Transaction Structure - The aggregate consideration for the transfer of Membership Interests includes $4,900,000 in cash and 775,000 shares of Series A Preferred Stock[15]. - The restructuring involved the formation of a Parent Company and the contribution of 100% of the Target Company's membership interests to it[12]. - The Target Company will continue to operate as a wholly-owned subsidiary of the surviving corporation after the mergers[14]. - The mergers are intended to qualify as a reorganization under Section 368(a) of the Code[12]. - The closing payments will be made in cash by wire transfer according to a specified Payment Spreadsheet[16]. - The Purchase Price is subject to adjustments based on the Closing Net Working Capital compared to the Target Net Working Capital[15]. - The Sellers owned 100% of the issued and outstanding membership interests of the Target Company prior to the Effective Date[12]. - The Parent Company will cease to exist following the merger with Merger Sub 2[13]. - The Board of Directors of Purchaser and the Board of Managers of the involved companies have approved the Agreement and the mergers[13]. - The transaction is structured to maintain the Target Company's status as an S Corporation for tax purposes[12]. Financial Obligations and Adjustments - At the Closing, the Purchaser will retain $1,000,000 in Cash Escrow and 100,000 shares of Escrow Stock for indemnification obligations[18]. - The Working Capital Escrow Amount is set at $250,000, which will also be held in a segregated account[18]. - The Estimated Closing Debt, Estimated Closing Cash on Hand, and Estimated Closing Transaction Expenses must be prepared and delivered by the Seller Representative at least three business days prior to the Closing Date[19]. - The Purchaser is required to deliver a Closing Balance Sheet and Purchaser Closing Statement within 120 calendar days of the Closing Date[20]. - If the Seller Representative disputes the Purchaser Closing Statement, they must provide a Dispute Notice within 30 calendar days[23]. - The final Purchase Price will be determined based on the Final Net Working Capital, Final Cash on Hand, Final Debt, and Final Transaction Expenses[26]. - If the Adjustment Amount is positive, the Purchaser will pay each Seller their Pro Rata Percentage of the Adjustment Amount within five calendar days[27]. - In the case of a negative Adjustment Amount, the Purchaser will disburse from the Working Capital Escrow Funds to cover the amount owed[28]. - Interest will accrue on any unpaid amounts at a rate of 8% per annum from the due date[29]. - An illustrative calculation of the Net Working Capital as if the Closing had occurred on January 31, 2025, is provided in the documentation[30]. Financial Statements and Internal Controls - The Target Company has consolidated balance sheets and statements of operations for the fiscal years ending December 31, 2022, 2023, and 2024, which fairly present its financial position[52]. - The Financial Statements indicate that the Target Company maintains proper internal accounting controls to ensure accurate financial reporting and asset accountability[53]. - The Target Company does not have any undisclosed liabilities that are required to be reflected on a balance sheet prepared in accordance with GAAP, except for those disclosed in the Interim Financial Statements[54]. Legal Compliance and Corporate Governance - The Membership Interests represent all of the issued and outstanding equity interests in the Parent Company on a fully diluted basis[45]. - The execution and delivery of the Agreement have been duly authorized by all requisite corporate action on the part of the Company[43]. - The Company is duly organized and in good standing under the laws of its respective states, ensuring compliance with legal requirements[44]. - There are no pending or threatened proceedings against the Company that materially affect its properties or assets[48]. - The Company has not been a party to any proceedings in the past four years, indicating a stable legal standing[49]. - The execution of the Agreement does not conflict with any provisions of the Company's Governing Documents or applicable laws[46]. Tax Compliance - The Company has not incurred any material liability for Taxes arising from extraordinary gains or losses since the date of the Interim Financial Statements[64]. - The Company has complied with all applicable Laws relating to Taxes and has duly filed all required Tax Returns[60]. - The unpaid Taxes of the Company did not exceed the reserve for Tax liability set forth in the Interim