Pennsylvania
|
23-1609753 | |
(State or other jurisdiction
of
incorporation or organization) |
(I.R.S. Employer ID No.) | |
435 Devon Park Drive
Building 800 Wayne, PA |
19087
(Zip Code) |
|
(Address of principal executive offices) |
Title of Each Class
|
Name of Each Exchange on Which Registered
|
|
Common Stock ($.10 par value)
|
New York Stock Exchange |
Large accelerated
filer
o
|
Accelerated filer þ |
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(Do not check if a smaller reporting company) |
Smaller reporting company o |
2
68
69
84
88
95
96
Item 1.
Business
Deploy
capital in companies within our strategic
focus;
Build
value in partner companies by developing
strong management teams, growing the companies organically and
through acquisitions, and positioning the companies for
liquidity at premium valuations;
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Realize
the value of partner companies through
selective, well-timed exits to maximize risk-adjusted
value; and
Provide
the tools needed for investors to fully
recognize the shareholder value that has been created by our
efforts.
finding opportunities to deploy our capital in additional
partner companies;
helping partner companies to achieve additional market
penetration, revenue growth, cash flow improvement and growth in
long-term value; and
realizing value in our partner companies if and when we believe
doing so will maximize value for our shareholders.
During 2009, we deployed $24.9 million in additional
capital to support the growth of ten existing partner companies.
In March and May, Clarient, Inc. completed a private placement
of $40.0 million of convertible preferred stock with Oak
Investment Partners. The new capital from Oak enabled Clarient
to retire all of its outstanding debt, except for receivable
financing, and provided additional working capital to support
Clarients growth and geographic expansion. As a result of
the transaction, our $30 million mezzanine debt facility
was terminated after Clarient repaid all $19.5 million in
borrowings then outstanding. In addition, the financing released
$12.3 million in cash collateral which supported our
guarantee of Clarient debt with another lender. Our ownership
position was reduced to 47%.
In July, we deployed $6.7 million in MediaMath, Inc.
leading a $7.2 million financing round. MediaMath has
developed the advertising industrys leading real-time
algorithmic buying platform for display media, utilizing data
and optimization for superior performance.
In August, we completed a
one-for-six
reverse split of our common stock, reducing the number of shares
outstanding to 20.4 million from 122.3 million. We
believe this transaction broadened our appeal to investors. As
of August 26, 2009, the day prior to the reverse split, the
market price of our common stock was $10.44 on a post-reverse
split basis. As of March 15, 2010, our stock price was
$12.98.
In the third quarter, we sold 18.4 million shares of
Clarients common stock to a diverse group of institutional
investors. This transaction further reduced our ownership
position in Clarient to 28%. Total proceeds from the sale were
$61.3 million.
In October, we deployed $5 million in Quinnova
Pharmaceuticals, Inc., leading a $17.4 million financing
round.
During the third and fourth quarters, we repurchased an
additional $7.8 million in face value of our 2.625%
convertible senior debentures, due March 2024. These
transactions brought our debenture repurchase total to
$71.8 million in face value since 2006 and reduced the
outstanding balance of the original 2004 issue of
$150 million to $78.2 million.
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Maturity
Many existing technologies,
solutions and therapies are reaching the end of their designed
lives or patent protection; the population of the U.S. is
aging; IT infrastructure is maturing and the sectors are
consolidating; and many businesses based on once-novel
technologies are now facing consolidation and other competitive
pressures.
Migration
Many technology platforms
are migrating to newer technologies with changing cost
structures; many medical treatments are moving toward earlier
stage intervention or generics; there is a migration from
generalized treatments to personalized medicine; many business
models are migrating towards different revenue-generation
models, integrating technologies and services; and traditional
media such as newspapers and advertising are migrating online.
Convergence
Many technology and life
sciences businesses are intersecting in fields like medical
devices and diagnostics for targeted therapies. Within life
sciences itself, devices, diagnostics and therapeutics are
converging.
Compliance
Regulatory compliance is
driving buying behavior in technology and life sciences. HIPPA,
Sarbanes-Oxley, the FDA and the SEC are all telling businesses
how to spend money.
Cost containment
The importance of
cost containment grows as healthcare costs and IT infrastructure
maintenance costs grow and as a recessionary dynamic weakens
sectors of the economy.
operating in large
and/or
growing markets;
with barriers to entry by competitors, such as proprietary
technology and intellectual property, or other competitive
advantages;
with capital requirements of up to $25 million; and
with a compelling strategy for achieving growth.
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responsive operational assistance, including strategy design and
execution, business development, corporate development, sales,
marketing, finance, risk management, human resources and legal
support;
the flexibility to structure minority or majority transactions
with or without debt;
occasional liquidity opportunities for founders and existing
investors;
a focus on maximizing
risk-adjusted
value growth, rather
than
absolute
value growth within a narrow or
predetermined time frame;
interim C-level management support, as needed;
opportunities to leverage Safeguards balance sheet for
borrowing and stability; and
a record of building value in our partner companies.
applying our expertise to support a companys introduction
of new products and services;
leveraging our market knowledge to generate additional growth
opportunities;
leveraging our business contacts and relationships; and
identifying and evaluating potential acquisitions and providing
capital to pursue potential acquisitions to accelerate growth.
defining short and long-term strategic goals;
identifying and planning for the critical success factors to
reach these goals;
identifying and addressing the challenges and operational
improvements required to achieve the critical success factors
and, ultimately, the strategic goals;
identifying and implementing the business measurements that we
and others will apply to measure a companys
success; and
providing capital to drive growth.
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Advanced
BioHealing, Inc.
(Safeguard Ownership: 28.3%)
Alverix,
Inc.
(Safeguard Ownership: 49.6%)
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Avid
Radiopharmaceuticals, Inc.
(Safeguard Ownership: 13.5%)
Cellumen,
Inc.
(Safeguard Ownership: 58.7%)
Clarient,
Inc.
(Safeguard Ownership: 28.0%)
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Garnet
BioTherapeutics, Inc.
(Safeguard Ownership: 31.1%)
Molecular
Biometrics, Inc.
(Safeguard Ownership: 35.4%)
NuPathe,
Inc.
(Safeguard Ownership: 22.9%)
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Quinnova
Pharmaceuticals, Inc.
(Safeguard Ownership: 25.7%)
Tengion,
Inc.
(Safeguard Ownership: 4.5%)
Advantedge
Healthcare Solutions, Inc.
(Safeguard Ownership: 39.7%)
Authentium,
Inc.
(Safeguard Ownership: 20.0%)
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Beyond.com,
Inc.
(Safeguard Ownership: 38.3%)
Bridgevine,
Inc.
(Safeguard Ownership: 23.6%)
MediaMath,
Inc.
(Safeguard Ownership: 17.5%)
Portico
Systems, Inc.
(Safeguard Ownership: 45.4%)
11
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Swaptree,
Inc.
(Safeguard Ownership: 29.3%)
12
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Item 1A.
Risk
Factors
most of our partner companies have a history of operating losses
or a limited operating history;
the intensifying competition affecting the products and services
our partner companies offer could adversely affect their
businesses, financial condition, results of operations and
prospects for growth;
the inability to adapt to the rapidly changing marketplaces;
the inability to manage growth;
the need for additional capital to fund their operations, which
we may not be able to fund or which may not be available from
third parties on acceptable terms, if at all;
the inability to protect their proprietary rights
and/or
infringing on the proprietary rights of others;
that certain of our partner companies could face legal
liabilities from claims made against them based upon their
operations, products or work;
the impact of economic downturns on their operations, results
and growth prospects;
the inability to attract and retain qualified personnel; and
the existence of government regulations and legal uncertainties
may place financial burdens on the businesses of our partner
companies.
change the partner companies on which we focus;
sell some or all of our interests in any of our partner
companies; or
otherwise change the nature of our interests in our partner
companies.
For the period from January 1, 2009 through May 14,
2009 and the years ended December 31, 2008 and 2007, we
consolidated the results of operations of Clarient in continuing
operations. On May 14, 2009, we deconsolidated Clarient and
subsequently account for our holdings in Clarient under the fair
value option.
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14
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the management of a partner company having economic or business
interests or objectives that are different than ours; and
the partner companies not taking our advice with respect to the
financial or operating difficulties they may encounter.
15
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rapidly changing technology;
evolving industry standards;
frequently introducing new products and services;
shifting distribution channels;
evolving government regulation;
frequently changing intellectual property landscapes; and
changing customer demands.
improve, upgrade and expand their business infrastructures;
scale up production operations;
develop appropriate financial reporting controls;
attract and maintain qualified personnel; and
maintain appropriate levels of liquidity.
17
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18
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Item 1B.
Unresolved
Staff Comments
Item 2.
Properties
19
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Item 3.
Legal
Proceedings
Item 4.
Reserved
64
President, Chief Executive Officer and Director
2005
47
Executive Vice President and Managing Director, Life Sciences
2005
41
Executive Vice President and Managing Director, Technology
2008
49
Senior Vice President and General Counsel
2007
48
Senior Vice President and Chief Financial Officer
2008
20
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Item 5.
Market
for the Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
High
Low
$
5.16
$
2.04
8.40
3.48
11.94
6.60
12.47
8.60
$
11.64
$
7.86
10.44
7.26
9.12
6.42
7.56
2.76
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Assumes reinvestment of dividends. We have not distributed cash
dividends during this period.
Assumes an investment of $100 on December 31, 2004.
Total Number of
Maximum Number of
Shares Purchased as
Shares that
Total Number
Average
Part of Publicly
May Yet Be
of Shares
Price Paid
Announced Plans or
Purchased Under the
Purchased
Per Share
Programs
Plans or Programs
43,441
$
10.9607
N/A
N/A
(1)
The purchases reported in this table represent shares of Company
common stock that were transferred to the Company by Warren V.
Musser, the former Chairman and CEO of the Company, in partial
payment against an outstanding loan obligation.
22
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Item 6.
Selected
Consolidated Financial Data
December 31,
2009
2008
2007
2006
2005
(In thousands)
$
67,347
$
75,051
$
96,201
$
60,381
$
117,633
39,066
14,701
590
94,155
31,770
1,098
6,910
6,934
22,686
19,398
105,983
88,400
97,184
133,643
139,877
282,099
232,402
258,075
277,019
220,657
78,225
86,000
129,000
129,000
150,000
345
906
1,939
2,073
5,461
9,600
9,111
9,276
12,571
190,507
104,710
155,831
216,698
175,453
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Year Ended December 31,
2009
2008
2007
2006
2005
(In thousands except per share amounts)
$
34,839
$
73,736
$
42,995
$
27,723
$
11,439
13,811
33,007
26,914
19,824
10,959
37,214
60,744
50,783
44,924
34,173
51,025
93,751
77,697
64,748
45,132
(16,186
)
(20,015
)
(34,702
)
(37,025
)
(33,693
)
108,881
10,280
(5,077
)
5,762
7,101
480
3,097
7,520
6,805
4,975
(3,164
)
(4,732
)
(5,489
)
(5,203
)
(5,195
)
(23,227
)
(34,697
)
(15,178
)
(3,732
)
(6,597
)
66,784
(46,067
)
(52,926
)
(33,393
)
(33,409
)
14
24
687
1,260
66,798
(46,043
)
(52,239
)
(32,133
)
(33,409
)
1,975
(9,620
)
(17,282
)
70,358
(5,026
)
68,773
(55,663
)
(69,521
)
38,225
(38,435
)
(1,163
)
3,650
3,653
7,218
6,365
$
67,610
$
(52,013
)
$
(65,868
)
$
45,443
$
(32,070
)
$
3.26
$
(2.10
)
$
(2.28
)
$
(1.32
)
$
(1.32
)
0.07
(0.46
)
(0.96
)
3.54
(0.30
)
$
3.33
$
(2.56
)
$
(3.24
)
$
2.22
$
(1.62
)
20,308
20,326
20,328
20,246
20,141
$
3.08
$
(2.10
)
$
(2.28
)
$
(1.32
)
$
(1.32
)
0.06
(0.46
)
(0.96
)
3.54
(0.30
)
$
3.14
$
(2.56
)
$
(3.24
)
$
2.22
$
(1.62
)
22,383
20,326
20,328
20,246
20,141
24
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Item 7.
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
25
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Revenue recognition;
Allowance for doubtful accounts and bad debt expense;
Impairment of ownership interests in and advances to companies;
Income taxes;
Commitments and contingencies; and
Stock-based compensation.
26
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27
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Year Ended December 31,
2009
2008
2007
(In millions)
$
4.1
$
6.6
$
10.1
2.3
5.3
$
14.2
$
8.9
$
5.3
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29
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Year Ended December 31,
2009
2008
2007
(In thousands)
$
99,289
$
(26,317
)
$
(28,357
)
(12,742
)
(12,947
)
(5,249
)
86,547
(39,264
)
(33,606
)
(19,763
)
(6,803
)
(19,320
)
14
24
687
(19,749
)
(6,779
)
(18,633
)
66,798
(46,043
)
(52,239
)
1,975
(9,620
)
(17,282
)
68,773
(55,663
)
(69,521
)
(1,163
)
3,650
3,653
$
67,610
$
(52,013
)
$
(65,868
)
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Safeguard Primary Ownership as of December 31
Accounting
2009
2008
2007
Method
28.3
%
28.3
%
28.3
%
Equity
49.6
%
50.0
%
50.0
%
Equity
13.5
%
13.5
%
13.8
%
Cost
58.7
%
40.6
%
40.3
%
Equity(1)
28.0
%
60.4
%
58.7
%
Fair Value(2)
31.1
%
31.2
%
NA
Equity
35.4
%
37.8
%
NA
Equity
22.9
%
23.5
%
26.2
%
Equity
25.7
%
NA
NA
Equity
4.5
%
4.5
%
NA
Cost
(1)
Due to the substantive participating rights of the minority
shareholders in the significant operating decisions of Cellumen,
we continue to account for our holdings in Cellumen under the
equity method.
