As filed with the Securities and Exchange Commission on April 9, 201930, 2020

Registration No. 333-

Registration No. 333-230210

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1

to

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

DIGIRAD CORPORATION

(Exact name of registrant as specified in its charter)

1048 Industrial Court

Suwanee, Georgia 30024

(858) 726-1600

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Matthew G. Molchan

President and Chief Executive Officer

Digirad Corporation

1048 Industrial Court

Suwanee, Georgia 30024

(858) 726-1600

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. x☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.¨☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ¨☐

CALCULATION OF REGISTRATION FEE

____________________

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended (the “Securities Act”). or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

Table of Contents 

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED APRIL 9, 201930, 2020

PRELIMINARY PROSPECTUS

Digirad Corporation

Up to [●] Shares of Common Stock

Up to [●] Pre-funded Warrants (each Pre-funded Warrant to purchase one Share of Common Stock) and

Up to [●] Shares of Common Stock underlying the Pre-funded Warrants

500,000 Shares of [●]% Series A Cumulative Term Preferred Stock

$25.00 per Share

Liquidation Preference $25.00 per Share

______________________

This is an offering of 500,000[●] shares of our [●]% Series A Cumulative Term Preferred Stock,common stock, par value of $0.0001 per share, which we refer to as the “Series A Preferred Stock.“common stock.”

Dividends onWe are also offering to each purchaser whose purchase of shares in this offering would otherwise result in the Series A Preferred Stockpurchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding shares of common stock immediately following the consummation of this offering, the opportunity to purchase, if any such purchaser so chooses, pre-funded warrants, in lieu of shares that would otherwise result in such purchaser’s beneficial ownership exceeding 4.99% of our outstanding shares of common stock. Each pre-funded warrant will be cumulative from (but excluding)exercisable for one share of common stock. The purchase price of each pre-funded warrant will be equal to the dateprice per share being sold to the public in this offering, minus $0.01, and the exercise price of original issue, which is expected toeach pre-funded warrant will be April [●], 2019,$0.01 per share. The pre-funded warrants will be certificated and will be payable quarterlyimmediately exercisable and may be exercised at any time until all of the pre-funded warrants are exercised in arrears, when, as and if declared byfull. Any exercise of the pre-funded warrants which would result in a holder beneficially owning more than 4.99% of our board of directors. Dividends will be payable out of amounts legally available therefor at a rate equal to [●]% per annum per $25.00 of stated liquidation preference per share, or $[●] per share of Series A Preferred Stock per year.

Commencing on April [●], 2022, we may redeem, at our option, the Series A Preferred Stock, in whole or in part, at a cash redemption price equal to $25.00 per share, plus any accumulated and unpaid dividends to, but not including, the redemption date. Prior to April [●], 2022, upon a Change of Control Triggering Event, as defined in this prospectus, we may redeem, at our option, the Series A Preferred Stock, in whole or part, at a cash redemption price of $25.00 per share, plus any accumulated and unpaid dividends to, but not including the redemption date.

Theoutstanding shares of Series A Preferred Stock have a maturity and mandatory redemption date of April [●], 2026.

The Series A Preferred Stockcommon stock will not be subject to any sinking fund and will not be convertible into or exchangeable for any of our other securities.consent.

HoldersFor each pre-funded warrant we sell, the number of the Series A Preferred Stock generallyshares we are offering will have no voting rights except for certain limited voting rights in circumstances where dividends payablebe decreased on the outstanding Series A Preferred Stock are in arrears for six or more consecutive or non-consecutive quarterly dividend periods.a one-for-one basis.

We will generally be restricted in our ability to amend, alter or repeal the provisions of our certificate of incorporation and the terms of the Series A Preferred Stock in any manner which would materially and adversely affect any right, preference, privilege or voting power of the Series A Preferred Stock, unless holders of at least a majority of the then outstanding Series A Preferred Stock consent to such amendments. See “Description of the Series A Preferred Stock—Voting Rights.”

Prior to this offering, there has been no public market for our Series A Preferred Stock and no shares of our Series A Preferred Stock are outstanding. We intend to apply to have our Series A Preferred StockOur common stock is listed on the Nasdaq Global Market under the symbol “DRADP.” There can be no assurance that such listing will be approved. The closing of this offering is contingent upon“DRAD”. On April 29, 2020, the successful listinglast reported sale price of our Series A Preferred Stockcommon stock on the Nasdaq Global Market.

common stock or pre-funded warrant, as the case may be, will be determined between us and the investors in the offering and may be at a discount to the current market price. There is no established public trading market for the pre-funded warrants, and we do not expect a market to develop. In addition, we do not intend to apply for a listing of the pre-funded warrants on any national securities exchange or other nationally recognized trading system.

Investing in our Series A Preferred Stockcommon stock involves significant risks. You should carefully considera high degree of risk. See the risk factorssection entitled “Risk Factors” beginning on page 1824 of this prospectus and in the risk factorsdocuments incorporated by reference into this prospectus before purchasing anyfor a discussion of the Series A Preferred Stock offered by this prospectus.risks that should be considered in connection with an investment in our common stock.

_____________________

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

We have grantedThe underwriter has the underwriters an option to purchase up to 75,000an additional [●] shares of Series A Preferred Stock solelycommon stock and/or pre-funded warrants from us at the public offering price, less the underwriting discounts and commissions, within 45 days after the date of this prospectus to cover over-allotments, if any. If the underwriters exercise the option in full, the total underwriting discounts and commissions payable by us will be $1,006,250, and total proceeds to us before expenses will be $13,368,750.

Certain of our officers and directors or their families and affiliates have indicated an interest in purchasing shares of the Series A Preferred Stockcommon stock in this offering on the same terms as the public. However, because indications of interest are not binding agreements or commitments to purchase, there can be no assurance that the underwritersunderwriter will determine to sell shares of Series A Preferred Stockcommon stock in this offering to any of these persons or entities, or that any of these persons or entities will determine to purchase shares of Series A Preferred Stockcommon stock in this offering. The underwritersunderwriter will receive the same underwriting discount on any shares of Series A Preferred Stockcommon stock purchased by these persons or entities as they will on any other shares of Series A Preferred Stockcommon stock sold to the public in this offering.

The underwriters expectunderwriter expects to deliver the shares and pre-funded warrants against payment in New York, New York on or about April[●], 2019.

Joint Book-Running Managers

2020.

Roth Capital Partners                                       Aegis Capital Corp.Sole Book-Running Manager

Maxim Group LLC

The date of this prospectus is [●], 20192020

TABLE OF CONTENTS

You should rely only on the information contained or incorporated into this prospectus. Neither we nor the underwriters haveunderwriter has authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date regardless of the time of delivery of this prospectus or any sale of our Series A Preferred Stock.common stock. Our business, financial condition, results of operations and prospects may have changed since that date. You should also read this prospectus together with the additional information described under “Where You Can Find More Information” and “Incorporation of Information by Reference”.”

No action is being taken in any jurisdiction outside the U.S. to permit a public offering of our Series A Preferred Stockcommon stock or possession or distribution of this prospectus in any such jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the U.S. are required to inform themselves about and to observe any restrictions about this offering and the distribution of this prospectus applicable to those jurisdictions.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors” and “Use of Proceeds,” as well as the information we incorporate herein by reference contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include, but are not limited to, statements regarding expectations, intentions and strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “target,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “would,” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this prospectus are based on current expectations and beliefs concerning future developments and their potential effects on our company and its subsidiaries. There can be no assurance that future developments will be those that have been anticipated. Factors that might cause such differences include, but are not limited to, those discussed in the section of this prospectus entitled “Risk Factors”.” New risks and uncertainties emerge from time to time, and it is not possible for us to predict all the risks and uncertainties that could have an impact on the forward-looking statements, including without limitation, risks and uncertainties relating to:

• our financial performance, including our ability to generate revenue;

• the conversion of the Company into a diversified holding company and the proposed acquisition of ATRM Holdings, Inc.;

• our inability to pay dividends if we fall out of compliance with our loan covenants in the future and then are prohibited by our bank lender from paying dividends

• ability of our products to achieve and/or maintain market success;

• success in retaining or recruiting, or changes required in, our officers, key employees or directors;

• potential ability to obtain additional financing when and if needed;

• our ability to protect our intellectual property;

• our ability to complete strategic acquisitions;

• our ability to complete strategic divestitures;

• our ability to manage growth and integrate acquired operations;

• our ability to regain compliance with The Nasdaq Stock Market LLC’s listing maintenance standards;

• potential liquidity and trading of our securities;

• regulatory or operational risks;

• downward revisions to, or withdrawals of, our credit ratings, if any, by third-party rating agencies; and

• our estimates regarding expenses, future revenue, capital requirements and needs for additional financing. 

We cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. Except as required by applicable law, including the securities laws of the U.S., we do not intend to update any of the forward-looking statements to conform these statements to reflect actual results, later events or circumstances or to reflect the occurrence of unanticipated events. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or other investments or strategic transactions we may engage in.

RISK FACTORS

Investing in our securities involves a high degree of risk. You should carefully consider and evaluate all of the risks described below, together with the other information contained in this prospectus, including our financial statements and the documents we incorporate by reference intorelated notes appearing at the end of this prospectus, before making your decision to invest in our securities. We cannot assure you decide to purchase our Series A Preferred Stock. Thethat any of the events discussed in the risk factors below will not occur. These risks could have a material and uncertainties described in this prospectus are not the only ones we face. Additional risks and uncertainties that we do not presently know about or that we currently believe are not material may also adversely affectadverse impact on our business, business prospects, results of operations, financial condition and cash flows, and our future prospects would likely be materially and adversely affected. If that were to happen, the trading price of our common stock could decline, and you could lose all or financial condition. Anypart of your investment. In addition, you should also carefully consider the other risks and uncertainties set forthdescribed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, which is incorporated herein by reference, as updated by annual, quarterly and other reports and documents that we file with the SECSecurities and incorporateExchange Commission after the date of this prospectus and that are incorporated by reference into this prospectus could materially and adversely affect our business, results of operations and financial condition. This could cause the market price of the Series A Preferred Stock to decline, perhaps significantly, and you may lose part or all of your investment.herein.

Risks Related to this Offering and Ownership of Shares of Our Series A Preferred Stock

The Series A Preferred Stock ranks junior to all of our indebtedness and other liabilities.

In the event of our bankruptcy, liquidation, dissolution, or winding-up of our affairs, our assets will be available to pay obligations on the Series A Preferred Stock only after all of our indebtedness and other liabilities have been paid. The rights of holders of the Series A Preferred Stock to participate in the distribution of our assets will rank junior to the prior claims of our current and future creditors and any future series or class of preferred stock we may issue that ranks senior to the Series A Preferred Stock. Also, the Series A Preferred Stock effectively ranks junior to all existing and future indebtedness and to the indebtedness and other liabilities of our existing subsidiaries and any future subsidiaries. Our existing subsidiaries are, and future subsidiaries would be, separate legal entities and have no legal obligation to pay any amounts to us in respect of dividends due on the Series A Preferred Stock.

We have incurred and may in the future incur substantial amounts of debt and other obligations that will rank senior to the Series A Preferred Stock. As of December 31, 2018, our total liabilities equaled approximately $24.8 million, including $9.5 million owed under a $20 million commercial revolving credit facility with Comerica Bank, which we refinanced on March 29, 2019 by entering into a Loan and Security Agreement with Sterling National Bank for borrowings of up to $20 million. If we are forced to liquidate our assets to pay our creditors, we may not have sufficient assets to pay amounts due on any or all of the Series A Preferred Stock then outstanding.

We may not be able to pay dividends onhave significant discretion over the Series A Preferred Stock if we fall outuse of compliance with our loan covenants.the net proceeds from this offering.

WeOur net proceeds from this offering are currently ableexpected to pay dividends under the restrictive covenants under the termsbe approximately $[●] million, assuming no exercise of the SNB Loan Agreement.underwriter’s over-allotment option. We intend to use approximately $[●] of the net proceeds from this offering to fund the KBS Projects (three modular housing projects to be constructed in New England pursuant to federal and state governmental contracts), and the remainder (if any) for working capital and for other general corporate purposes. Accordingly, our management will have broad discretion as to the application of such proceeds. As is the case with any business, it should be expected that certain expenses unforeseeable to management at this juncture will arise in the future. There can be no assurance that management’s use of proceeds generated through this offering will prove optimal or translate into revenue or profitability for the Company. Investors are urged to consult with their attorneys, accountants and personal investment advisors prior to making any decision to invest in the Company.

Even if this offering is successful, we may need to raise additional capital in the future to continue operations, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital if needed may have an adverse impact on our business and operations.

