Star Equity Holdings Stock

Star Equity Holdings, Inc. engages in the healthcare, construction, and investments businesses.

Segments

The company operates through three segments: Healthcare; Construction; and Investments.

Healthcare

This segment operates as Digirad Health, Inc. (Digirad Health), provides products and services in the area of nuclear medical imaging with a focus on cardiac health. Digirad Health operates across the United States and comprises two lines of business—providing imaging services to healthcare providers using a fleet of the company’s proprietary solid-state gamma cameras, as well as the manufacturing, distribution, and maintenance of its proprietary solid-state gamma cameras.

For physicians who wish to perform nuclear imaging, echocardiography, or general ultrasound tests, the company provides imaging systems, qualified personnel, radiopharmaceuticals, licensing services, and the logistics required to perform imaging in their own offices, while they retain the right and obligation to bill Medicare, Medicaid, or one of the third-party healthcare insurers directly for those services. While its services are primarily cardiac in nature, the company provides imaging services primarily to cardiologists, internal medicine physicians, and family practice doctors who typically enter into annual contracts for a set number of days ranging from once per month to five times per week. The company offers a convenient and economically efficient cardiac imaging services program as an alternative to purchasing equipment or outsourcing the procedure to an imaging center.

In addition, the company manufactures and sells its internally developed solid-state gamma cameras and imaging systems, as well as provide field services through camera maintenance contracts. The company’s imaging systems include nuclear cardiac imaging systems, as well as general purpose nuclear imaging systems. The company sells its imaging systems and service contracts to physician offices and hospitals primarily in the United States, although it has sold a small number of imaging systems internationally. The company’s imaging systems are sold in both portable and fixed configurations, provide enhanced flexibility and improved patient comfort, fit easily into floor spaces as small as seven feet by eight feet, and facilitate the delivery of nuclear medicine procedures in a physician’s office, an outpatient hospital setting, or within multiple departments of a hospital (e.g., emergency and operating rooms).

Diagnostic imaging depictions of the internal anatomy or physiology are generated primarily through non-invasive means. Diagnostic imaging facilitates the early diagnosis of diseases and disorders, often minimizing the scope, cost, and amount of care required and reducing the need for more invasive procedures. The major types of non-invasive diagnostic imaging technologies available are: ultrasound and nuclear imaging. The most widely used imaging acquisition technology utilizing gamma cameras is Single Photon Emission Computed Tomography, or SPECT. All of the company’s internally-developed cardiac gamma cameras employ SPECT technology.

Construction

This segment is made up of three operating businesses: KBS Builders, Inc. (KBS), EdgeBuilder, Inc. (EdgeBuilder), and Glenbrook Building Supply, Inc. (Glenbrook), with the latter two managed together and referred to jointly as EBGL. KBS is based in Maine and manufactures modular buildings for installation principally in the New England market. EBGL is based in the Minneapolis-Saint Paul area and principally serves the Upper Midwest. Together, the EBGL businesses manufacture and deliver structural wall panels and other engineered wood-based products, as well as distribute building materials primarily to professional builder customers.

This segment services residential and commercial construction projects via its KBS, EdgeBuilder and Glenbrook brands, through which the company manufactures modular housing units, structural wall panels, permanent wood foundation systems, and other engineered wood products, as well as supplies general contractors with building materials.

KBS is a Maine-based modular builder that started operations in 2001. KBS manufactures fully custom modular homes. KBS offers products for both multi-family and single-family residential buildings leveraging an in-house engineering team and design expertise. KBS markets its modular homes through a direct sales organization, which consists of inside sales and outside sales teams who work with a network of independent dealers, builders, and contractors primarily in the New England states (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont). KBS’s outside sales organization focuses on commercial building projects, and works with developers, architects, owners, and general contractors to establish the scope of work, terms of payment, and general requirements for each project. KBS’s inside sales people focus on a network of independent dealers, builders, and contractors to accurately configure and place orders for mainly single-family residential homes. KBS’s network of independent dealers and contractors do not work with KBS exclusively, although some have KBS model homes on display at their retail centers. KBS’s backlog and pipeline, along with its market initiatives to build more student, workforce, and affordable housing, are expected to position KBS for continued growth, particularly in the multi-family segment.

EdgeBuilder is a manufacturer of structural wall panels, permanent wood foundation systems, and other engineered wood products and conducts its operations in Prescott, Wisconsin. EdgeBuilder markets its engineered structural wall panels and permanent wood foundation systems through direct sales people and a network of builders, contractors, and developers in and around the Minneapolis-Saint Paul region. EdgeBuilder’s direct sales organization is responsible for both residential and commercial projects and works with general contractors, developers, and builders to provide bids and quotes for specific projects. The company’s marketing efforts include participation in industry trade shows, production of product literature, and sales support tools. These efforts are designed to generate sales leads for its independent builders and dealers, and direct salespeople.