(2)
Prior to May 14, 2009, we accounted for Clarient under the
consolidation method.
Year Ended December 31,
2009
2008
2007
(In thousands)
$
34,839
$
73,736
$
42,995
13,811
33,007
26,914
19,407
42,329
28,000
33,218
75,336
54,914
1,621
(1,600
)
(11,919
)
114,222
(5,331
)
4
21
60
(275
)
(880
)
(1,269
)
(16,283
)
(23,858
)
(9,898
)
$
99,289
$
(26,317
)
$
(28,357
)
31
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32
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Safeguard Primary Ownership as of
Accounting
2009
2008
2007
Method
39.7
%
37.7
%
35.2
%
Equity
20.0
%
20.0
%
19.9
%
Equity(1)
38.3
%
37.1
%
37.1
%
Equity
23.6
%
20.8
%
20.9
%
Equity
17.5
%
NA
NA
Cost
45.4
%
46.8
%
46.9
%
Equity
29.3
%
29.3
%
NA
Equity
(1)
During 2008, we increased our ownership interest in Authentium
to 20.0%, a threshold at which we believe we exercise
significant influence. Accordingly, we adopted the equity method
of accounting for our holdings in Authentium. We have adjusted
the financial statements for all prior periods presented to
retrospectively apply the equity method of accounting for our
holdings in Authentium since the initial date of acquisition in
April 2006.
Year Ended December 31,
2009
2008
2007
(In thousands)
$
(5,846
)
$
(2,251
)
$
(6,896
)
(10,696
)
(5,249
)
$
(12,742
)
$
(12,947
)
$
(5,249
)
33
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Year Ended December 31,
2009
2008
2007
(In thousands)
$
(14,695
)
$
(16,511
)
$
(19,058
)
(2,982
)
(1,738
)
(3,530
)
(130
)
(166
)
(195
)
476
3,076
7,460
(2,889
)
(3,852
)
(4,220
)
505
12,531
254
(48
)
(143
)
(31
)
$
(19,763
)
$
(6,803
)
$
(19,320
)
34
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35
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36
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37
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Year Ended December 31,
2009
2008
2007
(In thousands)
$
(14,682
)
$
(14,124
)
$
(16,777
)
15,861
27,327
50,788
(7,045
)
(34,675
)
741
$
(5,866
)
$
(21,472
)
$
34,752
38
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Year Ended December 31,
2009
2008
2007
(In thousands)
$
(19,170
)
$
(21,514
)
$
(36,253
)
47
32,805
53,063
11,419
(31,386
)
17,500
$
(7,704
)
$
(20,095
)
$
34,310
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Payments Due by Period
2011 and
2013 and
Due after
Total
2010
2012
2014
2014
(In millions)
$
78.2
$
$
$
$
78.2
2.9
0.6
1.2
1.1
1.6
1.5
0.1
3.4
2.0
1.4
4.2
0.8
1.5
1.5
0.4
$
90.3
$
4.9
$
4.2
$
2.6
$
78.6
Amount of Commitment Expiration by Period
2011 and
2013 and
After
Total
2010
2012
2014
2014
(In millions)
$
6.3
$
$
$
$
6.3
(a)
In February 2004, we completed the issuance of
$150.0 million of the 2024 Debentures with a stated
maturity of March 15, 2024. Through December 31, 2009,
we have repurchased $71.8 million in face value of the 2024
Debentures. The 2024 Debentures holders have the right to
require the Company to repurchase the 2024 Debentures on
March 21, 2011, March 20, 2014 or March 20, 2019
at a repurchase price equal to 100% of their respective face
amount, plus accrued and unpaid interest. See Note 21 to
the Consolidated Financial Statements regarding the exchange of
a portion of the 2024 Debentures in 2010.
(b)
These amounts include $1.0 million in conditional
commitments to provide non-consolidated partner companies with
additional funding. Also included are funding commitments to
private equity funds which have been included in the respective
years based on estimated timing of capital calls provided to us
by the funds management.
(c)
We have received distributions as both a general partner and a
limited partner from certain private equity funds. Under certain
circumstances, we may be required to return a portion or all the
distributions we received as a general partner of a fund for a
further distribution to such funds limited partners
(clawback). The maximum clawback we could be
required to return is approximately $3.4 million, of which
$2.0 million was reflected in Accrued expenses and other
current liabilities and $1.4 million was reflected in Other
long-term liabilities on the Consolidated Balance Sheets.
(d)
Reflects the estimated amount payable to our former Chairman and
CEO under an ongoing agreement.
(e)
A $6.3 million letter of credit is provided to the landlord
of CompuComs Dallas headquarters lease as required in
connection with our sale of CompuCom in 2004.
40
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41
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Acquisition costs are generally expensed as incurred;
Noncontrolling interests (formerly known as minority
interests) are valued at fair value at the acquisition
date;
Acquired contingent liabilities are recorded at fair value at
the acquisition date and subsequently measured at either the
higher of such amount or the amount determined under existing
guidance for non-acquired contingencies;
In-process research and development (IPR&D) is recorded at
fair value as an indefinite-lived intangible asset at the
acquisition date;
Restructuring costs associated with a business combination are
generally expensed subsequent to the acquisition date; and
Changes in deferred tax asset valuation allowances and income
tax uncertainties after the acquisition date generally affect
income tax expense.
42
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Item 7A.
Quantitative
and Qualitative Disclosures About Market Risk
Fair
After
Value at
2010
2011
2012
2012
December 31, 2009
$
$
$
$
78.2
$
74.3
2.625
%
2.625
%
2.625
%
2.625
%
N/A
$
2.1
$
2.1
$
2.1
$
23.0
N/A
43
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Item 8.
Financial
Statements and Supplementary Data
Page
45
46
47
48
49
50
51
52
44
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45
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46
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47
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CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
2009
2008
2007
(In thousands except per share data)
$
34,839
$
73,736
$
42,995
13,811
33,007
26,914
37,214
60,744
50,783
51,025
93,751
77,697
(16,186
)
(20,015
)
(34,702
)
108,881
10,280
(5,077
)
480
3,097
7,520
(3,164
)
(4,732
)
(5,489
)
(23,227
)
(34,697
)
(15,178
)
66,784
(46,067
)
(52,926
)
14
24
687
66,798
(46,043
)
(52,239
)
1,975
(9,620
)
(17,282
)
68,773
(55,663
)
(69,521
)
(1,163
)
3,650
3,653
$
67,610
$
(52,013
)
$
(65,868
)
$
3.26
$
(2.10
)
$
(2.28
)
0.07
(0.46
)
(0.96
)
$
3.33
$
(2.56
)
$
(3.24
)
$
3.08
$
(2.10
)
$
(2.28
)
0.06
(0.46
)
(0.96
)
$
3.14
$
(2.56
)
$
(3.24
)
20,308
20,326
20,328
22,383
20,326
20,328
$
66,240
$
(42,777
)
$
(46,481
)
1,370
(9,236
)
(19,387
)
$
67,610
$
(52,013
)
$
(65,868
)
48
Table of Contents
Year Ended December 31,
2009
2008
2007
(In thousands)
$
68,773
$
(55,663
)
$
(69,521
)
(2
)
(54
)
(77
)
(434
)
31
68,802
(55,717
)
(70,032
)
(1,163
)
3,650
3,653
$
67,639
$
(52,067
)
$
(66,379
)
49
Table of Contents
Accumulated
Other
Comprehensive
Additional
Accumulated
Income
Common Stock
Paid-In
Treasury Stock
Noncontrolling
Total
Deficit
(Loss)
Shares
Amount
Capital
Shares
Amount
Interest
(In thousands)
$
216,698
$
(551,645
)
$
536
120,419
$
12,042
$
750,361
$
$
5,404
(100,349
)
(10,035
)
10,035
(69,521
)
(65,868
)
(3,653
)
741
82
8
733
937
937
167
35
4
163
6,379
6,379
941
941
(511
)
(511
)
155,831
(617,513
)
25
20,187
2,019
768,608
2,692
(55,663
)
(52,013
)
(3,650
)
115
4
33
(12
)
82
255
74
7
251
5
(3
)
3,911
3,911
(1,296
)
162
(1,296
)
653
653
958
958
(54
)
(54
)
104,710
(669,526
)
(29
)
20,265
2,026
773,456
155
(1,217
)
68,773
67,610
1,163
270
34
3
267
(1
)
225
121
13
(1,038
)
(157
)
1,250
3,825
3,825
(44
)
4
(44
)
476
43
(476
)
12,750
31
13,882
(1,163
)
(2
)
(2
)
$
190,507
$
(601,916
)
$
20,420
$
2,042
$
790,868
44
$
(487
)
$
50
Table of Contents
Year Ended December 31,
2009
2008
2007
(In thousands)
$
68,773
$
(55,663
)
$
(69,521
)
(1,975
)
9,620
17,282
1,425
3,551
3,662
23,227
34,697
15,178
(108,881
)
(10,280
)
5,077
3,936
12,199
3,558
3,825
3,449
5,350
(11,467
)
(20,495
)
(6,318
)
1,967
4,696
(2,318
)
(3,288
)
(8,203
)
(19,170
)
(21,514
)
(36,253
)
61,302
4,263
2,783
(1,350
)
(4,210
)
(682
)
5,679
(35,939
)
(30,496
)
(61,025
)
(73,187
)
(75,809
)
(111,858
)
48,822
61,698
205,422
(1,956
)
(2,157
)
(3,530
)
(3,625
)
(156
)
(2,667
)
1,500
83,756
29,967
(2,867
)
(7,763
)
47
32,805
53,063
(7,271
)
(33,494
)
23,726
37,633
34,797
(33,237
)
(37,526
)
(28,766
)
449
(107
)
(2,574
)
(2,128
)
270
115
741
28,082
966
691
(44
)
(1,296
)
4,790
11,716
11,419
(31,386
)
17,500
(7,704
)
(20,095
)
34,310
(1,055
)
1,510
(7,704
)
(21,150
)
35,820
75,051
96,201
60,381
$
67,347
$
75,051
$
96,201
51
Table of Contents
1.
Significant
Accounting Policies
52
Table of Contents
53
Table of Contents
54
Table of Contents
55
Table of Contents
56
Table of Contents
57
Table of Contents
58
Table of Contents
Acquisition costs are generally expensed as incurred;
Noncontrolling interests (formerly known as minority
interests) are valued at fair value at the acquisition
date;
Acquired contingent liabilities are recorded at fair value at
the acquisition date and subsequently measured at either the
higher of such amount or the amount determined under existing
guidance for non-acquired contingencies;
In-process research and development (IPR&D) is recorded at
fair value as an indefinite-lived intangible asset at the
acquisition date;
Restructuring costs associated with a business combination are
generally expensed subsequent to the acquisition date; and
Changes in deferred tax asset valuation allowances and income
tax uncertainties after the acquisition date generally affect
income tax expense.
59
Table of Contents
2.
Discontinued
Operations
60
Table of Contents
Year Ended December 31,
2009
2008
2007
(In thousands)
$
$
45,712
$
140,509
(49,652
)
(156,688
)
(3,634
)
(5,438
)
(1,547
)
(2,031
)
(9,121
)
(23,648
)
93
(9,121
)
(23,555
)
1,975
(499
)
6,273
$
1,975
$
(9,620
)
$
(17,282
)
3.
Acquisitions
of Ownership Interests in Partner Companies
61
Table of Contents
62
Table of Contents
63
Table of Contents
4.
Fair
Value Measurements
64
Table of Contents
Carrying
Fair Value Measurement at December 31, 2009
Value
Level 1
Level 2
Level 3
(In thousands)
$
67,347
$
67,347
$
$
$
6,910
$
6,910
$
$
$
80,483
$
80,483
$
$
$
10,380
$
10,380
$
$
4,981
4,981
8,384
8,384
15,321
15,321
$
39,066
$
39,066
$
$
Carrying
Fair Value Measurement at December 31, 2008
Value
Level 1
Level 2
Level 3
(In thousands)
$
75,051
$
75,051
$
$
$
6,433
$
6,433
$
$
$
501
$
501
$
$
$
1,551
$
1,551
$
$
1,990
1,990
499
499
351
351
12,300
12,300
$
16,691
$
16,691
$
$
65
Table of Contents
5.
Property
and Equipment
As of December 31,
2009
2008
(In thousands)
$
483
$
9,034
1,039
17,735
1,522
26,769
(1,212
)
(14,400
)
$
310
$
12,369
6.
Ownership
Interests in and Advances to Companies
As of December 31,
2009
2008
(In thousands)
$
80,483
$
54,597
55,855
2,224
2,228
56,821
58,083
24,887
23,332
3,096
3,396
27,983
26,728
2,100
750
$
167,387
$
85,561
66
Table of Contents
67
Table of Contents
As of December 31,
2009
2008
(In thousands)
$
98,276
$
101,841
64,889
111,274
$
163,165
$
213,115
$
48,460
$
39,847
28,633
18,744
86,072
154,524
$
163,165
$
213,115
Year Ended December 31,
2009
2008
2007
(In thousands)
$
144,771
$
92,366
$
39,547
$
98,626
$
52,906
$
23,711
$
(50,436
)
$
(61,560
)
$
(43,986
)
As of December 31, 2008
(In thousands)
$
1,290
986
$
2,276
$
7,002
95
(4,821
)
$
2,276
Table of Contents
Year Ended December 31,
2008
2007
(In thousands)
$
638
$
631
$
(2,540
)
$
96
$
(12,300
)
$
(13,027
)
7.
