Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares shares in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
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Preferred stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Preferred stock, shares authorized (in shares) | 1,000 | 1,000 |
Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Common stock, shares authorized (in shares) | 83,333 | 83,333 |
Common stock, shares issued (in shares) | 21,573 | 21,573 |
Treasury stock, shares (in shares) | 789 | 930 |
Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
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General and administrative expense | $ 2,275 | $ 2,262 | $ 7,835 | $ 7,922 |
Operating loss | (2,275) | (2,262) | (7,835) | (7,922) |
Other income (loss), net | (820) | 8,777 | (7,045) | 10,010 |
Interest income | 52 | 234 | 209 | 1,870 |
Interest expense | 0 | (5,806) | 0 | (14,023) |
Equity income (loss), net | (1,300) | (3,440) | (15,591) | 65,324 |
Net income (loss) before income taxes | (4,343) | (2,497) | (30,262) | 55,259 |
Income tax benefit (expense) | 0 | 0 | 0 | 0 |
Net income (loss) | $ (4,343) | $ (2,497) | $ (30,262) | $ 55,259 |
Net income (loss) per share: | ||||
Basic (in dollars per share) | $ (0.21) | $ (0.12) | $ (1.46) | $ 2.68 |
Diluted (in dollars per share) | $ (0.21) | $ (0.12) | $ (1.46) | $ 2.68 |
Weighted average shares used in computing income (loss) per share: | ||||
Basic (in shares) | 20,786 | 20,657 | 20,731 | 20,623 |
Diluted (in shares) | 20,786 | 20,657 | 20,731 | 20,623 |
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
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Net income (loss) | $ (4,343) | $ (2,497) | $ (30,262) | $ 55,259 |
Other comprehensive income (loss): | ||||
Share of other comprehensive income (loss) of equity method interests | 0 | 0 | 0 | (31) |
Reclassification adjustment for sale of equity method investments | 0 | 0 | 0 | 6 |
Total comprehensive income (loss) | $ (4,343) | $ (2,497) | $ (30,262) | $ 55,234 |
Note 1 - General |
9 Months Ended |
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Sep. 30, 2020 | |
Notes to Financial Statements | |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] |
1. 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 2019 Annual Report on Form 10-K.
Liquidity
As of September 30, 2020 the Company had $16.4 million of cash and cash equivalents.
In January 2018, Safeguard announced that, from that date forward, the Company will not 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. As we seek to provide additional funding to existing companies where we have an ownership interest, we may be required to expend our cash or incur debt, which will decrease our liquidity. From time to time, we are engaged in discussions concerning acquisitions and dispositions which, if consummated, could impact our liquidity, perhaps significantly. Accordingly, the Company could also pursue other sources of capital in order to maintain its liquidity.
The Company believes that its cash and cash equivalents at September 30, 2020 will be sufficient to fund operations past one year from the issuance of these Consolidated Financial Statements.
Principles of Accounting for Ownership Interests
The Company accounts for its ownership interests 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 companies in the form of promissory notes which are included in the Ownership interests in and advances on the Consolidated Balance Sheets.
Equity Method. The Company accounts for ownership interests 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 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 20% to 50% 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 not 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 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 companies.
When the Company’s carrying value in an equity method 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 company. When such equity method 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 interest 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 interests in Ownership interests and advances on the Consolidated Balance Sheets.
Impairment of Ownership Interests and Advances
On a periodic basis, but no 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 not 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 third 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 is not written-up even if circumstances suggest the value of the company has subsequently recovered.
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 was 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. Additionally, on June 3, 2020 the FASB issued ASU 2020-05, which extended the adoption of ASC 606 for all nonpublic business entities that have not issued their 2019 financial statements as of June 3, 2020, until January 1, 2020.
As the new standard superseded most existing revenue guidance, it impacted revenue and cost recognition for certain 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 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, certain of the Company's private, calendar year companies adopted the revenue standard for the year ending December 31, 2019, including a cumulative effect where applicable as of the first day of the 2019 reporting period.
For our ownership interests that have adopted ASU 2014-09, 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 2020 on a one quarter-lag basis. The impact upon adoption resulted in a decrease to retained earnings and ownership interests of $1.8 million, net, due to the deferral of revenue and certain costs at our underlying ownership interests. Our results of operations for the nine months ended September 30, 2020 reflect a benefit of $1.8 million due primarily to the recognition of revenue in 2019 that was previously deferred as a result of the adoption of ASU 2014-09. Accordingly, the cumulative impact of the adoption of ASU 2014-09 was not significant. The Company continues to monitor the impact of ASU 2014-09 to our ownership interests that have not finalized their 2019 adoption or that may further delay adoption based on the June 3, 2020 update, however we do not expect any further adjustments to be significant.