While we had net income of approximately $0.74 million for the year ended December 31, 2018, we had a net loss of approximately $4.63 million for the year ended December 31, 2019, and our net loss attributable to common stockholders was approximately $2.56 per share for the year ended December 31, 2019. We may incur additional net losses in the future, and we may experience quarter-to-quarter fluctuations in revenues, expenses, and losses, some of which may be significant.

Assuming all shares offered by this prospectus are sold, we estimate that we will receive net proceeds of approximately $[●] million from the sale of common stock offered by us in this offering, based on the assumed public offering price of $[●] per share (the last reported sale price of our common stock on the Nasdaq Global Market on [●], 2020), and after deducting the estimated underwriting fees and estimated offering expenses payable by us. In the event of a decrease in the net proceeds to us from this offering as a result of a decrease in the assumed public offering price per share or the number of shares offered by us, we may need to scale back or eliminate certain of our business plans or to raise additional capital sooner than we anticipate. However, we may not be able to pay dividendsraise additional funds on acceptable terms, or at all. Conditions in the Series A Preferred Stockcapital markets and the financial services industry may make equity and debt financing more difficult to obtain, and may negatively impact our ability to complete financing transactions. Any debt financing, if we fall outavailable, may involve restrictive covenants, such as limitations on our ability to incur additional indebtedness and other operating restrictions that could adversely impact our ability to conduct our business.

We face risks related to health pandemics and other widespread outbreaks of compliance withcontagious disease, including the novel coronavirus, COVID-19, which could significantly disrupt our loan covenantsoperations and are prohibited by SNB from paying dividends.impact our financial results.

Our business has been disrupted and could be materially adversely affected by the recent outbreak of COVID-19. The SNB Loan Agreement requiresoutbreak and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce. Global health concerns, such as coronavirus, could also result in social, economic, and labor instability in the Companycountries in which we or the third parties with whom we engage operate. The future progression of the outbreak and its effects on our business and operations are uncertain. We cannot presently predict the scope and severity of any potential business shutdowns or disruptions, including downturns in global economies and financial markets that could affect our future operating results. Any adverse impact on our results and financial condition could have a negative impact on our ability to comply with variouscertain financial covenants in certain of our loan agreements (as described further below) and on your investment in our common stock.

An investment in our securities is speculative and there can be no assurance of any return on any such investment.

An investment in our securities is speculative and there is no assurance that investors will obtain any return on their investment. Investors will be subject to substantial risks involved in an investment in the Company, including the risk of losing their entire investment.

If you purchase shares of common stock in this offering, you will experience immediate and substantial dilution in your investment. You will experience further dilution if we issue additional equity or equity-linked securities in the future.

Since the price per share of our common stock being offered is substantially higher than the net tangible book value per share of our common stock, you will suffer immediate and substantial dilution with respect to the net tangible book value of the common stock you purchase in this offering. Based on the assumed public offering price of $[●] per share of common stock being sold in this offering, and our net tangible book value as specificallyof March 31, 2020, if you purchase shares of common stock in this offering, you will suffer immediate and substantial dilution of $[●] per share with respect to the net tangible book value of the common stock. See the section entitled “Dilution” for a more detailed discussion of the dilution you will incur if you purchase common stock in this offering.

If we issue additional shares of common stock, or securities convertible into or exchangeable or exercisable for shares of common stock, our stockholders, including investors who purchase shares of common stock and accompanying warrants in this offering, will experience additional dilution, and any such issuances may result in downward pressure on the price of our common stock. We also cannot assure you that we will be able to sell shares or other securities in any other offering at a price per share that is equal to or greater than the price per share paid by investors in this offering, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders.

Resales of our common stock in the public market by our stockholders as a result of this offering may cause the market price of our common stock to fall.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. The issuance of new shares of our common stock could result in resales of our common stock by our current stockholders concerned about the potential ownership dilution of their holdings. In turn, these resales could have the effect of depressing the market price for our common stock.

There is no public market for the pre-funded warrants being offered in this offering.

There is no established public trading market for the pre-funded warrants being offered in this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list the pre-funded warrants on any securities exchange or nationally recognized trading system, including the Nasdaq Global Market. Without an active market, the liquidity of the pre-funded warrants will be limited.

Holders of pre-funded warrants purchased in this offering will have no rights as stockholders of shares of common stock until such holders exercise their pre-funded warrants and acquire our shares of common stock, except as set forth in the SNB Loan Agreement. The SNB Loan Agreement limits our ability to pay dividends, if such dividend would result in our non-compliance with the financial covenantspre-funded warrants.

Except as set forth in the SNB Loan Agreement, there is insufficient borrowing availability underpre-funded warrants, until holders of pre-funded warrants acquire our shares of common stock upon exercise of the SNB Loan Agreement, or if there ispre-funded warrants, holders of pre-funded warrants have no rights with respect to our shares of common stock underlying such pre-funded warrants exercise of the pre-funded warrants, the holders will be entitled to exercise the rights of a default or eventstockholder of default undershares of common stock only as to matters for which the SNB Loan Agreement that has occurred and is continuing. In such a circumstance, we would be required to reduce or eliminate our quarterly cash dividend until compliance withrecord date occurs after the financial covenants can be met.

exercise date.

We must adhere to prescribed legal requirements, and we must also have sufficient cash,The pre-funded warrants are speculative in order to be able to pay dividends.nature.

In accordance with Section 170The pre-funded warrants offered hereby do not confer any rights of the Delaware General Corporation Law, we may only declare and pay cash dividendsshare of common stock ownership on the Series A Preferred Stock if we have either net profits during the fiscal year in which the dividend is declared and/or the preceding fiscal year, or a “surplus”, meaning the excess, if any, of our net assets (total assets less total liabilities) over our capital. We can provide no assurance that we will satisfytheir holders, such requirements in any given year. Further, even if we have the legal ability to declare a dividend, we may not have sufficient cash to pay dividends on the Series A Preferred Stock. Our ability to pay dividends may be impaired if any of the risks described in this prospectus actually occur. Also, payment of our dividends depends upon our financial condition and other factors as our board of directors may deem relevant from time to time. We cannot assure you that our businesses will generate sufficient cash flow from operationsvoting rights or that future borrowings will be available to us in an amount sufficient to enable us to pay dividends on the Series A Preferred Stock.

We may not be able to redeem the Series A Preferred Stock upon a Change of Control Triggering Event.

Upon the occurrence of a Change of Control Triggering Event, unless we have exercised our right to redeem the Series A Preferred Stock, each holder of the Series A Preferred Stock will have the right to require usreceive dividends, but rather merely represent the right to redeem all or any partacquire shares of such holder’s Series A Preferred Stockcommon stock at a price equal to the liquidation preference of $25.00 per share, plus an amount equal to any accumulated and unpaid dividends up to but excludingfixed price. Specifically, commencing on the date of payment, but without interest. If we experience a Changeissuance, holders of Control Triggering Event,the pre-funded warrants may acquire the shares of common stock issuable upon exercise of such warrants at an exercise price of $0.01 per share of common stock. Moreover, following this offering, the market value of the pre-funded warrants is uncertain and there can be no assurance that we would have sufficient financial resources availablethe market value of the pre-funded warrants will equal or exceed their public offering price. There can be no assurance that the market price of the shares of common stock will ever equal or exceed the exercise price of the pre-funded warrants, and consequently, whether it will ever be profitable for holders of the pre-funded warrants to satisfy our obligations to redeemexercise the Series A Preferred Stock and any indebtedness thatpre-funded warrants.

There may be requiredfuture sales of our securities or other dilution of our equity, which may adversely affect the market price of our common stock.

We are generally not restricted from issuing additional common stock, including any securities that are convertible into or exchangeable for, or that represent the right to be repaid or repurchasedreceive, common stock. The market price of our common stock could decline as a result of a future sale of common stock or securities that are convertible into or exchangeable for, or that represent the right to receive, common stock after this offering or the perception that such event. In addition,sales could occur. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution.

As a smaller reporting company, we are subject to scaled disclosure requirements that may make it more challenging for investors to analyze our results of operations and financial prospects.

Currently, we are a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act. As a “smaller reporting company,” we are able to provide simplified executive compensation disclosures in our filings and have certain other decreased disclosure obligations in our filings with the SEC, including being required to provide only two years of audited financial statements in annual reports. Consequently, it may be unablemore challenging for investors to redeem the Series A Preferred Stock uponanalyze our results of operations and financial prospects.

Furthermore, we are a Change of Control Triggering Event if such redemption would result in our non-compliance with the financial covenants in the SNB Loan Agreement, there is insufficient borrowing availability under the SNB Loan Agreement, or if there is a default or event of default under the SNB Loan Agreement that has occurred and is continuing in connection with the Change of Control Triggering Event. Our failure to redeem the Series A Preferred Stock could have material adverse consequences for us and the holdersnon-accelerated filer as defined by Rule 12b-2 of the Series A Preferred Stock. See “DescriptionExchange Act, and, as such, are not required to provide an auditor attestation of management’s assessment of internal control over financial reporting, which is generally required for SEC reporting companies under Section 404(b) of the Series A Preferred Stock—Redemption—ChangeSarbanes-Oxley Act. Because we are not required to, and have not, had our auditor’s provide an attestation of Control.”our management’s assessment of internal control over financial reporting, a material weakness in internal controls may remain undetected for a longer period.

If we cannot continue to satisfy the Nasdaq delistsCapital Market continued listing standards and other Nasdaq rules, our common stock could be delisted, which would harm our business, the Series A Preferred Stock from quotation on its exchange, investors’trading price of our common stock, our ability to make transactions inraise additional capital and the Series A Preferred Stock could be limited.liquidity of the market for our common stock.

We anticipate that the Series A Preferred Stock will beOur common stock is currently listed on the Nasdaq Global Market, a national securities exchange, upon consummationMarket. To maintain the listing of this offering. Since our common stock is listed on the Nasdaq Global Market, in order to for the Series A Preferred Stock to be listed on the Nasdaq Global Market, we mustare required to meet certain modified criteria,listing requirements, including, among others, either: (i) a minimum closing bid price of $1.00 per share, a market value of publicly held shares (excluding shares held by our executive officers, directors and 10% or more stockholders) of Series A Preferred Stock (generally 200,000 shares), withat least $5 million and stockholders’ equity of at least $10 million; or (ii) a minimum closing bid price of $1.00 per share, a market value (generally $4,000,000) and a minimum number of holders (generally 100 public holders). If we meet such standards and have our Series A Preferred Stock listed on the Nasdaq Global Market, we cannot assure you that the Series A Preferred Stock will continue to be listed on the Nasdaq Global Market in the future. In order to continue listing the Series A Preferred Stock on the Nasdaq Global Market, we must maintain certain financial, distribution and share price levels. Generally, this means having a minimum number of publicly held shares (excluding shares held by our executive officers, directors and 10% or more stockholders) of Series A Preferred Stock (generally 100,000 shares), aat least $15 million and total assets of at least $50 million and total revenue of at least $50 million (in the latest fiscal year or in two of the last three fiscal years).

There is no assurance that we will be able to maintain compliance with the minimum market value (generally $1,000,000)closing price requirement and a minimum number of holders (generally 100 public holders). Ifother listing requirements. In the event that we fail to maintain compliance with Nasdaq listing requirements for 30 consecutive trading days, our common stock ismay be delisted from the Nasdaq Global Market,Market. If our common stock were to be delisted from Nasdaq and was not eligible for quotation or listing on another market or exchange, trading of our common stock could be conducted only in the Series A Preferred Stockover-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it could become more difficult to dispose of, or obtain accurate price quotations for, our common stock, and there would likely also be required to meet the more stringent initial listing standards of the Nasdaq Global Market for a Primary Equity Security, including a minimum number of publicly held shares of Series A Preferred Stock (generally 1,100,000 shares) and a minimum number of holders (generally 400 public holders). If we are unable to meet these standardsreduction in our coverage by securities analysts and the Series A Preferred Stock is delisted fromnews media, which could cause the Nasdaq Global Market, we may apply to list our Series A Preferred Stock on the Nasdaq Capital Market. If we are also unable to meet the listing standards for the Nasdaq Capital Market, we may apply to list our Series A Preferred Stock on OTC Markets. If we are unable to maintain listing for the Series A Preferred Stock, the ability to transfer or sell sharesprice of the Series A Preferred Stock will be limited and the market value of the Series A Preferred Stock will likely be materially adversely affected.

The market for our Series A Preferred Stock may not provide investors with adequate liquidity.

We will apply to have our Series A Preferred Stock listed on the Nasdaq Global Market. However, a trading market for the Series A Preferred Stock may not develop or be maintained and may not provide investors with adequate liquidity. Liquidity of the market for the Series A Preferred Stock will depend on a number of factors, including prevailing interest rates, our financial condition and operating results, the number of holders of the Series A Preferred Stock, the market for similar securities and the interest of securities dealers in making a market in the Series A Preferred Stock. We cannot predict the extent to which investor interest in our Company will maintain a trading market in our Series A Preferred Stock, or how liquid that market will be. If an active market is not maintained, investors may have difficulty selling shares of our Series A Preferred Stock.

