SAFEGUARD SCIENTIFICS INC, 10-K filed on 2/28/2020
Annual Report
v3.19.3.a.u2
Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2019
Feb. 24, 2020
Jun. 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-K    
Document Period End Date Dec. 31, 2019    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Amendment Flag false    
Entity Common Stock, Shares Outstanding   20,650,958  
Entity Emerging Growth Company false    
Entity Small Business true    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Shell Company false    
Entity Current Reporting Status Yes    
Entity Public Float     $ 237,111,560
v3.19.3.a.u2
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Current Assets:    
Cash and cash equivalents $ 25,028 $ 7,703
Restricted cash 25 500
Marketable securities 0 37,955
Prepaid expenses and other current assets 1,297 577
Total current assets 26,350 46,735
Property and equipment, net 2,101 808
Ownership interests and advances 77,129 95,585
Other assets 1,997 2,609
Total Assets 107,577 145,737
Current Liabilities:    
Accounts payable 39 165
Accrued compensation and benefits 1,364 3,433
Accrued expenses and other current liabilities 627 2,182
Credit facility - current 0 22,100
Credit facility repayment feature 0 5,060
Lease liability - current 399  
Total current liabilities 2,429 32,940
Other long-term liabilities 1,027 2,804
Lease liability - non-current 2,380  
Credit facility - non-current 0 43,014
Total Liabilities 5,836 78,758
Commitments and contingencies (Note 12)
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 issued at December 31, 2019 and 2018, respectively 2,157 2,157
Additional paid-in capital 810,856 810,928
Treasury stock, at cost; 930 and 914 shares at December 31, 2019 and 2018, respectively (14,024) (15,001)
Accumulated deficit (697,223) (731,105)
Accumulated other comprehensive loss (25) 0
Total Equity 101,741 66,979
Total Liabilities and Equity $ 107,577 $ 145,737
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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
Dec. 31, 2019
Dec. 31, 2018
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 0.10 $ 0.10
Preferred stock, shares authorized 1,000,000 1,000,000
Common stock, par value $ 0.10 $ 0.10
Common stock, shares authorized 83,333,000 83,333,000
Common stock, shares issued 21,573,000 21,573,000
Treasury Stock, Shares 930,000 914,000
v3.19.3.a.u2
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Income Statement [Abstract]                    
General and administrative expense $ 2,060 $ 2,262 $ 2,603 $ 3,057 $ 2,618 $ 3,516 $ 5,148 $ 5,589 $ 9,982 $ 16,871
Operating loss (2,060) (2,262) (2,603) (3,057) (2,618) (3,516) (5,148) (5,589) (9,982) (16,871)
Other income (loss), net 2,245 8,777 3,118 (1,885) (193) (1,078) (2,452) (1,435) 12,255 (5,158)
Interest income 174 234 763 873 624 718 666 798 2,044 2,806
Interest expense 0 (5,806) (5,682) (2,535) (6,645) (3,310) (3,422) (2,690) (14,023) (16,067)
Equity income (loss), net (1,057) (3,440) 40,497 28,267 (7,791) 39,246 (14,540) 2,746 64,267 19,661
Net income (loss) before income taxes (698) (2,497) 36,093 21,663 (16,623) 32,060 (24,896) (6,170) 54,561 (15,629)
Income tax benefit (expense) 0 0 0 0 0 0 0 0 0 0
Net income (loss) $ (698) $ (2,497) $ 36,093 $ 21,663 $ (16,623) $ 32,060 $ (24,896) $ (6,170) $ 54,561 $ (15,629)
Net income (loss) per share:                    
Basic (in dollars per share) $ (0.03) $ (0.12) $ 1.75 $ 1.05 $ (0.81) $ 1.56 $ (1.21) $ (0.30) $ 2.64 $ (0.76)
Diluted (in dollars per share) $ (0.03) $ (0.12) $ 1.75 $ 1.05 $ (0.81) $ 1.56 $ (1.21) $ (0.30) $ 2.64 $ (0.76)
Weighted average shares used in computing net income (loss) per share:                    
Basic (in shares)                 20,636 20,544
Diluted (in shares)                 20,636 20,544
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Statement of Comprehensive Income [Abstract]    
Net loss $ 54,561 $ (15,629)
Other comprehensive income (loss), before taxes:    
Share of other comprehensive (loss) income of equity method investments (31) 113
Reclassification adjustment for sale of equity method investments 6 0
Total comprehensive income (loss) $ 54,536 $ (15,516)
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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($)
shares in Thousands, $ in Thousands
Total
Accumulated Deficit [Member]
AOCI Attributable to Parent [Member]
Common Stock [Member]
Additional Paid-In Capital [Member]
Treasury Stock [Member]
Beginning Balance at Dec. 31, 2017 $ 81,796 $ (715,476) $ (113) $ 2,157 $ 812,536 $ (17,308)
Beginning Balance (in shares) at Dec. 31, 2017       21,573   999
Net loss (15,629) (15,629)        
Stock options exercised, net of tax withholdings 0       (16) $ 16
Restricted stock awards, forfeitures and shares repurchased for tax withholdings, net (267)       (2,558) $ 2,291
Issuance of restricted stock, net of tax withholdings (in shares)           85
Stock-based compensation 966       966  
Other comprehensive loss 113   113      
Ending Balance at Dec. 31, 2018 66,979 (731,105) 0 $ 2,157 810,928 $ (15,001)
Ending Balance (in shares) at Dec. 31, 2018       21,573   914
Net loss 54,561 54,561        
Restricted stock awards, forfeitures and shares repurchased for tax withholdings, net (236)       (1,213) $ 977
Issuance of restricted stock, net of tax withholdings (in shares)           16
Stock-based compensation 1,141       1,141  
Other comprehensive loss (25)   (25)      
Dividends (20,679) (20,679)        
Ending Balance at Dec. 31, 2019 $ 101,741 $ (697,223) $ (25) $ 2,157 $ 810,856 $ (14,024)
Ending Balance (in shares) at Dec. 31, 2019       21,573   930
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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Cash Flows from Operating Activities:    
Net loss $ 54,561 $ (15,629)
Adjustments to reconcile to net cash used in operating activities:    
Depreciation 808 692
Amortization of debt discount 3,454 4,513
Amortization of right of use asset 260  
Equity income, net (64,267) (19,661)
(Income) loss from change in fair value of derivative (5,060) 4,541
Gain from observable price changes (4,526) (1,415)
Other, net (2,268) 2,044
Stock-based compensation, including liability classified awards 1,237 966
Changes in assets and liabilities:    
Prepaid expenses and other current assets (823) (2,065)
Accounts payable, accrued expenses, and other (3,346) (21)
Net cash used in operating activities (19,970) (26,035)
Cash Flows from Investing Activities:    
Acquisitions of ownership interests (11,640) (3,250)
Proceeds from sales and distributions 104,302 67,387
Advances and loans (5,055) (13,104)
Repayment of advances and loans 750 10,730
Purchase of marketable securities (57,243) (37,809)
Proceeds, from sales and maturities in securities 95,189 8,148
Proceeds from sales of property and equipment 0 1
Net cash provided by investing activities 126,303 32,103
Cash Flows from Financing Activities:    
Payment of dividend (20,679) 0
Proceeds from credit facility 0 35,000
Issuance costs of credit facility 0 (2,252)
Repayments on credit facility (68,568) (16,433)
Repurchase of convertible senior debentures 0 (41,000)
Tax withholdings related to equity-based awards (236) (267)
Net cash used in financing activities (89,483) (24,952)
Net change in cash, cash equivalents and restricted cash equivalents 16,850 (18,884)
Cash, cash equivalents and restricted cash equivalents at beginning of period 8,203 27,087
Cash, cash equivalents and restricted cash equivalents at end of period $ 25,053 $ 8,203
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Significant Accounting Policies
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Significant Accounting Policies
General
Liquidity And Capital Resources
As of December 31, 2019, Safeguard ("the Company") had $25.0 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, are and will consider initiatives including, among others: the sale of individual ownership interests, the sale of certain or all ownership interests in secondary market transactions, or a combination thereof, as well as other opportunities to maximize shareholder value.
The Company believes that its cash and cash equivalents at December 31, 2019 will be sufficient to fund operations past one year from the issuance of these financial statements.
Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Safeguard and all of its subsidiaries in which a controlling financial interest is maintained. All intercompany accounts and transactions are eliminated in consolidation.
Principles of Accounting for Ownership Interests in Companies
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 and debt securities, the Company also periodically makes advances to its companies in the form of promissory notes which are included in the Ownership interests 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 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 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 and advances on the Consolidated Balance Sheets.
Accounting Estimates
The preparation of the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect amounts reported in the financial statements and accompanying notes. Actual results may differ from these estimates. These estimates include the evaluation of the recoverability of the Company’s ownership interests and advances, the fair value of the credit facility repayment feature derivative, the current portion of the credit facility debt, the recoverability of deferred tax assets, stock-based compensation and commitments and contingencies. Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances.
 
