QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE ATRM SPECIAL MEETING

The following questions and answers address briefly some questions you may have regarding the Merger and the ATRM special meeting. These questions and answers may not address all questions that may be important to you as a shareholder of ATRM or as a stockholder of Digirad. Please refer to the more detailed information contained elsewhere in this proxy statement/prospectus, the annexes to this proxy statement/prospectus and the documents referred to in this proxy statement/prospectus.

What is the Merger?

In accordance with the terms and conditions of the Merger Agreement, if the holders of ATRM Common Stock and ATRM Preferred Stock approve the Merger Agreement and the transactions contemplated thereby, including the Merger, and the other closing conditions under the Merger Agreement are satisfied or waived, Merger Sub will merge with and into ATRM, and ATRM will be the surviving corporation and a wholly owned subsidiary of Digirad. A copy of the Merger Agreement is attached as Annex I to this proxy statement/prospectus.

Is shareholder approval necessary to complete the Merger?

Yes. ATRM and Digirad have agreed to combine the two companies upon the terms and conditions of the Merger Agreement that is described in this proxy statement/prospectus. You are receiving these proxy materials to help you decide, among other matters, how to vote your shares of ATRM with respect to the proposed Merger.

The Merger cannot be completed unless, among other things, ATRM shareholders approve the Merger Agreement and the transactions contemplated thereby, including the Merger. The ATRM special meeting is being held to vote on, among other matters, the proposals necessary to complete the Merger. Information about the special meeting, the Merger and the other business to be considered by ATRM shareholders is contained in this proxy statement/prospectus. Your vote is important. ATRM encourages you to vote as soon as possible.

Approval by Digirad stockholders of the Merger Agreement and the transactions contemplated thereby, including the Merger and the issuance of the Digirad Preferred Stock, is not required and will not be sought by Digirad.

Are there other matters related to the Merger that require the vote of ATRM shareholders?

Yes. At the ATRM special meeting, holders of ATRM Common Stock will be asked to consider and vote upon a proposal to approve, by a non-binding advisory vote, the agreements and understandings of ATRM and its President and Chief Executive Officer concerning compensation that is based on or otherwise relates to the Merger contemplated by the Merger Agreement, and the aggregate total of all such compensation that may be paid or become payable to or on behalf of such executive officer, as disclosed in this proxy statement/prospectus under the heading “The Merger—Interests of ATRM Directors and Executive Officers in the Merger—Change of Control Benefits for Executive Officers” (the “change in control payments”).

What are the “change in control payments?”

“Change in control payments” are certain compensation that is tied to or based on the completion of the Merger and may be payable to ATRM’s President and Chief Executive Officer under ATRM’s existing plans or agreements.

Why am I being asked to cast a non-binding, advisory vote to approve the change in control payments payable to ATRM’s President and Chief Executive Officer under his change of control agreement?

In accordance with the rules promulgated under the Exchange Act, ATRM is providing its shareholders with the opportunity to cast a non-binding, advisory vote on the change in control payments proposal on the compensation that may be payable to its President and Chief Executive Officer in connection with the Merger.

What will happen if the ATRM shareholders do not approve the change in control payments at the ATRM special meeting?

Approval of the change in control payments is not a condition to the completion of the Merger. The vote with respect to the change in control payments is an advisory vote and will not be binding on ATRM or Digirad. Further, the underlying compensation plans and agreements are contractual in nature and are not, by their terms, subject to shareholder approval. Accordingly, payment of the change in control compensation is not contingent on shareholder approval.

What will ATRM shareholders receive in the Merger?

Unless a holder of ATRM Common Stock exercise its dissenters’ rights and satisfies the procedures relating to dissenters’ rights under Minnesota law, a holder of ATRM Common Stock will be entitled to receive 0.03 shares of Digirad Preferred Stock for each share of ATRM Common Stock owned at the effective time of the Merger, and holders of ATRM Preferred Stock will be entitled to receive 2.5 shares of Digirad Preferred Stock for each share of ATRM Preferred Stock owned at the effective time of the Merger. No fractional shares of Digirad Preferred Stock will be issued. Each ATRM shareholder will be entitled to receive, in lieu of any fractional share of Digirad Preferred Stock, one whole share of Digirad Preferred Stock.

After completion of the Merger, each Digirad stockholder will have the same number of shares of Digirad common stock that such stockholder held immediately prior to the completion of the Merger. However, each share of Digirad common stock will then represent an interest in a combined company with more assets and more liabilities. In addition, upon completion of the Merger, all Digirad Preferred Stock will be held by former ATRM shareholders.

Where and when is the special meeting of ATRM shareholders?

The ATRM special meeting will be held at 11:00 a.m., Eastern Time, on September 6, 2019, at 53 Forest Ave., 1st Floor, Old Greenwich, CT 06870.

Who can vote at the ATRM special meeting?

Holders of ATRM Common Stock and holders of ATRM Preferred Stock can vote at the ATRM special meeting if such shareholders held such shares as of the close of business on July 30, 2019, which is the record date for the special meeting.

What vote of ATRM shareholders is required to approve the proposals?

To approve the Merger Agreement and the transactions contemplated thereby, including the Merger, holders of (i) at least a majority of the outstanding shares of ATRM Common Stock entitled to vote and (ii) at least two-thirds of the outstanding shares of ATRM Preferred Stock entitled to vote must vote their shares “ FOR ” the approval of the proposal.

To approve, by an advisory vote, the change in control payments, holders of the greater of (1) a majority of the outstanding shares of ATRM Common Stock present in person or represented by proxy and entitled to vote on this item of business at the ATRM special meeting, or (2) a majority of the voting power of the minimum number of the shares of ATRM Common Stock entitled to vote that would constitute a quorum for the transaction of business at the ATRM special meeting, must vote their shares “ FOR ” the proposal.

To approve adjournment of the special meeting, if necessary or appropriate, for, among other reasons, the solicitation of additional proxies, holders of a majority of the voting power of the shares of ATRM Common Stock present in person or represented by proxy and entitled to vote on this item of business at the ATRM special meeting, whether or not a quorum is present, must vote their shares “ FOR ” the proposal.

Digirad has entered into a voting agreement with the holders of all of the ATRM Preferred Stock and approximately 17.4% of the ATRM Common Stock pursuant to which such holders have agreed, among other things, to vote their ATRM shares in favor of the Merger and have given Digirad their proxies to vote “FOR” the approval of the Merger Agreement and the transactions contemplated thereby, including the Merger.

What constitutes a quorum for the ATRM special meeting?

The presence at the special meeting on September 6, 2019, in person or by proxy, of at least a majority of the outstanding ATRM Common Stock and a majority of the outstanding ATRM Preferred Stock votes that are entitled to cast a vote at the special meeting will constitute a quorum. A quorum is necessary to hold the meeting. In the event that a quorum is not present at the special meeting, ATRM expects that the special meeting will be adjourned or postponed to solicit additional proxies. If a quorum is not present, the shareholders present, in person or by proxy, may adjourn the meeting, without notice other than announced at the meeting, to another place, if any, date or time.

How does the Board of Directors of ATRM recommend that ATRM shareholders vote?

The ATRM board of directors has determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are in the best interests of ATRM and its shareholders and recommends that: (i) holders of ATRM Common Stock and ATRM Preferred Stock vote “ FOR ” the approval of the Merger Agreement and the transactions contemplated thereby, including the Merger; (ii) holders of ATRM Common Stock vote “ FOR ” the approval, by advisory vote, of the change in control payments; and (iii) holders of ATRM Common Stock vote “ FOR ” the proposal to adjourn or postpone the special meeting, if necessary or appropriate, for, among other reasons, the solicitation of additional proxies. The ATRM board of directors is soliciting shareholder votes consistent with the board’s recommendation. Digirad has entered into a voting agreement with the holders of all of the ATRM Preferred Stock and approximately 17.4% of the ATRM Common Stock pursuant to which such holders have agreed, among other things, to vote their ATRM shares in favor of the Merger and have given Digirad their proxies to vote “ FOR ” the approval of the Merger Agreement and the transactions contemplated thereby, including the Merger. You should read the section entitled “The Merger— Recommendation of the ATRM Board of Directors; ATRM’s Reasons for the Merger” for a discussion of the factors that the board considered in deciding to recommend voting “ FOR ” the approval of the Merger Agreement and the transactions contemplated thereby, including the Merger.

How do I vote?

If you are a holder of record of ATRM Common Stock or ATRM Preferred Stock, as of the record date, after carefully reading and considering the information contained in this proxy statement/prospectus, you may vote by any of the following methods:

Internet.     Electronically through the internet by accessing www.proxyvote.com. You may vote through the Internet until 11:59 p.m., Eastern Time, on September 5, 2019. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and create an electronic voting instruction form. Internet voting is available 24 hours a day, and the procedures are designed to authenticate votes cast by using a control number located on your proxy card. These procedures allow you to give a proxy to vote your shares and to confirm that your instructions have been properly recorded. If you vote through the Internet, you should not return your proxy card. 

Mail.     By returning your proxy through the mail. If you complete and properly sign the accompanying proxy card and return it to ATRM, it will be voted as you direct on the proxy card. You should follow the instructions set forth on the proxy card, being sure to complete it, to sign it, and to mail it in the enclosed postage-paid envelope. 

Telephone.     By calling 1-800-454-8683. You may vote by telephone until 11:59 p.m., Eastern Time, on September 5, 2019. This toll free number is also included on the proxy card. Telephone voting is available 24 hours a day, and the procedures are designed to authenticate votes cast by using a control number located on your proxy card. These procedures allow you to give a proxy to vote your shares and to confirm that your instructions have been properly recorded. If you vote by telephone, you should not return your proxy card. 

In Person.     In person at the meeting. If you are a shareholder of record and attend the meeting, you may vote at the meeting or deliver your complete proxy card in person.

ATRM recommends that you vote in advance even if you plan to attend the meeting so that ATRM will know as soon as possible that enough votes will be present for ATRM to hold the meeting. If you properly return or submit your proxy but do not indicate how you wish to vote, ATRM will count your proxy as a vote “ FOR ” the approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, “ FOR ” the approval, by advisory vote, of the change in control payments and “ FOR ” the proposal to adjourn or postpone the special meeting, if necessary or appropriate, for, among other reasons, the solicitation of additional proxies.

If your shares are held in “street name,” please refer to the information forwarded to you by your bank, broker or other holder of record to see what you must do in order to vote your shares, including whether you may be able to vote electronically through your bank, broker or other record holder. If so, instructions regarding electronic voting will be provided by the bank, broker or other holder of record to you as part of the package that includes this proxy statement/prospectus. If you are a “street name” beneficial holder of shares and you wish to vote in person at the meeting, you will need to obtain a proxy from the institution that holds your shares and present it to the inspector of elections with your ballot when you vote at the special meeting.

If you fail to vote by proxy or in person, it will have the same effect as a vote “against” the approval of the Merger Agreement.

What is the difference between a shareholder of record and a “street name” beneficial holder of shares?