We are generally restricted from issuing shares of other series of preferred stock that rank senior to the Series A Preferred Stock as to dividend rights, rights upon liquidation or voting rights, but may do so with the requisite consent of the holders of the Series A Preferred Stock; and, further, no such consent is required for the issuance of additional series of preferred stock ranking pari passu with the Series A Preferred Stock.

We are generally restricted from issuing shares of other series of preferred stock that rank senior to the Series A Preferred Stock as to dividend rights, rights upon liquidation or voting rights, but may do so with the requisite consent of the holders of the Series A Preferred Stock; and, further, no such consent is required for the issuance of additional series of preferred stock ranking pari passu with the Series A Preferred Stock.

We are allowed to issue shares of other series of preferred stock that rank above the Series A Preferred Stock as to dividend payments and rights upon our liquidation, dissolution or winding up of our affairs, only with the approval of the holders of at least a majority of the outstanding Series A Preferred Stock; however, we are allowed to issue additional shares of Series A Preferred Stock and/or additional series of preferred stock that would rank equally to the Series A Preferred Stock as to dividend payments and rights upon our liquidation or winding up of our affairs without first obtaining the approval of the holders of our Series A Preferred Stock. The issuance of additional shares of Series A Preferred Stock and/or additional series of preferred stock could have the effect of reducing the amounts available to the Series A Preferred Stock upon our liquidation or dissolution or the winding up of our affairs. It also may reduce dividend payments on the Series A Preferred Stock if we do not have sufficient funds to pay dividends on all Series A Preferred Stock outstanding and other classes or series of stock with equal or senior priority with respect to dividends. Future issuances and sales of senior or pari passu preferred stock, or the perception that such issuances and sales could occur, may cause prevailing market prices for the Series A Preferred Stock and our common stock to decline further.

If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, the price and trading volume of our securities could decline.

The trading market for our securities will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may adversely affectnever obtain research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of us, the trading price for our abilitysecurities would be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our clinical trials and operating results fail to raise additional capitalmeet the expectations of analysts, the price of our securities would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, at times and prices favorablewhich in turn could cause the price or trading volume of our securities to us.decline.

The Series A Preferred Stock will bear a risk of early redemption by us.

We may voluntarily redeem some or all of the Series A Preferred Stock on or after April [●], 2022. Any such redemptions may occur at a time that is unfavorable to holders of the Series A Preferred Stock. We may have an incentive to redeem the Series A Preferred Stock voluntarily before the mandatory redemption date, April [●], 2026, if market conditions allow us to issue other preferred stock or debt securities at a rate that is lower than the rate on the Series A Preferred Stock.

On or after April [●], 2022, we may, at our option, redeem the Series A Preferred Stock,be limited in whole or in part, at any time or from time to time. Also, upon the occurrence of a Change of Control Triggering Event (as defined in the section of this prospectus entitled “Description of the Series A Preferred Stock—Redemption”), prior to April [●], 2022, we may, at our option, redeem the Series A Preferred Stock, in whole or in part, within 120 days after the first date on which such Change of Control Triggering Event occurred. If we redeem the Series A Preferred Stock, then from and after the redemption date, dividends will cease to accrue on shares of Series A Preferred Stock, the shares of Series A Preferred Stock shall no longer be deemed outstanding and all rights as a holder of those shares will terminate, except the right to receive the redemption price plus accumulated and unpaid dividends, if any, payable upon redemption. For further information regarding our ability to redeem the Series A Preferred Stock, see “Descriptionutilize, or may not be able to utilize, net operating loss carryforwards to reduce our future tax liability as a result of the Series A Preferred Stock—Redemption.”

Holders of the Series A Preferred Stock will be subject to inflation risk.

Inflation is the reduction in the purchasing power of money resulting from the increase in the price of goods and services. Inflation risk is the risk that the inflation-adjusted, or “real,” value of an investment in term preferred stock or the income from that investment will be worth less in the future. As inflation occurs, the real value of the Series A Preferred Stock and dividends payable on such shares declines.

Market interest rates may materially and adversely affect the value of the Series A Preferred Stock.this offering.

OneAs disclosed in our most recent Annual Report on Form 10-K, under Section 382 of the factors that will influenceCode (as defined below) if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the price of the Series A Preferred Stock is the dividend yield on the Series A Preferred Stock (as a percentage of the market price of the Series A Preferred Stock) relativecorporation’s ability to market interest rates. Continued increase in market interest rates, which are currently at low levels relativeuse its pre-change net operating loss (“NOL”) carryforwards and other pre-change tax attributes (such as research tax credits) to historical rates, may lead prospective purchasers of the Series A Preferred Stock to expect a higher dividend yield (and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for dividend payments). Thus, higher market interest rates could cause the market price of the Series A Preferred Stock to materially decrease.

Holders of the Series A Preferred Stockoffset its post-change income may be unablelimited. This offering may, alone or in conjunction with other changes in our stock ownership that we cannot control, result in an “ownership change.” We may also experience ownership changes in the future as a result of strategic transactions or partnerships, equity offerings and other shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use the dividends-received deductionour pre-change NOL carryforwards and may not be eligible for the preferentialother deferred tax rates applicableassets to “qualified dividend income.”

Distributions paid to corporateoffset U.S. holders of the Series A Preferred Stock may be eligible for the dividends-received deduction, and distributions paid to non-corporate U.S. holders of the Series A Preferred Stockfederal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, similar limitations may apply at the preferentialstate level and there may be periods during which the use of NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

If we become a personal holding company, our results could be negatively impacted.

We could be subject to a second level of U.S. federal income tax rates applicable to “qualified dividendon a portion of our income” if we have currentare determined to be a personal holding company (“PHC”) for U.S. federal income tax purposes. A U.S. corporation generally will be classified as a PHC for U.S. federal income tax purposes in a given taxable year if (i) at any time during the last half of such taxable year, five or accumulated earningsfewer individuals (without regard to their citizenship or residency and profits,including as individuals for this purpose certain entities such as certain tax-exempt organizations, pension funds and charitable trusts) own or are deemed to own (pursuant to certain constructive ownership rules) more than 50% of the stock of the corporation by value (by reference to all common, preferred and all other classes of stock) (the “Ownership Test”) and (ii) at least 60% of the corporation’s adjusted ordinary gross income, as determined for U.S. federal income tax purposes. Additionally,purposes, for such taxable year consists of PHC income (which includes, among other things, dividends, interest, certain royalties, annuities and, under certain circumstances, rents) (the “Income Test”).

Based on our knowledge, we maybelieve we meet the Ownership Test discussed above. However, based on our present operations and income sources, we believe that we will not have sufficient current earningsmeet the Income Test, and profits during future fiscal yearsas a result we should not be treated as a PHC for the distributionsforeseeable future. If we are or were to become a PHC in a given taxable year, we would be subject to an additional PHC tax, currently 20%, on our undistributed PHC income, which generally includes our taxable income (without the Series A Preferred Stockbenefit of any federal net operating loss carry forward), subject to qualify as dividends for U.S. federal income tax purposes. Ifcertain adjustments. We can give no assurance that we will not become a PHC in the distributions failfuture.

Risks Related to qualify as dividends, U.S. holders wouldOur Business and Industry

Our HoldCo Conversion and related acquisitions or investments could involve unknown risks that could harm our business and adversely affect our financial condition.

We are in the process of becoming a diversified holding company with interests in a variety of industries and market sectors. The real estate acquisitions that we have made under our SRE real estate division and the pending and future acquisitions that we consummate will involve unknown risks, some of which will be particular to the industry in which the acquisition target operates. Although we intend to conduct extensive business, financial, and legal due diligence in connection with the evaluation of all our acquisition and investment opportunities, there can be no assurance our due diligence investigations will identify every matter that could have a material adverse effect on us. We may be unable to useadequately address the dividends-received deductionfinancial, legal, and may notoperational risks raised by such acquisitions or investments, especially if we are unfamiliar with the industry in which we invest. The realization of any unknown risks could prevent or limit us from realizing the projected benefits of the acquisitions or investments, which could adversely affect our financial condition and liquidity. In addition, our financial condition, results of operations and the ability to service our debt will be eligible forsubject to the preferential tax ratesspecific risks applicable to “qualified dividend income.”any company we acquire or in which we invest.

We rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that technology could materially harm our business.

We rely on information technology and systems, including the Internet, commercially available software, and other applications, to process, transmit, store, and safeguard information and to manage or support a variety of our business processes, including financial transactions and maintenance of records, which may include personal identifying information and other valuable or confidential information. If any distributions on the Series A Preferred Stockwe experience material failures, inadequacies, or interruptions or security failures of our information technology, we could incur material costs and losses. Further, third-party vendors could experience similar events with respect to any fiscal year are not eligibletheir information technology and systems that impact the products and services they provide to us or to our customers. We rely on commercially available systems, software, tools, and monitoring, as well as other applications and internal procedures and personnel, to provide security for processing, transmitting, storing, and safeguarding confidential information such as personally identifiable information related to our employees and others, information regarding financial accounts, and information regarding customers and vendors. We take various actions, and we incur significant costs, to maintain and protect the dividends-received deduction or preferential tax rates applicable to “qualified dividend income” becauseoperation and security of insufficient current or accumulated earningsour information technology and profits,systems, including the data maintained in those systems. However, it is possible that the market value of the Series A Preferred Stock might decline.

Our revenues, operating results and cash flows may fluctuate in future periods and we may fail to meet investor expectations, which may cause the price of our Series A Preferred Stock to decline.

Variations in our quarterly and year-end operating results are difficult to predict and our income and cash flows may fluctuate significantly from period to period, which may impact our board of directors’ willingness or legal ability to declare a quarterly dividend. If our operating results fall below the expectations of investors or securities analysts, the price of our Series A Preferred Stock could decline substantially. Specific factors that may cause fluctuations in our operating results include:

The Series A Preferred Stockthese measures will not be rated.

We do not intend to haveprevent the Series A Preferred Stock rated by any rating agency. Unrated securities usually trade atsystems’ improper functioning or a discount to similar, rated securities. As a result, there is a risk that the Series A Preferred Stock may trade at a price that is lower than they might otherwise trade if rated by a rating agency. It is possible, however, that one or more rating agencies might independently determine to assign a rating to the Series A Preferred Stock. In addition, we may elect to issue other securities for which we may seek to obtain a rating. If any ratings are assigned to the Series A Preferred Stockcompromise in the future or if we issue other securities with a rating,security, such ratings, if they are lower than market expectations or are subsequently lowered or withdrawn, could adversely affect the market for or the market value of the Series A Preferred Stock.

The market price of the Series A Preferred Stock could be substantially affected by various factors.

The market price of the Series A Preferred Stock could be subject to wide fluctuations in response to numerous factors. The price of the Series A Preferred Stock that will prevail in the market after this offering may be higher or lower than the offering price depending on many factors, some of which are beyond our control and may not be directly related to our operating performance.

These factors include, but are not limited to, the following:

As a result of these and other factors, investors who purchase the Series A Preferred Stock in this offering may experience a decrease, which could be substantial and rapid, in the market price of the Series A Preferred Stock, including decreases unrelated to our operating performance or prospects.

A holder of Series A Preferred Stock has extremely limited voting rights.

The voting rights for a holder of Series A Preferred Stock are limited. Our common stock is the only class of our securities that carry full voting rights. Voting rights for holders of Series A Preferred Stock exist primarily with respect to material and adverse changes in the terms of the Series A Preferred Stock and our failure to pay dividends on the Series A Preferred Stock. See “Description of the Series A Preferred Stock—Voting Rights” in this prospectus. Other than the limited circumstances described in the prospectus and except to the extent required by law, holders of Series A Preferred Stock do not have any voting rights.

The Series A Preferred Stock is not convertible into common stock, including in the event of a changecyberattack or the improper disclosure of controlinformation. Security breaches, computer viruses, attacks by hackers, online fraud schemes, and similar breaches can create significant system disruptions, shutdowns, fraudulent transfer of assets, or unauthorized disclosure of confidential information. For example, in April 2019, we became aware that we had been a victim of criminal fraud commonly referred to as “business email compromise fraud.” The incident involved the impersonation of an officer of the Company and investors will not realizeimproper access to his email, resulting in the transfer by the Company of funds to a corresponding upside if the price of the common stock increases.third-party account.