Convertible
Debentures, Long-Term Debt and Credit Arrangements
Table of Contents
As of December 31,
2008
(In thousands)
$
14,104
608
14,712
(14,367
)
$
345
8.
Accrued
Expenses and Other Current Liabilities
As of December 31,
2009
2008
(In thousands)
$
491
$
860
3,834
7,425
$
4,325
$
8,285
9.
Equity
70
Table of Contents
10.
Stock-Based
Compensation
Year Ended December 31,
2009
2008
2007
(In thousands)
$
49
$
133
$
61
3,776
3,316
5,289
$
3,825
$
3,449
$
5,350
71
Table of Contents
72
Table of Contents
Year Ended December 31,
2009
2008
2007
0%
0%
0%
59%
52%
61%
5 years
5 years
5 years
2.7%
3.1%
4.5%
Year Ended December 31,
2009
2008
2007
N/A
0%
0%
N/A
59%
55%
N/A
5 - 7 years
5 - 7 years
N/A
3.4%
5.0%
Year Ended December 31,
2009
2008
2007
0%
0%
N/A
59%
50%
N/A
4.9 years
4.4 years
N/A
2.7%
3.0%
N/A
73
Table of Contents
Weighted
Weighted
Average
Average
Remaining
Aggregate
Exercise
Contractual
Intrinsic
Shares
Price
Life
Value
(In thousands)
(In years)
(In thousands)
3,121
$
11.88
639
15.08
(82
)
9.05
(108
)
21.71
3,570
12.22
880
7.47
(34
)
7.88
(1,080
)
15.18
3,336
10.05
267
9.99
(34
)
7.77
(301
)
16.21
3,268
9.51
4.9
$
4,726
1,241
10.19
3.7
1,557
2,359
9.69
4.5
3,287
1,219
74
Table of Contents
Weighted Average
Grant Date Fair
Shares
Value
(In thousands)
11
$
15.07
64
7.27
(37
)
11.16
(6
)
14.01
32
7.87
370
6.02
(83
)
5.71
(2
)
15.18
317
5.95
75
Table of Contents
11.
Other
Income (Loss)
Year Ended December 31,
2009
2008
2007
(In thousands)
$
457
$
9,030
$
(7,338
)
1,737
30
1,042
105,991
19,502
(10,079
)
(2,251
)
(5,331
)
318
722
254
$
108,881
$
10,280
$
(5,077
)
12.
Income
Taxes
Year Ended December 31,
2009
2008
2007
(In thousands)
$
(14
)
$
(24
)
$
(687
)
$
(14
)
$
(24
)
$
(687
)
76
Table of Contents
Year Ended December 31,
2009
2008
2007
35.0
%
(35.0
)%
(35.0
)%
0.0
(0.1
)
(1.5
)
(35.2
)
34.1
33.5
0.2
0.9
1.5
0.0
%
0.1
%
(1.5
)%
2009
2008
(In thousands)
$
43,006
$
54,278
129,923
188,723
1,854
6,758
(19
)
6,240
9,281
181,023
259,021
(181,023
)
(259,021
)
$
$
(In thousands)
$
1,310
3,225
32,264
125,336
197,941
$
360,076
77
Table of Contents
Year Ended December 31,
2009
2008
2007
(In thousands)
$
14
$
44
$
754
(14
)
(30
)
(710
)
$
$
14
$
44
78
Table of Contents
13.
Net
Income (Loss) Per Share
Year Ended December 31,
2009
2008
2007
(In thousands except per share data)
$
66,240
$
(42,777
)
$
(46,481
)
1,370
(9,236
)
(19,387
)
$
67,610
$
(52,013
)
$
(65,868
)
20,308
20,326
20,328
$
3.26
$
(2.10
)
$
(2.28
)
0.07
(0.46
)
(0.96
)
$
3.33
$
(2.56
)
$
(3.24
)
$
66,240
$
(42,777
)
$
(46,481
)
2,616
$
68,856
$
(42,777
)
$
(46,481
)
1,370
(9,236
)
(19,387
)
$
70,226
$
(52,013
)
$
(65,868
)
20,308
20,326
20,328
1,956
111
8
22,383
20,326
20,328
$
3.08
$
(2.10
)
$
(2.28
)
0.06
(0.46
)
(0.96
)
$
3.14
$
(2.56
)
$
(3.24
)
79
Table of Contents
At December 31, 2009, 2008 and 2007, options to purchase
2.8 million, 3.3 million and 3.6 million shares
of common stock, respectively, at prices ranging from $7.50 to
$21.36 per share, were excluded from the calculation.
At December 31, 2009, 2008 and 2007, unvested restricted
stock units and DSUs convertible into 24 thousand, 32 thousand
and 11 thousand shares of stock, respectively, were excluded
from the calculations.
At December 31, 2008 and 2007 a total of 2.0 million
and 3.0 million shares, respectively, related to the
Companys 2024 Debentures representing the weighted average
effect of assumed conversion of the 2024 Debentures were
excluded from the calculation.
14.
Related
Party Transactions
15.
Commitments
and Contingencies
80
Table of Contents
81
Table of Contents
16.
Parent
Company Financial Information
As of December 31,
2008
(In thousands)
$
73,213
6,433
14,701
1,990
356
96,693
105,955
501
1,364
$
204,513
$
8,173
5,630
86,000
104,710
$
204,513
82
Table of Contents
Year Ended December 31,
2009
2008
2007
(In thousands)
$
(17,807
)
$
(18,415
)
$
(22,783
)
108,881
10,275
(5,089
)
5
12
476
3,076
7,460
(2,889
)
(3,852
)
(4,220
)
(22,435
)
(33,896
)
(22,571
)
66,226
(42,807
)
(47,191
)
14
30
710
1,370
(9,236
)
(19,387
)
$
67,610
$
(52,013
)
$
(65,868
)
Year Ended December 31,
2009
2008
2007
(In thousands)
$
67,610
$
(52,013
)
$
(65,868
)
(1,370
)
9,236
19,387
130
166
195
22,435
33,896
22,571
2,982
1,738
3,530
(108,881
)
(10,275
)
5,089
2,412
3,128
(1,681
)
(14,682
)
(14,124
)
(16,777
)
61,302
4,263
2,783
(7,150
)
(23,731
)
(4,182
)
21,179
6,913
(35,939
)
(30,496
)
(61,025
)
(73,187
)
(75,809
)
(111,858
)
48,822
61,698
205,422
861
(27
)
(28
)
(7
)
84,517
19,655
15,861
27,327
50,788
83
Table of Contents
Year Ended December 31,
2009
2008
2007
(In thousands)
(7,271
)
(33,494
)
270
115
741
(44
)
(1,296
)
(7,045
)
(34,675
)
741
(5,866
)
(21,472
)
34,752
73,213
94,685
59,933
$
67,347
$
73,213
$
94,685
17.
Supplemental
Cash Flow Information
18.
Operating
Segments
Table of Contents
Safeguard Primary Ownership as of December 31
Accounting
2009
2008
2007
Method
28.3
%
28.3
%
28.3
%
Equity
49.6
%
50.0
%
50.0
%
Equity
13.5
%
13.5
%
13.8
%
Cost
58.7
%
40.6
%
40.3
%
Equity(1)
28.0
%
60.4
%
58.7
%
Fair Value(2)
31.1
%
31.2
%
NA
Equity
35.4
%
37.8
%
NA
Equity
22.9
%
23.5
%
26.2
%
Equity
25.7
%
NA
NA
Equity
4.5
%
4.5
%
NA
Cost
Safeguard Primary Ownership as of
Accounting
2009
2008
2007
Method
39.7
%
37.7
%
35.2
%
Equity
20.0
%
20.0
%
19.9
%
Equity(3
)
38.3
%
37.1
%
37.1
%
Equity
23.6
%
20.8
%
20.9
%
Equity
17.5
%
NA
NA
Cost
45.4
%
46.8
%
46.9
%
Equity
29.3
%
29.3
%
NA
Equity
(1)
Due to the substantive participating rights of the minority
shareholders in the significant operating decisions of Cellumen,
the Company continues to account for its holdings in Cellumen
under the equity method.
(2)
Prior to May 14, 2009 the Company accounted for Clarient
under the consolidation method.
(3)
During 2008, the Company increased its ownership interest
in Authentium to 20.0%, a threshold at which the Company
believes it exercises significant influence. Accordingly, the
Company adopted the equity method of accounting for its holdings
in Authentium. The Company has adjusted the financial statements
for all prior periods presented to retrospectively apply the
equity method of accounting for its holdings in Authentium since
the initial date of acquisition in April 2006.
85
Table of Contents
For the Year Ended December 31, 2009
Total
Life
Total
Other
Continuing
Sciences
Technology
Segments
Items
Operations
(In thousands)
$
34,839
$
$
34,839
$
$
34,839
1,621
1,621
(17,807
)
(16,186
)
99,289
(12,742
)
86,547
(19,749
)
66,798
117,529
41,876
159,405
122,694
282,099
For the Year Ended December 31, 2008
Total
Life
Total
Other
Continuing
Sciences
Technology
Segments
Items
Operations
(In thousands)
$
73,736
$
$
73,736
$
$
73,736
(1,600
)
(1,600
)
(18,415
)
(20,015
)
(26,317
)
(12,947
)
(39,264
)
(6,779
)
(46,043
)
84,508
41,050
125,558
106,844
232,402
For the Year Ended December 31, 2007
Total
Life
Total
Other
Continuing
Sciences
Technology
Segments
Items
Operations
(In thousands)
$
42,995
$
$
42,995
$
$
42,995
(11,919
)
(11,919
)
(22,783
)
(34,702
)
(28,357
)
(5,249
)
(33,606
)
(18,633
)
(52,239
)
86
Table of Contents
Year Ended December 31,
2009
2008
2007
(In thousands)
$
(19,763
)
$
(6,803
)
$
(19,320
)
14
24
687
$
(19,749
)
$
(6,779
)
$
(18,633
)
19.
Selected
Quarterly Financial Information (Unaudited)
Three Months Ended
March 31
June 30
September 30
December 31
(In thousands except per share data)
$
23,192
$
11,647
$
$
8,966
4,845
17,089
10,983
4,237
4,905
26,055
15,828
4,237
4,905
(2,863
)
(4,181
)
(4,237
)
(4,905
)
(245
)
158,573
(1,908
)
(47,539
)
157
111
111
101
(926
)
(817
)
(728
)
(693
)
(5,513
)
(7,446
)
(4,827
)
(5,441
)
(9,390
)
146,240
(11,589
)
(58,477
)
14
(9,390
)
146,254
(11,589
)
(58,477
)
1,500
475
(7,890
)
146,254
(11,589
)
(58,002
)
(1,139
)
(24
)
$
(9,029
)
$
146,230
$
(11,589
)
$
(58,002
)
$
(0.49
)
$
7.21
$
(0.57
)
$
(2.88
)
0.04
0.03
$
(0.45
)
$
7.21
$
(0.57
)
$
(2.85
)
$
(0.49
)
$
6.56
$
(0.57
)
$
(2.88
)
0.04
0.03
$
(0.45
)
$
6.56
$
(0.57
)
$
(2.85
)
87
Table of Contents
Three Months Ended
March 31
June 30
September 30
December 31
(In thousands except per share data)
$
15,886
$
16,916
$
18,997
$
21,937
7,397
8,510
8,615
8,485
13,956
14,266
14,435
18,087
21,353
22,776
23,050
26,572
(5,467
)
(5,860
)
(4,053
)
(4,635
)
361
2,266
7,685
(32
)
929
790
913
465
(1,374
)
(1,191
)
(1,202
)
(965
)
(6,614
)
(5,313
)
(8,363
)
(14,407
)
(12,165
)
(9,308
)
(5,020
)
(19,574
)
(6
)
30
(12,165
)
(9,314
)
(4,990
)
(19,574
)
(7,078
)
(1,406
)
(1,136
)
(19,243
)
(10,720
)
(6,126
)
(19,574
)
389
2,153
928
180
$
(18,854
)
$
(8,567
)
$
(5,198
)
$
(19,394
)
$
(0.58
)
$
(0.37
)
$
(0.20
)
$
(0.96
)
(0.35
)
(0.05
)
(0.06
)
$
(0.93
)
$
(0.42
)
$
(0.26
)
$
(0.96
)
(a)
Per share amounts for the quarters have each been calculated
separately. Accordingly, quarterly amounts may not add to the
annual amounts because of differences in the average common
shares outstanding during each period. Additionally, in regard
to diluted per share amounts only, quarterly amounts may not add
to the annual amounts because of the inclusion of the effect of
potentially dilutive securities only in the periods in which
such effect would have been dilutive, and because of the
adjustments to net income (loss) for the dilutive effect of
partner company common stock equivalents and convertible
securities.
Table of Contents
20.
Trade
Accounts Receivable
21.
Subsequent
Events
89
Table of Contents
Item 9.
Changes
in and Disagreements With Accountants on Accounting and
Financial Disclosure
Item 9A.
Controls
and Procedures
(a)
Evaluation
of Disclosure Controls and Procedures
(b)
Managements
Report on Internal Control Over Financial Reporting
90
Table of Contents
(c)
Change in
Internal Control over Financial Reporting
Item 9B.