If your shares are registered directly in your name with ATRM’s transfer agent, ComputerShare, Inc., you are considered a shareholder of record with respect to those shares. If this is the case, the shareholder proxy materials have been sent or provided directly to you by ATRM.

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial holder” of the shares held for you in what is known as “street name.” If this is the case, the proxy materials have been forwarded to you by your brokerage firm, bank or other nominee, which is considered the shareholder of record with respect to these shares. As the beneficial holder, you have the right to direct your broker, bank or other nominee how to vote your shares. Please contact your broker, bank, or other nominee for instructions on how to vote any shares you beneficially own.

If my shares are held in “street name” by my broker, will my broker vote my shares for me?

If your shares are held for you as a beneficial owner in “street name,” your broker will vote your shares on the proposals only if you provide instructions to your broker on how to vote. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares. Without instructions, your shares will not be voted, which will have the effect of an “Against” vote for the proposal to approve the Merger Agreement and the transactions contemplated thereby, including the Merger, and will have no effect on the proposals to approve, by an advisory vote, the change in control payments and to adjourn or postpone the special meeting, if necessary or appropriate, for, among other reasons, the solicitation of additional proxies.

Will anyone contact me regarding this vote?

ATRM has retained InvestorCom, LLC to aid in the solicitation of proxies and to verify certain records related to the solicitation. ATRM will pay InvestorCom, LLC a fee of $10,000 plus reimbursement for its reasonable out-of-pocket expenses. Such solicitations may be made by mail, telephone, facsimile, e-mail, the internet or personal interviews.

Can I change my vote after I have delivered my proxy?

Yes. You can change your vote before the ATRM special meeting. If you are an ATRM shareholder of record, you may change your proxy voting instructions prior to commencement of the special meeting by granting a new proxy (by mail, by phone or over the internet), as described under “The ATRM Special Meeting—Voting by Proxy” on page 201. You may also revoke a proxy by submitting a notice of revocation to the Secretary of ATRM at the address set forth under “The ATRM Special Meeting—Voting by Proxy” on page 201 prior to the commencement of the special meeting. Attendance at the special meeting will not in and of itself constitute revocation of a proxy.

If your shares are held in “street name,” you may change your vote by submitting new voting instructions to your broker or other nominee holder in accordance with the procedures established by it. Please contact your broker or other nominee and follow its directions in order to change your vote.

Should I send in my ATRM stock certificates with my proxy card?

No. Please DO NOT send your ATRM stock certificates with your proxy card.

What are the material U.S. federal income tax consequences of the Merger to U.S. holders of ATRM shares?

The receipt of Digirad Preferred Stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. For U.S. federal income tax purposes, a U.S. Holder (as defined below in the section titled “Material United States Federal Income Tax Consequences” beginning on (page 79)) will generally recognize gain or loss equal to the difference, if any, between (i) the fair market value (as of the effective time) of the Digirad Preferred Stock received in the Merger and (ii) the U.S. Holder’s adjusted tax basis in the ATRM shares surrendered in exchange therefor.

Each U.S. Holder of ATRM shares should read the discussion under “Material United States Federal Income Tax Consequences” beginning on (page 79) for a more complete discussion of the U.S. federal income tax consequences of the Merger. Tax matters can be complicated, and the tax consequences of the Merger to a particular holder of ATRM shares will depend on such holder’s particular facts and circumstances. Holders of ATRM shares should consult their own tax advisors to determine the specific consequences to them of exchanging their ATRM shares for Digirad Preferred Stock pursuant to the Merger.

The tax discussion regarding the Merger does not address any state, local or foreign tax consequences of the Merger.

Please carefully review the information set forth in the section titled “Material United States Federal Income Tax Consequences” beginning on page 79 for a description of the material United States federal income tax consequences of the Merger.  The tax consequences of the Merger to each ATRM shareholder will depend on such ATRM shareholder’s own situation. ATRM shareholders should consult with their own tax advisors for a full understanding of the tax consequences of the Merger to them.

When do ATRM and Digirad expect the Merger to be completed?

ATRM and Digirad are working to complete the Merger as quickly as possible. If the Merger Agreement and the transactions contemplated thereby, including the Merger, are approved by ATRM shareholders and the other conditions to completion of the Merger are satisfied or waived, including any required regulatory approvals, it is anticipated that the Merger will be completed in the third quarter of 2019. However, it is possible that factors outside the control of ATRM and Digirad could require ATRM and Digirad to complete the Merger at a later time or not complete it at all. If the Merger is not completed by November 30, 2019, either ATRM or Digirad may terminate the Merger Agreement (provided that the party terminating the Merger Agreement has not materially contributed to the failure to fulfill any condition under the Merger Agreement).

Can ATRM shareholders dissent and require appraisal of their shares?

Yes. Because the ATRM Common Stock is not listed on a national stock exchange, holders of ATRM Common Stock have dissenters’ rights in connection with the Merger to receive the fair value, in cash, of their shares of ATRM Common Stock. In order to exercise dissenters’ rights, ATRM Common Stock holders must strictly comply with the dissenters’ rights procedures under Minnesota law or they will lose their dissenters’ rights. One of these rules is that you must not vote FOR the Merger. If you vote FOR the Merger, you will lose your dissenters’ rights. The cash you receive upon the exercise of your dissenters’ rights may be more or less than the value of the Digirad Preferred Stock you would have received in the Merger if you had not exercised your dissenters’ rights. The dissenters’ rights procedures are described in the section of this proxy statement/prospectus entitled “The Merger—Dissenters’ Rights of ATRM Shareholders.”

ATRM and Digirad have entered into a voting agreement with the holders of all of the ATRM Preferred Stock and approximately 17.4% of the ATRM Common Stock pursuant to which such holders have agreed, among other things, to vote their ATRM shares in favor of the Merger and have given Digirad their proxies to vote “ FOR ” the approval of the Merger Agreement and the transactions contemplated thereby, including the Merger.

Where can I find more information about ATRM and Digirad?

ATRM shareholders can find more information about ATRM and Digirad in their publicly filed reports with the SEC, and in the section titled “Where You Can Find More Information” beginning on page 208.

Who can help answer my questions?

If ATRM shareholders have any questions about the Merger or the ATRM special meeting, or if they need additional copies of this proxy statement/prospectus or the enclosed proxy card, they should contact:

InvestorCom, LLC
19 Old Kings Highway S. Suite 210 

Darien, CT 06820 

Banks and Brokerage Firms, please call: 203-972-9300
Stockholders and All others, call toll-free: 877-972-0090
Email: info@investor-com.com

RISK FACTORS RELATING TO THE MERGER

In addition to the other information included in this proxy statement/prospectus, ATRM’s shareholders should consider carefully the matters described below in determining whether to approve the Merger Agreement and the transactions contemplated thereby, including the Merger.

The price of Digirad Preferred Stock may be affected by factors different from those affecting the price of ATRM Common Stock and ATRM Preferred Stock.   Upon completion of the Merger, holders of ATRM Common Stock and ATRM Preferred Stock will become holders of Digirad Preferred Stock. Digirad’s business and results of operations and the market price of Digirad Preferred Stock may be affected by factors different than those affecting ATRM’s business and results of operations and the market price of ATRM Common Stock and ATRM Preferred Stock. For a discussion of Digirad’s and ATRM’s businesses and certain factors to consider in connection with their businesses, see each company’s risk factors and business sections included in this proxy statement/prospectus.

The Merger Agreement contains provisions that could discourage a potential competing acquiror that might be willing to pay more to effect a business combination with ATRM.   The Merger Agreement contains “no solicitation” provisions that restrict ATRM’s ability to solicit or facilitate proposals regarding a merger or similar transaction with another party. Further, several conditions must be satisfied in order for the ATRM board of directors to withdraw, amend or modify its recommendation regarding the proposed Merger, including that Digirad generally has an opportunity to offer to modify the terms of the proposed Merger in response to any competing acquisition proposal that may be made before the ATRM board of directors may withdraw, amend or modify its recommendation regarding the proposed Merger. See “The Merger Agreement—No Solicitations; Changes in Recommendation.” If the ATRM board of directors withdraws, amends or modifies its recommendation regarding the proposed Merger, Digirad has the right to terminate the Merger Agreement and receive a $725,000 termination fee from ATRM and the payment of its expenses up to $225,000. These provisions could discourage a potential competing acquiror from considering or proposing an acquisition of ATRM, even if it were prepared to pay consideration with a higher value than the shares proposed to be issued in the Merger, or might result in a potential competing acquiror proposing to pay a lower per share price than it might otherwise have proposed to pay because of the added expense of the termination fee.

The integration of Digirad and ATRM following the Merger may present significant challenges.     Digirad may face significant challenges in combining ATRM’s operations into its operations in a timely and efficient manner and in retaining key ATRM personnel. The failure to integrate successfully Digirad and ATRM and to manage successfully the challenges presented by the integration process may result in Digirad not achieving the anticipated benefits of the Merger including operational and financial synergies.

Digirad will incur transaction, integration and restructuring costs in connection with the Merger.   Digirad and ATRM expect to incur costs associated with transaction fees and other costs related to the Merger. Specifically, Digirad and ATRM each expects to incur approximately $1.2 million and $0.2 million, respectively, of transaction costs related to the Merger. In addition, Digirad will incur integration and restructuring costs following the completion of the Merger as it integrates the businesses of ATRM with those of Digirad. Although Digirad expects that the realization of efficiencies related to the integration of the businesses will offset incremental transaction, integration and restructuring costs over time, Digirad cannot give any assurance that this net benefit will be achieved in the near term.

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

Digirad has incurred and may in the future incur substantial amounts of debt and other obligations that will rank senior to the Digirad Preferred Stock. As of March 31, 2019, Digirad’s total liabilities equaled approximately $30.3 million, including $12.5 million owed under a commercial revolving credit facility pursuant to a Loan and Security Agreement with Sterling National Bank (the “SNB Loan Agreement”) for borrowings of up to $20 million. If Digirad is forced to liquidate its assets to pay its creditors, Digirad may not have sufficient assets to pay amounts due on any or all of the Digirad Preferred Stock then outstanding.

Digirad may not be able to pay dividends on the Digirad Preferred Stock if it falls out of compliance with its loan covenants. Digirad is currently permitted to pay dividends under the restrictive covenants of the SNB Loan Agreement. However, Digirad may be restricted from paying dividends on the Digirad Preferred Stock if it falls out of compliance with its loan covenants and are prohibited by Sterling National Bank from paying dividends.

The SNB Loan Agreement requires Digirad to comply with various financial covenants as specifically set forth in the SNB Loan Agreement. The SNB Loan Agreement limits Digirad’s ability to pay dividends if such dividend would result in Digirad’s non-compliance with the financial covenants in the SNB Loan Agreement, there is insufficient borrowing availability under the SNB Loan Agreement, or if there is a default or event of default under the SNB Loan Agreement that has occurred and is continuing. In such a circumstance, Digirad would be required to reduce or eliminate the Digirad Preferred Stock cash dividend until compliance with the financial covenants is met.