Financial Statements[64]. - The Company has timely paid all Taxes required to be paid, whether or not shown as due on any Tax Return[60]. - There are no Encumbrances for Taxes on any assets of the Company, other than current Taxes not yet due and payable[71]. - The Company has not executed any closing agreements with respect to Taxes[65]. - The Company has not participated in any "reportable transaction" as defined by the United States Treasury Regulations[75]. - The Company does not have any obligation to indemnify any employee or contractor for Taxes[73]. - The Company has not commenced any voluntary disclosure proceeding regarding Taxes that has not been fully resolved[69]. - The Company is not liable for Taxes of any other Person as a result of successor liability or other liabilities[72]. Operational Compliance and Assets - The Company has complied with all applicable laws regarding unclaimed property and does not hold any abandoned property[81]. - The Company has timely filed all required FinCEN and IRS forms related to foreign bank accounts[83]. - The Company has collected blanket resale certificates from all customers exempt from sales taxes[84]. - The Company has been treated as an "S corporation" for tax purposes since January 1, 2020, and is currently a disregarded entity for tax purposes[85][86]. - The Company has not sold or transferred any assets that would hinder the continuation of its historic business post-merger[89]. - The Company has good and marketable title to all assets reflected in the Interim Financial Statements, free of encumbrances[112]. - The tangible assets currently used in the business are in good condition and adequate for their intended use[113]. - The Company has not received any written notice regarding violations of building codes or zoning ordinances affecting its real property[93]. - All necessary licenses and permits for conducting business are in full force and effect[105]. - The Company has maintained compliance with data protection laws and has not faced any claims regarding the handling of Personally Identifiable Information[106][108]. Accounts and Inventory Management - All Accounts Receivable are valid and collectible within 90 days after invoicing, with no disputes reported[115]. - The reserve for bad debts has been determined in accordance with GAAP and is consistently applied[115]. - All Inventory is owned free and clear of any Encumbrances and is fairly reflected on the Interim Financial Statements[117]. Employee Relations and Compliance - The Company has not received any fines or penalties related to service defects in the past three years[121]. - The Company owns all Intellectual Property Assets necessary for its operations, which are in good standing and enforceable[123]. - There are no outstanding licenses or claims against the Company's Intellectual Property Assets[124]. - Each Employee Plan complies with applicable laws and has been administered in accordance with its terms[129]. - All required contributions to Employee Plans have been timely made or reflected in the Financial Statements[132]. - The Company does not have any liabilities related to pension plans or multiemployer plans[134]. - No prohibited transactions have occurred with respect to any Employee Plan that would result in liability for the Company[137]. - The Company has complied with the Affordable Care Act and has offered "minimum essential coverage" to full-time employees since January 1, 2018[143]. - There have been no labor strikes or disputes against the Company in the past five years, indicating stable labor relations[144]. - The Company has not engaged in any plant closings or mass layoffs in the past six years, maintaining employment stability[146]. - All employees have been properly classified under applicable labor laws, ensuring compliance with wage and hour regulations[147]. - The Company has maintained workers' compensation coverage as required by law through insurance, not self-insurance[151]. Environmental and Insurance Compliance - The Company has not received any notices of environmental violations in the past five years, demonstrating compliance with environmental regulations[158]. - The Company possesses all necessary licenses and permits to operate its business, ensuring uninterrupted operations[161]. - The Company has a comprehensive list of insurance policies in effect, covering various operational risks[163]. - The Company has maintained all insurance policies in full force, with no claims pending that have been denied or disputed by underwriters[164]. - There are no outstanding bonds or letters