Other
Information
Item 10.
Directors,
Executive Officers and Corporate Governance
Item 11.
Executive
Compensation
Item 12.
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
91
Table of Contents
92
Table of Contents
Number of Securities
Remaining Available for
Number of Securities to
Weighted-Average
Future Issuance Under
Be Issued Upon Exercise
Exercise Price of
Equity Compensation Plans
of Outstanding Options,
Outstanding Options,
(Excluding Securities
Warrants and Rights
Warrants and Rights(1)
Reflected in Column (a))
(a)
(b)
(c)
1,793,114
$
9.9721
995,222
1,746,226
$
9.1011
223,930
3,539,340
$
9.5066
1,219,152
(1)
The weighted average exercise price calculation excludes
271,830 shares underlying outstanding deferred stock units
and performance stock units included in column (a) which
are payable in stock, on a
one-for-one
basis.
(2)
Represents awards granted under the 1999 Equity Compensation
Plan and the 2004 Equity Compensation Plan and shares available
for issuance under the 2004 Equity Compensation Plan. Includes
165,124 shares underlying performance stock units and
deferred stock units awarded for no consideration and
106,706 shares underlying deferred stock units awarded to
directors in lieu of all or a portion of directors fees.
Payments in respect of deferred stock units are generally
distributable following termination of employment or service,
death, permanent disability or retirement. The value of the
deferred stock units was approximately $0.5 million based
on the fair value of the stock on the various grant dates. The
deferred stock units issued to directors in lieu of cash
compensation are fully vested at grant; deferred stock unit
awards and matching deferred stock units awarded to directors
generally vest on the first anniversary of the grant date.
(3)
Includes awards granted and shares available for issuance under
the 2001 Plan and 1,416,665 employee inducement
awards.
Item 13.
Certain
Relationships and Related Transactions, and Director
Independence
Item 14.
Principal
Accountant Fees and Services
Public Accountant Audit Fees.
93
Table of Contents
Item 15.
Exhibits
and Financial Statement Schedules
(a)
Consolidated
Financial Statements and Schedules
(b)
Exhibits
(c)
Financial
Statement Schedules
Incorporated Filing Reference
Exhibit
Form Type & Filing
Original
2
.1.1
Purchase Agreement, dated as of February 29, 2008, by and
between Safeguard Scientifics, Inc., as Seller, and Saints
Capital Dakota, L.P., as Purchaser.
Form 8-K
3/4/08
2
.1
2
.1.2
First Amendment to Purchase Agreement, dated May 6, 2008,
by and between Safeguard Scientifics, Inc., as Seller, and
Saints Capital Dakota, L.P., as Purchaser
Form 8-K
5/7/08
2
.1
3
.1.1
Seconded Amended and Restated Articles of Incorporation of
Safeguard Scientifics, Inc.
Form 8-K
10/25/07
3
.1
3
.1.2
Amendment to Seconded Amended and Restated Articles of
Incorporation of Safeguard Scientifics, Inc.
Form 8-K
8/27/09
3
.1
3
.2
Amended and Restated By-laws of Safeguard Scientifics, Inc.
Form 8-K
10/25/07
3
.2
4
.1
Indenture, dated as of February 18, 2004, between Safeguard
Scientifics, Inc. and Wachovia Bank, National Association, as
trustee, including the form of 2.625% Convertible Senior
Debentures due 2024
Form 10-K
3/15/04
4
.10
10
.1*
Safeguard Scientifics, Inc. 1999 Equity Compensation Plan, as
amended and restated on October 21, 2008
Form 10-Q
11/6/08
10
.4
10
.2
Safeguard Scientifics, Inc. 2001 Associates Equity Compensation
Plan, as amended and restated on October 21, 2008
Form 10-Q
11/6/08
10
.5
10
.3*
Safeguard Scientifics, Inc. 2004 Equity Compensation Plan, as
amended and restated on July 13, 2009 (attached to the
Companys Definitive Proxy Statement filed on July 23,
2009)
10
.4*
Safeguard Scientifics, Inc. Executive Deferred Compensation Plan
(amended and restated as of January 1, 2009)
Form 10-K
3/19/09
10
.4
10
.5*
Management Incentive Plan
Form 8-K
4/25/08
10
.1
94
Table of Contents
Incorporated Filing Reference
Exhibit
Form Type & Filing
Original
10
.6*
Compensation Summary Non-employee Directors
Form 10-K
3/19/09
10
.6
10
.7.1*
Amended and Restated Agreement by and between Safeguard
Scientifics, Inc. and Peter J. Boni dated December 5, 2008
Form 10-K
3/19/09
10
.7
10
.7.2*
Compensation Agreement by and between Safeguard Scientifics,
Inc. and Peter J. Boni dated December 14, 2009
10
.8.1*
Amended and Restated Agreement by and between Safeguard
Scientifics, Inc. and James A. Datin dated December 31, 2008
Form 10-K
3/19/09
10
.8
10
.8.2*
Compensation Agreement by and between Safeguard Scientifics,
Inc. and James A. Datin dated December 14, 2009
10
.9.1*
Agreement by and between Safeguard Scientifics, Inc. and Stephen
Zarrilli dated as of May 28, 2008
Form 8-K
5/29/08
10
.1
10
.9.2*
Letter Amendment dated December 9, 2008, to Agreement by
and between Safeguard Scientifics, Inc. and Stephen Zarrilli
dated as of May 28, 2008
Form 10-K
3/19/09
10
.9.2
10
.10.1*
Agreement by and between Safeguard Scientifics, Inc. and Kevin
L. Kemmerer dated December 29, 2008
Form 10-K
3/19/09
10
.11
10
.10.2*
Compensation Agreement by and between Safeguard Scientifics,
Inc. and Kevin L. Kemmerer dated December 14, 2009
10
.11.1*
Amended and Restated Letter Agreement by and between Safeguard
Scientifics, Inc. and Brian J. Sisko dated December 3, 2008
Form 10-K
3/19/09
10
.12
10
.11.2*
Compensation Agreement by and between Safeguard Scientifics,
Inc. and Brian J. Sisko dated December 14, 2009
10
.12
Amended and Restated Loan and Security Agreement dated as of
May 27, 2009, by and among Silicon Valley Bank, Safeguard
Scientifics, Inc., Safeguard Delaware, Inc. and Safeguard
Scientifics (Delaware), Inc.
Form 8-K
5/28/09
10
.1
10
.13
Securities Purchase Agreement dated November 8, 2005, by
and among Clarient, Inc. and the investors named therein
(1)
99
.1
10
.14
Amended and Restated Registration Rights Agreement dated
February 27, 2009, by and among Safeguard Delaware, Inc.,
Safeguard Scientifics, Inc., Safeguard Scientifics (Delaware),
Inc. and Clarient, Inc.
(2)
10
.4
10
.15
Amendment to Securities Purchase Agreement dated March 26,
2009, by and between Clarient, Inc. and Safeguard Delaware, Inc.
and its affiliates
(3)
10
.4
10
.16
Stockholders Agreement dated March 26, 2009, by and among
Safeguard Delaware, Inc, Safeguard Scientifics, Inc., Safeguard
Scientifics (Delaware), Inc. and Oak Investment Partners XII,
Limited Partnership
(3)
10
.6
10
.17
Purchase and Sale Agreement dated as of December 9, 2005 by
and among HarbourVest VII Venture Ltd., Dover Street VI L.P. and
several subsidiaries and affiliated limited partnerships of
Safeguard Scientifics, Inc.
Form 10-K
3/13/06
10
.36
14
.1
Code of Business Conduct and Ethics
21
.1
List of Subsidiaries
23
.1
Consent of Independent Registered Public Accounting
Firm KPMG LLP
Table of Contents
Incorporated Filing Reference
Exhibit
Form Type & Filing
Original
23
.2
Consent of Independent Registered Public Accounting
Firm Deloitte & Touche LLP
31
.1
Certification of Peter J. Boni pursuant to
Rules 13a-15(e)
and 15d-15(e) of the Securities Exchange Act of 1934
31
.2
Certification of Stephen T. Zarrilli pursuant to
Rules 13a-15(e)
and 15d-15(e) of the Securities Exchange Act of 1934
32
.1
Certification of Peter J. Boni pursuant to 18 U.S.C.
Section 1350, as Adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32
.2
Certification of Stephen T. Zarrilli pursuant to 18 U.S.C.
Section 1350, as Adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
99
.1
Consolidated Financial Statements of Clarient, Inc.
Filed herewith
*
These exhibits relate to management contracts or compensatory
plans, contracts or arrangements in which directors and/or
executive officers of the Registrant may participate.
(1)
Incorporated by reference to the Current Report on
Form 8-K
filed on November 9, 2005, by Clarient, Inc. (SEC File No.
000-22677)
(2)
Incorporated by reference to the Current Report on
Form 8-K
filed on March 2, 2009, by Clarient, Inc. (SEC File No.
000-22677)
(3)
Incorporated by reference to the Current Report on
Form 8-K
filed on March 27, 2009, by Clarient, Inc. (SEC File No.
000-22677)
Table of Contents
By:
President and Chief Executive Officer and Director (Principal
Executive Officer)
March 16, 2010
Senior Vice President and Chief Financial Officer (Principal
Financial and Accounting Officer)
March 16, 2010
Director
March 16, 2010
Director
March 16, 2010
Chairman of the Board of Directors
March 16, 2010
Director
March 16, 2010
Director
March 16, 2010
Director
March 16, 2010
Director
March 16, 2010
Director
March 16, 2010
97
/s/ Peter J. Boni
|
||
|
||
Peter J. Boni
|
By:
|
/s/ Brian J. Sisko
|
|||
|
Brian J. Sisko | |||
|
Senior Vice President & General Counsel |
/s/ James A. Datin
|
||
|
||
James A. Datin
|
By:
|
/s/ Brian J. Sisko
|
|||
|
Brian J. Sisko | |||
|
Senior Vice President & General Counsel |
/s/ Kevin L. Kemmerer
|
||
|
||
Kevin L. Kemmerer
|
By:
|
/s/ Brian J. Sisko | |||
|
|
|||
|
Brian J. Sisko | |||
|
Senior Vice President & General Counsel |
/s/ Brian J. Sisko
|
||
|
||
Brian J. Sisko
|
By:
|
/s/ Peter J. Boni | |||
|
|
|||
|
Peter J. Boni | |||
|
President & Chief Executive Officer |
| encourage among Company Personnel a culture of honesty, accountability and mutual respect; | |
| provide guidance to help Company Personnel recognize and deal with ethical issues; and | |
| provide mechanisms for Company Personnel to report unethical conduct. |
| stealing, embezzling or misapplying corporate or bank funds; | |
| using threats, physical force or other unauthorized means to collect money; | |
| making false entries in the books and records of the Company, or engaging in any conduct that results in the making of such false entries; | |
| making a payment for an expressed purpose on the Companys behalf to an individual who intends to use it for a different purpose; | |
| utilizing the Companys funds or other assets or services to make a political contribution or expenditure; and | |
| making payments, whether corporate or personal, of cash or other items of value that are intended to influence the judgment or actions of political candidates, government officials or businesses in connection with any of the Companys activities. |
-2-
-3-
V. | Fair Dealing |
VI. | Proper Use of Company Assets |
VII. | Delegation of Authority |
VIII. | Handling Confidential Information |
IX. | Books and Records; Public Disclosures |
-4-
X. | Report of Violations |
| Notification of Complaint |
| To report a violation or a suspected violation to the Compliance Officer, provide the report to the following address or e-mail address: |
-5-
| Complaints or concerns regarding accounting, internal accounting controls or auditing matters may also be submitted anonymously to the Audit Committee of the Safeguard Board in writing at the following address: |
| Whenever practical, the complaint should be made in writing. It is unacceptable to submit a complaint knowing it is false. | ||
| Company Personnel who are not comfortable using the procedures and protocols outlined above can make an anonymous report via our third party provider, MySafeWorkplace. This anonymous and confidential reporting system is not affiliated with the Company and is accessible 24/7 through the Internet (www.MySafeWorkplace.com) or by calling the toll free number (800.461.9330). |
| Investigation and Corrective Action | |
Reports of violations will promptly be investigated under the supervision of the Compliance Officer or, if appropriate, the Audit Committee. Company personnel are required to cooperate fully in the investigation of reported violations and to provide truthful, complete and accurate information. The investigation will be handled as discreetly as reasonably possible, allowing for a fair investigation and any necessary corrective action. Appropriate corrective action will be taken whenever a violation of this policy is determined to have occurred. Depending on the nature of the violation, the offending individual can be subject to disciplinary action which may include termination. In addition, anyone who interferes with an investigation, or provides information in an investigation that the individual knows to be untrue or inaccurate, will be subject to disciplinary action, which may include termination of employment. Retaliation against employees who, for lawful purposes, file a complaint or participate in an investigation is strictly prohibited. | ||
| Confidentiality | |
Except as may be required by law or by the requirements of the resulting investigation or the corrective action, all notices, reports and information received under this process will be treated in a confidential manner. Every reasonable effort will be made to handle the matter with discretion and to protect the identity of those who make reports as well as those who are being investigated. However, the Compliance Officer regularly will report to the Audit Committee any violations that have been reported. Further, if necessary to conduct a proper review or to comply with legal requirements, our Audit Committee, independent accountants or others may become involved in the review process. Also, as noted above, the Company must and will report all suspected criminal violations to the appropriate authorities for possible prosecution and will investigate, address and report to governmental or other authorities, as appropriate, non-criminal violations. |
-6-
-7-
Adopted:
|
April 8, 2004 | |
Last Approved:
|
October 28, 2009 |
-8-
1. | I have received a copy of the Code. | |
2. | I have read, understand and agree to comply with the Code. | |
3. | I am currently in compliance and, as applicable, members of my family are in compliance, with the terms of the Code and all obligations imposed by it, except as disclosed to the Compliance Officer or as otherwise disclosed in accordance with the procedures contained in Article X of the Code. | |
4. | I am not aware of any conduct on the part of any person associated with the Company that may constitute a violation of the Code, except with respect to any matters that I may have disclosed to the Compliance Officer or otherwise disclosed in accordance with the procedures contained in Article X of the Code. | |
5. | I understand that none of the benefits, policies, programs, procedures or statements in the Code are intended to confer any rights or privileges upon me or entitle me to be or remain an employee of the Company. I am aware that the Code is not a contract and is subject to change at any time, without notice, at the sole discretion of the Company. |
Signature | ||||
Name | ||||
Date | ||||
1. | I have complied and, as applicable, members of my family have complied, with the terms of the Code and all obligations imposed by it, except as disclosed to the Compliance Officer or as otherwise disclosed in accordance with the procedures contained in Article X of the Code. | |
2. | I have read and reviewed the Code with my subordinates and I am not aware of any conduct on the part of any person associated with the Company that may constitute a violation of the Code of Conduct, except with respect to any matters that I may have disclosed to the Compliance Officer or otherwise disclosed in accordance with the procedures contained in Article X of the Code. | |
3. | I understand that none of the benefits, policies, programs, procedures or statements in the Code are intended to confer any rights or privileges upon me or entitle me to be or remain an employee of the Company. I am aware that the Code is not a contract and is subject to change at any time, without notice, at the sole discretion of the Company. |
Signature | ||||
Name | ||||
Date | ||||
NAME | PLACE OF INCORPORATION | |
Bonfield Fund Management, L.P.