Certain amounts recorded to reflect the Company’s share of income or losses for companies accounted for under the equity method are based on unaudited results of operations of those companies and may require adjustments in the future when audits of these entities’ financial statements are completed.
It is reasonably possible that the Company’s accounting estimates with respect to the ultimate recoverability of the carrying value of the Company’s ownership interests and advances could change in the near term and that the effect of such changes on the financial statements could be material. At December 31, 2019, the Company believes the carrying value of the Company’s ownership interests and advances is not impaired, although there can be no assurance that the Company’s future results will confirm this assessment, that a significant write-down or write-off will not be required in the future or that a significant loss will not be recorded in the future upon the sale of a company.
Cash and Cash Equivalents and Marketable Securities
The Company considers all highly liquid instruments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist of deposits that are readily convertible into cash. The Company determines the appropriate classification of marketable securities at the time of purchase and reevaluates such designation as of each balance sheet date. Held-to-maturity securities were carried at amortized cost, which approximated fair value. Marketable securities consisted of held-to-maturity securities, primarily consisting of government agency bonds, commercial paper and certificates of deposits. Marketable securities with a maturity date greater than one year from the balance sheet date would be considered long-term. The Company has not experienced any significant losses on cash equivalents and does not believe it is exposed to any significant credit risk on cash and cash equivalents.
Restricted Cash
Restricted cash equivalents represents cash required to be set aside by a contractual agreement as a shareholder representative. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets:
 
December 31, 2019
 
December 31, 2018
 
(In thousands)
Cash and cash equivalents
$
25,028

 
$
7,703

Restricted cash
25

 
500

Total cash, cash equivalents and restricted cash
$
25,053

 
$
8,203


Financial Instruments
The Company’s financial instruments (principally cash and cash equivalents, marketable securities, accounts receivable, notes receivable, accounts payable and accrued expenses) are carried at cost, which approximates fair value due to the short-term maturity of these instruments. The Company’s long-term debt was carried at cost.
Property and Equipment
Property and equipment represents right-of-use assets resulting from the adoption of Accounting Standards Update ("ASU") No. 2016-02, Leases, and other previously existing leasehold improvements. The leasehold improvements were amortized over the shorter of the estimated useful lives or the expected remaining term of the lease. The right-of-use assets are reduced over the remaining term of the applicable lease (principally 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 prior corporate headquarters operating office lease. The discount rate used to calculate the lease liability was based on the Company's incremental borrowing rate, approximately 12%, at the transition to the guidance of ASU No. 2016-02, Leases. Subsequent values of the lease liability 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 $0.5 million and $0.6 million for the years ended December 31, 2019 and 2018, respectively, and $0.6 million and $0.6 million for the years ended December 31, 2019 and 2018, respectively.
In March 2019, the Company entered into a sublease of its prior corporate headquarters office space. 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, an equity method ownership interest, beginning in June 2019. The term of this sublease is 18 months with three conditional six months renewals based on mutual agreement with the sublessor. The aggregate payments expected under this sublease are not material.

A summary of the Company's operating lease cash flows at December 31, 2019 follows:
 
Operating lease payments
Expected sublease receipts
 
(In thousands)
2020
$
707

$
509

2021
595

525

2022
601

540

2023
607

556

2024
613

573

2025
619

590

Thereafter
207

199

Total future minimum lease payments
3,949

$
3,492

Less imputed interest
(1,170
)
 
Total operating lease liabilities
$
2,779

 
 
 
 


Valuation of Credit Facility repayment feature
The fair value of the Credit Facility repayment feature (a Level 3 measurement) was determined quarterly based on the present value of make-whole interest payments that were expected to be paid based on cash flow estimates that included a probability weighted estimate of exit transactions, estimated follow-on deployments, estimated quarterly operating cash flows and other cash commitments that would have resulted in qualified cash exceeding the $50 million threshold specified in the Credit Facility. This fair value of the Credit Facility repayment feature was eliminated in July 2019 upon the repayment of the Credit Facility.
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 are not written-up if circumstances suggest the value of the company has subsequently recovered.
Income Taxes
The Company accounts for income taxes under the asset and liability method whereby deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company measures deferred tax assets and liabilities using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled. The Company recognizes the effect on deferred tax assets and liabilities of a change in tax rates in income in the period of the enactment date. The Company provides a valuation allowance against the net deferred tax asset for amounts which are not considered more likely than not to be realized.
Net Income (Loss) Per Share
The Company computes net income (loss) per share using the weighted average number of common shares outstanding during each year. The Company includes in diluted net income (loss) per share common stock equivalents (unless anti-dilutive) which would arise from the exercise of stock options and conversion of other convertible securities and adjusted, if applicable, for the effect on net income (loss) of such transactions. Diluted net income (loss) per share calculations adjust net income (loss) for the dilutive effect of common stock equivalents and convertible securities issued by the Company’s consolidated or equity method companies.
Segment Information
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.
Reclassifications
Certain prior period amounts within Prepaid expenses and other current assets aggregating $2.1 million have been reclassified to Other assets to conform with current year presentation.
Recent 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 is 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 will supersede most existing revenue guidance, it could impact revenue and cost recognition for companies in which we hold an ownership interest. Any change in revenue or cost recognition for companies in which we hold an ownership interest could affect the Company's recognition of its share of the results of its equity method companies. On July 20, 2017, the SEC staff observer at the FASB’s Emerging Issues Task Force ("EITF") meeting announced that the SEC staff will 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 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 No. 2016-02, Leases (ASC 842). The guidance in ASU No. 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 No. 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 No. 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 where 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 former 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.
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Ownership Interests in and Advances to Partner Companies and Funds
12 Months Ended
Dec. 31, 2019
Ownership Interests in and Advances to Partner Companies and Funds [Abstract]  
Ownership Interests in and Advances to Partner Companies
Ownership Interests and Advances
The following summarizes the carrying value of the Company’s ownership interests and advances.
 