The Series A Preferred Stock is not convertible into sharesDespite any defensive measures we take to manage threats to our business, our risk and exposure to these matters remain heightened because of, common stock and earns dividends at a fixed rate. Accordingly, an increaseamong other things, the evolving nature of such threats in market pricelight of our common stock will not necessarily resultadvances in an increasecomputer capabilities, new discoveries in the market pricefield of our Series A Preferred Stock. The market value of the Series A Preferred Stock may depend more on dividendcryptography, new and interest rates forsophisticated methods used by criminals including phishing, social engineering, or other preferred stock, commercial paper andillicit acts, or other investment alternatives and our actual and perceived ability to pay dividends on, to redeem, and in the event of dissolution satisfy the liquidation preference with respect to, the Series A Preferred Stock.

We will have broad discretion in using the proceeds of this offering, and we may not effectively spend the proceeds.

We will use the net proceeds of this offering for the repayment of debt, working capital and general corporate purposes to support our growth. We have not allocated any specific portion of the net proceeds to any particular purpose, and our management will have the discretion to allocate the proceeds as it determines. We will have significant flexibility and broad discretion in applying the net proceeds of this offering, and we may not apply these proceeds effectively. Our management might not be able to yield a significant return, if any, on any investment of these net proceeds, and you will not have the opportunity to influence our decisions on how to use our net proceeds from this offering.

Our cash available for dividends to holders of our Series A Preferred Stock may not be sufficient to pay anticipated dividends, nor can we assure you of our ability to make dividends in the future, and we may need to borrow to make such dividendsevents or may not be able to make such dividends at all.

To remain competitive with alternative investments, our dividend rate may exceed our cash available for dividends, including cash generated from operations. In the event this happens, we intend to fund the difference out of any excess cash on hand or, if permitted, from borrowings under our revolving credit facility. If we do not have sufficient cash available for dividends generated by our assets, or if cash available for dividends decreases in future periods, the market price of our Series A Preferred Stock could decrease.

Our ability to pay dividends and/or make any required redemption payments to the holders of Series A Preferred Stock may be adversely affected by the operating results of our present and future acquisition targets including ATRM and our real estate acquisitions.

We previously announced our intent to convert our company into a diversified holding company. We have also previously announced our acquisition of two plants which manufacture modular buildings and our pending acquisition of a third such plant. In addition, we previously announced our intent to pursue the ATRM Acquisition in pursuit of this strategy. As of the date of this prospectus, we are not able to determine the potential operating results of our real estate assets. In addition, because we have concluded, as of the date of this prospectus, that the ATRM Acquisition is not “probable” under the applicable rules of the Securities Act of 1933, as amended, we are not required to include in this prospectus the financial statements and other information related to the business and operations of ATRM and you will, therefore, not have the opportunity to evaluate this information as part of this offering. There can be no assurance that we will consummate the proposed ATRM Acquisition or any other acquisition in furtherance of our strategy or that, in the event that we do consummate the proposed ATRM Acquisition or any other acquisition that such acquisition will have a positive impact on our profitability, cash flow or financial condition. In the event that we do consummate the proposed ATRM Acquisition and the financial and operating performance and results of our real estate division and/or ATRM are not positive and in line with our expectations, our ability to pay dividends and/or make any required redemption payments to the holder of the Series A Preferred Stock may be adversely impacted.

We may not be able to raise sufficient capital or borrow money in sufficient amounts or on sufficiently favorable terms necessary to attain the optimal degree of leverage to operate our business, which may have an adverse effect on our operations and ability to pay dividends.

Our ability to raise additional capital in the markets may be limited due to market conditions and applicable SEC regulations. Our business and acquisition strategies rely heavily on borrowing funds, sodevelopments that we may make more investments than would otherwise be possibleunable to maximize potential returnsanticipate or fail to holdersadequately mitigate. Any failure to maintain the security, proper function and availability of our securities. We may borrow on a securedinformation technology and systems, or unsecured basis. Pursuantcertain third-party vendors’ failure to the terms of the SNB Loan Agreement, our ability to incur additional indebtedness is subject to the consent of SNB, with certain limited exceptions. The SNB Loan Agreement is secured by a first-priority security interest in substantially all of the assets (excluding real estate) of the Companysimilarly protect their information technology and its subsidiaries and a pledge of all shares and membership interests of the Company’s subsidiaries. The SNB Loan Agreement, amongst other things, limits our ability, without the prior consent of the lender, to grant further security interests on our assets which serve as collateral for the SNB Loan Agreement, to discontinue insurance coverage, to incur additional indebtedness, to dispose of assets of the Company and its subsidiaries, to make investments, and to make distributions or pay dividendssystems that are relevant to our stockholders. The SNB Loan Agreement also specifies certain debtoperations, or to safeguard our business processes, assets, and other ratios that we are required to maintain. If we are unable to obtain the degree of leverage that we believeinformation could result in financial losses, interrupt our operations, damage our reputation, cause us to be optimal, we may have less cash for the paymentin default of dividendsmaterial contracts, and subject us to holdersliability claims or regulatory penalties, any of Series A Preferred Stock. Our use of leveragewhich could also make us more vulnerable to a downturn in our business or the economy generally and a significant increase in the ratio of our indebtedness to our assets may have an adverse effect on the future market price of our Series A Preferred Stock.

Future issuances of preferred stock may adversely affect the value of our Series A Preferred Stock.

We have authorized [750,000] shares of Series A Preferred Stock, and following the issuance of 500,000 shares of Series A Preferred Stock in this offering, we will have [250,000] shares of authorized but unissued shares of Series A Preferred Stock, assuming no exercise of the over-allotment option. We may issue additional shares of Series A Preferred Stock and/or other classes of preferred shares, whether to raise additional capital, in connection with the ATRM Acquisition (whether to acquire its outstanding common stock and/or preferred stock), in connection with the HoldCo Conversion or pursuant to other transactions we may enter into. The issuance of additional preferred shares on parity with or senior to our Series A Preferred Stock could affect the interests of the holders of Series A Preferred Stock issued in this offering, and any issuance of preferred stock that is senior to the Series A Preferred Stock could affect our ability to pay dividends on, redeem or pay the liquidation preference on the Series A Preferred Stock. However, the Certificate of Designations for the Series A Preferred Stock prevents us, without the consent of a majority of the holders of the Series A Preferred Stock, from issuing stock senior to the Series A Preferred Stock if the terms and rights of the holders of Series A Preferred Stock would be materially and adversely changed.

Risks Related to Our Businessand Industryaffect us.

We may not be able to achieve the anticipated synergies and benefits from business acquisitions.

Part of our business strategy is to acquire businesses that we believe can complement or expand our current business activities, both financially and strategically. On January 1, 2016, weSeptember 10, 2019, Digirad acquired PRHCATRM and its subsidiaries, including DMS Health Technologies, Inc. (“DMS Health”),KBS, EdgeBuilder and Glenbrook with these synergistic benefits in mind. Previously, weDigirad acquired PRHC and its subsidiaries, (including DMS Heath) on January 1, 2016; MD Office on March 5, 2015,2015; and Telerhythmics on March 13, 2014, which weDigirad subsequently sold on October 31, 2018. Acquisitions involve many complexities, including, but not limited to, risks associated with the acquired business’' past activities, loss of customers, regulatory changes that are not anticipated, difficulties in integrating personnel and human resource programs, integrating ERP systems and other infrastructures, general under performanceunderperformance of the business under ourDigirad control versus the prior owners, unanticipated expenses and liabilities, and the impact on ourits internal controls andof compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002. There is no guarantee that ourits acquisitions will increase ourthe profitability and cash flow of Digirad, and ourits efforts could cause unforeseen complexities and additional cash outflows, including financial losses. As a result, the realization of anticipated synergies or benefits from acquisitions may be delayed or substantially reduced, and could potentially result in the impairment of ourits investment in these businesses.

There can be no assurances that we will successfully complete our planned conversion intobe successful as a diversified holding company or complete our possible acquisition of ATRM Holdings, Inc.company.

Part of ourDigirad’s strategy is to become a diversified holding company through the acquisition of businesses that, we believe,Digirad believes, will realize a material benefit from being part of a larger holding company structure, both financially and strategically. There can be no assurances that weDigirad will find suitable acquisition targets that will enable usDigirad to successfully realize ourits conversion into a diversified holding company, and even if such targets are identified, there can be no assurances that weDigirad can negotiate and complete such acquisitions on attractive terms, including with regard to the possible acquisition of ATRM.terms.

If we areDigirad is unable to make successful acquisitions, ourits ability to grow ourits business could be adversely affected and ourits conversion to a diversified holding company structure may not succeed.succeeds. If weDigirad succeed in making suitable acquisitions, weDigirad may not be able to obtain the expected profitability or other benefits in the short or long term from such acquisitions.

Acquisitions, including the possible ATRM acquisition,Acquisition, involve many complexities, including, but not limited to, risks associated with the acquired business'business’ past activities, loss of customers, regulatory changes that are not anticipated, difficulties in integrating personnel and human resource programs, integrating ERP systems and other infrastructures under Company control, unanticipated expenses and liabilities, and the impact on ourits internal controls andof compliance with the regulatory requirements under the Sarbanes-OxleySarbanes- Oxley Act of 2002. There is no guarantee that ourits acquisitions will increase the profitability and cash flow of the Company,Digirad, and ourits efforts could cause unforeseen complexities and additional cash outflows, including financial losses. As a result, the realization of anticipated benefits from acquisitions may be delayed or substantially reduced. In addition, ourits leadership team’s attention may also be diverted by any historical or potential acquisitions.

We conduct certain operations through a joint venture and may enter into additional joint venturesare subject to particular risks associated with real estate ownership, which could result in the future. We may not be able to achieve anticipated benefits from joint ventures and disagreements with joint venture partners could adversely affect our interest in the joint ventures and lead to an unwinding of joint ventures.unanticipated losses or expenses.

On December 14, 2018,

Following our recent acquisition of real estate, our business is subject to many risks that are associated with the ownership of real estate. For example, if our tenants do not renew their leases or default on their leases, we and ATRM entered into a joint venture and formed Star Procurement, LLC (“Star Procurement”), with us and ATRM each holding a 50% interest. We may enter into additional joint ventures in the future. Joint ventures involve many complexities and there is no guarantee that our joint ventures will increase our profitability and cash flow. Our efforts could also cause unforeseen complexities and additional cash outflows, including financial losses. As a result, the realization of anticipated benefits from joint ventures may be delayed or substantially reduced.

Additionally, joint venture partners may have interestsunable to re-lease the facilities at favorable rental rates. Other risks that are different from ours, which may result in conflicting views as toassociated with real estate acquisition and ownership include, without limitation, the conduct of the business of the joint venture. In the event that we have a disagreement with a joint venture partner as to the resolution of a particular issue to come before the joint venture, or as to the management or conduct of the business of the joint venture in general, we may not be able to resolve such disagreement in our favor and such disagreement could have a material adverse effect on our interest in the joint venture or the business of the joint venture in general.following:

Our revenues may decline due to reductions in Medicare and Medicaid reimbursement rates.

The success of our business is largely dependent upon our medical professional customers’ ability to provide diagnostic care to their patients in an economically sustainable manner, either through the purchase of our imaging systems or using our diagnostic services, or both. Our customers are directly impacted by changes (decreases and increases) in governmental and private payor reimbursements for diagnostic services. We are directly and indirectly impacted by changes in reimbursements. In our businesses, where we are indirectly affected by reimbursement changes, we make every effort to act as business partners with our physician customers. For example, in 2010, we proactively adjusted our diagnostic imaging services rates down due to the dramatic reimbursement declines that our customers experienced from the Centers for Medicare & Medicaid Services. Reimbursements remain a source of concern for our customers and downward pressure on reimbursements causes greater pricing pressure on our services and influences the buying decisions of our customers. Although the gap is closing, hospital reimbursements remain higher than in-office reimbursements. Our Diagnostic Imaging segment’s products are targeted to serve the hospital market. A smaller portion of our Diagnostic Services business segment operates in the hospital market.

Reductions in reimbursements could significantly impact the viability of in-office imaging performed by independent physicians, as well as the viability of our cardiac event monitoring services business. The historical decline in reimbursements in diagnostic imaging has resulted in cancellations of imaging days in our Diagnostic Services business and the delay of purchase and service decisions by our existing and prospective customers in our Diagnostic Imaging business.

Our Diagnostic Services revenues may decline due to changes in diagnostic imaging regulations and the use of third party benefit managers by states and private payors to drive down diagnostic imaging volumes.

Nuclear medicine is a “designated health service” under the federal physician self-referral prohibition law known as the “Stark Law,” which states that a physician may not refer designated health services to an entity with which the physician or an immediate family member has a financial relationship, unless a statutory exception applies. Our business model and service agreements are structured to enable our physician customers to meet the statutory in-office ancillary services (“IOAS”) exception to the Stark Law, allowing them to perform nuclear diagnostic imaging services on their patients in the convenience of their own office. From time-to-time, the Centers for Medicare and Medicaid Services and Congress have proposed to modify the IOAS to further limit or eliminate this exception. Various lobbying organizations, including the Medicare Payment Advisory Commission (“MedPAC”), in the past have pushed for, discussed, and recommended that Congress limit the availability of the IOAS exception in order to reduce federal healthcare costs. Legislation has been introduced in prior Congresses to modify or eliminate the exception, but has not been enacted. The outcome of these efforts is uncertain at this time; however, the limitation or elimination of the IOAS exception could significantly impact our Diagnostic Services business segment as currently structured.