Digirad must adhere to prescribed legal requirements, and must also have sufficient cash, in order to be able to pay dividends. In accordance with Section 170 of the Delaware General Corporation Law, Digirad may only declare and pay cash dividends on the Digirad Preferred Stock if Digirad has either net profits during the fiscal year in which the dividend is declared and/or the preceding fiscal year, or a “surplus,” meaning the excess, if any, of Digirad’s net assets (total assets less total liabilities) over Digirad’s capital. Digirad can provide no assurance that it will satisfy such requirements in any given year. Further, even if Digirad has the legal ability to declare a dividend, it may not have sufficient cash to pay dividends on the Digirad Preferred Stock. Digirad’s ability to pay dividends may be impaired if any of the risks described in this proxy statement/prospectus actually occur. Also, payment of dividends will depend upon Digirad’s financial condition and other factors as Digirad’s board of directors may deem relevant from time to time. Digirad cannot assure you that its businesses will generate sufficient cash flow from operations or that future borrowings will be available to Digirad in an amount sufficient to enable it to pay dividends on the Digirad Preferred Stock.

Digirad may not be able to redeem the Digirad Preferred Stock upon a Change of Control Triggering Event. Upon the occurrence of a Change of Control Triggering Event, unless Digirad has exercised its option to redeem the Digirad Preferred Stock after the fifth anniversary of the effective date of the Merger, each holder of the Digirad Preferred Stock will have the right to require Digirad to redeem all or any part of such holder’s Digirad Preferred Stock at a price equal to the liquidation preference of $10.00 per share, plus an amount equal to any accumulated and unpaid dividends up to but excluding the date of payment, but without interest. If Digirad experiences a Change of Control Triggering Event, there can be no assurance that Digirad would have sufficient financial resources available to satisfy its obligations to redeem the Digirad Preferred Stock and any indebtedness that may be required to be repaid or repurchased as a result of such event. In addition, Digirad may be unable to redeem the Digirad Preferred Stock upon a Change of Control Triggering Event if such redemption would result in our non-compliance with the financial covenants in the SNB Loan Agreement, there is insufficient borrowing availability under the SNB Loan Agreement, or if there is a default or event of default under the SNB Loan Agreement that has occurred and is continuing in connection with the Change of Control Triggering Event. Digirad’s failure to redeem the Digirad Preferred Stock could have material adverse consequences for Digirad and the holders of the Digirad Preferred Stock. See “ Description of Digirad Capital Stock—Digirad Series A Preferred Stock—Redemption—Change of Control .”

If Nasdaq delists the Digirad Preferred Stock from quotation on its exchange, investors’ ability to make transactions in the Digirad Preferred Stock could be limited. Digirad anticipates that the Digirad Preferred Stock will be listed on the Nasdaq Global Market, a national securities exchange, upon consummation of the Merger. Since Digirad’s common stock is listed on the Nasdaq Global Market, in order to for the Digirad Preferred Stock to be listed on the Nasdaq Global Market, Digirad must meet certain modified criteria, including a minimum of publicly held shares of Digirad Preferred Stock (generally 200,000 shares), with a minimum market value (generally $4,000,000) and a minimum number of holders (generally 100 public holders). If Digirad meets such standards and has the Digirad Preferred Stock listed on the Nasdaq Global Market, Digirad cannot assure you that the Digirad Preferred Stock will continue to be listed on the Nasdaq Global Market in the future. In order to continue listing the Digirad Preferred Stock on the Nasdaq Global Market, Digirad must maintain certain financial, distribution and share price levels. Generally, this means having a minimum number of publicly held shares of Digirad Preferred Stock (generally 100,000 shares), a minimum market value (generally $1,000,000) and a minimum number of holders (generally 100 public holders). If Digirad common stock is delisted from the Nasdaq Global Market, the Digirad Preferred Stock would be required to meet the more stringent initial listing standards of the Nasdaq Global Market for a Primary Equity Security, including a minimum number of publicly held shares of Digirad Preferred Stock (generally 1,100,000 shares) and a minimum number of holders (generally 400 public holders). If Digirad is unable to meet these standards and the Digirad Preferred Stock is delisted from the Nasdaq Global Market, Digirad may apply to list the Digirad Preferred Stock on the Nasdaq Capital Market. If we are also unable to meet the listing standards for the Nasdaq Capital Market, we may apply to quote the Digirad Preferred Stock on the OTC Marketplace. If Digirad is unable to maintain listing for the Digirad Preferred Stock, the ability to transfer or sell shares of the Digirad Preferred Stock will be limited and the market value of the Digirad Preferred Stock will likely be materially adversely affected.

The market for Digirad Preferred Stock may not provide investors with adequate liquidity. Digirad is applying to have the Digirad Preferred Stock listed on the Nasdaq Global Market. However, Digirad may not obtain listing on the Nasdaq Global Market, and even if it does obtain such listing, a trading market for the Digirad Preferred Stock may not develop or be maintained and may not provide investors with adequate liquidity. Liquidity of the market for the Digirad Preferred Stock will depend on a number of factors, including prevailing interest rates, Digirad’s financial condition and operating results, the number of holders of the Digirad Preferred Stock, the market for similar securities and the interest of securities dealers in making a market in the Digirad Preferred Stock. Digirad cannot predict the extent to which investor interest in Digirad will maintain a trading market in the Digirad Preferred Stock, or how liquid that market will be. If an active market is not maintained, investors may have difficulty selling shares of the Digirad Preferred Stock.

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

Digirad is allowed to issue shares of other series of preferred stock that rank above the Digirad Preferred Stock as to dividend payments and rights upon Digirad’s liquidation, dissolution or winding up of its affairs, only with the approval of the holders of at least a majority of the outstanding Digirad Preferred Stock; however, Digirad is allowed to issue additional shares of Digirad Preferred Stock and/or additional series of preferred stock that would rank equally to the Digirad Preferred Stock as to dividend payments and rights upon Digirad’s liquidation or winding up of its affairs without first obtaining the approval of the holders of the Digirad Preferred Stock. The issuance of additional shares of Digirad Preferred Stock and/or additional series of preferred stock could have the effect of reducing the amounts available to the Digirad Preferred Stock upon Digirad’s liquidation or dissolution or the winding up of its affairs. It also may reduce dividend payments on the Digirad Preferred Stock if Digirad does not have sufficient funds to pay dividends on all Digirad Preferred Stock outstanding and other classes or series of stock with equal or senior priority with respect to dividends. Future issuances and sales of senior or pari passu preferred stock, or the perception that such issuances and sales could occur, may cause prevailing market prices for the Digirad Preferred Stock and Digirad’s common stock to decline and may adversely affect Digirad’s ability to raise additional capital in the financial markets at times and prices favorable to Digirad.

The Digirad Preferred Stock will bear a risk of early redemption. Digirad may voluntarily redeem some or all of the Digirad Preferred Stock on or after the fifth anniversary of the effective date of the Merger. Any such redemptions may occur at a time that is unfavorable to holders of the Digirad Preferred Stock. Digirad may have an incentive to redeem the Digirad Preferred Stock voluntarily if market conditions allow Digirad to issue other preferred stock or debt securities at a rate that is lower than the rate on the Digirad Preferred Stock.

On or after the fifth anniversary of the effective date of the Merger, Digirad may, at its option, redeem the Digirad Preferred Stock, in whole or in part, at any time or from time to time. Also, upon the occurrence of a Change of Control Triggering Event (as defined in the section of this proxy statement/prospectus entitled “ Description of Digirad Capital Stock—Digirad Series A Preferred Stock—Redemption ”), prior to the fifth anniversary of the effective date of the Merger, Digirad may, at its option, redeem the Digirad Preferred Stock, in whole or in part, within 120 days after the first date on which such Change of Control Triggering Event occurred. If Digirad redeems the Digirad Preferred Stock, then from and after the redemption date, dividends will cease to accrue on shares of Digirad Preferred Stock, the shares of Digirad Preferred Stock shall no longer be deemed outstanding and all rights as a holder of those shares will terminate, except the right to receive the redemption price plus accumulated and unpaid dividends, if any, payable upon redemption. For further information regarding Digirad’s ability to redeem the Digirad Preferred Stock, see “ Description of Digirad Capital Stock—Digirad Series A Preferred Stock—Redemption. ”

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

Market interest rates may materially and adversely affect the value of the Digirad Preferred Stock. One of the factors that will influence the price of the Digirad Preferred Stock is the dividend yield on the Digirad Preferred Stock (as a percentage of the market price of the Digirad Preferred Stock) relative to market interest rates. Continued increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of the Digirad Preferred Stock to expect a higher dividend yield (and higher interest rates would likely increase Digirad’s borrowing costs and potentially decrease funds available for dividend payments). Thus, higher market interest rates could cause the market price of the Digirad Preferred Stock to materially decrease.

Holders of the Digirad Preferred Stock may be unable to use the dividends-received deduction and may not be eligible for the preferential tax rates applicable to “qualified dividend income.” Distributions paid to corporate U.S. holders of the Digirad Preferred Stock may be eligible for the dividends-received deduction, and distributions paid to non-corporate U.S. holders of the Digirad Preferred Stock may be subject to tax at the preferential tax rates applicable to “qualified dividend income,” if Digirad has current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Additionally, Digirad may not have sufficient current earnings and profits during future fiscal years for the distributions on the Digirad Preferred Stock to qualify as dividends for U.S. federal income tax purposes. If the distributions fail to qualify as dividends, U.S. holders would be unable to use the dividends-received deduction and may not be eligible for the preferential tax rates applicable to “qualified dividend income.” If any distributions on the Digirad Preferred Stock with respect to any fiscal year are not eligible for the dividends-received deduction or preferential tax rates applicable to “qualified dividend income” because of insufficient current or accumulated earnings and profits, it is possible that the market value of the Digirad Preferred Stock might decline.

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

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

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

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

As a result of these and other factors, investors who receive the Digirad Preferred Stock pursuant to the Merger may experience a decrease, which could be substantial and rapid, in the market price of the Digirad Preferred Stock, including decreases unrelated to Digirad’s operating performance or prospects.

A holder of Digirad Preferred Stock has extremely limited voting rights. The voting rights for a holder of Digirad Preferred Stock are limited. Digirad’s common stock is the only class of Digirad’s securities that carry full voting rights. Voting rights for holders of Digirad Preferred Stock exist primarily with respect to material and adverse changes in the terms of the Digirad Preferred Stock and Digirad’s failure to pay dividends on the Digirad Preferred Stock. See “ Description of Digirad Capital Stock—Digirad Series A Preferred Stock—Voting Rights ” in this proxy statement/prospectus. Other than the limited circumstances described in this proxy statement/prospectus and except to the extent required by law, holders of Digirad Preferred Stock do not have any voting rights. Consequently, ATRM shareholders, as a general matter, will have significantly less influence over the management and policies of Digirad than they currently exercise over the management and policies of ATRM.

The Digirad Preferred Stock is not convertible into common stock, including in the event of a change of control of Digirad, and investors will not realize a corresponding upside if the price of the Digirad common stock increases. The Digirad Preferred Stock is not convertible into shares of common stock and earns dividends at a fixed rate. Accordingly, an increase in market price of Digirad’s common stock will not necessarily result in an increase in the market price of the Digirad Preferred Stock. The market value of the Digirad Preferred Stock may depend more on dividend and interest rates for other preferred stock, commercial paper and other investment alternatives and Digirad’s actual and perceived ability to pay dividends on, to redeem, and, in the event of dissolution, satisfy the liquidation preference with respect to the Digirad Preferred Stock.