December 31, 2019
 
December 31, 2018
 
(In thousands)
Equity Method:
 
 
 
Companies
$
34,271

 
$
64,097

Private equity funds
271

 
392

 
34,542

 
64,489

Other Method:
 
 
 
Companies
27,031

 
15,260

Private equity funds
453

 
511

 
27,484

 
15,771

Advances to companies
15,103

 
15,325

 
$
77,129

 
$
95,585


During 2019, the Company recognized an impairment of $3.0 million related to NovaSom, which is reflected in Equity income (loss) in the Consolidated Statements of Operations. The impairment was the result of NovaSom Inc.'s August 2019 bankruptcy filing.
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, and $0.7 million in 2020 for amounts held in escrow. The Company recognized a gain of $35.1 million, which is included in Equity income (loss) in the Consolidated Statements of Operations.
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.
In May 2019, Transactis was acquired by another entity for cash. To date, the Company received $57.5 million in cash proceeds in connection with the transaction, excluding certain amounts that continue to be held in escrow that may be released on various dates on or before May 2020. The Company has recognized gains of $50.7 million, which are included in Equity income (loss) in the Consolidated Statements of Operations.
During 2019, the Company ceased accounting for T-REX Group, Inc. and Hoopla Software, Inc. under the equity method as a result of losing our ability to exercise significant influence.
During 2019, the Company recorded $4.5 million of non-cash gains in Other income (loss) related to the increase in the value of certain equity securities based upon observable price changes.
During 2018, the Company recognized impairments of $12.6 million related to Apprenda, Inc. CloudMine, Inc. and Brickwork, which are reflected in Equity income (loss) in the Consolidated Statements of Operations. The impairments resulted from the discontinuance of operations or sale of the related entities.
In January 2018, Spongecell, Inc. merged into Flashtalking, a privately-held company. The Company received Flashtalking ordinary shares equal to approximately 10% of Flashtalking’s issued share capital at the time of the closing. The Company recorded its ownership interest at its fair value at the time of closing. The Company recognized a gain of $3.9 million on the transaction, which is included in Equity income (loss) in the Consolidated Statements of Operations, and has a carrying value for its interest of approximately $11.0 million at December 31, 2018 and 2019, respectively.
In January 2018, the Company received $0.6 million of proceeds from the sale of the assets of Aventura, Inc., a company that ceased operations and was fully impaired in 2016. The Company recognized a gain of $0.6 million, which is reflected in Equity income (loss) in the Consolidated Statements of Operations.
In February 2018, Nexxt, Inc., formerly Beyond.com, repaid $10.5 million of principal outstanding on a note received in connection with the Company's sale of its interest back to Nexxt for $26.0 million in March 2017. In that transaction, the Company received $15.5 million in cash and a three-year, $10.5 million note for the balance due, which accrued interest at a rate of 9.5% per annum. Interest was payable annually and interest income was recorded as earned throughout the year. The $10.5 million note was fully reserved and had a carrying value of zero as of December 31, 2017. The Company waived the interest accrued to date in connection with the early repayment of the principal balance. The receipt of $10.5 million of cash in February 2018 resulted in a gain of $9.5 million, net of the interest accrued to date, which is included in Equity income (loss) in the Consolidated Statements of Operations.
The Company obtained shares of Invitae in 2017 when Invitae, a public company, acquired Good Start Genetics, Inc. The Company recognized a net gain on the transaction of $4.3 million for the year ended December 31, 2017 and an additional gain on the transaction of $1.1 million for the year ended December 31, 2018 as shares were released from escrow. During 2018, the Company sold an aggregate of 492,340 shares of Invitae Corporation ("Invitae") common stock on the open market for proceeds of $3.7 million after transaction fees. During 2019, the Company sold an aggregate of 27,264 shares of Invitae common stock on the open market for proceeds of $0.7 million after transaction fees as a result of their release from escrow.
In May 2018, Cask Data, Inc. sold substantially all of its assets to another entity. The Company received $11.5 million in cash proceeds in connection with the transaction, excluding holdbacks and escrows. The Company recognized a gain of $4.2 million on the transaction during 2018, which was included in Equity income (loss) in the Consolidated Statements of Operations. During 2019, the Company received an aggregate of $3.8 million of additional proceeds resulting from escrows and holdbacks that is included as Equity income (loss) in the Consolidated Statements of Operations.

In July 2018, the Company sold 39.13% of its ownership position in MediaMath back to MediaMath for $45.0 million. The Company also granted MediaMath an option to repurchase an additional 10.87% of the Company’s ownership position in MediaMath for $12.5 million within 180 days after the close of the initial transaction, which was extended until September 30, 2019. MediaMath did not exercise its option to repurchase these shares. The Company recognized a gain of $45.0 million on the initial transaction, which is included in Equity income (loss) in the Consolidated Statements of Operations. The Company previously accounted for its ownership interest in MediaMath under the equity method of accounting. Immediately after the initial transaction, the Company discontinued utilizing the equity method of accounting for its remaining ownership interest in MediaMath. The Company's remaining ownership interest was recorded at its carrying value immediately prior to the July 2018 transaction. The carrying value will be adjusted for any observable price changes in the same or similar equity securities of MediaMath as those held by the Company.
In July 2018, the Company sold its interest in AdvantEdge Healthcare Solutions, Inc. in a secondary transaction for $10.0 million, excluding an additional $6.3 million that may be realized upon the achievement of certain valuation thresholds in connection with the future sale of Advantage Healthcare Solutions. The Company recognized a gain of $5.5 million on the transaction, which is included in Equity income (loss) in the Consolidated Statements of Operations.

Summarized Financial Information
The following table provides summarized financial information for ownership interests accounted for under the equity method for the periods presented and has been compiled from respective company financial statements, reflect certain historical adjustments, and are reported on a one quarter lag. Results of operations are excluded for periods prior to their acquisition and subsequent to their disposition. Historical results are not adjusted when the Company exits or writes-off a company. 
 
As of December 31,
 
2019
 
2018
 
(In thousands)
Balance Sheets:
 
 
 
Current assets
$
91,968

 
$
168,659

Non-current assets
26,231

 
24,432

Total assets
$
118,199

 
$
193,091

Current liabilities
$
80,783

 
$
88,988

Non-current liabilities
87,081

 
109,924

Shareholders’ equity
(49,665
)
 
(5,821
)
Total liabilities and shareholders’ equity
$
118,199

 
$
193,091

 
 
 
 
Number of equity method ownership interests
13

 
19



 
Year Ended December 31,
 
2019
 
2018
 
 
(In thousands)
Results of Operations:
 
 
 
 
Revenue
$
145,632

 
$
283,009

 
Gross profit
$
78,465

 
$
181,571

 
Net loss
$
(127,007
)
 
$
(154,696
)
 


As of December 31, 2019, the Company’s carrying value in equity method companies, in the aggregate, exceeded the Company’s share of the net assets of such companies by approximately $24.3 million. Of this excess, $19.0 million was allocated to goodwill and $5.3 million was allocated to intangible assets.
v3.19.3.a.u2
Acquisitions of Ownership Interests in Partner Companies and Funds
12 Months Ended
Dec. 31, 2019
Equity Method Investments and Joint Ventures [Abstract]  
Acquisitions of Ownership Interests in Partner Companies
Acquisitions of Ownership Interests
2019 Transactions
The Company deployed an additional $5.0 million to Syapse, Inc. The Company had previously deployed an aggregate of $15.6 million in Syapse. Syapse drives healthcare transformation through precision medicine, enabling provider systems to improve clinical outcomes, streamline operations, and shift to new payment models.