of credit required to satisfy any contractual obligations[165]. Contracts and Relationships - The Company has a complete list of Material Contracts, including those with annual payments exceeding $25,000[166]. - No Material Customers or Suppliers have terminated or materially modified their relationships with the Company since December 31, 2023[172]. - The Company is in compliance with all applicable laws and has not received any notices of violations in the past three years[173]. - The Company has not engaged in any Affiliate Transactions that deviate from standard arms-length terms[178]. - The Company has implemented reasonable steps to safeguard the integrity and security of its Information Systems[180]. - The Company has not made claims in excess of current insurance coverage[164]. - The Company has not received any written notice of default under any insurance policy[164]. Seller and Purchaser Representations - Each Seller has the requisite power and authority to enter into the Agreement and consummate the transactions without the consent of any other person[183]. - The Membership Interests owned by each Seller are free from any encumbrances, except for restrictions under federal or state securities laws[186]. - There are no pending or threatened litigations against the Sellers related to their ownership of Membership Interests or the transactions contemplated by the Agreement[187]. - Each Seller does not have any claims against the Company arising from facts existing prior to the Closing, excluding vested benefits under employee benefits[188]. - Each Seller is an accredited investor and is acquiring Series A Preferred Stock for its own account, not for distribution or resale[191]. - The Purchaser has all requisite power and authority to execute and deliver the Agreement and consummate the transactions[195]. - No consent or approval from any governmental entity is required for the execution and delivery of the Agreement by the Purchaser[198]. - There are no pending or threatened proceedings against the Purchaser that would impair its ability to consummate the purchase of Membership Interests[199]. - No broker or finder is entitled to any commission or finder's fee in connection with the Agreement or the transactions as a result of Purchaser's actions[200].

Fourth Quarter Revenues Increased 21% and Gross Profit Increased 56% Generated Fourth Quarter Adjusted EBITDA of $1.1 Million ADT Acquisition Closed in March, Establishing Energy Services Division OLD GREENWICH, Conn, March 20, 2025 (GLOBE NEWSWIRE) -- Star Equity Holdings, Inc. (Nasdaq: STRR; STRRP) (“Star Equity” or the “Company”), a diversified holding company, reported today its financial results for the fourth quarter (Q4) and fiscal year (FY) ended December 31, 2024. All 2024 and 2023 amounts in this ...

OLD GREENWICH, Conn., March 13, 2025 (GLOBE NEWSWIRE) -- Star Equity Holdings, Inc. (Nasdaq: STRR; STRRP), (“Star Equity” or the “Company”), a diversified holding company, announced today that it will release its financial results for the fourth quarter ended December 31, 2024, before the market opens on Thursday, March 20, 2025. A conference call is scheduled for 10:00 a.m. ET (7:00 a.m. PT) on March 20, 2025, to discuss the results and management’s outlook. The call may be accessed by dialing: Toll Free: ...

Core Viewpoint - Star Equity Holdings, Inc. has announced preliminary key financial metrics for Q4 2024, indicating a strong performance compared to Q4 2023, driven by increased activity in the Building Solutions segment and the signing of two significant commercial contracts by its subsidiary KBS Builders, Inc. [1][2] Financial Metrics - For Q4 2024, Star expects to report revenues of approximately $17.1 million, an increase of 21.3% from $14.1 million in Q4 2023 [2][5] - Gross profit for Q4 2024 is projected to be around $4.4 million, up from $2.9 million in Q4 2023, reflecting improved margins [2][5] - Adjusted EBITDA from continuing operations is expected to be approximately $1.1 million, a turnaround from a loss of $0.1 million in Q4 2023 [2][5] Business Developments - KBS Builders, Inc. has signed two large commercial contracts valued at $3.1 million and $2.1 million for the construction of housing units in Maine, with manufacturing expected to begin in Q1 and Q2 of 2025 [2][5] - The company anticipates strong demand for new projects due to an ongoing housing shortage and increasing acceptance of modular construction methods [2][5] Company Overview - Star Equity Holdings, Inc. operates through three divisions: Building Solutions, Energy Services, and Investments [3] - The Building Solutions division includes modular building manufacturing, structural wall panel manufacturing, and glue-laminated timber manufacturing [4]