Our customers who perform imaging services in their office also experience the continuing efforts by some private insurance companies to reduce healthcare expenditures by hiring radiology benefit managers to help them manage and limit imaging. The federal government has also set aside monies in the 2009 recession recovery acts to hire radiology benefit managers to provide image management services to Medicare/Medicaid and MedPAC has recommended and the Centers for Medicare & Medicaid Services has, in the past, proposed legislation requiring Medicare physicians who engage in a relatively high volume of medical imaging be required to obtain pre-authorization through a radiology benefit manager. A radiology benefit manager is an unregulated entity that performs various functions for private payors and managed care organizations. Radiology benefit manager activities can include pre-authorization for imaging procedures, setting and enforcing standards, approving which contracted physicians can perform the services, such as requiring even the most experienced and highly qualified cardiologists to obtain additional board certifications, or interfering with the financial decision of the private practitioner by requiring them to own their own imaging system and not allowing them to lease the system. The radiology benefit managers often do not provide written documentation of their decisions or an appeals process, leaving leasing physicians unable to challenge their decisions with the carrier or the state insurance department. Unregulated radiology benefit manager activities have and could continue to adversely affect our physician customers'customers’ ability to receive reimbursement, therefore impacting our customers’ decision to utilize our Diagnostic Services imaging services.

Manufacturing and providing service for our nuclear imaging cameras is highly dependent upon the availability of certain suppliers, thereby making us vulnerable to supply problems that could harm our business.

Our manufacturing process within Diagnostic Imaging, and our warranty and post-warranty camera support business, rely on a limited number of third parties to supply certain key components and manufacture our products. Alternative sources of production and supply may not be readily available or may take several months to scale-up and develop effective production processes. If a disruption in the availability of parts or in the operations of our suppliers were to occur, our ability to have gamma cameras built as well as our ability to provide support could be materially adversely affected. In certain cases, we have developed backup plans and have alternative procedures should we experience a disruption. However, if these plans are unsuccessful or if we have a single source, delays in the production and support of our gamma cameras for an extended period of time could cause a loss of revenue and/or higher production and support costs, which could significantly harm our business and results of operations.

Our Diagnostic Services and portions of our Mobile Healthcare operations are highly dependent upon the availability of certain radiopharmaceuticals, thereby making us vulnerable to supply problems and price fluctuations that could harm our business.

Both our Diagnostic Service business and portions of our Mobile Healthcare business involve the use of radiopharmaceuticals. There is a limited number of major nuclear reactors supplying medical radiopharmaceuticals worldwide and there is no guarantee that the reactors will remain in good repair or that our supplier will have continuing access to ample supply of our radiopharmaceutical product. If we are unable to obtain an adequate supply of the necessary radiopharmaceuticals, we may be unable to utilize our personnel and equipment through our in-office service operations, or the volume of our services could decline and our business may be adversely affected. Shortages can also cause price increases that may not be accounted for in third party reimbursement rates, thereby causing us to lose margin or require us to pass increases on to our physician customers.

Our business is not widely diversified.

We currently provide our mobile diagnostic services and sell our products primarily into the cardiac nuclear and ultrasound imaging private practice, in-office markets and hospitals. We may not be able to leverage our assets and technology to diversify our products and services in order to generate revenue beyond these. If we are unable to diversify our product and service offerings, our financial condition may suffer.

We compete against businesses that have greater resources and different competitive strengths.

The market for mobile diagnostic services and diagnostic imaging systems is limited and has experienced some declines in the past. Some of our competitors have greater resources and a more diverse product offering than we do. Some of our competitors also enjoy significant advantages over us, including greater brand recognition, greater financial and technical resources, established relationships with healthcare professionals, larger distribution networks, and greater resources for product development and capital expenditures, as well as more extensive marketing and sales resources. If we are unable to expand our current market share, our revenues and related financial condition could decline.

Our quarterly and annual financial results are difficult to predict and are likely to fluctuate from period to period.

We have historically experienced seasonality in all of our businesses, volatility due to the changing healthcare environment, the variable supply of radiopharmaceuticals, and downturns based on the changing U.S. economy. While our customers are typically obligated to pay us for imaging days to which they have committed, our contracts permit some flexibility in scheduling when services are to be performed. We cannot predict with certainty the degree to which seasonal circumstances such as the summer slowdown, winter holiday vacations, and weather conditions may affect the results of our operations. We have also experienced fluctuations in demand of our diagnostic imaging product sales due to economic conditions, capital budget availability, and other financial or business reasons. In addition, due to the way that customers in our target markets acquire our products, a large percentage of our products are booked during the last month of each quarterly accounting period, and often there can be a large amount in the last month of the year. As such, a delivery delay of only a few days may significantly impact quarter-to-quarter comparisons of our results of operations. Moreover, the sales cycle for all of our capital products is typically lengthy, particularly in the hospital market, which may cause us to experience significant revenue fluctuations.

We spend considerable time and money complying with federal and state laws, regulations, and other rules, and if we are unable to fully comply with such laws, regulations, and other rules, we could face substantial penalties.

We are directly, or indirectly through our customers, subject to extensive regulation by both the federal government and the states in which we conduct our business, including: the federal Medicare and Medicaid anti-kickback laws and other Medicare laws, regulations, rules, manual provisions, and policies that prescribe requirements for coverage and payment for services performed by us and our physician customers; the federal False Claims statutes; the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended in 2009 under the HITECH Act that places direct legal obligations and higher liability on us with respect to the security and handling of personal health information; the Stark Law; the federal Food, Drug and Cosmetic Act; federal and state radioactive materials laws; state food and drug and pharmacy laws and regulations; state laws that prohibit the practice of medicine by non-physicians and fee-splitting arrangements between physicians and non-physicians; state scope-of-practice laws; and federal rules prohibiting the mark-up of diagnostic tests to Medicare under certain circumstances. If our customers are unable or unwilling to comply with these statutes, regulations, rules, and policies, rates of our services and products could decline and our business could be harmed. Additionally, new government mandates will require us to provide a certain baseline of health benefits and premium contribution for our employees and their families or pay governmental penalties. Some of these costs are not tax deductible. We have opted to provide this coverage to our employee base in order to maintain retention of qualified medical technicians and other professionals rather than plan to pay penalties to the government. Either option will result in additional costs to us and could negatively impact our cash reserves.

We maintain a compliance program to identify and correct any compliance issues and remain in compliance with all applicable laws, to train employees, to audit and monitor our operations, and to achieve other compliance goals. Like most companies with compliance programs, we occasionally discover compliance concerns. In such cases, we take responsive action, including corrective measures when necessary. There can be no assurance that our responsive actions will insulate us from liability associated with any detected compliance concerns.

If our past or present operations are found to be in violation of any of the laws, regulations, rules, or policies described above or the other laws or regulations to which we or our customers are subject, we may be subject to civil and criminal penalties, damages, fines, exclusion from federal or state healthcare programs, or the curtailment or restructuring of our operations. Similarly, if our physician customers are found to be non-compliant with applicable laws, they may be subject to sanctions whichthat could have a negative impact on us. Any penalties, damages, fines, curtailment, or restructuring of our operations could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management'smanagement’s attention from the operation of our business, and damage our reputation. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, regulations, rules, and policies, the risks cannot be entirely eliminated. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security, and fraud laws may prove costly.

Healthcare policy changes could have a material adverse effect on our business.

In response to perceived increases in healthcare costs in recent years, there have been and continue to be proposals by the federal government, state governments, regulators, and third-party payers to control these costs and, more generally, to reform the U.S. healthcare system. Certain of these proposals could limit the prices we are able to charge for our products or the amounts of reimbursement available for our products, and could limit the acceptance and availability of our products. The adoption of some or all of these proposals could have a material adverse effect on our financial position and results of operations.

Any intrusions or attacks on our information technology infrastructure could impact our ability to conduct operations and could subject us to fines, penalties, and lawsuits related to healthcare privacy laws.

The operation of our business includes use of complex information technology infrastructures, access to the information technology networks of our customers, as well as the collection of storing of patient information that is subject to HIPAA. In recent years, attacks on corporate information technology infrastructures have become more common and more sophisticated. Attacks can range from attempts that are routinely blocked by security and related infrastructure, to intrusions that disrupt activity temporarily, to extensive intrusions that severely impact or disable a network, including “ransom” wareransomware that holds a network hostage until the impacted company pays a fee to the attacker. Further, attacks can specifically impact patient information stored on such networks, requiring a widespread notice to the affected population, which can be very costly. Any successful attack on our network could severely impact our ability to conduct operations and could result in lost customers. Though we carry customary insurance for notification events in the event of a patient information breach under HIPAA, our coverage may not be sufficient to cover every situation, and any notification could severely impact our customer confidence and operations.

We are subject to risks associated with self-insurance related to health benefits.

To help control our overall long-term costs associated with employee health benefits, we are self-insured up to certain limits for our health plans. As such, we are subject to risks associated with self-insurance of these health plan benefits. To limit our exposure, we have third party stop-loss insurance coverage for both individual and aggregate claim costs. However, we could still experience unforeseen and potentially significant fluctuations in our healthcare costs based on a higher than expected volume of claims below these stop-loss levels. These fluctuations could have a material adverse effect on our financial position and results of operations.

A portion of our operations are located in a facility that may be at risk from fire, earthquakes, or other disasters.

Final assembly in our manufacturing process and significant portions of our inventory are located in a single facility in Poway, California, near known fire areas and earthquake fault zones. Future natural disasters could cause substantial delays in our operations and cause us to incur additional expenses. Although we have taken precautions to insure our facilities and continuing operations, as well as provide for offsite back-up of our information systems, this may not be adequate to cover our losses in any particular case. A disaster could significantly harm our business and results of operations.

The medical device industry is litigious, which could result in the diversion of our management’s time and efforts, and require us to incur expenses and pay damages that may not be covered by our insurance.

Our operations entail risks of claims or litigation relating to product liability, radioactive contamination, patent infringement, trade secret disclosure, warranty claims, vendor disputes, product recalls, property damage, misdiagnosis, breach of contract, personal injury, and death. Any litigation or claims against us, or claims we bring against others, may cause us to incur substantial costs, could place a significant strain on our financial resources, divert the attention of our management from our core business, and harm our reputation. We may incur significant liability in the event of any such litigation, regardless of the merit of the action. If we are unable to obtain insurance, or if our insurance is inadequate to cover claims, our cash reserves and other assets could be negatively impacted. Additionally, costs associated with maintaining our insurance could become prohibitively expensive, and our ability to become or remain profitable could be diminished.

If we cannot provide quality technical and applications support, we could lose customers and our business and prospects will suffer.

The placement of our products and the introduction of our technology at new customer sites requires the services of highly trained technical support personnel. Hiring technical support personnel is very competitive in our industry due to the limited number of people available with the necessary scientific and technical backgrounds and ability to understand our technology at a technical level. To effectively support potential new customers and the expanding needs of current customers, we will need to expand our technical support staff. If we are unable to attract, train or retain the number of highly qualified technical services personnel that our business needs, our business and prospects will suffer.

Our long-term results depend upon our ability to improve existing products and services and introduce and market new products and services successfully.

Our business is dependent on the continued improvement of our existing products and services and our development of new products and services utilizing our current or other potential future technology. As we introduce new products and services or refine, improve or upgrade versions of existing products and services, we cannot predict the level of market acceptance or the amount of market share these products and services will achieve, if any. We cannot assure you that we will not experience material delays in the introduction of new products or services in the future.

We generally sell our products and services in industries that are characterized by rapid technological changes, frequent new product introductions and changing industry standards. If we do not develop new products and services and product enhancements based on technological innovation on a timely basis, our products and services may become obsolete over time and our revenues, cash flow, profitability and competitive position may suffer. Our success will depend on several factors, including our ability to:

Even if we successfully innovate and develop new products, services and product enhancements, we may incur substantial costs in doing so, and our profitability may suffer.

If we do not successfully manage the development and launch of new products and services, our financial results could be adversely affected.

We may face risks associated with launching new products and services. If we encounter development or manufacturing challenges or discover errors during our product development cycle, the product launch dates of new products and services may be delayed. The expenses or losses associated with unsuccessful product development or launch activities or lack of market acceptance of our new products and services could adversely affect our business or financial condition.

Undetected errors or defects in our products could harm our reputation or decrease market acceptance of our products.