The Company deployed an additional $2.0 million to Moxe Health Corporation, including $0.3 million that was funded initially as a convertible loan. The Company had previously deployed $5.5 million in Moxe Health. Moxe Health connects payers to their provider networks, facilitating real-time data exchange through its electronic integration platform.

The Company deployed an additional $1.5 million to Aktana, Inc. The Company had previously deployed an aggregate of $10.2 million in Aktana. 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 $1.5 million to 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.

The Company deployed an additional $1.5 million to Zipnosis, Inc. The Company had previously deployed $8.5 million in Zipnosis. Zipnosis provides health systems with a white-labeled, fully integrated virtual care platform.
The Company deployed an aggregate of $0.4 million to 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 funded an additional $2.0 million of convertible 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 funded an aggregate of $1.1 million of convertible loans to WebLinc, Inc. The Company had previously deployed an aggregate of $15.0 million in WebLinc. WebLinc is an e-commerce platform for online retailers.
The Company funded an aggregate of $1.0 million of convertible loans to NovaSom, Inc. The Company had previously deployed an aggregate of $26.4 million in NovaSom. See Note 2 for impairment recorded during the second quarter of 2019.
The Company funded an additional $0.6 million of convertible loans to QuanticMind. The Company had previously deployed an aggregate of $12.9 million in QuanticMind. QuanticMind delivers an intelligent, scalable and fast platform for maximizing digital marketing performance, including paid search and social, for enterprises.
2018 Transactions
The Company deployed an additional $1.5 million in Zipnosis, Inc.
The Company deployed an additional $1.0 million in meQuilibrium.
The Company deployed an aggregate of $1.0 million of convertible bridge loans to CloudMine, Inc. The Company had previously deployed an aggregate of $10.0 million in CloudMine. See Note 2 for discussion of the impairment of our interests in 2018. The Company had previously accounted for its interest in CloudMine under the equity method.
The Company funded an aggregate of $2.2 million of convertible bridge loans to Sonobi, Inc.
The Company funded an aggregate of $2.2 million of convertible loans to NovaSom, Inc. See Note 2 for impairment recorded during the second quarter of 2019.
The Company funded an additional $1.4 million of convertible bridge loans to QuanticMind.
The Company funded an additional $1.0 million of convertible bridge loans to Moxe Health Corporation.
The Company funded an aggregate of $1.0 million of convertible bridge loans to WebLinc, Inc.
The Company funded an aggregate of $0.7 million of term notes and $1.6 million of convertible bridge loans to InfoBionic, Inc. The Company had previously deployed an aggregate of $19.7 million in InfoBionic. InfoBionic is an emerging digital health company focused on creating patient monitoring solutions for chronic disease management with an initial market focus on cardiac arrhythmias. The Company accounts for its interest in InfoBionic under the equity method.
The Company funded an aggregate of $0.7 million of convertible bridge loans to Brickwork. The Company had previously deployed an aggregate of $4.2 million in Brickwork. The Company previously accounted for its interest in Brickwork under the equity method. See Note 2 for discussion of the sale of this company in 2019.
The Company funded an additional $0.5 million in Aktana, Inc.
The Company funded an aggregate of $0.5 million of convertible bridge loans to Spongecell, Inc. The Company had previously deployed an aggregate of $18.6 million in Spongecell. In the first quarter of 2018, Spongecell merged into Flashtalking as discussed in Note 2. The Company previously accounted for its interest in Spongecell under the equity method.
The Company funded an aggregate of $0.4 million of convertible bridge loans to Cask Data, Inc. The Company had previously deployed an aggregate of $13.0 million in Cask Data. Cask Data made building and running big data solutions on-premises or in the cloud easy with Cask Data Application Platform. In May 2018, Cask Data sold substantially all of its assets to another entity resulting in the gain discussed in Note 2. The Company had previously accounted for its interest in Cask Data under the equity method.
The Company deployed an additional $0.3 million in Propeller. The Company had previously deployed an aggregate of $14.0 million in Propeller. Propeller provides digital solutions to measurably improve respiratory health. The Company accounted for its interest in Propeller under the equity method. See Note 2 discussion of the sale of this company in 2019.
v3.19.3.a.u2
Fair Value Measurements
12 Months Ended
Dec. 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 (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 assets 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 December 31, 2019 and 2018:
 
Carrying
Value
 
Fair Value Measurement at December 31, 2019
 
 
Level 1
 
Level 2
 
Level 3
 
(in thousands)
Cash and cash equivalents
$
25,028

 
$
25,028

 
$

 
$

Restricted cash equivalents
25

 
25

 

 

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

 
$
7,703

 
$

 
$

Restricted cash equivalents
500

 
500

 

 

Marketable securities—held-to-maturity:

 

 
 
 
 
Government agency bond
$
21,473

 
$
21,473

 
$

 
$

U.S. Treasury Bills
16,482

 
16,482

 

 

 Total marketable securities
$
37,955

 
$
37,955

 
$

 
$

 
 
 
 
 
 
 
 