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Note 2 - Ownership Interests In and Advances |
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Investments in and Advances to Affiliates, Schedule of Investments [Text Block] |
2. Ownership Interests in and Advances
The following summarizes the carrying value of the Company’s ownership interests in and advances.
In September 2020, Sonobi, Inc. was acquired by another entity for cash. The Company received $6.6 million in cash proceeds in connection with this transaction, excluding holdbacks and escrows. The Company recognized an insignificant gain on the sale, which is included in Equity income (loss) in the Consolidated Statements of Operations for the three and nine months ended September 30, 2020.
During the nine months ended September 30, 2020, Company recorded impairments of $9.2 million related to the ownership interests of WebLinc, Inc., QuanticMind, Inc. and Sonobi, Inc. accounted for under the equity method, which are reflected in Equity income (loss) in the Consolidated Statement of Operations. During the three months and nine months ended September 30, 2020, the Company also recorded impairments of $0.4 million and $8.1 million, respectively, related to the ownership interests of T-REX Group, Inc., b8ta and others accounted for under the Other method, which are reflected in Other income (loss), net in the Consolidated Statement of Operations. The impairments were determined based on declines in the fair value of our ownership interests resulting from reduced valuation expectations and extended exit timelines resulting from the more challenging mergers and acquisitions environment related to COVID-19 and the related uncertain economic impact. The measurement of fair value for these impairments was estimated based on evaluating several valuation methods available for each of the applicable ownership interests, primarily including the value at which independent third parties have invested, the valuation of comparable public companies, the valuation of acquisitions of similar companies and the present value of our expected outcomes. Assumptions considered within these methods include determining which public companies are comparable, projecting forward revenues for the measured ownership interest, discounts to apply for the lack of marketability or lack of comparability, other factors and the relative weight to apply to each valuation method available. The aggregate estimated fair value of the ownership interests for which impairments were recorded is $12.5 million, $9.1 million and $2.2 million at March 31, 2020, June 30, 2020, and September 30, 2020, respectively. Due to the unobservable nature of some of these inputs, we have determined these fair value estimates to be Level 3 fair value measurements.
During the nine months ended September 30, 2020, the Company recorded a $1.5 million non-cash gain based upon an observable price change related to our ownership interest in Flashtalking Inc. accounted for under the Other method, which is reflected in Other income (loss), net in the Consolidated Statement of Operations. During the three months ended September 30, 2020, the Company also recorded a $0.5 million Other loss of an other equity security based on an observable price change.
Summarized Financial Information
The following table summarizes the statement of operations data for the companies accounted for under the equity method for the three and nine months ended September 30, 2020 and 2019, respectively. These results have been compiled from the respective companies' 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.
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Note 3 - Acquisitions of Ownership Interests |
9 Months Ended |
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Sep. 30, 2020 | |
Notes to Financial Statements | |
Cost and Equity Method Investments Disclosure [Text Block] |
3. Acquisitions of Ownership Interests
The following is a summary of additional deployments during the nine month period ended September 30, 2020:
The Company deployed an additional $2.5 million to Aktana, Inc. during the three month period ended September 30, 2020. The Company had previously deployed an aggregate of $11.7 million. Aktana leverages big data and machine learning to enable pharmaceutical brands to dynamically optimize their strategy and enhance sales execution.
The Company deployed an additional $1.0 million to meQuilibrium. The Company had previously deployed an aggregate of $13.0 million. 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.
The Company deployed an additional $4.4 million to Syapse, Inc., including the $0.6 million of convertible loans deployed in the first quarter of 2020, which was converted to equity in the second quarter. The Company had previously deployed $20.6 million. Syapse drives healthcare transformation through precision medicine, enabling provider systems to improve clinical outcomes, streamline operations, and shift to new payment models.
The Company funded an additional $0.7 million of convertible loans to Trice Medical, Inc. The Company had previously deployed an aggregate of $10.2 million. Trice is focused on orthopedic diagnostics using fully integrated camera-enabled technologies to provide clinical solutions to physicians.