Core Viewpoint - Star Equity Holdings, Inc. has acquired Alliance Drilling Tools, LLC, marking a significant milestone in its growth strategy by establishing a new "Energy Services" operating division [1][4][9]. Transaction Highlights - The acquisition closed on March 3, 2025, with an enterprise value of $12.65 million, which includes real estate valued at approximately $3.0 million [6][7]. - Star Equity paid $4.9 million in cash, partially funded by $2.5 million in debt financing, and issued 775,000 shares of Series A Preferred Stock valued at $7.75 million [7]. Company Overview - Alliance Drilling Tools, founded in 2009, specializes in the rental, sale, and repair of downhole tools for the oil and gas, geothermal, mining, and water-well industries [3][8]. - ADT generated approximately $10.5 million in revenue for the full year 2024, with a gross margin of 48% and Adjusted EBITDA of $2.4 million [4]. Strategic Fit - The acquisition allows Star to diversify its operating portfolio and leverage ADT's specialized industry knowledge to capitalize on growth opportunities in the energy sector [4][9]. - ADT will retain its brand and continue operations as a division of Star, which now comprises three divisions: Building Solutions, Energy Services, and Investments [4][9]. Future Growth Potential - Star plans to enhance ADT's growth through strategic investments aimed at expanding operational capacity and meeting rising demand for its services [4][6].

Core Viewpoint - Star Equity Holdings, Inc. announced a $3.2 million contract for a multifamily housing project in Maine, further enhancing its market position in New England [1][2][3] Group 1: Contract Details - The contract involves the manufacturing of 40 modules for five 4-unit townhouse condominiums in Lincoln County, Maine [2] - Production is set to begin in January 2025, with delivery expected in the second quarter of 2025 [2] - This project is the second of two potential contracts exceeding $5 million mentioned in the company's Q3 2024 earnings release, with the first being a $2.1 million project in Vermont [2] Group 2: Company Insights - Rick Coleman, CEO of Star, emphasized the project as a significant win for KBS in Maine, reinforcing its strong reputation in the region [3] - The company is actively converting large commercial projects from its sales pipeline into booked backlog, indicating a positive trend in business operations [3] - The company believes its location and expertise position it well to address the housing shortage in New England, providing high-quality construction solutions [3] Group 3: Company Structure - Star Equity Holdings, Inc. operates as a diversified holding company with two main divisions: Building Solutions and Investments [4] - The Building Solutions division includes modular building manufacturing, structural wall panel and wood foundation manufacturing, and glue-laminated timber manufacturing [5] - The Investments division manages the company's real estate assets and investment positions in both private and public companies [6]

Core Viewpoint - Star Equity Holdings, Inc. has signed a $2.1 million contract for the manufacturing of multifamily apartments in Vermont, indicating a strong position in the New England commercial construction market, particularly in multifamily housing [1][3]. Contract Details - The $2.1 million contract involves the manufacturing of 16 modules for three 4-unit apartment buildings in Randolph, Vermont, with manufacturing set to begin in February and delivery expected in the second quarter of 2025 [2]. Market Position and Outlook - The CEO of Star Equity Holdings expressed confidence in the improved market conditions and increased demand for new housing, supported by recent multimillion-dollar contracts for affordable housing projects in Maine [3]. - The company believes that the improving interest rate environment, strong backlog, and sales pipeline indicate a momentum shift in the marketplace that is expected to continue into 2025 [3]. Company Structure - Star Equity Holdings operates through two divisions: Building Solutions and Investments [4]. - The Building Solutions division includes modular building manufacturing, structural wall panel and wood foundation manufacturing, and glue-laminated timber manufacturing [5]. - The Investments division manages and finances the company's real estate assets and investment positions in both private and public companies [6].