Credit facility repayment feature liability
$
5,060

 
$

 
$

 
$
5,060


As of December 31, 2018, $38.0 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 December 31, 2018, $5.1 million was recorded as a credit facility repayment feature liability due to the provision in the Credit Facility that required prepayments of outstanding principal amounts when the Company's qualified cash at any quarter end date exceeded $50.0 million. This represented an increase of $4.5 million from its initial value established during the second quarter of 2018. The prepayment feature was an embedded derivative that was accounted for as a liability separate from the Credit Facility. The liability was adjusted to zero upon repayment of the Credit Facility, which occurred in July 2019. Management's cash forecasts are defined as Level 3 inputs under the fair value hierarchy.
v3.19.3.a.u2
Credit Facility and Convertible Debentures
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Credit Facility and Convertible Debentures
Convertible Debentures
Credit Facility     
The Company's credit facility was with HPS Investment Partners, LLC (“Lender”), and was amended in May 2018 ("Credit Facility"). The Credit Facility had a scheduled maturity of May 11, 2020 and 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 was secured by all of the Company's assets in accordance with the terms of the Credit Facility.
The terms of the Credit Facility included a requirement that if the aggregate amount of the Company’s qualified cash at any quarter end date exceeded $50.0 million, the Company would 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. Additionally, the Company repaid the remaining principal of $44.5 million and make-whole interest of $4.1 million in July 2019.
The Company was subject to certain debt covenants under the Credit Facility which required 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, 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 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 was restricted from repurchasing shares of its outstanding common stock and/or issuing dividends until such time as the Credit Facility was repaid in full. The Company was in compliance with all applicable covenants.
The Credit Facility required prepayments of outstanding principal and interest amounts when the Company’s qualified cash at any quarter end date exceeded $50.0 million. This provision in the Credit Facility was an embedded derivative that was accounted for separately from the Credit Facility. A liability of $0.5 million was recorded on the 2018 amendment date for the fair value of potential future prepayments based upon management's probability weighted cash forecast. This amount was also included in debt issuance costs and had been amortized over the remaining term of the Credit Facility. The liability was adjusted to fair value at each balance sheet date based upon management's updated probability weighted cash forecast. During 2019, the Company recorded a decrease in the liability of $5.1 million, which is included in Other income (loss) on the Consolidated Statements of Operations.
The Company recorded interest expense under the Credit Facility of $14.0 million and $14.6 million for the years ended December 31, 2019 and 2018, respectively. The effective interest rate on the Credit Facility was 15.1%. The Company made interest payments under the Credit Facility of $11.5 million and $10.0 million for the years ended December 31, 2019 and 2018, respectively.
Convertible Senior Debentures
At December 31, 2017, the Company had $41.0 million of outstanding 5.25% convertible senior debentures which were repaid in full in May 2018.
v3.19.3.a.u2
Equity
12 Months Ended
Dec. 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. During the years ended December 31, 2019 and 2018, the Company did not repurchase any shares under the existing authorization. 
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") which was ratified by shareholders at its 2018 Annual Meeting of 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 occur 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 of record on March 2, 2018. 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.
On November 7, 2019, the Board of Directors declared a special cash dividend of $1.00 per share, payable on December 30, 2019 to shareholders of record as of the close of business on December 23, 2019, resulting in total dividends paid of $20.7 million.
v3.19.3.a.u2
Stock-Based Compensation
12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation
Stock-Based Compensation
Equity Compensation Plans
The 2014 Equity Compensation Plan has 4.1 million shares authorized for issuance. During 2019 and 2018, the Company issued no stock-based awards outside of existing plans. To the extent allowable, service-based options are incentive stock options. Options granted under the plans are at prices equal to or greater than the fair market value at the date of grant. Upon exercise of stock options, the Company issues shares first from treasury stock, if available, then from authorized but unissued shares. At December 31, 2019, the Company had reserved 3.1 million shares of common stock for possible future issuance under its 2014 Equity Compensation Plan and other previously expired equity compensation plans.
Classification of Stock-Based Compensation Expense
Stock-based compensation expense was recognized in the Consolidated Statements of Operations as follows: 
 
Year Ended December 31,
 
2019
 
2018
 
 
(In thousands)
General and administrative expense
$
1,237

 
$
966

 
 
$
1,237

 
$
966

 

At December 31, 2019, the Company had outstanding options that vest based on two different types of vesting schedules:
1) performance-based; and
2) service-based.
Performance-based awards entitle participants to vest in a number of awards determined by achievement by the Company of target capital returns based on net cash proceeds received by the Company upon the sale, merger or other exit transaction of certain identified companies. Vesting may occur, if at all, once per year. The requisite service periods for the performance-based awards are based on the Company’s estimate of when the performance conditions will be met. Compensation expense is recognized for performance-based awards for which the performance condition is considered probable of achievement. Compensation expense is recognized over the requisite service periods using the straight-line method but is accelerated if capital return targets are achieved earlier than estimated. No performance-based options were issued during the years ended December 31, 2019 or 2018. During the years ended December 31, 2019 and 2018, 0 thousand and 1 thousand performance-based options vested each year. During the years ended December 31, 2019 and 2018, respectively, 174 thousand and 76 thousand performance-based options were canceled or forfeited. The Company recorded a reduction of compensation expense related to performance-based options of $0.1 million and $0.7 million for the years ended December 31, 2019 and 2018 respectively. The maximum number of unvested options at December 31, 2019 attainable under these grants was 85 thousand shares.
Service-based awards generally vest over four years after the date of grant and expire eight years after the date of grant. Compensation expense is recognized over the requisite service period using the straight-line method. The requisite service period for service-based awards is the period over which the award vests. During the years ended December 31, 2019 and 2018, respectively, the Company issued no service-based options to employees and recorded no compensation expense from the vesting of previously issued awards. During the years ended December 31, 2019 and 2018, respectively, 57 thousand and 17 thousand service-based options were canceled or forfeited.
There were no options granted during 2019 and 2018.

Stock-based compensation expense of $0.1 million was recognized during the year ended December 31, 2019 related to Board fees earned in 2019 that were subsequently settled in stock. Compensation expense of $0.1 million was also recognized during the year ended December 31, 2019 related to the dividend payments made to holders of unvested restricted stock awards pursuant to the terms of those instruments.

Option activity of the Company is summarized below: 
 
Shares
 
Weighted
Average
Exercise Price
 
Weighted Average
Remaining
Contractual Life
 
Aggregate
Intrinsic
Value
 
(In thousands)
 
 
 
(In years)
 
(In thousands)
Outstanding at January 1, 2018
569

 
14.74

 
 
 
 
Options granted

 

 
 
 
 
Options exercised
(15
)
 
12.29

 
 
 
 
Options canceled/forfeited
(144
)
 
15.21

 
 
 
 
Outstanding at December 31, 2018
410

 
14.66

 
 
 
 
Options granted

 

 
 
 
 
Options exercised

 

 
 
 
 
Options canceled/forfeited
(231
)
 
14.19

 
 
 
 
Outstanding at December 31, 2019
179

 
15.27

 
1.65
 
$

Options exercisable at December 31, 2019
89

 
15.38

 
1.35
 

Shares available for future grant
2,602

 
 
 
 
 
 


At December 31, 2019, total unrecognized compensation cost related to non-vested service-based options was immaterial. At December 31, 2019, total unrecognized compensation cost related to non-vested performance-based options was immaterial.
Performance-based stock units vest based on achievement by the Company of target capital returns based on net cash proceeds received by the Company on the sale, merger or other exit transaction of certain identified companies, as described above related to performance-based awards. Performance-based stock units represent the right to receive shares of the Company’s common stock, on a one-for-one basis. The Company did not issue any performance-based units during the years ended December 31, 2019 or 2018. During the years ended December 31, 2019 and 2018, respectively, and 0 thousand and 1 thousand performance-based stock units vested each year. During the years ended December 31, 2019 and 2018, respectively, 339 thousand and 117 thousand performance-based stock units were canceled or forfeited. Under the terms of the 2016 and 2015 performance-based awards, once performance-based stock units are fully vested, participants are entitled to receive cash payments based on their initial performance grant values as target capital returns described above are exceeded. At December 31, 2019, the liability associated with such potential cash payments was $0.0 million.
During the years ended December 31, 2019 and 2018, respectively, the Company issued 31 thousand and 48 thousand restricted shares to employees and directors. Restricted shares generally vest over a period of approximately two to four years, or are vested at issuance for directors 65 or older. During the years ended December 31, 2019 and 2018, respectively, 75 thousand and 44 thousand restricted shares were canceled or forfeited.
During the years ended December 31, 2019 and 2018, respectively, the Company issued 0 thousand, and 6 thousand deferred stock units to non-employee directors for annual service grants or fees earned during the preceding quarter. Deferred stock units issued to directors in lieu of directors fees are 100% vested at the grant date; matching deferred stock units equal to 25% of directors’ fees deferred vest one year following the grant date or, if earlier, upon reaching age 65. Deferred stock units are payable in stock on a one-for-one basis. Payments related to the deferred stock units are generally distributable following termination of service, death or permanent disability.
 