The Company deployed an aggregate of $0.2 million to Clutch Holdings. The Company had previously deployed an aggregate of $16.7 million. 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 funded an additional $0.2 million of convertible loans to QuanticMind. The Company had previously deployed an aggregate of $13.5 million. QuanticMind delivers an intelligent, scalable and fast platform for maximizing digital marketing performance, including paid search and social, for enterprises.
The Company funded an aggregate of $0.1 million of convertible loans to WebLinc, Inc. The Company had previously deployed an aggregate of $16.1 million. WebLinc is an e-commerce platform for online retailers.
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Note 4 - Fair Value Measurements |
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Fair Value Disclosures [Text Block] |
4. 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 September 30, 2020 and December 31, 2019:
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Note 5 - Stock-Based Compensation |
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Share-based Payment Arrangement [Text Block] |
5. Stock-Based Compensation
Stock-based compensation expense was recognized in the Consolidated Statements of Operations as follows:
During the nine months ended September 30, 2020 and 2019, the Company granted 79 thousand and 30 thousand restricted stock awards, respectively to non-employee directors for compensation. |
Note 6 - Income Taxes |
9 Months Ended |
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Sep. 30, 2020 | |
Notes to Financial Statements | |
Income Tax Disclosure [Text Block] |
6. Income Taxes
The Company’s consolidated income tax benefit (expense) was $0.0 million for the three and nine months ended September 30, 2020 and 2019. 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 that would have been recognized in the three and nine months ended September 30, 2020 was offset by changes in the valuation allowance. During the three and nine months ended September 30, 2020, the Company had no material changes in uncertain tax positions. |
Note 7 - Net Income (Loss) Per Share |
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Earnings Per Share [Text Block] |
7. Net Income (Loss) Per Share
The calculations of net income (loss) per share were as follows:
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 an equity method 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 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:
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Note 8 - Segment Reporting |
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Segment Reporting Disclosure [Text Block] |
8. Segment Reporting
The Company operates as one operating segment based upon the similar nature of its technology-driven 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 September 30, 2020, the Company held ownership interests accounted for using the equity method in 12 non-consolidated companies.
Certain of the Company’s ownership interests as of September 30, 2020 included the following:
As of September 30, 2020 and December 31, 2019, all of the Company’s assets were located in the United States. |
Note 9 - Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Text Block] |
9. Commitments and Contingencies
In March 2019, the Company entered into a sublease of its prior corporate headquarters office space beginning in June 2019. The term of the sublease is through April 2026, the same as the Company's underlying lease. Fixed sublease payments to the Company are escalating over the term of the sublease and are reported as a component of general and administrative expenses.
In April 2019, the Company entered into a sublease for replacement office space with a related party, a company in which we hold an ownership interest, beginning in June 2019. The term of this sublease expires during the fourth quarter of 2020 and is not expected to be renewed.
A summary of the Company's operating lease cash flows at September 30, 2020 follows:
The Company and the companies in which it holds ownership interests 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 companies. The Company records costs associated with legal fees as such services are rendered.
The Company had outstanding guarantees of $3.8 million at September 30, 2020 which related to one of the Company's private equity holdings.
In 2018, the Board of Directors (the “Board”) of the Company adopted a long-term incentive plan, which was amended in February 2019 and June 2020, known as 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. The June 2020 amendment lowered the level of the first threshold and the resulting bonus pool percentage as an incentive to employees to accelerate actions consistent with the business strategy. Under the LTIP, participants, which include certain current and former employees, have received awards that may result in cash payments in connection with sales of the Company’s ownership interests (“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 0.2% (previously 1.0%) of received proceeds at the first threshold to 1.3% 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 within 60 days 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. The Company has accrued approximately $1.5 million under the LTIP as of September 30, 2020, which $0.9 million is estimated as current accrued compensation.
The Company recorded severance expense of $1.9 million during the nine months ended September 30, 2020 primarily for the former CEO in accordance with an existing employment arrangement. Obligations under this arrangement with the former CEO were paid during the second quarter. Other accrued compensation amounts previously deferred will be paid during the fourth quarter of 2020. Additional contingent amounts could be paid based on continued participation in prior awards granted pursuant to the LTIP. 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 $2.5 million at September 30, 2020.
In June 2011, the Company's former ownership interest, 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.
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Note 10 - Equity |
9 Months Ended |
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Sep. 30, 2020 | |
Notes to Financial Statements | |
Stockholders' Equity Note Disclosure [Text Block] |
10. 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 repurchased any shares under the existing authorization during 2019 or the nine months ended September 30, 2020.