|
DELAWARE | |
|
||
Bonfield VII, Ltd.
|
BRITISH VIRGIN ISLANDS | |
|
||
Bonfield Partners Capital, L.P.
|
DELAWARE | |
|
||
Novitas Capital Management, L.P.
|
DELAWARE | |
|
||
Novitas Capital II Management, L.P.
|
PENNSYLVANIA | |
|
||
Safeguard Capital Management, Inc.
|
DELAWARE | |
|
||
Safeguard Delaware, Inc.
|
DELAWARE | |
|
||
Safeguard Fund Management, Inc.
|
DELAWARE | |
|
||
Safeguard Fund Management, L.P.
|
DELAWARE | |
|
||
Safeguard Partners Capital, L.P.
|
DELAWARE | |
|
||
Safeguard Scientifics (Delaware), Inc.
|
DELAWARE | |
|
||
Safeguard Technologies, Inc.
|
DELAWARE | |
|
||
SFE Properties, Inc.
|
DELAWARE | |
|
||
SSI Management Company, Inc.
|
DELAWARE | |
|
||
SSI Partnership Holdings (Pennsylvania), Inc.
|
PENNSYLVANIA | |
|
1. | I have reviewed this Annual Report on Form 10-K of Safeguard Scientifics, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c. | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d. | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
SAFEGUARD SCIENTIFICS, INC.
|
||||
Date: March 16, 2010 | /s/ Peter J. Boni | |||
Peter J. Boni | ||||
President and Chief Executive Officer | ||||
1. | I have reviewed this Annual Report on Form 10-K of Safeguard Scientifics, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c. | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d. | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
SAFEGUARD SCIENTIFICS, INC.
|
||||
Date: March 16, 2010 | /s/ Stephen T. Zarrilli | |||
Stephen T. Zarrilli | ||||
Senior Vice President and Chief Financial Officer | ||||
1. | The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, (15 U.S.C. 78m(a)); and | ||
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Safeguard. |
SAFEGUARD SCIENTIFICS, INC.
|
||||
Date: March 16, 2010 | /s/ Peter J. Boni | |||
Peter J. Boni | ||||
President and Chief Executive Officer | ||||
1. | The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, (15 U.S.C. 78m(a)); and | ||
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Safeguard. |
SAFEGUARD SCIENTIFICS, INC.
|
||||
Date: March 16, 2010 | /s/ Stephen T. Zarrilli | |||
Stephen T. Zarrilli | ||||
Senior Vice President and Chief Financial Officer | ||||
Page | ||||
No. | ||||
1 | ||||
|
||||
3 | ||||
|
||||
4 | ||||
|
||||
5 | ||||
|
||||
6 | ||||
|
||||
7 | ||||
|
1
2
December 31, | ||||||||
2009 | 2008 | |||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 10,903 | $ | 1,838 | ||||
Restricted cash
|
765 | | ||||||
Accounts receivable, net of allowance for doubtful accounts of $8,747 and
$8,045 at December 31, 2009 and 2008, respectively
|
21,568 | 20,315 | ||||||
Supplies inventory
|
1,291 | 648 | ||||||
Prepaid expenses and other current assets
|
935 | 653 | ||||||
|
||||||||
Total current assets
|
35,462 | 23,454 | ||||||
Restricted cash
|
1,314 | | ||||||
Property and equipment, net
|
14,346 | 11,911 | ||||||
Intangible assets, net
|
11,639 | | ||||||
Goodwill
|
3,959 | | ||||||
Other assets
|
227 | 144 | ||||||
|
||||||||
Total assets
|
$ | 66,947 | $ | 35,509 | ||||
|
||||||||
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
|
||||||||
Current liabilities:
|
||||||||
Revolving lines of credit
|
$ | 2,678 | $ | 14,104 | ||||
Related party line of credit, net of discount
|
| 11,461 | ||||||
Accounts payable
|
2,883 | 3,783 | ||||||
Accrued payroll
|
3,985 | 3,760 | ||||||
Accrued expenses and other current liabilities
|
3,984 | 2,563 | ||||||
Current maturities of capital lease obligations
|
645 | 263 | ||||||
|
||||||||
Total current liabilities
|
14,175 | 35,934 | ||||||
Long-term capital lease obligations
|
604 | 345 | ||||||
Deferred rent and other non-current liabilities
|
3,055 | 3,970 | ||||||
Contingently issuable common stock
|
2,650 | | ||||||
|
||||||||
Commitments and contingencies
|
||||||||
|
||||||||
Preferred stock subject to redemption requirements outside the control of the issuer:
|
||||||||
Series A convertible preferred stock $0.01 par value, authorized 8,000 shares,
issued and outstanding 5,263 and -0- shares at December 31, 2009 and December 31,
2008, respectively. Aggregate liquidation preference and redemption value: December
31, 2009 and December 31, 2008$55,800 and $-0-, respectively
|
38,586 | | ||||||
|
||||||||
Stockholders equity (deficit):
|
||||||||
Common stock $0.01 par value, authorized 150,000 shares, issued and outstanding
84,092 and 76,995 shares, at December 31, 2009 and 2008, respectively
|
841 | 770 | ||||||
Additional paid-in capital
|
172,200 | 149,403 | ||||||
Accumulated deficit
|
(165,164 | ) | (154,822 | ) | ||||
Accumulated other comprehensive loss
|
| (91 | ) | |||||
|
||||||||
Total stockholders equity (deficit)
|
7,877 | (4,740 | ) | |||||
|
||||||||
Total liabilities and stockholders equity (deficit)
|
$ | 66,947 | $ | 35,509 | ||||
|
3
For the Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
|
||||||||||||
Net revenue
|
$ | 91,599 | $ | 73,736 | $ | 42,995 | ||||||
Cost of services
|
39,107 | 32,936 | 26,807 | |||||||||
|
||||||||||||
Gross profit
|
52,492 | 40,800 | 16,188 | |||||||||
Operating expenses:
|
||||||||||||
Sales and marketing
|
17,380 | 10,941 | 8,630 | |||||||||
General and administrative
|
23,587 | 18,729 | 15,278 | |||||||||
Bad debt
|
12,927 | 12,199 | 3,558 | |||||||||
Research and development
|
1,719 | 421 | 519 | |||||||||
|
||||||||||||
Total operating expenses
|
55,613 | 42,290 | 27,985 | |||||||||
|
||||||||||||
Loss from operations
|
(3,121 | ) | (1,490 | ) | (11,797 | ) | ||||||
|
||||||||||||
Interest expense, net of interest income of $32, $21, and $60 in
the years ended December 31, 2009, 2008, and 2007, respectively
|
874 | 859 | 1,209 | |||||||||
Interest expense to related parties
|
3,557 | 7,290 | 1,140 | |||||||||
|
||||||||||||
Loss from continuing operations before income taxes
|
(7,552 | ) | (9,639 | ) | (14,146 | ) | ||||||
Income tax benefit (expense) (see Note 18)
|
599 | (6 | ) | 2,088 | ||||||||
|
||||||||||||
Loss from continuing operations, net of income taxes
|
(6,953 | ) | (9,645 | ) | (12,058 | ) | ||||||
Income from discontinued operations, net of income tax expense of
$599, $0, and $2,088 in the years ended December 31, 2009, 2008,
and 2007, respectively (see Notes 4 and 18)
|
901 | | 3,301 | |||||||||
|
||||||||||||
Net loss
|
$ | (6,052 | ) | $ | (9,645 | ) | $ | (8,757 | ) | |||
|
||||||||||||
Series A preferred stock beneficial conversion feature
|
(4,290 | ) | | | ||||||||
|
||||||||||||
Net loss applicable to common stockholders
|
$ | (10,342 | ) | $ | (9,645 | ) | $ | (8,757 | ) | |||
|
||||||||||||
|
||||||||||||
Net income (loss) per share applicable to common stockholders
basic and diluted:
|
||||||||||||
Loss from continuing operations
|
$ | (0.14 | ) | $ | (0.13 | ) | $ | (0.17 | ) | |||
|
||||||||||||
Income from discontinued operations
|
0.01 | | 0.05 | |||||||||
|
||||||||||||
Net loss applicable to common stockholders
|
$ | (0.13 | ) | $ | (0.13 | ) | $ | (0.12 | ) | |||
|
||||||||||||
|
||||||||||||
Weighted-average shares used to compute net loss per common share:
|
||||||||||||
Basic and diluted
|
77,693 | 72,918 | 71,573 | |||||||||
|
4
Common Stock | Accumulated | Total | ||||||||||||||||||||||||||
$0.01 | Additional | Other | Stockholders | |||||||||||||||||||||||||
Issued | Par | Paid-in | Accumulated | Comprehensive | Equity | Comprehensive | ||||||||||||||||||||||
Shares | Value | Capital | Deficit | Loss | (Deficit) | Loss | ||||||||||||||||||||||
Balances at December 31,
2006
|
71,488 | $ | 715 | $ | 136,670 | $ | (136,420 | ) | $ | (14 | ) | $ | 951 | |||||||||||||||
Issuance of warrants
|
| | 734 | | | 734 | ||||||||||||||||||||||
Exercise of warrants
|
17 | | | | | | ||||||||||||||||||||||
Exercise of stock options
|
577 | 6 | 686 | | | 692 | ||||||||||||||||||||||
Restricted stock cancelled
|
(15 | ) | | | | | | |||||||||||||||||||||
Expense related to stock
options and restricted stock
|
| | 1,668 | | | 1,668 | ||||||||||||||||||||||
Comprehensive loss:
|
||||||||||||||||||||||||||||
Net loss
|
| | | (8,757 | ) | | (8,757 | ) | $ | (8,757 | ) | |||||||||||||||||
Foreign currency
translation adjustment
|
| | | | (77 | ) | (77 | ) | (77 | ) | ||||||||||||||||||
|
||||||||||||||||||||||||||||
Comprehensive loss
|
$ | (8,834 | ) | |||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Balances at December 31,
2007
|
72,067 | $ | 721 | $ | 139,758 | $ | (145,177 | ) | $ | (91 | ) | $ | (4,789 | ) | ||||||||||||||
Issuance of warrants
|
| | 7,020 | | | 7,020 | ||||||||||||||||||||||
Exercise of warrants
|
4,164 | 42 | | | | 42 | ||||||||||||||||||||||
Exercise of stock options
|
675 | 6 | 779 | | | 785 | ||||||||||||||||||||||
Issuance of common stock
|
89 | 1 | 184 | | | 185 | ||||||||||||||||||||||
Expense related to stock
options and restricted stock
|
| | 1,662 | | | 1,662 | ||||||||||||||||||||||
Comprehensive loss:
|
||||||||||||||||||||||||||||
Net loss
|
| | | (9,645 | ) | | (9,645 | ) | $ | (9,645 | ) | |||||||||||||||||
|
||||||||||||||||||||||||||||
Comprehensive loss
|
$ | (9,645 | ) | |||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Balances at December 31,
2008
|
76,995 | $ | 770 | $ | 149,403 | $ | (154,822 | ) | $ | (91 | ) | $ | (4,740 | ) | ||||||||||||||
Issuance of warrants
|
| | 600 | | | 600 | ||||||||||||||||||||||
Exercise of warrants
|
1,869 | 19 | 2,062 | | | 2,081 | ||||||||||||||||||||||
Exercise of stock options
|
382 | 4 | 544 | | | 548 | ||||||||||||||||||||||
Issuance of common stock
(excluding common stock issued
as consideration for a
completed business
acquisition)
|
92 | 1 | 216 | | | 217 | ||||||||||||||||||||||
Issuance of restricted stock
|
673 | 6 | (6 | ) | | | | |||||||||||||||||||||
Cancelled restricted stock
|
(9 | ) | | | | | | |||||||||||||||||||||
Expense related to stock
options and restricted stock
|
| | 2,181 | | | 2,181 | ||||||||||||||||||||||
Stock options issued as
consideration for a completed
business acquisition
|
| | 744 | | | 744 | ||||||||||||||||||||||
Common stock issued as
consideration for a completed
business acquisition
|
4,090 | 41 | 10,103 | | | 10,144 | ||||||||||||||||||||||
Stock options expected to be
issued as consideration for a
completed business acquisition
|
| | 424 | | | 424 | ||||||||||||||||||||||
Common stock expected to be
issued as consideration for a
completed business acquisition
|
| | 1,639 | | | 1,639 | ||||||||||||||||||||||
Series A preferred stock
beneficial conversion feature
|
| | 4,290 | (4,290 | ) | | | |||||||||||||||||||||
Comprehensive loss:
|
||||||||||||||||||||||||||||
Net loss
|
| | | (6,052 | ) | | (6,052 | ) | $ | (6,052 | ) | |||||||||||||||||
Foreign currency translation
adjustment
|
| | | | 91 | 91 | 91 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Comprehensive loss
|
$ | (5,961 | ) | |||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
Balances at December 31,
2009
|