Digirad’s cash available for dividends to holders of the Digirad Preferred Stock may not be sufficient to pay anticipated dividends, nor can Digirad assure you of Digirad’s ability to make dividends in the future, and Digirad may need to borrow to make such dividends or may not be able to make such dividends at all. To remain competitive with alternative investments, Digirad’s dividend rate may exceed Digirad’s cash available for dividends, including cash generated from operations. In the event this happens, Digirad intends to fund the difference out of any excess cash on hand or, if permitted, from borrowings under Digirad’s revolving credit facility. If Digirad does not have sufficient cash available for dividends generated by its assets, or if cash available for dividends decreases in future periods, the market price of the Digirad Preferred Stock could decrease.

Digirad’s ability to pay dividends and/or make any required redemption payments to the holders of the Digirad Preferred Stock may be adversely affected by the operating results of Digirad’s present and future acquisition targets, including ATRM and Digirad’s real estate acquisitions. Digirad previously announced its intent to convert Digirad into a diversified holding company. Digirad also previously announced its acquisition of three plants which manufacture modular buildings. The acquisitions of those plants and the Merger are part of Digirad’s conversion into a diversified holding company. As of the date of this proxy statement/prospectus, Digirad is not able to fully determine the potential operating results of its real estate assets. Digirad can make no assurance that all closing conditions to the Merger will be satisfied in order to consummate the Merger or any other acquisition in furtherance of Digirad’s intended strategy or that, in the event that the Merger or any other acquisition is consummated, such acquisition will have a positive impact on Digirad’s profitability, cash flow or financial condition. In the event that the financial and operating performance and results of Digirad’s real estate division and/or ATRM post-Merger are not positive and in line with Digirad’s expectations, Digirad’s ability to pay dividends and/or make any required redemption payments to the holders of the Digirad Preferred Stock may be adversely impacted.

Digirad may not be able to raise sufficient capital or borrow money in sufficient amounts or on sufficiently favorable terms necessary to attain the optimal degree of leverage to operate its business, which may have an adverse effect on its operations and ability to pay dividends. Digirad’s ability to raise additional capital in the markets may be limited due to market conditions and applicable SEC regulations. Digirad’s business and acquisition strategies rely heavily on borrowing funds, so that Digirad may make more investments than would otherwise be possible to maximize potential returns to holders of Digirad’s securities. Digirad may borrow on a secured or unsecured basis. Pursuant to the terms of the SNB Loan Agreement, Digirad’s ability to incur additional indebtedness is subject to the consent of Sterling National Bank, with certain limited exceptions. The SNB Loan Agreement is secured by a first-priority security interest in substantially all of the assets (excluding real estate) of Digirad and its subsidiaries and a pledge of all shares and membership interests of the Digirad’s subsidiaries. The SNB Loan Agreement, amongst other things, limits Digirad’s ability, without the prior consent of the lender, to grant further security interests on Digirad’s assets which serve as collateral for the SNB Loan Agreement, to discontinue insurance coverage, to incur additional indebtedness, to dispose of assets of Digirad and its subsidiaries, to make investments, and to make distributions or pay dividends to Digirad’s stockholders. The SNB Loan Agreement also specifies certain debt and other ratios that Digirad is required to maintain. If Digirad is unable to obtain the degree of leverage that it believes to be optimal, it may have less cash for the payment of dividends to holders of Digirad Preferred Stock. Digirad’s use of leverage could also make Digirad more vulnerable to a downturn in its business or the economy generally and a significant increase in the ratio of Digirad’s indebtedness to its assets may have an adverse effect on the future market price of the Digirad Preferred Stock.

Future issuances of preferred stock may adversely affect the value of the Digirad Preferred Stock. Digirad intends to authorize 8,000,000 shares of Digirad Preferred Stock, and following the issuance of 1,612,655 shares of Digirad Preferred Stock in connection with the Merger, Digirad would have 6,387,345 shares of authorized but unissued shares of Digirad Preferred Stock. Digirad also expects to issue 300,000 shares of Digirad Preferred Stock pursuant to the Private Placement and may issue 100,000 shares of Digirad Preferred Stock pursuant to the Issuance Option. Digirad may issue additional shares of Digirad Preferred Stock and/or other classes of preferred shares, whether to raise additional capital or pursuant to other transactions Digirad may enter into. The issuance of additional preferred shares on parity with or senior to the Digirad Preferred Stock could affect the interests of the holders of Digirad Preferred Stock issued in connection with the Merger, and any issuance of preferred stock that is senior to the Digirad Preferred Stock could affect Digirad’s ability to pay dividends on, redeem or pay the liquidation preference on the Digirad Preferred Stock. However, the Certificate of Designations prevents Digirad, without the consent of a majority of the holders of the Digirad Preferred Stock, from issuing stock senior to the Digirad Preferred Stock if the terms and rights of the holders of the Digirad Preferred Stock would be materially and adversely changed.

The shares of Digirad Preferred Stock to be received by ATRM shareholders as a result of the Merger will have different rights from the shares of ATRM Common Stock and ATRM Preferred Stock. The rights of all ATRM shareholders are currently governed by the ATRM articles of incorporation, the ATRM bylaws, and Minnesota law. In addition, the rights of holders of ATRM Preferred Stock are subject to the certificate of designation of the ATRM Preferred Stock. Upon completion of the Merger, all shareholders of ATRM will become holders of Digirad Preferred Stock and their rights will be governed by the Digirad certificate of incorporation, the Digirad Preferred Stock Certificate of Designation, the Digirad bylaws, and Delaware law. See “ Comparison of Rights of ATRM Common Stock, ATRM Preferred Stock and Digirad Preferred Stock .”

Certain directors and executive officers of ATRM may have potential conflicts of interest with respect to the approval of the Merger Agreement.   Some of ATRM’s directors and executive officers have interests in the Merger that are different from, or in addition to, those of ATRM shareholders generally. Although other ATRM directors will not become directors of Digirad after the Merger, Digirad will indemnify and maintain liability insurance for all of the officers and directors of ATRM for their services as directors or officers before the Merger. In addition, the President and Chief Executive Officer of ATRM is a party to change in control agreements that entitle each such executive officer to enhanced severance if his employment were to terminate following the Merger under specific circumstances. The Merger Agreement also provides that certain equity awards held by ATRM executive officers and directors will and be converted to the right to receive 0.03 shares of Digirad Preferred Stock for each share of ATRM Common Stock which would otherwise be issuable pursuant to such awards.

In addition, Jeffrey E. Eberwein, who is the Chairman of Digirad’s board of directors and is also the Chairman of the board of directors of ATRM, owns approximately 17.4% of the outstanding ATRM Common Stock. Mr. Eberwein is also the Chief Executive Officer of LSVM, a subsidiary of ATRM. LSVM is the investment manager of LSVI and LSV Co-Invest I, which together own all of the outstanding ATRM Preferred Stock. Through these relationships and other relationships with affiliated entities, Mr. Eberwein may be deemed the beneficial owner of the securities owned by LSVI and LSV Co-Invest I. Mr. Eberwein disclaims beneficial ownership of the ATRM Preferred Stock, except to the extent of his pecuniary interest therein.

In addition to stock of ATRM, LSV Co-Invest I holds unsecured promissory notes of ATRM for a principal amount totaling $1.4 million; LSVM holds an unsecured note of ATRM for a principal amount totaling $0.3 million; and LSVI has pledged up to $3.0 million plus additional fees as collateral to secure a promissory note payable by ATRM to Gerber Finance due December 31, 2019.

LSVM and LSV Co-Invest I are party to subordination agreements with ATRM and Gerber Finance pursuant to which LSVM and LSV Co-Invest I agreed to subordinate their rights under their ATRM unsecured promissory notes to the rights of Gerber Finance as a lender to ATRM. Additionally, as a condition to a revolving credit loan agreement with Premier Bank, Mr. Eberwein entered into a guaranty in favor of Premier Bank, guaranteeing certain obligations of EBGL. Also, in connection with amendments of a loan agreement between Gerber Finance and KBS, Mr. Eberwein has executed reaffirmations of guaranty in favor of Gerber Finance relating to his unconditional guaranty of $0.6 million of KBS’s obligations under a loan agreement related to over-advances.

Further, Mr. Eberwein may be owed or may owe certain funds in connection with the resolution of a working capital adjustment related to ATRM’s acquisition of LSVM.

Digirad has entered into the Voting and Support Agreement with Mr. Eberwein and certain of his affiliates, which together hold all of the ATRM Preferred Stock and approximately 17.4% of the ATRM Common Stock, pursuant to which such holders have given Digirad their proxies to vote “ FOR ” the approval of the Merger Agreement and the transactions contemplated thereby, including the Merger.

Further, ATRM’s other executive officers and directors own approximately 2.2% of the outstanding ATRM Common Stock. As a result of the Merger, Mr. Eberwein, LSVI and LSV Co-Invest I will receive approximately 96% in the aggregate of the Digirad Preferred Stock issued as Merger Consideration. ATRM’s other executive officers and directors will receive approximately 0.2% in the aggregate of the Digirad Preferred Stock issued as Merger Consideration. See “ The Merger—Interests of ATRM Directors and Executive Officers in the Merger ” for a discussion of these interests.

Whether or not the Merger is completed, the pendency of the transaction could cause disruptions in the businesses of ATRM and Digirad, which could have an adverse effect on their businesses and financial results.     These disruptions could include the following:

The unaudited pro forma financial statements are presented for illustrative purposes only and should not be viewed as a forecast of Digirad’s financial condition or results of operations following the Merger.     The unaudited pro forma financial statements have been derived from the historical financial statements of Digirad and ATRM and certain adjustments and assumptions have been made regarding Digirad after giving effect to the Merger. The information upon which these adjustments and assumptions have been made is preliminary, and these kinds of adjustments and assumptions are difficult to make with complete accuracy. Moreover, the unaudited pro forma financial statements do not reflect all costs that are expected to be incurred or savings to be achieved by Digirad in connection with the Merger. For example, neither the impact of any incremental costs incurred in integrating the two companies, nor any potential cost savings is reflected in the unaudited pro forma financial statements. As a result, the actual financial condition and results of operations of Digirad following the Merger will likely not be consistent with, or evident from, these unaudited pro forma financial statements. In addition, the assumptions used in preparing the unaudited pro forma financial information may not prove to be accurate, and other factors may affect Digirad’s financial conditions or results of operations following the Merger. Therefore, the shareholders of ATRM should not place undue reliance on the pro forma financial statements when deciding whether to vote for the proposals relating to the Merger. See “Summary Unaudited Pro Forma Financial Information.”