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 2019 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. If such beneficial ownership is acquired without the approval of the Board, under the Plan, the Company will issue 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. |
Significant Accounting Policies (Policies) |
9 Months Ended |
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Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Liquidity, Policy [Policy Text Block] | Liquidity
As of September 30, 2020 the Company had $16.4 million of cash and cash equivalents.
In January 2018, Safeguard announced that, from that date forward, the Company will not 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. As we seek to provide additional funding to existing companies where we have an ownership interest, we may be required to expend our cash or incur debt, which will decrease our liquidity. From time to time, we are engaged in discussions concerning acquisitions and dispositions which, if consummated, could impact our liquidity, perhaps significantly. Accordingly, the Company could also pursue other sources of capital in order to maintain its liquidity.
The Company believes that its cash and cash equivalents at September 30, 2020 will be sufficient to fund operations past one year from the issuance of these Consolidated Financial Statements.
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Investment, Policy [Policy Text Block] | Principles of Accounting for Ownership Interests
The Company accounts for its ownership interests 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 companies in the form of promissory notes which are included in the Ownership interests in and advances on the Consolidated Balance Sheets.
Equity Method. The Company accounts for ownership interests 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 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 20% to 50% 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 not 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 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 companies.
When the Company’s carrying value in an equity method 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 company. When such equity method 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 interest 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 interests in Ownership interests and advances on the Consolidated Balance Sheets.
Impairment of Ownership Interests and Advances
On a periodic basis, but no 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 not 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 third 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 is not written-up even if circumstances suggest the value of the company has subsequently recovered.
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New Accounting Pronouncements, Policy [Policy Text Block] | 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 was 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. Additionally, on June 3, 2020 the FASB issued ASU 2020-05, which extended the adoption of ASC 606 for all nonpublic business entities that have not issued their 2019 financial statements as of June 3, 2020, until January 1, 2020.
As the new standard superseded most existing revenue guidance, it impacted revenue and cost recognition for certain 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 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, certain of the Company's private, calendar year companies adopted the revenue standard for the year ending December 31, 2019, including a cumulative effect where applicable as of the first day of the 2019 reporting period.
For our ownership interests that have adopted ASU 2014-09, 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 2020 on a one quarter-lag basis. The impact upon adoption resulted in a decrease to retained earnings and ownership interests of $1.8 million, net, due to the deferral of revenue and certain costs at our underlying ownership interests. Our results of operations for the nine months ended September 30, 2020 reflect a benefit of $1.8 million due primarily to the recognition of revenue in 2019 that was previously deferred as a result of the adoption of ASU 2014-09. Accordingly, the cumulative impact of the adoption of ASU 2014-09 was not significant. The Company continues to monitor the impact of ASU 2014-09 to our ownership interests that have not finalized their 2019 adoption or that may further delay adoption based on the June 3, 2020 update, however we do not expect any further adjustments to be significant.
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Note 2 - Ownership Interests In and Advances (Tables) |
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Equity Method Investments [Table Text Block] |
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Note 4 - Fair Value Measurements (Tables) |