84,092 | $ | 841 | $ | 172,200 | $ | (165,164 | ) | $ | | $ | 7,877 | ||||||||||||||||
|
5
For the Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Cash flows from operating activities:
|
||||||||||||
Net loss
|
$ | (6,052 | ) | $ | (9,645 | ) | $ | (8,757 | ) | |||
Gain from discontinued operations (see Notes 4 and 18)
|
(901 | ) | | (3,301 | ) | |||||||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||||||
Depreciation
|
3,803 | 3,275 | 3,342 | |||||||||
Bad debt expense
|
12,953 | 12,199 | 3,558 | |||||||||
Amortization of warrants to related party interest expense
|
2,506 | 5,378 | 133 | |||||||||
Amortization of deferred financing and offering costs
|
446 | 588 | 470 | |||||||||
Amortization of intangible assets
|
45 | | | |||||||||
Interest on related party debt
|
| 1,259 | 21 | |||||||||
Stock-based compensation
|
2,398 | 1,711 | 1,820 | |||||||||
Income tax benefit (see Notes 4, 14, and 18)
|
(599 | ) | | (2,088 | ) | |||||||
Changes in operating assets and liabilities, net of acquisition of ownership interest:
|
||||||||||||
Interest on restricted cash
|
(12 | ) | | | ||||||||
Accounts receivable, net
|
(14,206 | ) | (20,494 | ) | (6,413 | ) | ||||||
Inventories
|
(770 | ) | 92 | (80 | ) | |||||||
Prepaid expenses and other assets
|
(738 | ) | 80 | (636 | ) | |||||||
Accounts payable
|
(1,256 | ) | 922 | (1,140 | ) | |||||||
Accrued payroll
|
191 | 1,844 | 496 | |||||||||
Accrued interest on related party debt
|
(1,259 | ) | | | ||||||||
Accrued expenses and other current liabilities
|
1,219 | (1,628 | ) | 1,319 | ||||||||
Deferred rent and other non-current liabilities
|
(915 | ) | (129 | ) | 448 | |||||||
Cash flows from operating activities of discontinued operations
|
| | (751 | ) | ||||||||
|
||||||||||||
Net cash used in operating activities
|
(3,147 | ) | (4,548 | ) | (11,582 | ) | ||||||
|
||||||||||||
Cash flows from investing activities:
|
||||||||||||
Purchases of property and equipment
|
(4,587 | ) | (3,502 | ) | (3,864 | ) | ||||||
Proceeds from sale of discontinued operations, net of selling costs
|
1,500 | | 10,329 | |||||||||
Increase in restricted cash
|
(2,067 | ) | | | ||||||||
Acquisition of ownership interest, net of cash acquired
|
5 | | | |||||||||
Cash flows from investing activities of discontinued operations
|
| | (132 | ) | ||||||||
|
||||||||||||
Net cash provided by (used in) investing activities
|
(5,149 | ) | (3,502 | ) | 6,333 | |||||||
|
||||||||||||
Cash flows from financing activities:
|
||||||||||||
Proceeds from sale of preferred stock
|
40,000 | | | |||||||||
Offering costs from sale of preferred stock
|
(1,414 | ) | | | ||||||||
Proceeds from exercise of stock options and warrants
|
2,629 | 827 | 606 | |||||||||
Repayments on capital lease obligations
|
(359 | ) | (2,574 | ) | (2,011 | ) | ||||||
Borrowings on revolving lines of credit
|
76,425 | 37,538 | 33,858 | |||||||||
Repayments on revolving lines of credit
|
(87,851 | ) | (37,526 | ) | (27,829 | ) | ||||||
Borrowings on related party debt
|
5,800 | 15,020 | 2,000 | |||||||||
Repayments on related party debt
|
(17,908 | ) | (4,913 | ) | | |||||||
Debt issuance costs
|
(52 | ) | | | ||||||||
Cash flows from financing activities of discontinued operations
|
| | (230 | ) | ||||||||
|
||||||||||||
Net cash provided by financing activities
|
17,270 | 8,372 | 6,394 | |||||||||
|
||||||||||||
Effect of exchange rate changes on cash and cash equivalents
|
91 | | (77 | ) | ||||||||
|
||||||||||||
Net increase in cash and cash equivalents
|
9,065 | 322 | 1,068 | |||||||||
Cash and cash equivalents at beginning of year
|
1,838 | 1,516 | 448 | |||||||||
|
||||||||||||
Cash and cash equivalents at end of year
|
$ | 10,903 | $ | 1,838 | $ | 1,516 | ||||||
|
||||||||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Cash paid for interest
|
$ | 2,887 | $ | 1,112 | $ | 1,605 | ||||||
Cash paid for income taxes
|
| 6 | 23 | |||||||||
Non cash investing and financing activities:
|
||||||||||||
Property and equipment financed by capital leases
|
1,127 | 767 | 449 | |||||||||
Beneficial conversion feature of Series A convertible preferred stock
|
4,290 | | | |||||||||
Issuance of warrants in connection with borrowings from related party
|
600 | 7,020 | 396 | |||||||||
Issuance of common stock and stock options in connection with acquisition of
ownership interest (Note 15)
|
15,601 | | | |||||||||
Issuance of common stock in consideration for research and development services
|
217 | 49 | 136 |
6
7
8
9
Office furniture, computer, software, and laboratory equipment
|
Three to five years | |
Leasehold improvements
|
Shorter of useful life or remaining term of lease |
10
Ending balance, December 31, 2007
|
$ | 3,370 | ||
Bad debt expense
|
12,199 | |||
Write-offs
|
(7,524 | ) | ||
|
||||
Ending balance, December 31, 2008
|
8,045 | |||
Bad debt expense
|
12,927 | |||
Write-offs
|
(12,225 | ) | ||
|
||||
Ending balance, December 31, 2009
|
$ | 8,747 | ||
|
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Office furniture, computer hardware and software, and laboratory equipment
|
$ | 21,480 | $ | 16,341 | ||||
Leasehold improvements
|
9,650 | 8,551 | ||||||
|
||||||||
Total
|
31,130 | 24,892 | ||||||
Less: accumulated depreciation and amortization
|
(16,784 | ) | (12,981 | ) | ||||
|
||||||||
Property and equipment, net
|
$ | 14,346 | $ | 11,911 | ||||
|
11
December 31, | ||||
2009 | ||||
Biomarkers
|
$ | 11,349 | ||
In-process research and development
|
76 | |||
Issued patents
|
26 | |||
Patent applications
|
123 | |||
Non-compete agreements
|
110 | |||
Less: accumulated amortization
|
(45 | ) | ||
|
||||
Intangible assets, net
|
$ | 11,639 | ||
|
Estimated | ||||||||||||
Useful Life | Estimated Annual | Consolidated Statement of Operations | ||||||||||
(years) | Amortization | Classification | ||||||||||
Biomarkers
|
7 | $ | 1,621 | Cost of services | ||||||||
In-process research and development
|
7 | 11 | Research and development | |||||||||
Issued patents
|
7 | 4 | Cost of services | |||||||||
Patent applications
|
7 | 18 | Cost of services | |||||||||
Non-competition agreements
|
3 | 37 | Research and development | |||||||||
|
||||||||||||
Total
|
$ | 1,691 | ||||||||||
|
Proceeds from ACIS Business sale
|
$ | 11,000 | ||||||
Less: Selling costs
|
(671 | ) | ||||||
|
||||||||
Net proceeds from ACIS Business sale
|
10,329 | |||||||
Inventories
|
(1,480 | ) | ||||||
Property and equipment, net
|
(473 | ) | ||||||
Goodwill and intangibles, net
|
(4,042 | ) | ||||||
Other assets
|
(518 | ) | ||||||
Deferred revenue
|
692 | |||||||
Debt
|
1,616 | |||||||
|
||||||||
Net assets sold
|
(4,205 | ) | ||||||
|
||||||||
Gain on sale of ACIS Business
|
$ | 6,124 | ||||||
|
12
Year Ended | ||||
December 31, | ||||
2007 | ||||
Net revenue
|
$ | 864 | ||
Cost of revenue
|
364 | |||
Operating expenses
|
1,180 | |||
Interest expense
|
32 | |||
|
||||
Net loss from discontinued operations
|
(712 | ) | ||
Gain on sale of ACIS Business
|
6,124 | |||
|
||||
Subtotal
|
$ | 5,412 | ||
Income tax expense on gain on sale of ACIS Business
|
(2,111 | ) | ||
|
||||
Income from discontinued operations, net of income taxes
|
$ | 3,301 | ||
|
| Transaction costs are generally expensed as incurred. These costs were previously treated as costs of the acquisition; |
| Contingent consideration is recorded at fair value as an element of purchase price with subsequent adjustments recognized in operations. Contingent consideration was previously accounted for as a subsequent adjustment of purchase price; |
| In-process research and development (IPR&D) is recorded at fair value as an indefinite-lived intangible asset at the acquisition date; |
| Restructuring costs associated with a business combination are generally expensed subsequent to the acquisition date; and |
| Subsequent decreases in valuation allowances on acquired deferred tax assets are recognized in operations after the measurement period. Such changes were previously considered to be subsequent changes in consideration and were recorded as decreases in goodwill. |
13
December 31, | ||||||||
2009 | 2008 | |||||||
Governmental (Medicare and Medicaid)
|
20 | % | 24 | % | ||||
Private health insurers
|
43 | % | 40 | % | ||||
Clients (pathologists, hospitals, clinics, and biopharmaceutical companies)
|
18 | % | 18 | % | ||||
Patients (indirect bill)
|
10 | % | 5 | % | ||||
Patients (direct bill)
|
9 | % | 13 | % | ||||
|
||||||||
Total
|
100 | % | 100 | % |
14
As of December 31, 2009 - Total | Gross Amount | Percent of Total | ||||||
Total
|
$ | 30,315 | 100 | % | ||||
|
||||||||
Unbilled
|
4,819 | 16 | % | |||||
Current
|
5,817 | 19 | % | |||||
31-60 days past due
|
4,341 | 14 | % | |||||
61-90 days past due
|
2,799 | 9 | % | |||||
91-120 days past due
|
1,963 | 6 | % | |||||
121-150 days past due
|
1,299 | 4 | % | |||||
Greater than 150 days past due
|
9,277 | 32 | % |
Governmental payors (Medicare and Medicaid) | Gross Amount | Percent of Total | ||||||
Total
|
$ | 5,989 | 100 | % | ||||
|
||||||||
Unbilled
|
1,508 | 25 | % | |||||
Current
|
1,332 | 22 | % | |||||
31-60 days past due
|
517 | 9 | % | |||||
61-90 days past due
|
335 | 6 | % | |||||
91-120 days past due
|
228 | 4 | % | |||||
121-150 days past due
|
204 | 3 | % | |||||
Greater than 150 days past due
|
1,864 | 31 | % |
Private health insurer payors | Gross Amount | Percent of Total | ||||||
Total
|
$ | 13,009 | 100 | % | ||||
|
||||||||
Unbilled
|
2,391 | 18 | % | |||||
Current
|
1,989 | 15 | % | |||||
31-60 days past due
|
1,395 | 11 | % | |||||
61-90 days past due
|
1,069 | 8 | % | |||||
91-120 days past due
|
728 | 6 | % | |||||
121-150 days past due
|
580 | 5 | % | |||||
Greater than 150 days past due
|
4,857 | 37 | % |
Client (pathologists, hospitals, clinics, and biopharmaceutical) payors | Gross Amount | Percent of Total | ||||||
Total
|
$ | 5,433 | 100 | % | ||||
|
||||||||
Unbilled
|
585 | 11 | % | |||||
Current
|
1,791 | 33 | % | |||||
31-60 days past due
|
1,570 | 29 | % | |||||
61-90 days past due
|
530 | 10 | % | |||||
91-120 days past due
|
299 | 5 | % | |||||
121-150 days past due
|
164 | 3 | % | |||||
Greater than 150 days past due
|
494 | 9 | % |
15
Patient payors (indirect bill) | Gross Amount | Percent of Total | ||||||
Total
|
$ | 2,992 | 100 | % | ||||
|
||||||||
Unbilled
|
| | ||||||
Current
|
137 | 5 | % | |||||
31-60 days past due
|
343 | 11 | % | |||||
61-90 days past due
|
337 | 11 | % | |||||
91-120 days past due
|
302 | 10 | % | |||||
121-150 days past due
|
275 | 9 | % | |||||
Greater than 150 days past due
|
1,598 | 54 | % |
Patient payors (direct bill) | Gross Amount | Percent of Total | ||||||
Total
|
$ | 2,892 | 100 | % | ||||
|
||||||||
Unbilled
|
335 | 12 | % | |||||
Current
|
569 | 19 | % | |||||
31-60 days past due
|
516 | 18 | % | |||||
61-90 days past due
|
528 | 18 | % | |||||
91-120 days past due
|
405 | 14 | % | |||||
121-150 days past due