Any delay in the completion of the Merger may significantly reduce the benefits expected to be obtained from the Merger or could adversely affect the market price of the common stock of each of Digirad or ATRM or their future business and financial results.     The Merger is subject to a number of conditions, including approval of ATRM shareholders, that are beyond the control of Digirad and ATRM and that may prevent, delay or otherwise materially and adversely affect completion of the Merger. Digirad and ATRM cannot predict whether and when these other conditions will be satisfied.

Failure to complete the Merger would prevent Digirad and ATRM from realizing the anticipated benefits of the Merger. Each company would also remain liable for significant transaction costs, including legal, accounting and financial advisory fees. Any delay in completing the Merger may significantly reduce the synergies and other benefits that Digirad expects to achieve if it successfully completes the Merger within the expected timeframe and integrates the businesses. In addition, the market price of each company’s common stock may reflect various market assumptions as to whether and when the Merger will be completed. Consequently, the completion of, the failure to complete, or any delay in the completion of the Merger could result in a significant change in the market price of the common stock of each of Digirad or ATRM.

The Merger is a taxable transaction and the resulting tax liability of an ATRM shareholder, if any, will depend on each such ATRM shareholder’s particular situation. The receipt of Digirad Preferred Stock as Merger Consideration in exchange for ATRM Common Stock or ATRM Preferred Stock in the Merger will be treated as a taxable sale by each ATRM shareholder for U.S. federal income tax purposes. The amount of gain or loss recognized by each ATRM shareholder in the Merger will vary depending on each ATRM shareholder’s particular situation, including the value of the Digirad Preferred Stock received by each shareholder as Merger Consideration in the Merger, and the adjusted tax basis of the ATRM Common Stock or ATRM Preferred Stock exchanged by each shareholder in the Merger. For a more complete discussion of certain U.S. federal income tax consequences of the Merger, see “Material United States Federal Income Tax Consequences”.

THE MERGER

This summary highlights selected information from this proxy statement/prospectus. It may not contain all of the information that is important to you. You are urged to carefully read the entire proxy statement/prospectus, including the annexes and the other documents referred to in this proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the Merger Agreement, the Merger and the other matters being considered at the ATRM special meeting. For additional information, see “ Where You Can Find More Information ” on page 208.

The Companies

Digirad

On September 10, 2018, Digirad announced that its board of directors approved the conversion of Digirad into a diversified holding company.

Historically, Digirad has delivered convenient, effective, and efficient healthcare solutions on an as needed, when needed, and where needed basis. Digirad’s diverse portfolio of mobile healthcare solutions and diagnostic imaging equipment and services, provides hospitals, physician practices, and imaging centers throughout the United States access to technology and services necessary to provide patient care in the rapidly changing healthcare environment.

Digirad has grown both organically and through acquisitions over the last three years. Prior to the year ended December 31, 2016, Digirad was organized as two reportable segments: Diagnostic Services and Diagnostic Imaging. With the acquisition of DMS Health on January 1, 2016, Digirad added two additional reportable segments: Mobile Healthcare and Medical Device Sales and Services. In February of 2018, Digirad completed the sale of its customer contracts relating to our MDSS post-warranty service business to Philips North America LLC. On October 31, 2018, Digirad sold its Telerhythmics business to G Medical, for $1.95 million in cash. As of December 31, 2018, Digirad’s business was organized into three reportable segments: Diagnostic Services, Mobile Healthcare, and Diagnostic Imaging.

Digirad’s aim is to continue to grow its business into an integrated healthcare services company while simultaneously converting into a diversified holding company through the acquisition of businesses that meet Digirad’s internally developed financially disciplined approach for acquisitions.

On December 14, 2018, Digirad and ATRM, entered into a joint venture and formed Star Procurement, LLC, with Digirad and ATRM each holding a 50% interest. The purpose of the joint venture is to provide the service of purchasing and selling building materials and related goods to KBS, a wholly-owned subsidiary of ATRM with which Star Procurement entered into a Services Agreement on January 2, 2019. In accordance with the terms of the Star Procurement Limited Liability Company Agreement, Digirad made a $1.0 million capital contribution to the joint venture, which was made in January 2019.

As part of the HoldCo Conversion, Digirad formed a real estate subsidiary named Star Real Estate Holdings USA, Inc. SRE will hold any significant real estate assets Digirad acquires. Digirad expects SRE to be substantially self-funded over time by raising its own capital in the form of commercial mortgages on the properties it owns or by raising other forms of external capital. As an initial transaction to create Digirad’s real estate division under SRE and launch that aspect of the HoldCo Conversion, in April 2019, Digirad purchased three plants in Maine that manufacture modular buildings (two of which were purchased from KBS) and leased those three properties to KBS.

ATRM

ATRM, a Minnesota corporation, through its wholly-owned subsidiaries, KBS, Glenbrook and EdgeBuilder, manufactures modular buildings for commercial and residential applications in production facilities located in South Paris and Waterford, Maine, operates a retail lumber yard located in Oakdale, Minnesota, and manufactures structural wall panels, permanent wood foundation systems and other engineered wood products for use in construction of residential and commercial buildings in a production facility located in Prescott, Wisconsin. ATRM wholly owns LSVM, a Connecticut investment advisor located in Greenwich, CT. ATRM and its subsidiaries have 124 employees. ATRM’s corporate headquarters is located in Oakdale, Minnesota.

Digirad Acquisition Corporation

Merger Sub is a Minnesota corporation and a wholly-owned subsidiary of Digirad. It was incorporated on June 20, 2019 solely for the purpose of effecting the Merger with ATRM, pursuant to the Merger Agreement.

The Agreement and Plan of Merger

Under the terms of the Merger Agreement, Merger Sub will merge with and into ATRM, with ATRM continuing as the surviving corporation and a wholly-owned subsidiary of Digirad. The Merger Agreement is attached to this proxy statement/prospectus as Annex I and is incorporated into this proxy statement/prospectus by reference. ATRM and Digirad encourage you to read the entire Merger Agreement carefully as it is the legal document which governs the Merger.

As a result of the Merger, the separate corporate existence of Merger Sub will cease and ATRM will continue as the surviving corporation and a wholly-owned direct subsidiary of Digirad.

At the effective time of the Merger, unless a holder of ATRM Common Stock previously exercised its dissenters’ rights and satisfied the procedures relating to dissenters’ rights under Minnesota law, a holder of ATRM Common Stock will be entitled to receive 0.03 shares of Digirad Preferred Stock for each share of ATRM Common Stock owned at the effective time of the Merger, and holders of ATRM Preferred Stock will be entitled to receive 2.5 shares of Digirad Preferred Stock for each share of ATRM Preferred Stock owned at the effective time of the Merger. No fractional shares of Digirad Preferred Stock will be issued. Each ATRM shareholder will be entitled to receive, in lieu of any fractional share of Digirad Preferred Stock, one whole share of Digirad Preferred Stock.

Upon the closing of the Merger, ATRM Common Stock will cease trading on the OTC Marketplace. Digirad has applied for the Digirad Preferred Stock to trade on the Nasdaq Global Market under the symbol “DRADP” upon the consummation of the Merger.

Background of the Merger

Digirad Background

The ATRM board of directors regularly reviews ATRM’s performance, risks, opportunities and strategy and discusses such matters at board meetings. ATRM’s board of directors and management team review and evaluate the possibility of pursuing various strategic alternatives and relationships as part of ATRM’s ongoing efforts to strengthen its businesses and improve its operations and financial performance in order to create value for its shareholders, taking into account economic, competitive and other conditions.

Likewise, the Digirad board of directors and the senior management team of Digirad regularly discuss opportunities intended to enhance value for Digirad stockholders. As part of its strategic planning process, Digirad’s management regularly considers and evaluates business and strategic opportunities, including to identify and investigate prospective transactions that could complement Digirad’s existing operations, development and operating expertise and capabilities and support its strategic growth plans. In connection with the foregoing, Digirad regularly discusses such matters with financial advisors, including Oberon Securities LLC (“Oberon”) to, among other things, review potential acquisition opportunities. As described below, a special committee of the board of directors of Digirad composed of independent Digirad board members (the “Digirad Special Committee”) engaged Oberon to provide advisory services in respect of the Merger, and subsequently entered into a formal advisory engagement in respect of the Merger effective June 1, 2018.

On April 25, 2018, the Digirad board of directors met and discussed ways to create value for the Digirad stockholders over the long term. The Digirad board of directors considered Digirad’s cash flow generating healthcare business, Digirad’s NOLs, Digirad’s public listing on the Nasdaq Global Market, and ways to leverage scale and scope in order to allocate corporate and public company costs over a wider base of operations, revenues, and cash flow. Mr. Eberwein, the Chairman of the Digirad board of directors and the ATRM board of directors, suggested creating a multi-industry holding company in order to accomplish these goals and mentioned his involvement in ATRM, a smaller company that may be interested in being acquired or merging with a larger entity. The Digirad board of directors decided to investigate the idea of converting Digirad into a multi-industry holding company and possibly acquiring ATRM. The Board formed the Digirad Special Committee to investigate, assess, negotiate, accept or reject a transaction with ATRM and/or any or all of its affiliates.

On April 27, 2018, the Digirad Special Committee met and discussed the proposed acquisition of ATRM (the “ATRM Transaction”) and the process of evaluating the transaction, including with regard to due diligence, utilizing the appropriate form, determining terms of the ATRM Transaction, preparing a term sheet, negotiating a definitive agreement and preparing and filing a registration statement. The Digirad Special Committee discussed potential financial advisors and determined that members of the Digirad Special Committee would speak with candidates to serve as potential advisors.

On June 1, 2018, the Digirad Special Committee engaged Oberon to serve as its financial advisor with respect to a potential ATRM Transaction.

On August 1, 2018, the Digirad board of directors met in executive session and received an update on work being done by the Digirad Special Committee in connection with the ATRM Transaction.

On August 21, 2018, the Digirad Special Committee met and discussed the proposed ATRM Transaction and a presentation prepared by Oberon (the “Oberon Presentation”) analyzing the proposed ATRM Transaction.  Stephen Clark, the Chief Financial Officer of ATRM at the time, gave an overview of recent ATRM transactions and an update on market conditions and other factors affecting ATRM.  Mr. Clark reviewed and provided feedback on portions of the Oberon Presentation.  Subsequent to this meeting, Mr. Eberwein made a presentation to the Digirad Special Committee regarding the potential benefits of converting Digirad into a multi-industry holding company and consummating the ATRM Transaction as an initial “kick-off” transaction to get the concept started. 

On August 24, 2018, the Digirad Special Committee met and discussed the proposed ATRM Transaction, Digirad’s financial condition, strategic alternatives, transaction mechanics, considerations regarding how and when to announce the potential ATRM Transaction and transaction related risks.

On August 27, 2018, Oberon made a presentation to the Digirad Special Committee highlighting the potential benefits of converting into a holding company structure and potentially acquiring ATRM as an initial acquisition to establish proof of concept.

On August 31, 2018, the Digirad Special Committee met and discussed the ATRM Transaction, the preparation of a non-binding letter of intent setting forth proposed terms of the proposed ATRM Transaction (the “Transaction LOI”), obtaining consents and approvals for the ATRM Transaction, fairness opinions, the need for audited ATRM financials and risks related to the ATRM Transaction.