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Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block] |
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Note 5 - Stock-Based Compensation (Tables) |
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Share-based Payment Arrangement, Activity [Table Text Block] |
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Note 7 - Net Income (Loss) Per Share (Tables) |
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Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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Note 8 - Segment Reporting (Tables) |
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Schedule of Partner Company Ownership Interest [Table Text Block] |
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Note 9 - Commitments and Contingencies (Tables) |
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Lessee, Operating Lease, Liability, Maturity [Table Text Block] |
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Note 1 - General (Details Textual) - USD ($) $ in Thousands |
9 Months Ended | ||
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Sep. 30, 2020 |
Apr. 01, 2020 |
Dec. 31, 2019 |
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Cash and Cash Equivalents, at Carrying Value, Ending Balance | $ 16,437 | $ 25,028 | |
Retained Earnings (Accumulated Deficit), Ending Balance | (729,286) | $ (697,223) | |
Accounting Standards Update 2014-09 [Member] | |||
Contract with Customer, Liability, Revenue Recognized | $ 1,800 | ||
Cumulative Effect, Period of Adoption, Adjustment [Member] | Accounting Standards Update 2014-09 [Member] | |||
Retained Earnings (Accumulated Deficit), Ending Balance | $ (1,800) |
Note 2 - Ownership Interests In and Advances (Details Textual) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2020 |
Sep. 30, 2020 |
Jun. 30, 2020 |
Mar. 31, 2020 |
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Equity Securities, FV-NI, Unrealized Gain (Loss), Total | $ (0.5) | $ 1.5 | ||
Fair Value, Inputs, Level 3 [Member] | ||||
Impaired Investments in Affiliates Subsidiaries Associates and Joint Ventures, FairValue | 2.2 | 2.2 | $ 9.1 | $ 12.5 |
WebLinc, Inc and QuanticMind, Inc [Member] | ||||
Equity Method Investment, Other than Temporary Impairment | 9.2 | |||
T-Rex Group, Inc [Member] | ||||
Equity Securities without Readily Determinable Fair Value, Impairment Loss, Annual Amount | 0.4 | $ 8.1 | ||
Sonobi [Member] | ||||
Proceeds from Sale of Equity Method Investments | $ 6.6 |
Note 2 - Ownership Interests In and Advances - Carrying Value of Ownership Interests (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
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Equity Method Companies | $ 30,707 | $ 34,542 |
Other Companies | 20,438 | 27,484 |
Advances to companies | 4,699 | 15,103 |
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures, Total | 55,844 | 77,129 |
Partnership Interest [Member] | ||
Equity Method Companies | 30,436 | 34,271 |
Other Companies | 20,015 | 27,031 |
Private Equity Funds [Member] | ||
Equity Method Companies | 271 | 271 |
Other Companies | $ 423 | $ 453 |
Note 2 - Ownership Interests In and Advances - Results of Operations (Details) - Equity Method Investment, Nonconsolidated Investee or Group of Investees [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
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Revenue | $ 39,388 | $ 28,940 | $ 119,270 | $ 112,540 |
Gross profit | 23,244 | 14,448 | 73,395 | 61,401 |
Net loss | $ (15,650) | $ (30,470) | $ (56,684) | $ (99,282) |
Note 3 - Acquisitions of Ownership Interests (Details Textual) - USD ($) $ in Thousands |
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Mar. 31, 2020 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Dec. 31, 2019 |
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Payments to Acquire Equity Method Investments | $ 7,510 | $ 9,500 | ||
Equity Method Investments | 30,707 | $ 34,542 | ||
Aktana, Inc. [Member] | ||||
Payments to Acquire Equity Method Investments | 2,500 | |||
Equity Method Investments | 11,700 | |||
meQuilibrium [Member] | ||||
Payments to Acquire Equity Method Investments | 1,000 | |||
Equity Method Investments | $ 13,000 | |||
Syapse, Inc. [Member] | ||||
Payments to Acquire Equity Method Investments | $ 600 | 4,400 | ||
Equity Method Investments | 20,600 | |||
Trice Medical [Member] | ||||
Equity Method Investments | 10,200 | |||
Convertible Bridge Loan | 700 | |||
Clutch Holdings [Member] | ||||
Payments to Acquire Equity Method Investments | 200 | |||
Equity Method Investments | 16,700 | |||
QuanticMind [Member] | ||||
Equity Method Investments | 13,500 | |||
Convertible Bridge Loan | 200 | |||
WebLinc, Inc. [Member] | ||||
Equity Method Investments | 16,100 | |||
Convertible Bridge Loan | $ 100 |
Note 4 - Fair Value Measurements - Fair Value of Assets and Liabilities Measured On Recurring Basis (Details) - Fair Value, Recurring [Member] - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
