Items]    
Convertible bridge loan $ 900  
Equity method investments   $ 15,000
v3.19.1
Fair Value Measurements - Carrying Value and Fair Value of Certain Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - Fair Value, Measurements, Recurring - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 31, 2018
Reported Value Measurement [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash and cash equivalents $ 44,592 $ 7,703
Long-term restricted cash equivalents 525 500
Debt Securities, Trading 306  
Marketable securities—held-to-maturity: 32,905 37,955
Credit facility repayment feature liability 7,069 5,060
Estimate of Fair Value Measurement [Member] | Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash and cash equivalents 44,592 7,703
Long-term restricted cash equivalents 525 500
Debt Securities, Trading 306  
Marketable securities—held-to-maturity: 32,905 37,955
Credit facility repayment feature liability 0 0
Estimate of Fair Value Measurement [Member] | Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash and cash equivalents 0 0
Long-term restricted cash equivalents 0 0
Debt Securities, Trading 0  
Marketable securities—held-to-maturity: 0 0
Credit facility repayment feature liability 0 0
Estimate of Fair Value Measurement [Member] | Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash and cash equivalents 0 0
Long-term restricted cash equivalents 0 0
Debt Securities, Trading 0  
Marketable securities—held-to-maturity: 0 0
Credit facility repayment feature liability $ 7,069 $ 5,060
v3.19.1
Fair Value Measurements - Narrative (Detail) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 31, 2018
May 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Marketable securities, current $ 32,905 $ 37,955  
Amended Credit Facility      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Credit facility repayment feature 7,100 $ 2,000 $ 500
Cash and cash equivalent threshold $ 50,000   $ 50,000
v3.19.1
Credit Facility and Convertible Debentures - Additional Information (Detail) - USD ($)
1 Months Ended 3 Months Ended
Apr. 15, 2019
May 31, 2017
Mar. 31, 2019
Mar. 31, 2018
Dec. 31, 2018
May 31, 2018
Debt Instrument [Line Items]            
Gain (loss) from covenant liability     $ (2,000,000)      
Interest expense     2,535,000 $ 2,690,000    
Revolving Credit Facility            
Debt Instrument [Line Items]            
Cash and cash equivalent threshold           $ 50,000,000
Liquidity threshold           20,000,000
Minimum aggregate appraised value plus liquidity threshold           350,000,000
Expense threshold           11,500,000
Revolving Credit Facility | Line of Credit            
Debt Instrument [Line Items]            
Interest expense     $ 2,500,000 1,800,000    
Debt instrument, interest rate, effective percentage     15.30%      
Interest paid     $ 1,900,000 1,300,000    
Credit Facility | Revolving Credit Facility | Interest Rate Application A | London Interbank Offered Rate (LIBOR)            
Debt Instrument [Line Items]            
Basis spread on variable rate   8.50%        
Credit Facility | Revolving Credit Facility | Interest Rate Application A | London Interbank Offered Rate (LIBOR) | Minimum            
Debt Instrument [Line Items]            
Basis spread on variable rate   1.00%        
Credit Facility | Revolving Credit Facility | Interest Rate Application B            
Debt Instrument [Line Items]            
Basis spread on variable rate   2.00%        
Credit Facility | Revolving Credit Facility | Interest Rate Application B | Minimum            
Debt Instrument [Line Items]            
Basis spread on variable rate   7.50%        
Credit Facility | Revolving Credit Facility | Interest Rate Application B | London Interbank Offered Rate (LIBOR)            
Debt Instrument [Line Items]            
Basis spread on variable rate   1.00%        
Credit Facility | Revolving Credit Facility | Interest Rate Application B | Federal Funds Effective Swap Rate            
Debt Instrument [Line Items]            
Basis spread on variable rate   0.50%        
Amended Credit Facility            
Debt Instrument [Line Items]            
Long-term line of credit outstanding     68,600,000      
Cash and cash equivalent threshold     50,000,000     50,000,000
Liquidity threshold           20,000,000
Minimum aggregate appraised value plus liquidity threshold           350,000,000
Deployment threshold           40,000,000.0
Expense threshold           11,500,000.0
Unamortized discount and debt issuance costs     2,900,000      
Long-term debt     65,700,000      
Credit facility repayment feature     $ 7,100,000   $ 2,000,000 $ 500,000
Amended Credit Facility | Subsequent Event            
Debt Instrument [Line Items]            
Repayments of lines of credit $ 24,000,000          
Periodic payment, interest $ 2,900,000          
2018 Debentures | Convertible Debt            
Debt Instrument [Line Items]            
Interest expense       $ 900,000