Glenbrook is a supplier of lumber, windows, doors, cabinets, drywall, roofing, decking, and other building materials to professional builders and conducts its operations in Oakdale, Minnesota with an operational facility in Hudson, Wisconsin. EdgeBuilder and Glenbrook operate as one business with a single management team and the company refers to them together as EBGL.

Investments

This segment is an internally funded unit directly supervised by Star Equity management. This entity holds and manages the company’s corporate-owned real estate, which includes its three manufacturing facilities in Maine that are leased to KBS, as well as minority investments in several public companies.

The company holds three real estate assets in its portfolio, all of which it leases to its construction subsidiary, KBS. These include their principal production facility in South Paris, ME. Also, the company continues to expand its investment activities and has established minority positions in the equity securities of a small number of publicly traded companies.

Sales

Healthcare

The company maintains separate sales organizations that are aligned with each of its business units and operates independently but in cooperation with each other. Diagnostic Services sales focuses its efforts on twelve regional areas where the demand for cardiac imaging is concentrated. Diagnostic Imaging equipment sales has a national focus and targets both hospitals and physician practices. Diagnostic Services and Diagnostic Imaging sales teams work collaboratively to address the full range of customers from smaller practice mobile nuclear cardiac imaging services to selling capital equipment to larger practices and hospitals.

Construction

KBS markets its modular homes products through both outside and inside salespeople. The company’s inside sales team works primarily with its network of independent dealers who source end customers for single family homes, largely in northern New England. The company’s outside sales team focuses on commercial scale multi-unit projects through new and established relationships with architects, designers, developers, owners builders, general contractors, consultants, and construction managers throughout New England. Their work involves developing and negotiating the full scope of work for KBS, terms of payment, and general requirements for each project.

EBGL markets its engineered structural wall panels and permanent wood foundation systems through direct sales people to a network of builders, contractors and developers in the Minneapolis-Saint Paul area and the Upper Midwest states. EBGL’s direct sales organization is responsible for both residential and commercial projects. The company’s marketing efforts include participation in industry trade shows, production of product literature, and the use of sales support tools. The company’s showroom and lumber yard processes orders over the phone and services walk-in traffic, mainly focusing on serving professional builders with its highly experienced in-house sales team.

Strategy

The key elements of the company’s strategy are to operate in markets and geographies that will allow it to continue to grow its core businesses, allowing it to benefit from its scale and strengths; plan to continue to focus on healthcare solutions-related businesses that deliver necessary assets, services, and logistics directly to the customer site; and plan to continue to look at complementary businesses that meet its financial criteria for acquisitions to grow it.

Intellectual Property

Patents

In Healthcare, the company has developed a patent portfolio that covers its products, components, and processes. The company has 9 non-expired United States patents. The patents cover, among other things, aspects of solid-state radiation detectors that make it possible for the company to provide mobile imaging services, and its scan technology that provides for lower patient doses and more specific cardiac images. The company patents expire between 2024 (U.S. Patent 7,164,130) and 2030 (U.S. Patent 8,362,438). While each of the company’s patents applies to nuclear medicine, many also apply to the construction of area detectors for other types of medical and non-medical imagers and imaging methods.

Trademarks and Copyrights

The company’s registered trademark portfolio consists of registrations in the United States for Digirad and CARDIUS. The company has produced proprietary software for Diagnostic Imaging systems, including nSPEED 3D-OSEM Reconstruction, SEEQUANTA acquisition, and STASYS motion correction software. The company also licenses certain software products, and their related copyrights, on a nonexclusive basis from Cedars-Sinai Health System. The license includes updates to the software. On May 23, 2018, the parties entered into an amendment to the license agreement to, among other things, extend the term of license through July 1, 2023.

Competition

Construction: Glenbrook Building Supply’s professional building material distribution business competes on a local level against both small, local lumber yards, regional building supply companies, and to a certain degree, the ‘big box’ stores, such as Home Depot, Lowe’s, and Menard’s.

Government Regulation

Some of the laws and regulations applicable to the company’s business include The Medicare/Medicaid Patient Protection Act of 1987, as amended; The Health Insurance Portability and Accountability Act of 1996, or HIPAA. Federal and state agencies, including the U.S. Food and Drug Administration (FDA) and state pharmacy boards, regulate the radiopharmaceuticals used in the company’s Diagnostic Services business. The FDA classifies medical devices, such as its cameras, into one of three classes, depending on the degree of risk associated with the device and the extent of control needed to ensure safety and effectiveness.

The company and its contract manufacturers are subject to the U.S. Food and Drug Administration (FDA) Quality System Regulations, state regulations, and standards set by the International Organization for Standardization, or ISO. The company has received FDA 510(k) clearance for its complete nuclear imaging camera product line (Cardius XPO, Cardius X-ACT, and Ergo gamma cameras). In addition, the X-ACT camera utilizes an x-ray technology to provide attenuation correction information for the SPECT reconstruction. The company has received additional FDA clearance of its Ergo large-field-of-view General Purpose Imager for use in intraoperative and molecular breast imaging.

History

Star Equity Holdings, Inc. was founded in 1985. The company was incorporated in Delaware in 1997.