Our products may contain undetected errors or defects when first introduced or as new versions or new products are released. Disruptions affecting the introduction or release of, or other performance problems with, our products may damage our customers’ businesses and could harm their and our reputation. If that occurs, we may incur significant costs, the attention of our key personnel could be diverted, or other significant customer relations problems may arise. We may also be subject to warranty and liability claims for damages related to errors or defects in our products. In addition, if we do not meet industry or quality standards, if applicable, our products may be subject to recall. A material liability claim, recall, or other occurrence that harms our reputation or decreases market acceptance of our products could harm our business and operating results.

Our ability to protect our intellectual property and proprietary technology through patents and other means is uncertain.

We rely on patent protection as well as trademark, copyright, trade secret and other intellectual property rights protection and contractual restrictions to protect our proprietary technologies, all of which provide limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. Our success depends, in part, on our ability to protect our proprietary rights to the technologies used in our products. If we fail to protect and/or maintain our intellectual property, third parties may be able to compete more effectively against us, we may lose our technological or competitive advantage, and/or we may incur substantial litigation costs in our attempts to recover or restrict use of our intellectual property.

We do not have any pending patent applications. We cannot assure investors that we will continue to innovate and file new patent applications, or that if filed any future patent applications will result in granted patents. Further, we cannot predict how long it will take for such patents to issue, if at all. It is possible that, for any of our patents that have issued or that may issue in the future, our competitors may design their products around our patented technologies. Further, we cannot assure investors that other parties will not challenge any patents granted to us, or that courts or regulatory agencies will hold our patents to be valid, enforceable, and/or infringed. We cannot guarantee investors that we will be successful in defending challenges made against our patents and patent applications. Any successful third-party challenge or challenges to our patents could result in the unenforceability or invalidity of such patents, or such patents being interpreted narrowly and/or in a manner adverse to our interests. Our ability to establish or maintain a technological or competitive advantage over our competitors and/or market entrants may be diminished because of these uncertainties. For these and other reasons, our intellectual property may not provide us with any competitive advantage. For example:

To the extent our intellectual property offers inadequate protection, or is found to be invalid or unenforceable, we would be exposed to a greater risk of direct or indirect competition. If our intellectual property does not provide adequate coverage of our competitors’ products, our competitive position could be adversely affected, as could our business.

The measures that we use to protect the security of our intellectual property and other proprietary rights may not be adequate, which could result in the loss of legal protection for, and thereby diminish the value of, such intellectual property and other rights.

In addition to pursuing patents on our technology, we also rely upon trademarks, trade secrets, copyrights and unfair competition laws, as well as license agreements and other contractual provisions, to protect our intellectual property and other proprietary rights. Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated. In addition, we take steps to protect our intellectual property and proprietary technology by entering into confidentiality agreements and intellectual property assignment agreements with our employees, consultants, corporate partners and, when needed, our advisors. Such agreements may not be enforceable or may not provide meaningful protection for our trade secrets and/or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements, and we may not be able to prevent such unauthorized disclosure. Moreover, if a party having an agreement with us has an overlapping or conflicting obligation to a third party, our rights in and to certain intellectual property could be undermined. Monitoring unauthorized and inadvertent disclosure is difficult, and we do not know whether the steps we have taken to prevent such disclosure are, or will be, adequate. If we were to enforce a claim that a third party had illegally obtained and was using our trade secrets, it would be expensive and time consuming, the outcome would be unpredictable, and any remedy may be inadequate.

In addition, competitors could purchase our products and attempt to replicate and/or improve some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design their products around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights. If our intellectual property does not adequately protect our market share against competitors’ products and methods, our competitive position could be adversely affected, as could our business.

We may need to enter into license agreements in the future.

We may need or may choose to obtain licenses and/or acquire intellectual property rights from third parties to advance our research or commercialization of our current or future products, and we cannot provide any assurances that third-party patents do not exist that might be enforced against our current or future products in the absence of such a license. We may fail to obtain any of these licenses or intellectual property rights on commercially reasonable terms. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In that event, we may be required to expend significant time and resources to develop or license replacement technology. If we are unable to do so, we may be unable to develop or commercialize the affected products, which could materially harm our business and the third parties owning such intellectual property rights could seek either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation.

If we are sued for infringing intellectual property rights of third parties, it would be costly and time consuming, and an unfavorable outcome in that litigation could have a material adverse effect on our business.

Our success also depends on our ability to develop, manufacture, market and sell our products and perform our services without infringing the proprietary rights of third parties. Numerous U.S. issued patents and pending patent applications owned by third parties exist in the fields in which we are developing products and services. As part of a business strategy to impede our successful commercialization and entry into new markets, competitors may allege that our products and/or services infringe their intellectual property rights.

We could incur substantial costs and divert the attention of our management and technical personnel in defending ourselves against claims of infringement made by third parties. Any adverse ruling by a court or administrative body, or perception of an adverse ruling, may have a material adverse impact on our ability to conduct our business and our finances. Moreover, third parties making claims against us may be able to obtain injunctive relief against us, which could block our ability to offer one or more products or services and could result in a substantial award of damages against us. Intellectual property litigation can be very expensive, and we may not have the financial means to defend ourselves.

Because patent applications can take many years to issue, there may be pending applications, some of which are unknown to us, that may result in issued patents upon which our products or proprietary technologies may infringe. Moreover, we may fail to identify issued patents of relevance or incorrectly conclude that an issued patent is invalid or not infringed by our technology or any of our products. If a third-party claims that we infringe upon a third-party’s intellectual property rights, we may have to:

Our issued patents could be found invalid or unenforceable if challenged in court or at the Patent Office or other administrative agency, which could have a material adverse impact on our business.

Any patents we have obtained or do obtain may be challenged by re-examination or otherwise invalidated or eventually found unenforceable. Both the patent application process and the process of managing patent disputes can be time consuming and expensive. If we were to initiate legal proceedings against a third party to enforce a patent related to one of our products or services, the defendant in such litigation could counterclaim that our patent is invalid and/or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity and/or unenforceability are commonplace, as are validity challenges by the defendant against the subject patent or other patents before the USPTO. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement, failure to meet the written description requirement, indefiniteness, and/or failure to claim patent eligible subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent intentionally withheld material information from the USPTO, or made a misleading statement, during prosecution. Additional grounds for an unenforceability assertion include an allegation of misuse or anticompetitive use of patent rights, and an allegation of incorrect inventorship with deceptive intent. Third parties may also raise similar claims before the USPTO even outside the context of litigation. The outcome is unpredictable following legal assertions of invalidity and unenforceability. With respect to the validity question, for example, we cannot be certain that no invalidating prior art existed of which we and the patent examiner were unaware during prosecution. These assertions may also be based on information known to us or the Patent Office. If a defendant or third party were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the claims of the challenged patent. Such a loss of patent protection would or could have a material adverse impact on our business.

We may be involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful.

Competitors may attempt to challenge or invalidate our patents, or may be able to design alternative techniques or devices that avoid infringement of our patents that have issued or that may issue in the future, or develop products with functionalities that are comparable to ours. In the event a competitor infringes upon our patent or other intellectual property rights, litigation to enforce our intellectual property rights or to defend our patents against challenge, even if successful, could be expensive and time consuming and could require significant time and attention from our management. We may not have sufficient resources to enforce our intellectual property rights or to defend our patents against challenges from others.

An adverse result in any such litigation proceedings could put one or more of our patents at risk of being invalidated, being found to be unenforceable, and/or being interpreted narrowly and could impact the validity or enforceability positions of our other patents. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, an adverse outcome in such litigation or proceedings may expose us to loss of our proprietary position, expose us to significant liabilities, or require us to seek licenses that may not be available on commercially acceptable terms, if at all.

We may make financial investments in other businesses that may lose value.

As we look for the best ways to deploy our capital and maximize our returns for our businesses and stockholders,shareholders, we may make financial investments in other businesses or processes for purposes of enhancing our supply chain, creating financial returns, strategic developments, or other purposes. These investments may be speculative in nature, and there is no guarantee that we will experience a financial return and we may lose our entire principal balance if not successful.

Our mobile healthcare fleet is highly utilized; any downtime in our assets could have a material impact on our revenues and costs.

Our Mobile Healthcare business unit utilizes a fleet of highly sophisticated imaging and related transportation assets that require nearly 100% uptime to service our customer needs. Though we utilize an array of highly competent service providers to support our imaging fleet, imaging and related transportation machines can experience unproductive downtime. Any downtime of our imaging fleet could have near term impacts on our revenues and underlying costs.

Our goodwill and other long-lived assets are subject to potential impairment whichthat could negatively impact our earnings.

A significant portion of our assets consists of goodwill and other long-lived assets, the carrying value of which may be reduced if we determine that those assets are impaired. At December 31, 2018,2019, goodwill and net intangible assets represented $7.0$32.9 million, or 13.8%36.3% of our total assets. In addition, net property, plant and equipment assets totaled $21.6$22.1 million, or 42.8%24.4% of our total assets. If actual results differ from the assumptions and estimates used in our goodwill and long-lived asset valuation calculations, we could incur impairment charges, which could negatively impact our earnings.

We review our reporting units for potential goodwill impairment annually or more often if events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. In addition, we test the recoverability of long-lived assets if events or circumstances indicate the carrying values may not be recoverable. Recoverability of long-lived assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. We conduct impairment testing based on our current business strategy in light of present industry and economic conditions, as well as future expectations. There are numerous risks that may cause the fair value of a reporting unit to fall below its carrying amount and/or the value of long-lived assets to not be recoverable, which could lead to the measurement and recognition of goodwill and/or long-lived asset impairment. These risks include, but are not limited to, significant negative variances between actual and expected financial results, lowered expectations of future financial results, failure to realize anticipated synergies from acquisitions, adverse changes in the business climate, and the loss of key personnel. If we are not able to achieve projected performance levels, future impairments could be possible, which could negatively impact our earnings.

During the year ended December 31, 2018, the Company derecognized $1.1 million of goodwill related to the termination of the Philips Agreements with DMS Health effective December 31, 2017. DuringAdditionally, during the years ended December 31, 2018 and 2017,same period, the Company recorded a $0.5 million and $0.2 million goodwill impairment loss, respectively, related to Telerhythmics LLC (Telerhythmics), the Company’s cardiac event monitoring services business that was acquired on March 13, 2014. On October 31, 2018, the Company entered into a membership interest purchase agreement (the “Telerhythmics Purchase Agreement”) with G Medical Innovations USA, Inc. (“G Medical”), pursuant to which we sold all the outstanding membership interests in Telerhythmics to G MedicalMedical. On September 10, 2019, Digirad completed its acquisition of ATRM pursuant to the ATRM Merger Agreement. The $8.2 million goodwill recognized is attributable primarily to expected synergies and the assembled workforce of ATRM. As of December 31, 2019, as a result of the finalization of the purchase price allocation for $1.95 million in cash. the ATRM Merger, an adjustment of $3,000 was made to the recognized amounts of goodwill resulting from the acquisition of ATRM.

No other significant impairment losses on long-lived assets were recognized during the years ended December 31, 20182019 and 2017.2018. See Note 2 “Basis2.Basis of Presentation,Note 5.Merger and Note 7 “Goodwill”8.Goodwill, within the notes to ourconsolidated financial statements and the accompanying notes thereto, included in our 2018Annual Report on Form 10-K for the year ended December 31, 2019 and incorporated herein by reference for further discussion regarding goodwill and long-lived assets.

Our HoldCo ConversionThe Company is dependent on its senior management team and related acquisitionsother key employees.

The Company’s success depends, to a significant extent, on its senior management team and other key employees and the ability of other personnel or investmentsnew hires to effectively replace key employees who may retire or resign. Failure to retain its leadership team and attract and retain new leadership and other important personnel could involve unknown risks thatlead to ineffective management and operations, which could harm our businessmaterially and adversely affect its business and operating results.

ATRM’s operating results could be adversely affected by changes in the cost and availability of raw materials.

Prices and availability of raw materials used to manufacture its products can change significantly due to fluctuations in supply and demand. Additionally, availability of the raw materials used to manufacture its products may be limited at times resulting in higher prices and/or the need to find alternative suppliers. Both KBS’s and EBGL’s major material components are dimensional lumber and wood sheet products, which include plywood and oriented strand board. Lumber costs are subject to market fluctuations. Furthermore, the cost of raw materials may also be influenced by transportation costs. It is not certain that any price increases can be passed on to its customers without affecting demand or that limited availability of materials will not impact its production capabilities. The state of the financial and housing markets may also impact its suppliers and affect the availability or pricing of materials. ATRM’s inability to raise the price of its products in response to increases in prices of raw materials or to maintain a proper supply of raw materials could have an adverse effect on its revenue and earnings.

If we are unable to secure contracts for the KBS Projects or are unable to successfully complete the KBS Projects, our financial condition.revenues and results could be adversely affected.