On September 4, 2018, the Digirad board of directors met and received an update from the Digirad Special Committee on its review of the ATRM Transaction. The Digirad board of directors discussed converting Digirad into a diversified holding company, Oberon’s conclusions regarding the ATRM Transaction and the need for audited ATRM financials. The Digirad board of directors also discussed the timing of the ATRM Transaction, the announcement of the Transaction LOI following its execution, ATRM Transaction approvals, ATRM debt, Digirad debt, fairness opinions and the related party nature of the ATRM Transaction. The Digirad board of directors approved the preparation and filing of a Current Report on Form 8-K with the SEC on September 10, 2018, disclosing the execution and delivery of the Transaction LOI and Digirad’s planned conversion into a diversified holding company.

On September 6, 2018, the Digirad Special Committee met and discussed the proposed ATRM Transaction, including with regard to shareholder approval requirements, and received an update from Mr. Eberwein.

On September 6, 2018, the Digirad board of directors also met and discussed the ATRM Transaction and the proposed conversion of Digirad into a diversified holding company. Mr. Eberwein described his ownership of ATRM preferred stock. The Digirad board of directors discussed Mr. Eberwein’s relationship with ATRM and Digirad, the related party nature of the transaction and Nasdaq shareholder approval requirements. The Board also discussed feedback from the Digirad Special Committee on the Transaction LOI, financing options, ATRM’s historical liabilities, ATRM’s preferred stock and indebtedness, transaction timing and mechanics, and transaction risks.

On September 7, 2018, the Digirad Special Committee met and discussed the ATRM Transaction and the Transaction LOI to be delivered by Digirad to ATRM. The Digirad Special Committee approved the Transaction LOI and authorized Mr. Climaco to execute and deliver the Transaction LOI, which was signed by Digirad and ATRM later that same day.

On September 7, 2018, the Board met and discussed the ATRM Transaction, fairness opinion, Oberon’s fees and the conversion of the Company into a diversified holding company. The Board approved (a) the conversion of the Company into a diversified holding company, (b) a waiver for Mr. Eberwein and affiliated entities (the “Eberwein Group”) under the protective amendment to Digirad’s Amended and Restated Certificate of Incorporation (the “Charter”) in order to permit the Eberwein Group’s possible acquisition of shares as a result of the ATRM Transaction and pursuant to a put option and standstill agreement contemplated by Mr. Eberwein and another Digirad stockholder (the “Put Option Agreement”) and (c) the filing of a current report on Form 8-K and the release of a press release and presentation, in each case disclosing Digirad’s conversion into a diversified holding company, the entry into the Transaction LOI on September 7, 2018 and Mr. Eberwein’s entry into the Put Option Agreement on September 7, 2018.

On September 10, 2018, Digirad filed a Current Report on Form 8-K and issued a press release that publicly announced its planned conversion into a diversified holding company and the entry into the Transaction LOI with ATRM and the contemplated terms thereunder.

October 31, 2018, the Digirad board of directors met and received an update from Mr. Eberwein on Digirad’s transition to a holding company structure.

On November 5, 2018 and November 6, 2018, Messrs. Climaco and Angelis traveled to Minnesota and Wisconsin to conduct due diligence related to the ATRM Transaction and to meet with the management teams of ATRM’s subsidiaries, EdgeBuilder and KBS, and certain KBS clients in Maine.  Messrs. Sayward and Noble were also present during portions of the trip, which was hosted by Dan Koch, the Chief Executive Officer of ATRM.

On November 13, 2018, the Digirad Special Committee met and received an update from Mr. Clark to his prior report to the Digirad Special Committee in which he reviewed Oberon Presentation. Mr. Clark described recent developments in ATRM’s business operations, reviewed certain business and financial metrics, and provided an update on market conditions and other factors affecting ATRM.

On December 6, 2018, the Digirad board of directors met and received an update from Mr. Eberwein on the ATRM Transaction and a proposed joint venture with ATRM, and to discuss Digirad’s conversion into a diversified holding company.

On December 11, 2018, the Digirad board of directors and the Digirad Special Committee met and received an update from Mr. Eberwein on the ATRM Transaction, a proposed bridge loan to ATRM of up to $275,000 (the “Bridge Loan”), and a proposed joint venture with ATRM, with initial funding by Digirad of $250,000 and additional funding of up to $1 million (the “Joint Venture”). The Digirad board of directors and the Digirad Special Committee approved the Bridge Loan and the Joint Venture.

On December 14, 2018, the Digirad Special Committee met and received an update from Mr. Eberwein on the ATRM Transaction and received a presentation from Mr. Eberwein on the Digirad’s transition to a holding company structure. The Digirad Special Committee discussed various considerations related to the ATRM Transaction, including with regard to Oberon’s services, and the conversion of Digirad to a holding company structure.

On December 18, 2018, the Digirad Special Committee met and discussed the ATRM Transaction and expected timing for its completion.

On December 18, 2018, Digirad’s board of directors met and received an update from Mr. Eberwein on the ATRM Transaction and the proposed Joint Venture. Mr. Eberwein reviewed the proposed purchase of two plants from KBS in a potential sale leaseback transaction with ATRM (the “ATRM Sale-Leaseback”), and Digirad’s board of directors directed management to move forward with the ATRM Sale-Leaseback.

On January 15, 2019, the Digirad board of directors met and received an update from Mr. Eberwein on the ATRM Transaction in which he described his continued analysis of various considerations. Mr. Eberwein updated the Digirad board of directors on the Joint Venture and proposed that the Digirad board of directors increase funding of the Joint Venture up to the full $1,000,000 originally contemplated. The Digirad board of directors approved an additional investment of $750,000 in the Joint Venture. Mr. Eberwein updated the Digirad board of directors on Digirad’s purchase of real property and equipment from KBS.

On January 18, 2019, Mitch Quain was appointed to the Digirad board of directors and was later appointed to the Digirad Special Committee. Following his appointment to the Board, Mr. Quain traveled to Maine to conduct due diligence related to the ATRM Sale-Leaseback.

On February 27, 2019, the Digirad Special Committee met and discussed the proposed ATRM Sale-Leaseback, which involved (i) the purchase from KBS of a facility in Waterford, ME for a purchase price of $990,000, and a facility in Paris, ME for a purchase price of $2.9 million; and (ii) entering into lease agreements with KBS for each of the facilities. The Digirad Special Committee also discussed purchasing a third facility in Maine from RJF - Keiser Real Estate, LLC (“RJF”), an unaffiliated third party, for $1.2 million and leasing that facility to KBS (the “Oxford Purchase and Lease”). The Digirad Special Committee considered the advisability of the ATRM Sale-Leaseback and Oxford Purchase and Lease, considered the purchase price and lease payments, and other business terms and determined that they were fair and reasonable and the transactions were in the best interest of Digirad. The Digirad Special Committee determined that the ATRM Sale-Leaseback and the Oxford Purchase and Lease were in the best interest of the Company and recommended that the Digirad board of directors authorize and approve such transactions.

On February 27, 2019, the Digirad board of directors met and received an update from Mr. Noble on the ATRM Transaction, the ATRM Sale-Leaseback and the Oxford Purchase and Lease. The Digirad board of directors then approved the ATRM Sale-Leaseback and the Oxford Purchase and Lease.

On April 3, 2019, Digirad filed a Current Report on Form 8-K and issued a press release announcing the formation of its real estate division, SRE, and the entry into purchase agreements and leases in connection with the ATRM Sale Leaseback and the Oxford Purchase and Lease.

On May 1, 2019, the Digirad Special Committee met and discussed providing financial assistance to ATRM in order to enable ATRM to become current with its financial statements and filings with the SEC. The Digirad Special Committee approved such financial assistance up to an aggregate maximum amount of $400,000, with Mr. Angelis being authorized to approve additional amounts in increments of up to $10,000, on the condition that Digirad negotiate and enter into an agreement with ATRM that provides for the repayment of all such financial assistance if the proposed ATRM Transaction is not consummated.

On May 1, 2019, the Digirad board of directors met and received an update from Mr. Eberwein and Mr. Noble on the proposed ATRM Transaction. The Digirad board of directors also discussed providing financial assistance to ATRM in order to enable ATRM to become current with its financial statements and filings with the SEC. The Digirad board of directors approved such financial assistance up to an aggregate maximum amount of $400,000, with Mr. Angelis being authorized to approve additional amounts in increments of up to $10,000, and on the condition that Digirad negotiate and enter into an agreement with ATRM that provides for the repayment of all financial assistance to ATRM if the proposed ATRM Transaction is not consummated.

The Digirad Special Committee considered various candidates to represent it as counsel in connection with the Merger. On May 22, 2019, Mr. Climaco, as Chairman of the Digirad Special Committee, interviewed Martin W. Enright, partner of Littman Krooks LLP (“LK”), regarding LK’s expertise on matters such as the Merger and investigated whether LK had any conflict of interest that would prevent it from representing the Digirad Special Committee. At that time, Messrs. Enright and Climaco discussed the role of the Digirad Special Committee in evaluating the Merger and making its recommendation to the full Board, including the relevant standards of review under Delaware law for related party transactions. LK had not represented Digirad, ATRM, any of the executive officers of either Digirad, or the Chairman of the Board of Directors of Digirad and ATRM or any of his or their affiliates. Following their discussion on May 22, 2019 other members of the Digirad Special Committee had telephonic conversations with Mr. Enright on these same topics and the Digirad Special Committee engaged LK as counsel to the Digirad Special Committee in connection with the negotiation and implementation of the Merger.

On May 23, 2019 the Digirad Special Committee received a proposed term sheet for the ATRM Transaction that was prepared by Digirad management and their advisors and on May 24, 2019, the Digirad Special Committee received a draft Merger Agreement from Olshan Frome Wolosky LLP, counsel to Digirad. The Digirad Special Committee took the Term Sheet and draft Merger Agreement under advisement, asked LK to review them and to report back to the Digirad Special Committee. A Digirad Special Committee meeting was scheduled for Monday, June 3. The Digirad Special Committee also scheduled a meeting for June 3 with management of ATRM, Digirad management and Oberon to hear a presentation from ATRM management regarding ATRM’s proposed business plan going forward and their projections for operating results following the consummation of the proposed Merger.

Prior to the June 3, 2019 meeting with ATRM, the Digirad Special Committee received a PowerPoint presentation prepared by ATRM containing a narrative discussion of the business units of ATRM and detailed financial projections. At the June 3, 2019 meeting of the Digirad Special Committee, ATRM management gave an oral presentation to the Digirad Special Committee detailing the strategic rationale for the ATRM Transaction, the merits of the Merger as part of Digirad’s plans to become a diversified holding company and the projected value that would accrue to Digirad as a result. ATRM management guided the Digirad Special Committee through its projections through 2023 and explained the underlying assumptions, including regarding ATRM’s order backlog and sales pipeline. The analysis was broken down by ATRM subsidiaries KBS, EdgeBuilder and LSVM. ATRM management indicated that Digirad’s strategy of arranging or providing financing for ATRM operations, as well as the ATRM Sale-Leaseback and Star Procurement materials purchasing program had helped restore customer confidence in ATRM and allowed it to build a better order backlog and generate significantly more interest from potential new orders. ATRM management provided an analysis of its internal valuation of ATRM based on projected results and historical evidence regarding stock performance of other companies in the same industry grouping. Members of the Digirad Special Committee and representatives of Oberon asked questions of ATRM management regarding the assumptions underlying the projections and management’s degree of confidence that the projections could be met. Management indicated that current order book, expressions of interest on new orders, enhancements in purchasing and cost of goods reductions should result in significant improvements in performance in the coming years.