Financial Performance - Total revenues for the three months ended September 30, 2024, were $13,663,000, an increase of 30% compared to $10,435,000 for the same period in 2023[12] - Gross profit for the three months ended September 30, 2024, was $2,817,000, up from $2,203,000 in the same period last year, reflecting a gross margin improvement[12] - The net loss attributable to common shareholders for the three months ended September 30, 2024, was $(2,511,000), compared to a loss of $(3,101,000) in the same period of 2023[12] - Net income for the nine months ended September 30, 2024, was a loss of $7,981,000 compared to a net income of $23,404,000 for the same period in 2023[18] - For Q3 2024, consolidated revenue was $13.7 million, a 30% increase from $10.4 million in Q3 2023[86] - The company reported a consolidated gross profit of $2.8 million for Q3 2024, compared to $2.2 million in Q3 2023[86] Expenses and Losses - Operating expenses increased to $8,139,000 for the three months ended September 30, 2024, compared to $3,864,000 in the prior year, primarily due to higher selling, general, and administrative expenses[12] - The company experienced a significant impairment of cost method investment totaling $4,086,000[18] - The company incurred a segment loss from operations of $5.3 million in Q3 2024, compared to a loss of $1.7 million in Q3 2023[86] - Depreciation and amortization totaled $1.0 million in Q3 2024, compared to $569 thousand in Q3 2023[86] Cash Flow and Assets - Cash and cash equivalents decreased to $5,492,000 as of September 30, 2024, from $18,326,000 at December 31, 2023[14] - Total current assets were $25,250,000 as of September 30, 2024, down from $39,152,000 at December 31, 2023[14] - Total cash, cash equivalents, and restricted cash at the end of the period was $7,095,000, down from $21,252,000 at the end of the previous year[20] - The company reported a net cash used in investing activities of $12,493,000, compared to a net cash provided of $19,503,000 in the same period last year[18] - The company reported a decrease in accounts receivable by $5,166,000, indicating improved collection efforts[18] Liabilities and Equity - Total liabilities increased to $27,349,000 as of September 30, 2024, compared to $10,197,000 at December 31, 2023[14] - The company reported a total stockholders' equity of $58,374,000 as of September 30, 2024, down from $65,299,000 at December 31, 2023[16] - The balance of accumulated deficit increased to $116,070,000 as of September 30, 2024, from $110,313,000 at the end of the previous quarter[22] Dividends and Stock - The company declared dividends of $0.25 per share of Series A perpetual preferred stock for the three months ended September 30, 2024[12] - The Series A Preferred Stock has a 10.0% annual dividend rate, with dividends totaling approximately $0.5 million declared in 2024[96] - The company repurchased $0.2 million worth of its common stock during Q3 2024 as part of a $1 million stock buyback program[97] Acquisitions and Investments - The company completed the sale of its Healthcare division, Digirad Health, for a total consideration of $40 million, which included $19.7 million in cash[33] - Timber Technologies was acquired for a total consideration of $23.1 million, including $19.1 million in cash and a $3.0 million term loan[89] - Big Lake Lumber was acquired for $2.8 million in cash and an earn-out provision of up to $0.5 million, expanding market share in the Greater Minneapolis area[92] Future Outlook - The company anticipates continued growth in revenues and improvements in operational efficiency in the upcoming quarters[8] Internal Controls and Compliance - The company identified a material weakness in internal control over financial reporting due to insufficient accounting resources to address complex matters[157] - Management is taking steps to enhance the skills of accounting staff and has retained outside financial consultants for technical accounting reviews[158] - The company’s disclosure controls and procedures were deemed ineffective as of September 30, 2024, due to the identified material weakness[157]