Total compensation expense for deferred stock units, performance-based stock units and restricted stock was $1.2 million $1.0 million, for the years ended December 31, 2019 and 2018, respectively. Unrecognized compensation expense related to deferred stock units, performance stock units and restricted stock at December 31, 2019 was $1.1 million. The total fair value of deferred stock units, performance stock units and restricted stock vested during the years ended December 31, 2019 and 2018 was $1.2 million and $1.6 million, respectively.


Deferred stock unit, performance-based stock unit and restricted stock activity are summarized below: 
 
Shares
 
Weighted Average
Grant Date Fair
Value
 
(In thousands)
 
 
Unvested at January 1, 2018
1,005

 
$
14.21

Granted
54

 
9.47

Vested
(121
)
 
12.87

Forfeited
(161
)
 
14.21

Unvested at December 31, 2018
777

 
14.08

Granted
31

 
12.12

Vested
(107
)
 
11.79

Forfeited
(414
)
 
14.28

Unvested at December 31, 2019
287

 
14.44

v3.19.3.a.u2
Employee Benefit Plan
12 Months Ended
Dec. 31, 2019
Retirement Benefits [Abstract]  
Employee Benefit Plan
Employee Benefit Plan

The Company maintains a qualified 401(k) retirement plan for eligible employees. The Plan’s matching formula is 100% of the first 5% of participants’ qualified compensation. Compensation expense related to our matching contributions to the Plan for the years ended December 31, 2019 and 2018, were $0.2 million and $0.2 million, respectively.
v3.19.3.a.u2
Income Taxes
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The federal and state provision (benefit) for income taxes was $0.0 million for the years ended December 31, 2019 and 2018.
The total income tax provision (benefit) differed from the amounts computed by applying the U.S. federal income tax rate of 21.0% for the years ended December 31, 2019 and 2018 to net income (loss) before income taxes as a result of the following:
 
Year Ended December 31,
 
2019
 
2018
 
Statutory tax (benefit) expense
21.0
 %
 
(21.0
)%
 
Increase (decrease) in taxes resulting from:
 
 
 
 
Nondeductible expenses
0.4

 
1.5

 
Valuation allowance
(21.4
)
 
19.5

 
 
0.0
 %
 
0.0
 %
 

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows: 
 
As of December 31,
 
2019
 
2018
 
(In thousands)
Deferred tax asset:
 
 
 
Carrying values of ownership interests and other holdings
$
32,760

 
$
60,951

Tax loss and credit carryforwards
70,914

 
62,901

Disallowed interest carryforwards
7,292

 
3,831

Credit facility repayment feature

 
1,312

Accrued expenses
213

 
675

Stock-based compensation
432

 
550

Other
604

 
1,034

 
112,215

 
131,254

Valuation allowance
(112,215
)
 
(131,254
)
Net deferred tax asset
$

 
$


As of December 31, 2019, the Company and its subsidiaries had federal net operating and capital loss carryforwards for tax purposes of approximately $337 million, of which approximately $34 million have an indefinite life. These carryforwards expire as follows: 
 
Total
 
(In thousands)
2020
$

2021
3,728

2022
48,848

2023
20,981

2024 and thereafter
229,615

 
$
303,172


In assessing the recoverability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has determined that it is more likely than not that certain future tax benefits may not be realized as a result of current and future income. Accordingly, a valuation allowance has been recorded against substantially all of the Company’s deferred tax assets.

The Company recognizes in its Consolidated Financial Statements the impact of a tax position if that position is more likely than not to be sustained upon examination, based on the technical merits of the position. All uncertain tax positions relate to unrecognized tax benefits that would impact the effective tax rate when recognized.

The Company does not expect any material increase or decrease in its income tax expense, in the next twelve months, related to examinations or changes in uncertain tax positions.
 
There were no changes in the Company’s uncertain tax positions for the years ended December 31, 2019 and 2018.
The Company files income tax returns in the U.S. federal jurisdiction, and various state jurisdictions. Tax years 2015 and forward remain open for examination for federal tax purposes and the Company’s more significant state tax jurisdictions. To the extent utilized in future years’ tax returns, net operating loss carryforwards at December 31, 2019 will remain subject to examination until the respective tax year is closed. The Company recognizes penalties and interest accrued related to income tax liabilities in income tax benefit (expense) in the Consolidated Statements of Operations.
v3.19.3.a.u2
Net Income (Loss) Per Share
12 Months Ended
Dec. 31, 2019
Earnings Per Share [Abstract]  
Net Loss Per Share
Net Income (Loss) Per Share
The calculations of net income (loss) per share were: 
 
Year Ended December 31,
 
2019
 
2018
 
 
(In thousands, except per share data)
Basic:
 
 
 
 
Net income (loss)
$
54,561

 
$
(15,629
)
 
Weighted average common shares outstanding
20,636

 
20,544

 
Net income (loss) per share
$
2.64

 
$
(0.76
)
 
Diluted:
 
 
 
 
Net income (loss)
$
54,561

 
$
(15,629
)
 
Weighted average common shares outstanding
20,636

 
20,544

 
Net income (loss) per share
$
2.64

 
$
(0.76
)
 

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 from net income (loss) 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 income (loss) per share for the years ended December 31, 2019 and 2018 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 December 31, 2019 and 2018, options to purchase 0.2 million and 0.4 million shares of common stock, respectively, at prices ranging from $10.37 to $18.45 per share, and $9.83 to $19.95 per share per share, respectively, were excluded from the calculation.

At December 31, 2019 and 2018, unvested restricted stock, performance-based stock units and DSUs convertible into 0.3 million and 0.8 million shares of stock, respectively, were excluded from the calculations.

For the year ended December 31, 2018, 0.8 million shares of common stock, respectively, representing the effect of assumed conversion of the 2018 Debentures were excluded from the calculations.
v3.19.3.a.u2
Related Party Transactions
12 Months Ended
Dec. 31, 2019
Related Party Transactions [Abstract]  
Related Party Transactions
Related Party Transactions
In the normal course of business, the Company’s officers and employees hold board positions with companies in which the Company has a direct or indirect ownership interest.
v3.19.3.a.u2
Commitments and Contingencies
12 Months Ended
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
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 December 31, 2019 which related to one of the Company's private equity holdings.