|
76 | 3 | % | |||||
Greater than 150 days past due
|
463 | 16 | % |
As of December 31, 2008 Total | Gross Amount | Percent of Total | ||||||
Total
|
$ | 28,360 | 100 | % | ||||
|
||||||||
Unbilled
|
4,532 | 16 | % | |||||
Current
|
4,636 | 16 | % | |||||
31-60 days past due
|
4,119 | 15 | % | |||||
61-90 days past due
|
3,403 | 12 | % | |||||
91-120 days past due
|
2,713 | 9 | % | |||||
121-150 days past due
|
2,166 | 8 | % | |||||
Greater than 150 days past due
|
6,791 | 24 | % |
Governmental payors (Medicare and Medicaid) | Gross Amount | Percent of Total | ||||||
Total
|
$ | 6,732 | 100 | % | ||||
|
||||||||
Unbilled
|
1,124 | 16 | % | |||||
Current
|
1,202 | 18 | % | |||||
31-60 days past due
|
1,156 | 17 | % | |||||
61-90 days past due
|
790 | 12 | % | |||||
91-120 days past due
|
729 | 11 | % | |||||
121-150 days past due
|
584 | 9 | % | |||||
Greater than 150 days past due
|
1,147 | 17 | % |
16
Private health insurer payors | Gross Amount | Percent of Total | ||||||
Total
|
$ | 11,367 | 100 | % | ||||
|
||||||||
Unbilled
|
2,384 | 21 | % | |||||
Current
|
1,242 | 11 | % | |||||
31-60 days past due
|
1,529 | 13 | % | |||||
61-90 days past due
|
1,349 | 12 | % | |||||
91-120 days past due
|
992 | 9 | % | |||||
121-150 days past due
|
948 | 8 | % | |||||
Greater than 150 days past due
|
2,923 | 26 | % |
Client (pathologists, hospitals, clinics, and biopharmaceutical) payors | Gross Amount | Percent of Total | ||||||
Total
|
$ | 5,213 | 100 | % | ||||
|
||||||||
Unbilled
|
703 | 13 | % | |||||
Current
|
1,661 | 32 | % | |||||
31-60 days past due
|
818 | 16 | % | |||||
61-90 days past due
|
588 | 11 | % | |||||
91-120 days past due
|
417 | 8 | % | |||||
121-150 days past due
|
141 | 3 | % | |||||
Greater than 150 days past due
|
885 | 17 | % |
Patient payors (indirect bill) | Gross Amount | Percent of Total | ||||||
Total
|
$ | 1,302 | 100 | % | ||||
|
||||||||
Unbilled
|
| | % | |||||
Current
|
205 | 16 | % | |||||
31-60 days past due
|
241 | 18 | % | |||||
61-90 days past due
|
212 | 16 | % | |||||
91-120 days past due
|
138 | 11 | % | |||||
121-150 days past due
|
166 | 13 | % | |||||
Greater than 150 days past due
|
340 | 26 | % |
Patient payors (direct bill) | Gross Amount | Percent of Total | ||||||
Total
|
$ | 3,746 | 100 | % | ||||
|
||||||||
Unbilled
|
320 | 9 | % | |||||
Current
|
328 | 9 | % | |||||
31-60 days past due
|
376 | 10 | % | |||||
61-90 days past due
|
464 | 12 | % | |||||
91-120 days past due
|
436 | 12 | % | |||||
121-150 days past due
|
327 | 9 | % | |||||
Greater than 150 days past due
|
1,495 | 39 | % |
17
December 31, | ||||||||
2009 | 2008 | |||||||
Gemino Facility
|
$ | 2,678 | $ | 5,104 | ||||
Capital lease obligations
|
1,249 | 608 | ||||||
Safeguard Mezzanine Financing
|
| 13,366 | ||||||
Comerica Facility
|
| 9,000 | ||||||
|
||||||||
Subtotal
|
3,927 | 28,078 | ||||||
Less: Unamortized discount on Mezzanine Facilities
|
| (1,905 | ) | |||||
|
||||||||
Total debt
|
3,927 | 26,173 | ||||||
Less: Short-term debt, including current maturities of capital lease obligations
|
(3,323 | ) | (25,828 | ) | ||||
|
||||||||
Long-term capital lease obligations
|
$ | 604 | $ | 345 | ||||
|
18
19
20
Interest Expense Recognized | ||||||||||||||||||||||||||||||||
Warrant | Warrant | Year | Year | Year | ||||||||||||||||||||||||||||
Number of | Exercise | Warrant | Issuance | Expiration | Ended | Ended | Ended | |||||||||||||||||||||||||
warrants | Price | Term | Date | Date | Fair Value | 2009 | 2008 | 2007 | ||||||||||||||||||||||||
125,000*
|
$ | 0.01 | 4 years | March 7, 2007 | March 7, 2011 | $ | 204 | $ | 23 | $ | 88 | $ | 93 | |||||||||||||||||||
62,500
|
1.39 | 4 years | March 7, 2007 | March 7, 2011 | 69 | 8 | 30 | 31 | ||||||||||||||||||||||||
31,250*
|
0.01 | 4 years | November 14, 2007 | November 14, 2011 | 62 | 11 | 42 | 9 | ||||||||||||||||||||||||
31,250*
|
0.01 | 4 years | December 17, 2007 | December 17, 2011 | 61 | 13 | 49 | | ||||||||||||||||||||||||
31,250*
|
0.01 | 4 years | March 5, 2008 | March 5, 2012 | 62 | 16 | 46 | | ||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Total
|
$ | 458 | $ | 71 | $ | 255 | $ | 133 | ||||||||||||||||||||||||
|
Interest Expense | ||||||||||||||||||||||||||||
Recognized | ||||||||||||||||||||||||||||
Warrant | Year | Year | ||||||||||||||||||||||||||
Exercise | Warrant | Warrant | Expiration | Ended | Ended | |||||||||||||||||||||||
Number of warrants | Price | Term | Issuance Date | Date | Fair Value | 2009 | 2008 | |||||||||||||||||||||
1,643,750*
|
$ | 0.01 | 5 years | March 14, 2008 | March 14, 2013 | $ | 2,666 | $ | 703 | $ | 1,962 | |||||||||||||||||
550,000*
|
0.01 | 5 years | June 10, 2008 | June 11, 2013 | 1,140 | 300 | 839 | |||||||||||||||||||||
550,000*
|
0.01 | 5 years | July 2, 2008 | July 2, 2013 | 1,095 | 289 | 806 | |||||||||||||||||||||
550,000*
|
0.01 | 5 years | September 2, 2008 | September 2, 2013 | 1,167 | 308 | 859 | |||||||||||||||||||||
550,000*
|
0.01 | 5 years | November 6, 2008 | November 6, 2013 | 890 | 235 | 657 | |||||||||||||||||||||
|
||||||||||||||||||||||||||||
Total
|
$ | 6,958 | $ | 1,835 | $ | 5,123 | ||||||||||||||||||||||
|
* | On November 20, 2008 Safeguard exercised the indicated common stock warrants plus an additional 0.1 million warrants issued in January 2007 in connection with its guarantee of the Comerica Facility. In December 2009, Safeguard exercised 0.5 million warrants issued in December 2005 in connection with the Companys closing of a $9.0 million private stock offering. |
Interest Expense | ||||||||||||||||||||||||
Warrant | Recognized for the | |||||||||||||||||||||||
Number of | Exercise | Warrant | Warrant | Expiration | Year Ended | |||||||||||||||||||
Warrants Issued | Price | Term | Issuance Date | Date | Fair Value | 2009 | ||||||||||||||||||
500,000
|
$ | 1.376 | 5 years | February 27, 2009 | February 27, 2014 | $ | 600 | $ | 600 | |||||||||||||||
|
||||||||||||||||||||||||
Total
|
$ | 600 | $ | 600 | ||||||||||||||||||||
|
2010
|
$ | 733 | ||
2011
|
498 | |||
2012
|
141 | |||
|
||||
Subtotal
|
1,372 | |||
Less: interest
|
(123 | ) | ||
|
||||
Total
|
1,249 | |||
Less: current portion
|
(645 | ) | ||
|
||||
Capital lease obligations, long-term portion
|
$ | 604 | ||
|
21
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Basic and diluted EPS numerator:
|
||||||||||||
Loss from continuing operations, net of income taxes
|
$ | (6,953 | ) | $ | (9,645 | ) | $ | (12,058 | ) | |||
Series A convertible preferred stock beneficial
conversion feature (see Note 12)
|
(4,290 | ) | | | ||||||||
|
||||||||||||
Loss from continuing operations applicable to common
stockholders, net of income taxes
|
$ | (11,243 | ) | $ | (9,645 | ) | $ | (12,058 | ) | |||
Income from discontinued operations, net of income taxes
|
901 | | 3,301 | |||||||||
|
||||||||||||
|
||||||||||||
Net loss applicable to common stockholders
|
$ | (10,342 | ) | $ | (9,645 | ) | $ | (8,757 | ) | |||
|
||||||||||||
|
||||||||||||
Net income (loss) per share basic and diluted:
|
||||||||||||
Loss from continuing operations, net of income taxes
|
$ | (0.14 | ) | $ | (0.13 | ) | $ | (0.17 | ) | |||
Income from discontinued operations, net of income taxes
|
0.01 | | 0.05 | |||||||||
|
||||||||||||
|
||||||||||||
Net income (loss) applicable to common stockholders
|
$ | (0.13 | ) | $ | (0.13 | ) | $ | (0.12 | ) | |||
|
22
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Basic and diluted EPS denominator:
|
||||||||||||
Weighted-average outstanding common
shares
|
77,693 | 72,918 | 71,573 | |||||||||
|
Outstanding at December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Series A convertible preferred stock (as converted see Note 13)
|
21,053 | | | |||||||||
Common stock options
|
8,083 | 6,332 | 5,165 | |||||||||
Common stock warrants
|
1,413 | 3,195 | 5,550 | |||||||||
Unvested restricted stock
|
569 | 218 | 80 | |||||||||
|
||||||||||||
Total
|
31,118 | 9,745 | 10,795 | |||||||||
|
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Net loss
|
$ | (6,052 | ) | $ | (9,645 | ) | $ | (8,757 | ) | |||
Foreign currency translation adjustment
|
91 | | (77 | ) | ||||||||
|
||||||||||||
Comprehensive loss
|
$ | (5,961 | ) | $ | (9,645 | ) | $ | (8,834 | ) | |||
|
23
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Cost of services
|
$ | 252 | $ | 133 | $ | 165 | ||||||
Operating expenses
|
1,929 | 1,578 | 1,655 | |||||||||
|
||||||||||||
Total stock-based compensation expense
|
$ | 2,181 | $ | 1,711 | $ | 1,820 | ||||||
|
Forfeiture rates | ||||||||
2009, 2008, 2007 | 2007 | |||||||
(10/1/07 through 12/31/07) | (1/1/07 through 9/30/07) | |||||||
Executive and senior management group
|
5 | % | 8 | % | ||||
Staff group
|
8 | % | 35 | % |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Dividend yield
|
0 | % | 0 | % | 0 | % | ||||||
Volatility (a)
|
63% to 70% | 68% to 80% | 87 | % | ||||||||
Average expected option life (b)
|
5.0 years | 5.0 years | 3.5 to 6.1 years | |||||||||
Risk-free interest rate (c)
|
2.1% to 2.8% | 1.6% to 3.4% | 3.6% to 4.3% |
(a) | Measured using weekly price observations for a period equal to the stock options expected term. | |
(b) | Determined by the historical stock option exercise behavior of the Companys employees. | |
(c) | Based upon the U.S. Treasury yield curve in effect at the end of the quarter that the options were granted (for a period equaling the stock options expected term). |
24
Weighted- | ||||||||||||||||
Weighted- | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Number of | Exercise | Contractual | Intrinsic | |||||||||||||
Shares | Price | Term | Value* | |||||||||||||
Outstanding at December 31, 2006
|
6,570 | $ | 1.58 | |||||||||||||
Options granted
|
380 | 1.92 | ||||||||||||||
Options exercised
|
(577 | ) | 1.20 | |||||||||||||
Options forfeited and cancelled
|
(1,208 | ) | 2.23 | |||||||||||||
|
||||||||||||||||
Outstanding at December 31, 2007
|
5,165 | $ | 1.44 | |||||||||||||
Options granted
|
2,720 | 1.76 | ||||||||||||||
Options exercised
|
(675 | ) | 1.16 | |||||||||||||
Options forfeited and cancelled
|
(878 | ) | 1.82 | |||||||||||||
|
||||||||||||||||
Outstanding at December 31, 2008
|
6,332 | $ | 1.55 | |||||||||||||
Options granted**
|
2,575 | 2.00 | ||||||||||||||
Options exercised
|
(382 | ) | 1.43 | |||||||||||||
Options forfeited and cancelled
|
(442 | ) | 2.19 | |||||||||||||
|
||||||||||||||||
Outstanding at December 31, 2009
|
8,083 | $ | 1.67 | 6.21 years | $ | 8,253 | ||||||||||
|
||||||||||||||||
|
||||||||||||||||
Options vested and expected to vest at December 31, 2009
|
7,844 | $ | 1.66 | 6.15 years | $ | 8,086 | ||||||||||
Options exercisable (fully vested) at December 31, 2009
|
4,571 | $ | 1.42 | 4.38 years | $ | 5,672 |