We are in advanced stages of negotiation for contracts to secure the process of becoming a diversified holding company with interests in a variety of industries and market sectors. The real estate acquisitionsKBS Projects; however, we can provide no assurance that we have made under our SRE real estate division andwill be awarded the pending and future acquisitionsKBS Projects, that we consummate will involve unknown risks, some of which will be particularable to successfully complete the KBS Projects if they are awarded to KBS, or that the anticipated revenues from the KBS Projects will be achieved. If we are not awarded the contracts for the KBS Projects, do not complete them as planned or do not receive payment for the KBS Projects as projected, then KBS’ and our revenues and results may be adversely affected.

If KBS is unable to maintain or establish its relationships with independent dealers and contractors who sell its homes, KBS revenue could decline.

KBS sells residential homes through a network of independent dealers and contractors. As is common in the modular home industry, KBS’s independent dealers may also sell homes produced by competing manufacturers and can cancel their relationships with KBS on short notice. In addition, these dealers may not remain financially solvent, as they are subject to industry, economic, demographic and seasonal trends similar to those faced by KBS. If KBS is not able to maintain good relationships with its dealers and contractors or establish relationships with new solvent dealers or contractors, KBS’s revenue could decline.

Due to the industrynature of ATRM’s business, many of its expenses are fixed costs and if there are decreases in demand for its products, it may adversely affect its operating results.

Many of its expenses, particularly those relating to properties, capital equipment, and certain manufacturing overhead items, are fixed in the short term. Reduced demand for its products causes its fixed production costs to be allocated across reduced production volumes, which the acquisition target operates. Although we intend to conduct extensive business, financialadversely affects its gross margins and legal due diligenceprofitability.

Certain actions taken in connection with reducing operating costs may have a negative impact on ATRM’s business.

In the evaluationevent of all our acquisitiona housing downturn and investment opportunities,a decline in its revenues, ATRM may implement cost reduction actions such as temporary factory shutdowns, workforce reductions, pay freezes and reductions, and reductions in other expenditures. In doing so, ATRM will attempt to maintain the necessary infrastructures to allow ATRM to take full advantage of subsequent improvements in market conditions. However, there can be no assurance our due diligencethat reductions ATRM may make in personnel and expenditure levels and the loss of the capabilities of personnel ATRM has terminated or may terminate will not inhibit ATRM in the timely ramp up of production in response to improving market conditions.

Due to the nature of the work the Company and its subsidiaries perform, the Company may be subject to significant liability claims and disputes.

The Company and its wholly owned subsidiaries engage in services that can result in substantial injury or damages that may expose the Company to legal proceedings, investigations and disputes. For example, in the ordinary course of its business, the Company may be involved in legal disputes regarding personal injury and wrongful death claims, employee or labor disputes, professional liability claims, and general commercial disputes, as well as other claims. LSVM as an exempt reporting advisor may also be subject to legal proceedings and investigations with the SEC or other regulatory bodies and may have disputes related to its fiduciary duties to the funds or instruments LSVM manages. An unfavorable legal ruling against the Company or its subsidiaries could result in substantial monetary damages. Although the Company has adopted a range of insurance, risk management, safety, and risk avoidance programs designed to reduce potential liabilities, there can be no assurance that such programs will identify every matterprotect the Company fully from all risks and liabilities. If the Company sustains liabilities that exceed its insurance coverage or for which the Company is not insured, it could have a material adverse effectimpact on us. We may be unable to adequately address the financial, legal and operational risks raised by such acquisitions or investments, especially if we are unfamiliar with the industry in which we invest. The realization of any unknown risks could prevent or limit us from realizing the projected benefits of the acquisitions or investments, which could adversely affect our financial condition and liquidity. In addition, our financial condition,its results of operations and the ability to service our debt will be subject to the specific risks applicable to any company we acquire or in which we invest.financial condition.

We are subject to particular risks associated with real estate ownership, whichATRM’s costs of doing business could increase as a result of changes in, unanticipated lossesexpanded enforcement of, or expenses.adoption of new federal, state or local laws and regulations.

Following our recent acquisition of real estate, our business

ATRM is subject to many risksvarious federal, state and local laws and regulations that are associated withgovern numerous aspects of its business. In recent years, a number of new laws and regulations have been adopted, and there has been expanded enforcement of certain existing laws and regulations by federal, state and local agencies. These laws and regulations, and related interpretations and enforcement activity, may change as a result of a variety of factors, including political, economic or social events. Changes in, expanded enforcement of, or adoption of new federal, state or local laws and regulations governing minimum wage or living wage requirements; the ownershipclassification of real estate.  For example, if our tenants do not renew their leasesexempt and non-exempt employees; the distinction between employees and contractors; other wage, labor or default on their leases, we may be unable to re-leaseworkplace regulations; healthcare; data protection and cybersecurity; the facilities at favorable rental rates.  Other risks that are associated with real estate acquisitionsale and ownership include, without limitation, the following:

Risks Related to our Indebtedness

On March 29, 2019, weDigirad and certain of its healthcare subsidiaries entered into the SNBa Loan and Security Agreement with Sterling National Bank a national banking association.(the “SNB Loan Agreement”). The SNB Loan Agreement is a five-year revolving credit facility (maturing in March 2024), which, as amended, has a maximum credit amount of $20 million. We usedmillion (the “SNB Credit Facility”). On January 31, 2020, Digirad and certain of its Investments Subsidiaries entered into a portionLoan and Security Agreement with Gerber (as amended, the “Star Loan Agreement”), which provides for a credit facility with borrowing availability of up to $2.5 million and matures on January 1, 2025, unless terminated in accordance with the terms therein (the “Star Loan”). On January 31, 2020, Digirad and certain of its Construction Subsidiaries entered into a Loan and Security Agreement with Gerber (the “EBGL Loan Agreement”), which provides for a credit facility with borrowing availability of up to $3.0 million and matures on January 1, 2022, unless extended or terminated in accordance with the terms therein (the “EBGL Loan”). On January 31, 2020, Glenbrook and EdgeBuilder entered into an Extension and Modification Agreement (the “Modification Agreement”) with Premier Bank (“Premier”) that modified the terms of the financingloan made availableby Premier to Glenbrook and EdgeBuilder pursuant to that certain Revolving Credit Loan Agreement, dated June 30, 2017, by and among Glenbrook, EdgeBuilder and Premier (as amended, the “Premier Loan Agreement”). Pursuant to the Modification Agreement, the amount of indebtedness evidenced by the promissory note issued under the Premier Loan Agreement was reduced to $1.0 million. Our credit facility under the Loan and Security Agreement, dated February 23, 2016, by and among KBS, ATRM, the Company and Gerber (as amended, the “KBS Loan Agreement”) provides for a revolving credit facility of up to $4.0 million that matures on February 22, 2021, subject to automatic extension for an additional year unless terminated. The SNB Loan Agreement, Star Loan Agreement, EBGL Loan Agreement, the Premier Loan Agreement and the KBS Loan Agreement are collectively referred to refinanceas the “Company Loan Agreements.” See Note 15,Related Party Transactions, within the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 and terminate, effective as of March 29, 2019, aincorporated herein by reference for information regarding certain Revolving Credit Agreement, dated June 21, 2017, by and between the Company and Comerica Bank.ATRM promissory notes that are outstanding.

Our indebtedness could restrict our operations and make us more vulnerable to adverse economic conditions.

Our indebtedness could have important consequences for us and our stockholders. For example, the SNB Loan Agreement requires a balloon payment at the termination of the facility in March 2024 and the Star Loan Agreement has a balloon payment in January 2021, which payments may require us to dedicate a substantial portion of our cash flow from operations to this future payment if we feel we cannot be successful in our ability to refinance in the future, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, and acquisitions, and for other general corporate purposes. In addition, our indebtedness could:

The SNBCompany Loan AgreementAgreements governing our indebtedness containscontain restrictive covenants that will restrict our operating flexibility and require that we maintain specified financial ratios. If we cannot comply with these covenants, we may be in default under one or more of the SNB Loan Agreement. Agreements.

The SNB Loan AgreementAgreements governing our indebtedness containscontain restrictions and limitations on our ability to engage in activities that may be in our long-term best interests. The SNB Loan Agreement contains affirmative and negative covenants that limit and restrict, among other things, our ability to:

The SNB Loan Agreement limits our ability to pay dividends and to redeem our equity securities ifsuch dividend or redemption would result in our non-compliance with thefinancial covenants in the SNB Loan Agreement, there is insufficient borrowing availability under the SNB Loan Agreement,, or if there is a default or event of default under theSNB LoanAgreement that has occurred and is continuing. In addition, the Company Loan Agreements include explicit restrictions on the payment of dividends and distributions to Digirad, which could limit the Company’s ability to pay dividends. The Company may, therefore be required to reduce or eliminate its quarterly cash dividenddividends, if any, including on the Series A Preferred Stock (if any outstanding), and/or may be unable to redeem shares of the Series A Preferred Stock (if any outstanding) until compliance with such financial covenants can be met.

The SNB Loan Agreement contains a fixed charge coverage ratio covenant and a leverage ratio covenant. GoingAgreements contain various financial covenants that, going forward, we or our subsidiaries may not have the ability to meet these and othermeet. Due to increased financial pressure on the Company as a result of the COVID-19 pandemic, there is an increased likelihood that we may fail to comply with such financial covenants if the impacts of the pandemic persist for a significant duration. We cannot provide any assurance that any such breach of covenants will be able to be remedied or that they will not result in a default under the SNB Loan Agreement depending on a number of factors including, without limitation,Agreements.

The Loan Agreements also contain various other affirmative and negative covenants regarding, among other things, the performance of our business, capital allocation decisions made by the Company and its subsidiaries, or events beyond our control.

Our failure to comply with our covenants and other obligations under the SNB Loan AgreementAgreements may result in an event of default thereunder. A default, if not cured or waived, may permit acceleration of our indebtedness. If our indebtedness is accelerated, we cannot be certain that we will have sufficient funds available to pay the accelerated indebtedness (together with accrued interest and fees), or that we will have the ability to refinance the accelerated indebtedness on terms favorable to us or at all. This could have serious consequences to our financial condition, operating results, and business, and could cause us to become insolvent or enter bankruptcy proceedings, and stockholders may lose all or a portion of their investment because of the priority of the claims of our creditors on our assets.

Substantially all of our assets (including the assets of our subsidiaries) have been pledged to SNBlenders as security for our indebtedness under the SNB Loan AgreementAgreements.

Pursuant to the SNBThe Loan Agreement, theSNB Loan Agreement isAgreements are secured by a first-priority security interest in substantially all of the assets of the Company and its subsidiaries and a pledge of all shares and equity interests of the Company’s subsidiaries. Upon the occurrence and during the continuation of an event of default under theSNBany Loan Agreement, SNBthe applicable lender may, among other things, declare the loans and all other obligations under theSNB Loan Agreementthereunder immediately due and payable and may, in certain instances, increase the interest rate at which loans and obligations under theSNB Loan Agreement bear interest. The exercise by SNBa lender of remedies provided under theSNB applicable Loan Agreement in the event of a default thereunder may have a material adverse effect on the liquidity, financial condition and results of operations of the applicable borrowers and/or the Company and could cause such borrowers and/or the Company to become bankrupt or insolvent. The obligations of the Company and various subsidiaries of the Company under the Loan Agreements are guaranteed by other subsidiaries of the Company and/or the Company. In the event of any bankruptcy, liquidation, dissolution, reorganization, or similar proceeding against us, the assets that are pledged as collateral securing any unpaid amounts undertheSNB applicable Loan Agreementmust first be used to pay such amounts, as well as any other obligation secured by the pledged assets, in full, before making any distributions to our stockholders. In the event of any of the foregoing, our stockholders could lose all or a part of their investment.

The inability of the Company, ATRM, KBS, or any of the Company’s other subsidiaries to comply with applicable financial covenants under the Loan Agreements could have a material adverse effect on financial condition of the Company.

As of December 31, 2019 and 2018, KBS was not in compliance with the financial covenants under the KBS Loan Agreement requiring no net annual post-tax loss for KBS or the minimum leverage ratio covenant as of these test dates. In April 2019, June 2019 and February 2020, ATRM obtained a waiver from Gerber Finance for these events. In addition, ATRM and Gerber Finance agreed to eliminate the minimum leverage ratio covenant for years after 2018.

If the Company, ATRM, KBS, or any of the Company’s other subsidiaries fail to comply with any applicable financial covenants under the Loan Agreements to which it is a party, or if there is otherwise an event of default under the Loan Agreements by a borrower, the borrowers’ obligations thereunder may (subject to any applicable cure periods) become immediately due and payable and the applicable lender(s) may demand the repayment of the credit facilities amount outstanding and any unpaid interest thereon.