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 former executive passed away in 2019. Accordingly, the Company recorded a $1.7 million gain in Other income (loss) which also eliminated the remaining projected benefits related to this agreement that were previously included in Accrued expenses and other current liabilities and Other long-term liabilities on the Consolidated Balance Sheets.
The Company has agreements with certain 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 severance agreements for remaining employees is approximately $4.0 million at December 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 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 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. The Company has accrued approximately $0.5 million under the LTIP as of December 31, 2019.
In June 2011, 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.
In November 2019, the Company engaged a consultant to assist with certain strategic, operational and financial projects through March 31, 2020. In addition to certain cash compensation, the Company, at its sole discretion, may issue up to 8,000 unrestricted shares to the consultant as bonus compensation.
v3.19.3.a.u2
Supplemental Cash Flow Information
12 Months Ended
Dec. 31, 2019
Supplemental Cash Flow Information [Abstract]  
Supplemental Cash Flow Information
Supplemental Cash Flow Information
During the years ended December 31, 2019 and 2018, the Company converted $2.3 million and $12.4 million, respectively, of advances into ownership interests. Cash paid for interest for the years ended December 31, 2019 and 2018 was $11.5 million and $11.1 million, respectively. Cash paid for taxes in each of the years ended December 31, 2019 and 2018 was $0.0 million.
v3.19.3.a.u2
Operating Segments
12 Months Ended
Dec. 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 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 December 31, 2019, the Company held ownership interests accounted for using the equity method in 13 non-consolidated companies. During 2019 we ceased using the equity method of accounting for Hoopla Software, Inc. and T-REX Group, Inc. as a result of other new investors diluting our interest. We have retained our ownership interests in those companies under the Other accounting method.
Certain of the Company’s ownership interests as of December 31, 2019 and 2018 included the following:
 
 
 
Safeguard Primary Ownership
as of December 31,
 
 
Company Name
 
 
2019
 
2018
 
 
Accounting Method
Aktana, Inc.
 
 
17.8%
 
18.9%
 
 
Equity
Clutch Holdings, Inc.
 
 
41.2%
 
41.2%
 
 
Equity
Flashtalking, Inc.*
 
 
10.1%
 
10.1%
 
 
Other
InfoBionic, Inc.
 
 
25.2%
 
25.4%
 
 
Equity
Lumesis, Inc.
 
 
43.5%
 
43.7%
 
 
Equity
MediaMath, Inc. **
 
 
13.3%
 
13.4%
 
 
Other
meQuilibrium
 
 
32.7%
 
33.1%
 
 
Equity
Moxe Health Corporation
 
 
29.9%
 
32.4%
 
 
Equity
Prognos Health Inc.
 
 
28.7%
 
28.7%
 
 
Equity
QuanticMind, Inc.
 
 
24.2%
 
24.2%
 
 
Equity
Sonobi, Inc.
 
 
21.6%
 
21.6%
 
 
Equity
Syapse, Inc.
 
 
20.0%
 
20.0%
 
 
Equity
T-REX Group, Inc.
 
 
13.7%
 
21.1%
 
 
Other
Trice Medical, Inc.
 
 
16.6%
 
17.4%
 
 
Equity
WebLinc, Inc.
 
 
38.5%
 
38.5%
 
 
Equity
Zipnosis, Inc
 
 
37.7%
 
34.7%
 
 
Equity

* Spongecell, Inc. merged into Flashtalking in January 2018.
** The Company sold 39.1% of its ownership interest back to MediaMath Inc. for $45 million of proceeds in July 2018.
As of December 31, 2019 and 2018, all of the Company’s assets were located in the United States.
v3.19.3.a.u2
Selected Quarterly Financial Information (Unaudited)
12 Months Ended
Dec. 31, 2019
Quarterly Financial Information Disclosure [Abstract]  
Selected Quarterly Financial Information (Unaudited)
Selected Quarterly Financial Information (Unaudited) 
 
Three Months Ended
 
March 31
 
June 30
 
September 30 (b)
 
December 31 (b)
 
(In thousands, except per share data)
2019:
 
 
 
 
 
 
 
General and administrative expense
$
3,057

 
$
2,603

 
$
2,262

 
$
2,060

Operating loss
(3,057
)
 
(2,603
)
 
(2,262
)
 
(2,060
)
Other income (loss), net
(1,885
)
 
3,118

 
8,777

 
2,245

Interest income
873

 
763

 
234

 
174

Interest expense
(2,535
)
 
(5,682
)
 
(5,806
)
 

Equity income (loss), net
28,267

 
40,497

 
(3,440
)
 
(1,057
)
Net loss before income taxes
21,663

 
36,093

 
(2,497
)
 
(698
)
Income tax benefit (expense)

 

 

 

Net income (loss)
$
21,663

 
$
36,093

 
$
(2,497
)
 
$
(698
)
Net income (loss) per share (a)
 
 
 
 
 
 

Basic
$
1.05

 
$
1.75

 
$
(0.12
)
 
$
(0.03
)
Diluted
$
1.05

 
$
1.75

 
$
(0.12
)
 
$
(0.03
)
2018:
 
 
 
 
 
 
 
General and administrative expense
$
5,589

 
$
5,148

 
$
3,516

 
$
2,618

Operating loss
(5,589
)
 
(5,148
)
 
(3,516
)
 
(2,618
)
Other income (loss), net
(1,435
)
 
(2,452
)
 
(1,078
)
 
(193
)
Interest income
798

 
666

 
718

 
624

Interest expense
(2,690
)
 
(3,422
)
 
(3,310
)
 
(6,645
)
Equity income (loss), net
2,746

 
(14,540
)
 
39,246

 
(7,791
)
Net income (loss) before income taxes
(6,170
)
 
(24,896
)
 
32,060

 
(16,623
)
Income tax benefit (expense)

 

 

 

Net income (loss)
$
(6,170
)
 
$
(24,896
)
 
$
32,060

 
$
(16,623
)
Net income (loss) per share (a)
 
 
 
 
 
 

Basic
$
(0.30
)
 
$
(1.21
)
 
$
1.56

 
$
(0.81
)
Diluted
$
(0.30
)
 
$
(1.21
)
 
$
1.56

 
$
(0.81
)
 
(a)
Per share amounts for the quarters have each been calculated separately. Accordingly, quarterly amounts may not add to the annual amounts because of differences in the average common shares outstanding during each period. Additionally, in regard to diluted per share amounts only, quarterly amounts may not add to the annual amounts because of the inclusion of the effect of potentially dilutive securities only in the periods in which such effect would have been dilutive, and because of the adjustments to net income (loss) for the dilutive effect of common stock equivalents and convertible securities at our ownership interests.
(b)
The three months ended December 31, 2019 includes equity income of $1.4 million related to an equity method investment that should have been recorded during the three months ended September 30, 2019. There was no impact on the full year results.
v3.19.3.a.u2
Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Principles of Consolidation
Principles of Consolidation
The consolidated financial statements include the accounts of Safeguard and all of its subsidiaries in which a controlling financial interest is maintained. All intercompany accounts and transactions are eliminated in consolidation.
Principles of Accounting for Ownership Interests in Companies
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 are not written-up if circumstances suggest the value of the company has subsequently recovered.
Principles of Accounting for Ownership Interests in Companies
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 and debt securities, the Company also periodically makes advances to its companies in the form of promissory notes which are included in the Ownership interests 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 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 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 and advances on the Consolidated Balance Sheets.
Accounting Estimates
Accounting Estimates
The preparation of the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect amounts reported in the financial statements and accompanying notes. Actual results may differ from these estimates. These estimates include the evaluation of the recoverability of the Company’s ownership interests and advances, the fair value of the credit facility repayment feature derivative, the current portion of the credit facility debt, the recoverability of deferred tax assets, stock-based compensation and commitments and contingencies. Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances.
 