* | Represents the total difference between the Companys closing stock price on the last trading day of 2009 and the stock option exercise price, multiplied by the number of in-the-money options as of December 31, 2009. The amount of intrinsic value will change based on the fair market value of the Companys stock. | |
** | Amount includes 0.6 million stock option grants issued outside of the 2007 Plan in connection with the acquisition of AGI (see Note 15). As part of the terms of the acquisition, the Company was obligated to exchange all outstanding AGI stock options to Company stock options in accordance with a contractual exchange rate and exercise price, resulting in the issuance of 0.6 million options with an exercise price of $0.40 per share. |
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Aggregate grant date fair value of options
|
$ | 2,048 | $ | 3,100 | $ | 500 | ||||||
Weighted-average grant date fair value
|
$1.22 per option | $1.14 per option | $1.40 per option | |||||||||
The total intrinsic value of options exercised
(stock price at exercise
minus
exercise price)
|
$ | 927 | $ | 551 | $ | 500 | ||||||
Cash received by the Company from option
exercises
|
$ | 548 | $ | 785 | $ | 692 | ||||||
Tax benefit to the Company for tax deductions
from options exercised (see Note 14)
|
$ | 486 | $ | 514 | $ | 314 |
25
Weighted Average | ||||||||
Shares | Grant Date Fair Value | |||||||
Unvested at December 31, 2006
|
260 | $ | 1.05 | |||||
Vested
|
(156 | ) | $ | 1.72 | ||||
Released
|
(24 | ) | $ | 1.11 | ||||
|
||||||||
Unvested at December 31, 2007
|
80 | $ | 2.05 | |||||
Granted
|
200 | $ | 2.39 | |||||
Released
|
(62 | ) | | |||||
|
||||||||
Unvested at December 31, 2008
|
218 | $ | 2.36 | |||||
Granted
|
477 | $ | 4.03 | |||||
Released
|
(126 | ) | | |||||
|
||||||||
Unvested at December 31, 2009
|
569 | $ | 3.73 | |||||
|
(12) | Stock Transactions |
26
Weighted Average | ||||||||
Shares | Exercise Price | |||||||
Warrants outstanding, December 31, 2006
|
5,301 | $ | 1.88 | |||||
Granted
|
517 | $ | 0.70 | |||||
Exercised
|
(17 | ) | $ | 1.35 | ||||
Canceled
|
(250 | ) | $ | 4.26 | ||||
|
||||||||
Warrants outstanding, December 31, 2007
|
5,550 | $ | 1.66 | |||||
Granted
|
3,875 | $ | 0.01 | |||||
Exercised
|
(4,196 | ) | $ | 0.01 | ||||
Canceled
|
(2,034 | ) | $ | 2.89 | ||||
|
||||||||
Warrants outstanding, December 31, 2008
|
3,195 | $ | 1.35 | |||||
Granted
|
500 | $ | 1.38 | |||||
Exercised
|
(2,099 | ) | $ | 1.37 | ||||
Canceled
|
(183 | ) | $ | 2.00 | ||||
|
||||||||
Warrants outstanding, December 31, 2009
|
1,413 | $ | 1.26 | |||||
|
27
28
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Provision for income taxes
:
|
||||||||||||
Continuing operations
(exclusive of gain on sale from
ACIS Business)
|
$ | | $ | 6 | $ | 23 | ||||||
Gain on sale from ACIS Business
|
(599 | ) | | (2,111 | ) | |||||||
|
||||||||||||
Total income tax (benefit) expense
|
$ | (599 | ) | $ | 6 | $ | (2,088 | ) | ||||
|
December 31, | ||||||||
2009 | 2008 | |||||||
Deferred tax assets:
|
||||||||
Current:
|
||||||||
Accrued vacation
|
$ | 434 | $ | 324 | ||||
Contractual allowances
|
953 | | ||||||
Allowance for doubtful accounts
|
3,485 | 3,211 | ||||||
Other
|
54 | 280 | ||||||
|
||||||||
Gross current deferred tax assets
|
4,926 | 3,815 | ||||||
Non-current:
|
||||||||
Net operating loss carryforward
|
52,014 | 46,663 | ||||||
Research and development and other tax credits
|
62 | 62 | ||||||
Depreciation
|
384 | 137 | ||||||
Intangible assets, net of amortization
|
| 185 | ||||||
Deferred rent
|
612 | 613 | ||||||
Landlord reimbursements
|
780 | 956 | ||||||
Stock-based compensation
|
1,384 | 1,354 | ||||||
Other
|
62 | 651 | ||||||
|
||||||||
Gross non-current deferred tax assets
|
55,298 | 50,621 | ||||||
|
||||||||
Total gross deferred tax assets
|
60,224 | 54,436 | ||||||
|
||||||||
Valuation allowance
|
(55,423 | ) | (54,436 | ) | ||||
|
||||||||
Deferred tax assets, net of valuation allowance
|
$ | 4,801 | $ | | ||||
|
||||||||
Deferred tax liability:
|
||||||||
Intangible assets, net of amortization
|
$ | (4,801 | ) | $ | | |||
|
||||||||
Net deferred tax assets
|
$ | | $ | | ||||
|
29
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Loss from continuing operations before income taxes
|
$ | (7,552 | ) | $ | (9,639 | ) | $ | (14,146 | ) | |||
|
||||||||||||
Statutory federal income tax rate
|
34 | % | 34 | % | 34 | % | ||||||
Computed expected federal tax income benefit
|
(2,568 | ) | (3,277 | ) | (4,810 | ) | ||||||
|
||||||||||||
Increase (decrease) in taxes resulting from:
|
||||||||||||
State income taxes
|
| 4 | (702 | ) | ||||||||
Nondeductible expenses
|
559 | 244 | 374 | |||||||||
Change in valuation allowance
|
2,009 | 3,035 | 5,161 | |||||||||
Benefit due to recognized tax expense on ACIS Sale
|
(599 | ) | | (2,111 | ) | |||||||
|
||||||||||||
Income tax expense (benefit) from continuing
operations
|
$ | (599 | ) | $ | 6 | $ | (2,088 | ) | ||||
|
30
Gross Unrealized Tax | ||||
Benefits | ||||
Balance at January 1, 2007
|
$ | 3,200 | ||
Additions for tax positions
|
| |||
Decreases for tax positions
|
| |||
|
||||
Balance at December 31, 2007
|
3,200 | |||
Additions for tax positions
|
| |||
Decreases for tax positions
|
| |||
|
||||
Balance at December 31, 2008
|
3,200 | |||
Additions for tax positions (AGI research and development tax credits)
|
359 | |||
Decreases for tax positions
|
| |||
|
||||
Balance at December 31, 2009
|
$ | 3,559 | ||
|
31
Variable Shares value | ||||
December 31, 2008
|
$ | | ||
Issuance of Variable Shares
|
2,650 | |||
Realized/unrealized gains or losses
|
| |||
|
||||
December 31, 2009
|
$ | 2,650 | ||
|
32
Cash
|
$ | 5 | ||
Prepaid expenses
|
21 | |||
Identifiable intangible assets
|
11,684 | |||
Accounts payable and other current liabilities
|
(68 | ) | ||
|
||||
Total identifiable net assets
|
11,642 | |||
|
||||
Goodwill
|
3,959 | |||
|
||||
Total purchase price allocation
|
$ | 15,601 | ||
|
Consolidated | ||||||||||||||||
Estimated | Statement of | |||||||||||||||
Useful Life | Estimated Annual | Operations | ||||||||||||||
Identified Intangible Assets | Fair Value | (years) | Amortization Expense | Classification | ||||||||||||
Biomarkers (a)
|
$ | 11,349 | 7 | $ | 1,621 | Cost of services | ||||||||||
In-process research and development (a)
|
76 | 7 | 11 | Research and development | ||||||||||||
Issued patents (b)
|
26 | 7 | 4 | Cost of services | ||||||||||||
Patent applications(b)
|
123 | 7 | 18 | Cost of services | ||||||||||||
Non-competition agreements (c)
|
110 | 3 | 37 | Research and development | ||||||||||||
|
||||||||||||||||
Total
|
$ | 11,684 | $ | 1,691 | ||||||||||||
|
(a) | To estimate fair value of biomarkers, the Company used the income approach which is a valuation technique that converts the estimated commercialization probability and future expected net cash flows to be derived from these assets into a single, present-valued amount. | |
(b) | To estimate fair value of issued patents and patent applications, the Company used the cost approach which determines the fair value in terms of cost (i.e. current cash expenditures) required to recreate or develop the underlying intangible assets. | |
(c) | To estimate fair value, the Company determined the cash flows that are protected by the non-competition agreements using a variant of the income approach, called the postulated loss of income approach. In applying this approach, the Companys cash flows were forecasted in two separate scenarios: one with and one without the presence of the non-competition agreements. The difference in cash flows, at present value, represents the benefit of the non-competition agreements. |
33
Year Ended December 31, | ||||||||
(unaudited) | ||||||||
2009 | 2008 | |||||||
Net revenue
|
$ | 91,599 | $ | 73,766 | ||||
Net loss
|
(7,676 | ) | (11,332 | ) | ||||
Net loss applicable to common stockholders
|
(11,966 | ) | (11,332 | ) | ||||
Net loss per share applicable to common stockholders basic and diluted
|
$ | (0.14 | ) | $ | (0.15 | ) | ||
|
||||||||
Weighted average shares basic and diluted
|
81,671 | 77,008 |
Income (Loss) | Income | Net | ||||||||||||||||||||||||||
From | From | Net Loss | Loss per Share | |||||||||||||||||||||||||
Continuing | Discontinued | Applicable to | Applicable to | |||||||||||||||||||||||||
Net | Gross | Operations, | Operations. Net of | Net Income | Common | Common | ||||||||||||||||||||||
Revenue | Profit | Net of Tax | Tax | (Loss) | Stockholders | Stockholders | ||||||||||||||||||||||
Three Months Ended:
|
||||||||||||||||||||||||||||
December 31, 2009
|
$ | 23,252 | $ | 12,820 | $ | (2,690 | ) | $ | | $ | (2,690 | ) | (2,690 | ) | $ | (0.03 | ) | |||||||||||
September 30, 2009
|
21,425 | 11,629 | (3,235 | ) | | (3,235 | ) | (3,235 | ) | (0.04 | ) | |||||||||||||||||
June 30, 2009
|
23,730 | 13,808 | 29 | | 29 | (4,261 | ) | (0.06 | ) | |||||||||||||||||||
March 31, 2009 (a)
|
23,192 | 14,235 | (1,057 | ) | 901 | (156 | ) | (156 | ) | (0.00 | ) | |||||||||||||||||
|
||||||||||||||||||||||||||||
December 31, 2008
|
$ | 21,937 | $ | 13,466 | $ | (2,218 | ) | $ | | $ | (2,218 | ) | $ | (2,218 | ) | $ | (0.03 | ) | ||||||||||
September 30, 2008
|
18,997 | 10,401 | (2,214 | ) | | (2,214 | ) | (2,214 | ) | (0.03 | ) | |||||||||||||||||
June 30, 2008
|
16,916 | 8,425 | (4,279 | ) | | (4,279 | ) | (4,279 | ) | (0.06 | ) | |||||||||||||||||
March 31, 2008
|
15,886 | 8,508 | (934 | ) | | (934 | ) | (934 | ) | (0.01 | ) |
(a) | Presented amounts are inclusive of certain adjustments, as discussed in Note 18, and summarized in the below table: |
34
Three Months Ended | ||||||||
March 31, 2009 | ||||||||
Previously | As | |||||||
Reported | Adjusted | |||||||
Condensed Consolidated Statements of Operations:
|
||||||||
Income tax benefit
|
$ | | $ | 599 | ||||
Loss from continuing operations
|
(2,321 | ) | (1,057 | ) | ||||
Income from discontinued operations, net of income taxes
|
1,500 | 901 | ||||||
|
||||||||
Net income (loss) per share applicable to common
stockholders basic and diluted:
|
||||||||
Loss from continuing operations
|
$ | (0.03 | ) | $ | (0.02 | ) | ||
Income from discontinued operations
|
0.02 | 0.01 |
(17) | Commitments and Contingencies |
2010
|
$ | 1,784 | ||
2011
|
1,824 | |||
2012
|
1,847 | |||
2013
|
1,803 | |||
2014
|
1,726 | |||
Thereafter
|
1,542 | |||
|
||||
|
$ | 10,526 | ||
|
35
Year Ended | ||||||||
December 31, 2007 | ||||||||
Previously | As | |||||||
Reported | Adjusted | |||||||
Condensed Consolidated Statements of Operations:
|
||||||||
Income tax (expense) benefit
|
$ | (23 | ) | $ | 2,088 | |||
Loss from continuing operations, net of income taxes
|
(14,169 | ) | (12,058 | ) | ||||
Income from discontinued operations, net of income taxes
|
5,412 | 3,301 | ||||||
|
||||||||
Net income (loss) per share applicable to common
stockholders basic and diluted:
|
||||||||
Loss from continuing operations
|
$ | (0.20 | ) | $ | (0.17 | ) | ||
Income from discontinued operations
|
0.08 | 0.05 |
36