If we are unable to generate or borrow sufficient cash to make payments on our indebtedness, our financial condition would be materially harmed, our business could fail, and stockholders may lose all of their investment.

Our ability to make scheduled payments on or to refinance our obligations will depend on our financial and operating performance, which will be affected by economic, financial, competitive, business, and other factors, some of which are beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations to service our indebtedness or to fund our other liquidity needs. If we are unable to meet our debt obligations or fund our other liquidity needs, we may need to restructure or refinance all or a portion of our indebtedness on or before maturity or sell certain of our assets. We cannot assure you that we will be able to restructure or refinance any of our indebtedness on commercially reasonable terms, if at all, which could cause us to default on our debt obligations and impair our liquidity. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.

Increases in interest rates could adversely affect our results from operations and financial condition.

The SNB, Premier and Gerber Loan Agreement allows the Company to electAgreements allow for amounts borrowed under the SNB Loan Agreementthereunder to be subject to a floating interest rate which may change with market interest rates. An increase in prevailing interest rates would have an effect on the interest rates charged on our variable rate debt, which rise and fall upon changes in interest rates. If prevailing interest rates or other factors result in higher interest rates, the increased interest expense would adversely affect our cash flow and our ability to service our indebtedness.

Risks Related to our Common Stock

The market price of our common stock may be volatile, and the value of your investment could decline significantly.

The market price of our common stock has been, and we expect it to continue to be, volatile. The prices at which our shares of common stock trade depend upon a number of factors, including our historical and anticipated operating results, our financial situation, announcements of new products by us or our competitors, history of timely dividend payments, our ability or inability to raise the additional capital we may need and the terms on which we raise it, and general market and economic conditions. Some of these factors are beyond our control. Broad market fluctuations may lower the market price of our common stock and affect the volume of trading in our stock, regardless of our financial condition, results of operations, business, or prospects. It is impossible to assure you that the market price of our shares of common stock will not fall in the future.

Our common stock may be subject to delisting fromhas a low trading volume and shares available under our equity compensation plans could affect the Nasdaq Global Market if we do not meet Nasdaq’s Minimum Bid Price Requirement.trading price of our common stock.

On January 8, 2019, we receivedOur common stock historically has had a deficiency letter from the Nasdaq Listing Qualifications Department notifying us that, for the prior thirty consecutive business days, the closing bid price forlow trading volume. Any significant sales of our common stock may cause volatility in our stock price. We also have registered shares of common stock that we may issue under our employee benefit plans or from our treasury stock. Accordingly, these shares can be freely sold in the public market upon issuance, subject to restrictions under the securities laws. If any of these stockholders, or other selling stockholders, cause a large number of securities to be sold in the public market without a corresponding demand, the sales could reduce the trading price of our common stock. One or more stockholders holding a significant amount of our common stock might be able to significantly influence matters requiring approval by our stockholders, possibly including the election of directors and the approval of mergers or other business combination transactions.

Payment of dividends on our common stock is prohibited unless we have declared and paid (or set apart for payment) full accumulated dividends on the Series A Preferred Stock, which also has a significant liquidation value.

Unless full cumulative dividends on the Series A Preferred Stock have been, or contemporaneously are, declared and paid or declared and a sum sufficient for the payment thereof is set apart for payment for all past dividend periods, no dividends (other than a dividend in shares of common stock or other shares of stock ranking junior to the Series A Preferred Stock as to dividends and upon liquidation) can be declared and paid or declared and set apart for payment on our common stock, nor can any shares of common stock be redeemed, purchased or otherwise acquired for any consideration by the Company. To date no dividends have been paid on the Series A Preferred Stock and as a result, cumulative dividends will continue to accrue as part of the liquidation value of the Series A Preferred Stock, which had closed belowa liquidation value of $10.00 per share at issuance. Dividends on the minimumSeries A Preferred Stock are payable out of amounts legally available therefor at a rate equal to 10.0% per annum per $10.00 of stated liquidation preference per share, or $1.00 per share requirement for continued listingof Series A Preferred Stock per year. Dividends on the Nasdaq Global Market pursuantSeries A Preferred Stock are only be payable in cash. As of December 31, 2019, there were 1,915,637 shares of Series A Preferred Stock Issued and Outstanding.

If we fail to Nasdaq Listing Rule 5450(a)(1) (the “Minimum Bid Price Requirement”). In accordance with Nasdaq Listing Rules, wepay dividends on our Series A Preferred Stock for six or more consecutive quarters, holders of our Series A Stock will be entitled to elect two additional directors to our board of directors.

To date no dividends have been given 180 calendar days,paid on the Series A Preferred Stock and as a result, cumulative dividends will continue to accrue as part of the liquidation value of the Series A Preferred Stock. Whenever dividends on any shares of Series A Preferred Stock are in arrears for six or until July 8, 2019 to regain compliancemore consecutive quarters, then the holders of those shares together with the Minimum Bid Price Requirement. If we do not regain compliance by July 8, 2019, we may transfer from The Nasdaq Global Marketholders of all other series of preferred stock equal in rank with the Series A Preferred Stock upon which like voting rights have been conferred and are exercisable, will be entitled to The Nasdaq Capital Market and may be eligible for an additional compliance period of 180 days. To qualifyvote separately as a class for the election of a total of two additional compliance period, we will have to: (i) submit a transfer application and related application fees; (ii) meet the continued listing requirement for market valuedirectors to Digirad’s board of publicly held shares and all other initial listing standards of The Nasdaq Capital Market (except for the bid price requirement); and (iii) provide written notice to Nasdaqdirectors. Holders of our intentioncommon stock will not be entitled to cure the deficiency during thevote no such additional 180-day compliance period by effecting a reverse stock split if necessary. If we do not qualify for an additional compliance period, or should we determine not to submit a transfer application or make the required representation, or if Nasdaq concludes that we willdirectors.

Digirad may not be able to cure the deficiency, Nasdaq will provide written notice to us that our common stock will be subject to delisting.redeem its Series A Preferred Stock upon a Change of Control Triggering Event. 

On March 8, 2019, our boardUpon the occurrence of directors unanimously approved, subject to stockholder approval, an amendment to our Restateda Change of Control Triggering Event, (as defined in the Certificate of IncorporationDesignations, Rights and Preferences of 10% Series A Cumulative Perpetual Preferred Stock of Digirad Corporation) unless the Company has exercised its option to effectredeem the Series A Preferred Stock after September 10, 2024, each holder of the Series A Preferred Stock will have the right to require the Company to redeem all or any part of such holder’s Series A Preferred Stock at a reverse stock splitprice equal to the liquidation preference of our outstanding common stock by a ratio of not less than 1-for-5$10.00 per share, plus an amount equal to any accumulated and not more than 1-for-10 at any time within 12 months followingunpaid dividends up to but excluding the date of stockholder approvalpayment, but without interest. The exercise of these redemption rights by the holders of the reverse stock split, withSeries A Preferred Stock could have an adverse effect on the exact ratio to be set within this range by our board of directors at its sole discretion, and a reductionholders of the numbercommon stock. If the Company experiences a Change of authorized shares of common stock to 30 million shares authorized. Our board of directors may alternatively elect to abandon such proposed amendment and not effect the Reverse Stock Split authorized by stockholders, in its sole discretion. As proposed to our stockholders, our board of directors will have 12 months following stockholder approval to implement the Reverse Stock Split, and if we implement the Reverse Stock Split to regain compliance with the Minimum Bid Price Requirement by the July 8, 2019 deadline, we must complete the Reverse Split no later than ten business days prior to such deadline. The Reverse Stock Split (which includes the reduction of the number of authorized shares of common stock), if approved by our stockholders, would become effective at the time and date set forth in a certificate of amendment to our Restated Certificate of Incorporation to be filed with the Secretary of State of the State of Delaware. The form of the proposed certificate of amendment to our Restated Certificate of Incorporation to effect the Reverse Stock Split is attached as Appendix A to our preliminary proxy statement filed on March 8, 2019.

If we choose to implement a reverse stock split, it must be completed no later than ten business days prior to July 8, 2019. ThereControl Triggering Event, there can be no assurance that our stockholders will approvethe Company would have sufficient financial resources available to satisfy its obligations to redeem the Series A Preferred Stock and any indebtedness that may be required to be repaid or repurchased as a reverse stock split or thatresult of such event. In addition, Digirad may be unable to redeem the reverse stock split willSeries A Preferred Stock upon a Change of Control Triggering Event if such redemption would result in a sustained increaseour non-compliance with the financial covenants in the per share market priceCompany Loan Agreements. Digirad’s failure to redeem the Series A Preferred Stock could have material adverse consequences for the common stock so we can regain compliance with the Minimum Bid Price Requirement.

If we do not regain compliance with the Minimum Bid Price Requirement by July 8, 2019 and we are not eligible for an additional compliance period at that time, the staff will provide written notification to us that our common stock will be subject to delisting. At that time, we may appeal the staff’s decision to a Nasdaq Listing Qualifications Panel (the “Panel”). We would remain listed pending the Panel’s decision. There can be no assurance that, if we do appeal a subsequent delisting determination by the staff to the Panel, that such an appeal would be successful.

If we are not able to regain compliance with the Minimum Bid Price Requirement or do not transfer to The Nasdaq Capital Market, our common stock could be traded on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it would become more difficult to dispose of, or obtain accurate price quotations for, our common stock, and there would likely be a reduction in our coverage by security analystsDigirad, and the news media, which could causeholders of the price of our common stock to decline further. Additionally, the sale or purchase of our common stock would likely be made more difficult and the trading volume and liquidity of our common stock would likely decline.Series A delisting from the Nasdaq would also result in negative publicly and would negatively impact our ability to raise capital in the future.Preferred Stock.

The protective amendment contained in our Restated Certificate of Incorporation, which is intended to help preserve the value of certain income tax assets, primarily tax net operating loss carryforwards, (“NOLs”), may have unintended negative effects.

Pursuant to Internal Revenue Code Sections 382 and 383, use of our NOLs may be limited by an “ownership change” as defined under Section 382 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. In order to protect the Company’s significant NOLs, we filed an amendment to the Restated Certificate of Incorporation of the Company (as amended and extended, the “Protective Amendment”) with the Delaware Secretary of State on May 5, 2015. The Protective Amendment was approved by the Company’s stockholders at the Company’s 2015 Annual Meeting of Stockholders held on May 1, 2015.

On April 27, 2018, we filed a Certificate of Amendment to the Company’s Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, which was approved by our stockholders at our 2018 Annual Meeting (the “Extended Protective Amendment”). The Extended Protective Amendment effects a three-year extension to the provisions of the Protective Amendment. The Extended Protective Amendment leaves the Protective Amendment unchanged in all respects, other than to extend the expiration date from May 1, 2018 to May 1, 2021, and to make revisions necessary as a result of the enactment of Public Law 115-97 (commonly referred to as the Tax Cut and Jobs Act) on December 22, 2017.

The Protective Amendment is designed to assist the Company in protecting the long-term value of its accumulated NOLs by limiting certain transfers of the Company’s common stock. The Protective Amendment’s transfer restrictions generally restrict any direct or indirect transfers of the common stock if the effect would be to increase the direct or indirect ownership of the common stock by any person from less than 4.99% to 4.99% or more of the common stock, or increase the percentage of the common stock owned directly or indirectly by a person owning or deemed to own 4.99% or more of the common stock. Any direct or indirect transfer attempted in violation of the Protective Amendment will be void as of the date of the prohibited transfer as to the purported transferee.

The Protective Amendment also requires any person attempting to become a holder of 4.99% or more of our common stock to seek the approval of our Board. This may have an unintended “anti-takeover” effect because our Board may be able to prevent any future takeover. Similarly, any limits on the amount of stock that a stockholdershareholder may own could have the effect of making it more difficult for stockholdersshareholders to replace current management. Additionally, because the Protective Amendment may have the effect of restricting a stockholder’sshareholder’s ability to dispose of or acquire our common stock, the liquidity and market value of our common stock might suffer.

Anti-takeover provisions in our organizational documents and Delaware law may prevent or delay removal of current management or a change in control.

Our restated certificate of incorporation and amended and restated bylaws contain provisions that may delay or prevent a change in control, discourage bids at a premium over the market price of our common stock, and adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. In addition, as a Delaware corporation, we are subject to Delaware law, including Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder unless certain specific requirements are met as set forth in Section 203. These provisions, alone or together, could have the effect of deterring or delaying changes in incumbent management, proxy contests, or changes in control.

USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of our Series A Preferred Stockcommon stock in this offering will be $11,490,000,$[●] million, based on the public offering price of $25.00$[●] per share, after deducting underwriting discounts and commissions and estimated offering expenses. If the over-allotment option granted to the underwritersunderwriter is exercised in full, we will receive additional net proceeds of $1,743,750,$[●] million, after deducting underwriting discounts and commissions and estimated offering expenses.