Following the meeting with ATRM management, the Digirad Special Committee met separately on June 3, 2019 with representatives of Oberon and LK to discuss next steps. Oberon described its process for evaluating the approximate value of ATRM, the data required for them to prepare their fairness opinion and the methods by which ATRM would be valued in their analysis. Mr. Enright of LK advised the Digirad Special Committee as to the “entire fairness” standard under which Delaware courts would evaluate the fairness of the proposed ATRM transaction to Digirad’s minority stockholders. Members of the Digirad Special Committee asked questions regarding the proposed term sheet and Merger Agreement and Mr. Enright reported on the results of his review of those documents.

On June 6, 2019 the Digirad Special Committee met to further discuss Oberon’s role, the ATRM projections, additional questions to put to ATRM, SEC reporting responsibilities and projected cost savings as a result of the Merger. The Committee further discussed the proposed term sheet for the Merger, including the terms and conditions of the proposed new Digirad Preferred Stock and related tax considerations.

On June 11, 2019, the Digirad Special Committee met to discuss the latest drafts of ATRM’s financial statements as well as the drafts of Merger Agreement and term sheet. The Digirad Special Committee received counsel from LK and reviewed Oberon’s preliminary valuation findings. Based on these inputs, the Digirad Special Committee determined that it wished to advance negotiations with ATRM and its counsel and asked Mr. Enright to authorize Olshan to transmit drafts of the Merger Agreement and term sheet to ATRM and their counsel for review and comment.

On June 17, 2019 the Digirad Special Committee met and provisionally adopted the term sheet dated as of June 14, 2019 as accurately reflecting terms on which the parties would continue to negotiate the Merger Agreement.

On June 20, 2019 the Digirad Special Committee met with LK and Oberon. Oberon presented a draft of their analysis on the value of ATRM and the proposed Digirad Preferred Stock. Oberon explained their analysis to the Digirad Special Committee, and informed the Digirad Special Committee that subject to Oberon’s receipt of certain outstanding data that prior to the execution of a Merger Agreement, Oberon would be able to conclude that the proposed Merger would be fair to Digirad from a financial perspective. The Digirad Special Committee also discussed Digirad management’s projected consolidated financial statements for the combined companies post-Merger.

On June 21, 2019, the Digirad board of directors met and received an update from Mr. Eberwein on the ATRM Transaction, reviewed the merits and terms of the ATRM Transaction, and reviewed information prepared for the Digirad Special Committee. Mr. Eberwein explained the form and nature of the consideration being paid in the ATRM Transaction. Andrew Silver, of Oberon, discussed the review by Oberon of the ATRM Transaction, including the merit of Digirad’s conversion to a holding company structure, the benefits of acquiring ATRM, and the financial analysis performed by Oberon in evaluating the ATRM Transaction. Mr. Silver informed the Digirad board of directors that Oberon had advised the Digirad Special Committee that Oberon viewed the ATRM Transaction as fair to Digirad and its stockholders from a financial point of view. The Digirad board of directors discussed with Mr. Silver and Digirad’s management ATRM’s past performance, projections and other considerations related to combining the Digirad and ATRM. The Digirad Special Committee indicated to the Digirad board of directors that they were inclined to approve the Merger, subject to their review of ATRM’s final SEC filings, an execution copy of the Merger Agreement and all ancillary documents.

On June 26, 2019 the Digirad Special Committee met with Oberon and LK to discuss the contents of ATRM’s recently filed periodic reports for 2018 and a draft of 2019 ATRM financial statements. The parties discussed proposed cost savings of the Merger, the potential impact of Digirad’s assumption of ATRM debt on Digirad’s liquidity and BDO’s conclusions on the preservation of NOLs in connection with the issuance of the Digirad Preferred Stock. Mr. Silver noted that ATRM’s EBITDA for the first quarter of 2019 was higher than prior estimates and the previous draft financial statements had indicated and that the value of the Merger Consideration to be issued to ATRM stockholders remained in a range that Oberon would consider fair. Mr. Silver also noted that, while both Digirad and ATRM believe that there will be savings of approximately $400,000 relating to ATRM ceasing to be a public company as a result of the Merger, which savings are reflected in the ATRM projections, but Oberon’s financial analysis did not assume any other potential synergies or savings.

The Digirad Special Committee met again on June 27, 2019 to discuss the impact on Digirad’s liquidity of the dividend on the Digirad Preferred Stock to be issued in the Merger, Digirad’s available borrowings under its current lines of credit, certain plans to refinance certain ATRM properties post-Merger and whether any further action was warranted to ensure that Digirad would have adequate liquidity going forward after the consummation of the Merger. Certain potential strategies to enhance Digirad’s liquidity were discussed. The Committee further discussed the impact of the issuance of the Digirad Preferred Stock to ATRM shareholders on Digirad’s NOLs and reviewed further ATRM’s draft first quarter 2019 financials.

On July 2, 2019, the Digirad Special Committee met to discuss a proposal that arose in conversations between John Climaco, Chairman of the Digirad Special Committee, and Jeffrey Eberwein, Chairman of the Board of Digirad regarding Digirad’s liquidity going forward after the Merger. The Digirad Special Committee authorized Mr. Climaco to negotiate the terms of a put option that would require Mr. Eberwein to purchase an additional $1 million of Preferred Stock, at Digirad’s option, should Digirad determine that it was advisable to enhance Digirad’s liquidity.

On July 3, 2019, the Digirad Special Committee unanimously adopted a written Action by Consent in Lieu of Meeting (i) determining and declaring that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Digirad and its stockholders and (ii) recommending to the full Board of Directors of Digirad that it adopt and approve the execution, delivery and performance of the Merger Agreement and the consummation of the Merger and the other transactions contemplated by the Agreement in accordance with the Merger Agreement.

The Digirad board of directors met on July 3, 2019 to finally consider the merits and parameters of the Merger including the exchange ratios with respect to each of the ATRM Common Stock and ATRM Preferred Stock and the proposed terms of the Merger Agreement. Prior to the final Digirad board meeting on that date, final presentation materials concerning the proposed Merger had been circulated to the individual members of the Digirad board of directors. The Digirad board of directors also had reference to the proposed forms of the Merger Agreement, the Voting and Support Agreement and other related documentation. At the meeting, the Digirad board of directors received a report from the Digirad Special Committee that having received Oberon’s final draft fairness opinion on July 2, 2019 stating that the Merger was advisable, fair and in the best interests of Digirad and its stockholders, the Digirad Special Committee recommended that the Digirad board of directors approve the Merger. A representative of Oberon was also present at the meeting and discussed its analysis with the Digirad board of directors. Having received the recommendation of the Digirad Special Committee and discussed the matters at hand with regard to the best interests of Digirad and the Digirad stockholders, and following the receipt of legal and financial advice, including the oral opinion from Digirad’s financial advisor that the proposed Merger was fair as of the date of the Merger Agreement, from a financial point of view, to Digirad stockholders, the Digirad board of directors unanimously determined that the Merger was in the best interests of Digirad and determined to unanimously support Digirad’s entry into the Merger Agreement, the Voting and Support Agreement and related matters. The exchange ratios were formally agreed to by the parties after market close on July 3, 2019, with the support of the Digirad board of directors.

ATRM Background

Conversation between ATRM and Digirad occurred throughout 2018, culminating in the Transaction LOI dated September 7, 2018 and publicly announced September 10, 2018. The Transaction LOI expired on December 31, 2018, as the parties recognized the transaction contemplated by that letter of intent could not be implemented because ATRM was not current in filing its periodic reports.

The parties again began discussions about a possible transaction in late spring of 2019. The focal point for those conversations was Mr. Eberwein, the Chairman of the board of directors of ATRM, who is also a member of the board of directors of Digirad. Because of the potential conflicts, the ATRM board of directors created a special committee of that board (the “ATRM Special Committee”) composed of the two ATRM Board members who did not have a conflict, Mr. Rodney Schwatken and Mr. Mark Hood. The fourth member of the ATRM Board of Directors, Mr. Daniel Koch, was deemed conflicted because of the impact a proposed transaction might have on his compensation.

The ATRM Special Committee met on May 30, 2019 by teleconference. The ATRM Special Committee members were joined by Mr. Koch and by Steve Carman, a partner at Husch Blackwell LLP. The ATRM Special Committee had previously obtained information from three different law firms, and asked Mr. Carman to attend the meeting and answer questions so that he could be considered as counsel to the ATRM Special Committee. After a discussion with Mr. Carman about his firm, his experience, and the terms of his retention, the ATRM Special Committee retained Husch Blackwell to represent the ATRM Special Committee. Husch Blackwell had not previously done work for ATRM, Digirad, any of the executive officers of either company, or the Chairman of the Board of Directors of ATRM or any of his or their affiliates. At the first meeting, the ATRM Special Committee also considered retaining a financial advisor. After much discussion, it was concluded that because of the financial expertise of the members of the ATRM Special Committee, the prospects of ATRM as a stand-alone entity, the expected cost of a financial advisor, and the access to Mr. Koch as a resource as needed, the ATRM Special Committee would proceed without retaining its own financial advisor.

The ATRM Special Committee received on June 10, 2019, a draft of the Merger Agreement and a draft letter of intent describing the proposed terms of the transaction. After separately reviewing those documents, the Special Committee scheduled a meeting with its counsel and with Mr. Koch for June 12, 2019. As a result of an unexpected matter, Mr. Hood was unable to attend but encouraged Mr. Schwatken to proceed without him. At the meeting, Mr. Schwatken asked numerous questions about the proposed transaction, some of which related to facts about the business of ATRM and that were answered by Mr. Koch, and some of which related to the proposed transaction and the appropriate process to follow in considering what was being proposed by Digirad. Those questions were answered by Mr. Carman. Mr. Schwatken noted that significant progress had been made in bringing current ATRM’s periodic reports with the SEC and that he had increasing comfort with the accuracy of the recent financial statements of ATRM that he had reviewed. As a result, Mr. Schwatken noted that he and Mr. Hood should be in a position to accurately evaluate the financial condition of ATRM, the book value and potential of the ATRM Common Stock, the ability of ATRM to continue as a going concern, and the value of a share of ATRM Common Stock if ATRM could not continue.