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Cash and cash equivalents | $ 16,437 | $ 25,028 |
Restricted cash equivalents | 25 | |
Fair Value, Inputs, Level 1 [Member] | ||
Cash and cash equivalents | 16,437 | 25,028 |
Restricted cash equivalents | 25 | |
Fair Value, Inputs, Level 2 [Member] | ||
Cash and cash equivalents | 0 | 0 |
Restricted cash equivalents | 0 | |
Fair Value, Inputs, Level 3 [Member] | ||
Cash and cash equivalents | $ 0 | 0 |
Restricted cash equivalents | $ 0 |
Note 5 - Stock-Based Compensation (Details Textual) - shares shares in Thousands |
9 Months Ended | |
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Sep. 30, 2020 |
Sep. 30, 2019 |
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Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures, Total (in shares) | 79 | 30 |
Note 5 - Stock-Based Compensation - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
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Stock-based compensation expense | $ 452 | $ 248 | $ 979 | $ 934 |
General and Administrative Expense [Member] | ||||
Stock-based compensation expense | $ 452 | $ 248 | $ 979 | $ 934 |
Note 6 - Income Taxes (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
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Income Tax Expense (Benefit), Total | $ 0 | $ 0 | $ 0 | $ 0 |
Note 7 - Net Income (Loss) Per Share (Details Textual) - $ / shares shares in Millions |
9 Months Ended | |
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Sep. 30, 2020 |
Sep. 30, 2019 |
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Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 0.2 | |
Share-based Payment Arrangement, Option [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 0.2 | |
Share-based Payment Arrangement, Option, Exercise Price Range, Lower Range Limit (in dollars per share) | $ 10.37 | $ 9.83 |
Share-based Payment Arrangement, Option, Exercise Price Range, Upper Range Limit (in dollars per share) | $ 17.11 | $ 19.41 |
Restricted Stock, Performance-based Stock Units, and Deferred Stock Units [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 0.3 | 0.3 |
Note 7 - Net Income (Loss) Per Share - Calculations of Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2020 |
Jun. 30, 2020 |
Mar. 31, 2020 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Basic: | ||||||||
Net income (loss) | $ (4,343) | $ (9,911) | $ (16,008) | $ (2,497) | $ 36,093 | $ 21,663 | $ (30,262) | $ 55,259 |
Basic (in shares) | 20,786 | 20,657 | 20,731 | 20,623 | ||||
Basic (in dollars per share) | $ (0.21) | $ (0.12) | $ (1.46) | $ 2.68 | ||||
Diluted: | ||||||||
Net income (loss) | $ (4,343) | $ (9,911) | $ (16,008) | $ (2,497) | $ 36,093 | $ 21,663 | $ (30,262) | $ 55,259 |
Basic (in shares) | 20,786 | 20,657 | 20,731 | 20,623 | ||||
Unvested restricted stock and DSU's (in shares) | 0 | 0 | 0 | 0 | ||||
Employee stock options (in shares) | 0 | 0 | 0 | 0 | ||||
Diluted (in shares) | 20,786 | 20,657 | 20,731 | 20,623 | ||||
Diluted (in dollars per share) | $ (0.21) | $ (0.12) | $ (1.46) | $ 2.68 |
Note 8 - Segment Reporting (Details Textual) |
9 Months Ended |
---|---|
Sep. 30, 2020 | |
Number of Operating Segments | 1 |
Note 9 - Commitments and Contingencies (Details Textual) - USD ($) $ in Millions |
9 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Jun. 30, 2020 |
|
Deferred Compensation Liability, Current and Noncurrent, Total | $ 1.5 | |
Deferred Compensation Liability, Current, Total | 0.9 | |
Employee and Severance Agreement, Maximum Aggregate Exposure | 2.5 | |
Employee Severance [Member] | ||
Restructuring Charges, Total | $ 1.9 | |
Minimum [Member] | ||
Long-term Incentive Plan, Bonus Pool, Percent of Proceeds Received | 0.20% | |
Maximum [Member] | ||
Long-term Incentive Plan, Bonus Pool, Percent of Proceeds Received | 1.30% | 1.00% |
Private Equity Funds [Member] | ||
Guarantor Obligations, Current Carrying Value | $ 3.8 |
Note 9 - Commitments and Contingencies - Operating Lease Cash Flow (Details) $ in Thousands |
Sep. 30, 2020
USD ($)
|
---|---|
2020 (three months ending December 31) | $ 170 |
2020 (three months ending December 31) | 129 |
2021 | 595 |
2021 | 525 |
2022 | 601 |
2022 | 540 |
2023 | 607 |
2023 | 556 |
2024 | 613 |
2024 | 573 |
2025 | 619 |
2025 | 590 |
Thereafter | 208 |
Thereafter | 199 |
Total future minimum lease payments | 3,413 |
Total future minimum lease payments | 3,112 |
Less imputed interest | (936) |
Total operating lease liabilities | $ 2,477 |
Note 10 - Equity (Details Textual) - USD ($) $ in Millions |
9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Dec. 31, 2019 |
Feb. 28, 2019 |
Jul. 31, 2015 |
|
Stock Repurchase Program, Authorized Amount | $ 25 | |||
Treasury Stock, Shares, Acquired (in shares) | 0 | 0 | ||
Sale of Stock, Individual Ownership, Percent, Maximum | 4.99% | |||
Preferred Stock Purchase Right to be Exchanged for Common Stock Above Maximum Ownership Threshold (in shares) | 1 |