Certain amounts recorded to reflect the Company’s share of income or losses for companies accounted for under the equity method are based on unaudited results of operations of those companies and may require adjustments in the future when audits of these entities’ financial statements are completed.
It is reasonably possible that the Company’s accounting estimates with respect to the ultimate recoverability of the carrying value of the Company’s ownership interests and advances could change in the near term and that the effect of such changes on the financial statements could be material. At December 31, 2019, the Company believes the carrying value of the Company’s ownership interests and advances is not impaired, although there can be no assurance that the Company’s future results will confirm this assessment, that a significant write-down or write-off will not be required in the future or that a significant loss will not be recorded in the future upon the sale of a company.
Cash and Cash Equivalents and Marketable Securities
Cash and Cash Equivalents and Marketable Securities
The Company considers all highly liquid instruments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist of deposits that are readily convertible into cash. The Company determines the appropriate classification of marketable securities at the time of purchase and reevaluates such designation as of each balance sheet date. Held-to-maturity securities were carried at amortized cost, which approximated fair value. Marketable securities consisted of held-to-maturity securities, primarily consisting of government agency bonds, commercial paper and certificates of deposits. Marketable securities with a maturity date greater than one year from the balance sheet date would be considered long-term. The Company has not experienced any significant losses on cash equivalents and does not believe it is exposed to any significant credit risk on cash and cash equivalents.
Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]
Restricted Cash
Restricted cash equivalents represents cash required to be set aside by a contractual agreement as a shareholder representative.
Financial Instruments
Financial Instruments
The Company’s financial instruments (principally cash and cash equivalents, marketable securities, accounts receivable, notes receivable, accounts payable and accrued expenses) are carried at cost, which approximates fair value due to the short-term maturity of these instruments. The Company’s long-term debt was carried at cost.
Property and Equipment
Property and Equipment
Property and equipment represents right-of-use assets resulting from the adoption of Accounting Standards Update ("ASU") No. 2016-02, Leases, and other previously existing leasehold improvements. The leasehold improvements were amortized over the shorter of the estimated useful lives or the expected remaining term of the lease. The right-of-use assets are reduced over the remaining term of the applicable lease (principally 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
Lease liability
The initial lease liability represents the present value of the fixed escalating lease payments through April 2026 associated with the Company's prior corporate headquarters operating office lease.
Income Taxes
Income Taxes
The Company accounts for income taxes under the asset and liability method whereby deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company measures deferred tax assets and liabilities using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled. The Company recognizes the effect on deferred tax assets and liabilities of a change in tax rates in income in the period of the enactment date. The Company provides a valuation allowance against the net deferred tax asset for amounts which are not considered more likely than not to be realized.
Net Income (Loss) Per Share
Net Income (Loss) Per Share
The Company computes net income (loss) per share using the weighted average number of common shares outstanding during each year. The Company includes in diluted net income (loss) per share common stock equivalents (unless anti-dilutive) which would arise from the exercise of stock options and conversion of other convertible securities and adjusted, if applicable, for the effect on net income (loss) of such transactions. Diluted net income (loss) per share calculations adjust net income (loss) for the dilutive effect of common stock equivalents and convertible securities issued by the Company’s consolidated or equity method companies.
Segment Information
Segment Information
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.
Reclassifications
Reclassifications
Certain prior period amounts within Prepaid expenses and other current assets aggregating $2.1 million have been reclassified to Other assets to conform with current year presentation.
New Accounting Pronouncements and Changes in Accounting Principles [Text Block]
Recent 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 is 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 will supersede most existing revenue guidance, it could impact revenue and cost recognition for companies in which we hold an ownership interest. Any change in revenue or cost recognition for companies in which we hold an ownership interest could affect the Company's recognition of its share of the results of its equity method companies. On July 20, 2017, the SEC staff observer at the FASB’s Emerging Issues Task Force ("EITF") meeting announced that the SEC staff will 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 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 No. 2016-02, Leases (ASC 842). The guidance in ASU No. 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 No. 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 No. 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 where 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 former 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.
v3.19.3.a.u2
Significant Accounting Policies Significant Accounting Policies (Tables)
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Restrictions on Cash and Cash Equivalents
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets:
 
December 31, 2019
 
December 31, 2018
 
(In thousands)
Cash and cash equivalents
$
25,028

 
$
7,703

Restricted cash
25

 
500

Total cash, cash equivalents and restricted cash
$
25,053

 
$
8,203

Leases
A summary of the Company's operating lease cash flows at December 31, 2019 follows:
 
Operating lease payments
Expected sublease receipts
 
(In thousands)
2020
$
707

$
509

2021
595

525

2022
601

540

2023
607

556

2024
613

573

2025
619

590

Thereafter
207

199

Total future minimum lease payments
3,949

$
3,492

Less imputed interest
(1,170
)
 
Total operating lease liabilities
$
2,779

 
 
 
 
Leases
A summary of the Company's operating lease cash flows at December 31, 2019 follows:
 
Operating lease payments
Expected sublease receipts
 
(In thousands)
2020
$
707

$
509

2021
595

525

2022
601

540

2023
607

556

2024
613

573

2025
619

590

Thereafter
207

199

Total future minimum lease payments
3,949

$
3,492

Less imputed interest
(1,170
)
 
Total operating lease liabilities
$
2,779

 
 
 
 
v3.19.3.a.u2
Ownership Interests in and Advances to Partner Companies and Funds (Tables)
12 Months Ended
Dec. 31, 2019
Ownership Interests in and Advances to Partner Companies and Funds [Abstract]  
Summary of the carrying value of the Company's ownership interests in and advances to partner companies and private equity funds
The following summarizes the carrying value of the Company’s ownership interests and advances.
 
December 31, 2019
 
December 31, 2018
 
(In thousands)
Equity Method:
 
 
 
Companies
$
34,271

 
$
64,097

Private equity funds
271

 
392

 
34,542

 
64,489

Other Method:
 
 
 
Companies
27,031

 
15,260

Private equity funds
453

 
511

 
27,484

 
15,771

Advances to companies
15,103

 
15,325

 
$
77,129

 
$
95,585

Results of Operation
 
As of December 31,
 
2019
 
2018
 
(In thousands)
Balance Sheets:
 
 
 
Current assets
$
91,968

 
$
168,659

Non-current assets
26,231

 
24,432

Total assets
$
118,199

 
$
193,091

Current liabilities
$
80,783

 
$
88,988

Non-current liabilities
87,081

 
109,924

Shareholders’ equity
(49,665
)
 
(5,821
)
Total liabilities and shareholders’ equity
$
118,199

 
$
193,091

 
 
 
 
Number of equity method ownership interests
13

 
19



 
Year Ended December 31,
 
2019
 
2018
 
 
(In thousands)
Results of Operations:
 
 
 
 
Revenue
$
145,632

 
$
283,009

 
Gross profit
$
78,465

 
$
181,571

 
Net loss
$
(127,007
)
 
$
(154,696
)
 


v3.19.3.a.u2
Fair Value Measurements (Tables)
12 Months Ended
Dec. 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 December 31, 2019 and 2018:
 
Carrying
Value
 
Fair Value Measurement at December 31, 2019
 
 
Level 1
 
Level 2
 
Level 3
 
(in thousands)
Cash and cash equivalents
$
25,028

 
$
25,028

 
$

 
$

Restricted cash equivalents
25

 
25

 

 

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

 
$
7,703

 
$

 
$

Restricted cash equivalents
500

 
500

 

 

Marketable securities—held-to-maturity:

 

 
 
 
 
Government agency bond
$
21,473

 
$
21,473

 
$

 
$

U.S. Treasury Bills
16,482

 
16,482