Financial Data and Key Metrics Changes - The company's Q3 2024 revenue increased by 30.9% compared to Q3 2023, primarily due to the inclusion of Timber Technologies and Big Lake Lumber revenues [7] - Gross profit for Q3 2024 was $2.8 million, up 27.9% year-over-year, despite a slight decline in gross margins [18] - The net loss from continuing operations for Q3 2024 was $2 million, an improvement from a net loss of $2.4 million in Q3 2023 [19] - Non-GAAP adjusted net loss from continuing operations was $0.9 million or $0.31 per share, compared to adjusted net income of $0.2 million or $0.07 per share in Q3 2023 [20] - Consolidated cash flow from continuing operations for the first nine months of 2024 was an outflow of $3.7 million, compared to an inflow of $2.7 million in the same period of 2023 [21] - The unrestricted cash balance at the end of Q3 2024 was $5.5 million, down from $18.3 million at the end of 2023 [22] Business Line Data and Key Metrics Changes - The Building Solutions division's organic performance has been impacted by higher interest rates and economic uncertainty, leading to delays in commercial contracts [8] - Recent project signings in the Building Solutions division indicate a material improvement in activity, with significant contracts announced in October [9][10] - The Investments division has diversified its portfolio, entering the energy services and transportation sectors through an investment in Enservco [13] Market Data and Key Metrics Changes - The construction backlog and sales pipeline remain strong, with recent interest rate cuts and high housing demand expected to convert pipeline opportunities into signed contracts [11] - The company is seeing increased activity from customers who had previously delayed projects, indicating a return to normalcy in the market [10] Company Strategy and Development Direction - The company is focused on creating shareholder value through targeted business development initiatives and identifying accretive opportunities in both the Building Solutions and Investments divisions [26] - The management team is optimistic about the momentum in the Building Solutions division and the potential for improved financial results in fiscal year 2025 [12] Management's Comments on Operating Environment and Future Outlook - Management noted that the recent momentum in the Building Solutions division is encouraging, with a shift in demand for large commercial construction projects [12] - The company anticipates a significant increase in revenue, particularly in the KBS segment, as projects that were delayed are now coming to fruition [39] Other Important Information - The company closed two sale-leaseback transactions in Q3 2024, generating approximately $8.3 million in net proceeds [23] - The impairment of $2.8 million recorded in SG&A was related to the equity investment in TTG, with no further writedowns anticipated at this time [18][30] Q&A Session Summary Question: Is the improved outlook due to older projects coming back or new business? - Management indicated that the improvement is due to both new business filling the pipeline and delayed projects now coming to fruition as builders adjust to the current environment [28] Question: Should more impairment costs be expected? - Management hopes not to see more impairment costs, although it is difficult to predict [29] Question: How much of the business is exposed to imported lumber products? - The company does not buy much imported lumber, but the market could be impacted by tariffs, which would be an industry-wide issue rather than a specific concern for the company [34] Question: Can price changes be passed on in contracts? - Management confirmed that they have mechanisms in place to pass on price changes to clients, including fixed pricing and hedging options [35] Question: Can you provide context around the $14 million revenue in Building Solutions? - The revenue was a good contribution from all businesses, with the modular side and EdgeBuilder performing well, although wall panels were slower [38] Question: What contributed to the quarter-over-quarter improvement in margins? - The improvement was attributed to a full quarter of Timber Technologies, which is the highest margin business [46]

Group 1: Earnings Performance - Star Equity reported a quarterly loss of $0.29 per share, which was better than the Zacks Consensus Estimate of a loss of $0.32, representing an earnings surprise of 9.38% [1] - The company posted revenues of $13.66 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 1.21%, compared to year-ago revenues of $10.44 million [2] - Over the last four quarters, Star Equity has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Group 2: Stock Performance and Outlook - Star Equity shares have lost about 41% since the beginning of the year, while the S&P 500 has gained 23.6% [4] - The current consensus EPS estimate for the coming quarter is $0.28 on $19 million in revenues, and for the current fiscal year, it is -$0.78 on $55.1 million in revenues [8] - The estimate revisions trend for Star Equity is mixed, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market in the near future [7] Group 3: Industry Context - The Zacks Industry Rank for Diversified Operations, which includes Star Equity, is currently in the bottom 43% of over 250 Zacks industries, suggesting potential challenges for stock performance [9] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [6]