The ATRM Special Committee also considered the need to conduct due diligence of Digirad because the proposed transaction contemplated that Digirad securities would be the sole consideration received by ATRM shareholders. The ATRM Special Committee requested counsel to prepare a due diligence request list for the Special Committee to review and forward to Digirad, and Mr. Schwatken suggested several pieces of information he would be interested in reviewing. Mr. Schwatken noted that the draft documents from Digirad did not include an exchange ratio. As a result, he concluded that it would be premature to respond to Digirad in any way based on those documents. At the conclusion of the meeting, Mr. Schwatken undertook to provide Mr. Hood a complete update on the conversation. Mr. Hood provided his comments on the proposed transaction separately.

The ATRM Special Committee met again on June 19, 2019, after receiving from Digirad, a fully completed letter of intent for the proposed transaction and the requested due diligence material. The ATRM Special Committee members were joined by Mr. Carman, Ms. Taylor, and Ms. Simpson-Conner from Husch Blackwell, Mr. Koch, and Ms. Hannah Bible, an employee of LSVM and ATRM. The ATRM Special Committee first asked Mr. Carman to provide a thorough review of the proposed draft of the Merger Agreement, highlighting areas in which Husch Blackwell would propose changes be made. During the course of Mr. Carman’s presentation, the ATRM Special Committee members asked numerous questions for which satisfactory answers were provided. Mr. Carman noted the work to be done to confirm the accuracy of the representations to be made by ATRM and the ability of ATRM to comply with the proposed covenants.

The ATRM Special Committee then reviewed and discussed the material provided by Digirad in response to the due diligence request. The ATRM Special Committee considered whether they would benefit from having any additional information about Digirad before proceeding. The ATRM Special Committee concluded that, in light of the information publicly available and the information provided, no additional information was needed.

The ATRM Special Committee then authorized Mr. Carman to provide comments on the proposed Merger Agreement to counsel for Digirad and then discussed the most efficient process to follow for moving forward. The ATRM Special Committee concluded that it was in a position to make a decision to recommend the proposed merger to the full board of directors of ATRM for approval.

After the meeting, Mr. Carman called counsel to Digirad to discuss the changes in the draft Merger Agreement sought by the ATRM Special Committee. Counsel for Digirad subsequently conferred with Mr. Carman concerning the proposed changes, some of which were agreed to and some of which were not, and Mr. Carman reported that information back to the ATRM Special Committee. In addition, after the June 19, 2019 meeting, Husch Blackwell worked closely with Mr. Koch to ensure the accuracy of the ATRM representations and to prepare the related disclosure schedule.

The ATRM board of directors met on June 21, 2019 to consider the merits and parameters of the Merger, including the exchange ratios with respect to each of the ATRM Common Stock and ATRM Preferred Stock and the proposed terms of the Merger Agreement. Prior to the ATRM board meeting, a fully negotiated version of the Merger Agreement had been circulated to the members of the ATRM board of directors. Following discussion by the ATRM board of directors, including a full reflection of the prior separate deliberation by the independent directors of the ATRM board, and following the receipt of legal advice, the ATRM board of directors unanimously determined that the Merger was in the best interests of ATRM and the holders of ATRM Common Stock and ATRM Preferred Stock and determined to unanimously support the entry into the Merger Agreement and to recommend the approval of the Merger to its shareholders.

The Merger Agreement were then executed by ATRM after the close of markets on July 3, 2019 and the Merger Agreement and the Voting and Support Agreement were executed by the other parties thereto at the same time. The Merger Agreement and the Voting and Support Agreement were publicly announced by a press release by Digirad on July 3, 2019. For a discussion of the Merger Agreement, see “ The Merger Agreement ” beginning on page 83 of this proxy statement/prospectus.

On July 16, 2019, ATRM, LSVI and LSV Co-Invest I entered into a Series B Preferred Stock Dividend Agreement, pursuant to which the parties thereto agreed to cancel all accrued but unpaid dividends for 2018 on the ATRM Preferred Stock in exchange for the issuance to LSVI and LSV Co-Invest I of an aggregate of 17,915 shares of ATRM Preferred Stock. As a result of such agreement, there are no accrued dividends on the ATRM Preferred Stock.

On July 17, 2019, ATRM entered into two waivers with LSV Co-Invest I and one waiver with LSVM, pursuant to which the parties thereto agreed (i) that the closing of the Merger would not constitute an event of default under the terms of two promissory notes issued by ATRM to LSV Co-Invest I on January 12, 2018 and June 1, 2018 for the principal amounts of $500,000 and $900,000, respectively, or under the terms of a promissory note issued by ATRM to LSVM on December 17, 2018 for the principal amount of $300,000, (ii) that neither LSV Co-Invest I nor LSVM would be entitled to accelerate any payment under such notes as a result of the closing of the Merger and (iii) upon the closing of the Merger, ATRM would be permitted to amend its governing documents in accordance with the terms of the Merger Agreement.

Recommendation of the ATRM Board; ATRM’s Reasons for the Merger

At a meeting of ATRM’s board of directors held on June 21, 2019, the board of directors determined that the Merger Agreement and the Merger are advisable, fair to and in the best interests of ATRM and ATRM’s shareholders and unanimously approved the Merger Agreement and the Merger.  Accordingly, ATRM’s board of directors unanimously recommends that ATRM’s shareholders vote “FOR” adoption of the Merger Agreement and approval of the Merger and the other transactions contemplated by the Merger Agreement.

In reaching its decision to approve the Merger Agreement and the Merger and to recommend that ATRM shareholders vote “ FOR ” adoption of the Merger Agreement and approval of the Merger and related transactions, the ATRM Special Committee, and then the ATRM board of directors, with the assistance of ATRM’s management and legal advisors, considered and analyzed a number of factors, including those reviewed by the ATRM board of directors at the meetings described in this proxy statement/prospectus under “—Background of the Merger.” The following are the material factors considered by the ATRM board of directors in determining to approve the Merger Agreement and the Merger transactions and to recommend that ATRM shareholders vote “ FOR ” adoption of the Merger Agreement and approval of the Merger and related transactions (which are not listed in any relative order of importance):

Positive Factors Relating to the Merger

Strategic Benefits of the Merger . The ATRM board of directors believes that the combination of ATRM and Digirad should result in significant strategic benefits to Digirad upon completion of the Merger, which would benefit ATRM and the ATRM shareholders as holders of Digirad Preferred Stock following completion of the Merger. These strategic benefits include the following:

Digirad’s Businesses, Operating Results, Financial Condition and Management. The ATRM board of directors believes that the combination of ATRM and Digirad should result in significant financial benefits to the businesses, operating results and financial condition of Digirad, on both a historical and prospective basis, and the quality, breadth and experience of Digirad’s senior management, including:

Merger Consideration .

Terms and Conditions of the Merger Agreement. The ATRM board of directors considered the terms and conditions of the Merger Agreement in addition to the exchange ratios, including the following:

Continued Operation as a Stand-Alone Enterprise.     Evaluation, as an alternative to the Merger, of the potential rewards and risks associated with the continued execution by ATRM of its strategic plan as an independent company. Due to ATRM’s operating results, substantial doubt exists as to ATRM’s ability to continue as a going concern and there can be no assurance that ATRM’s actions to generate liquidity, including additional debt financing, will generate expected liquidity as currently planned or be successful at all. The ATRM board of directors reviewed ATRM’s historical and possible future performance in light of execution risks of meeting its plans, as illustrated by its capital and liquidity constraints, and the risks affecting its businesses, operations and financial condition. The ATRM board of directors considered, among other factors, the challenges of continuing to operate independently and the risks affecting ATRM’s ability to compete effectively against larger and better capitalized competitors. The ATRM board also considered the potential downside risk in the long-term stock price as a stand-alone enterprise as compared to that of the combined company following a combination with Digirad.

Alternative Transactions. Evaluation, as alternatives to the Merger or continued independent operations, of ATRM’s prospects for a merger transaction with a company other than Digirad and the potential terms of any such transaction, including consideration of the following:

Potentially Negative Factors Relating to the Merger

The ATRM board of directors took into account a number of potentially negative factors in its deliberations concerning the Merger with Digirad, including the following considerations:

After consideration of these factors, the ATRM board of directors determined that the potential negative factors were significantly outweighed by the potential positive factors referenced above and the other potential benefits of the Merger to ATRM’s shareholders.

The foregoing summary of the factors considered by the ATRM board is not intended to be exhaustive, but is believed to include material factors considered by the ATRM board of directors. In view of the variety of factors considered in connection with its evaluation of the Merger, ATRM’s board did not find it practicable to, and did not, quantify or otherwise assign relative or specific weight to these factors. In addition, individual members of ATRM’s board of directors may have given different weight to different factors.

THE MERGER AGREEMENT

The following discussion sets forth the principal terms of the Merger Agreement, a copy of which is attached as Annex I to this proxy statement/prospectus and is incorporated by reference herein. The rights and obligations of the parties are governed by the express terms and conditions of the Merger Agreement and not by this discussion, which is a summary by nature. This discussion is not complete and is qualified in its entirety by reference to the complete text of the Merger Agreement. You are encouraged to read the Merger Agreement carefully in its entirety, as well as this proxy statement/prospectus, before making any decisions regarding the Merger.

The Merger 

Subject to the terms and conditions of the Merger Agreement and in accordance with Minnesota law, Merger Sub, a wholly owned subsidiary of Digirad, will merge with and into ATRM. ATRM will be the surviving company in the Merger and continue its corporate existence as a wholly owned subsidiary of Digirad. Upon consummation of the Merger, the separate corporate existence of Merger Sub will terminate.

Closing and Effectiveness of the Merger 

The closing of the Merger will occur as soon as possible, but no later than two business days after the date of the conditions to its completion have been satisfied or waived. The Merger will become effective at such time (the “effective time”) as the parties file articles of merger with the Secretary of State of the State of Minnesota (or at such later time as ATRM and Digirad may agree and is specified in the articles of merger).

Consideration to be Received in the Merger 

At the effective time of the Merger, each share of ATRM Common Stock (other than shares owned directly by ATRM, any ATRM subsidiary, Digirad or Merger Sub) issued and outstanding immediately prior to the effective time of the Merger will be converted into and become the right to receive 0.03 shares of Digirad Preferred Stock, and each share of ATRM Preferred Stock (other than shares owned directly by ATRM, any ATRM subsidiary, Digirad or Merger Sub or any shares for which dissenters’ rights are exercised) issued and outstanding immediately prior to the effective time of the Merger will be converted into and become the right to receive 2.5 shares of Digirad Preferred Stock. No fractional shares of Digirad Preferred Stock will be issued. Each holder will be entitled to receive in lieu of any fractional share of Digirad Preferred Stock one whole share of Digirad Preferred Stock.

Treatment of ATRM Equity Awards 

As of the date of the Merger Agreement, ATRM’s outstanding equity awards consisted solely of grants of restricted shares of ATRM Common Stock and restricted stock units for shares of ATRM Common Stock. Pursuant to the Merger Agreement, ATRM may not issue any additional equity grants prior to the completion of the Merger. For any equity grants of restricted shares of ATRM Common Stock and restricted stock units for shares of ATRM Common Stock outstanding at the time of the Merger, at the Effective Time, each unvested share of restricted ATRM Common Stock or restricted ATRM Common Stock unit subject to vesting, repurchase, or other lapse of restrictions shall, by virtue of the Merger and without any action on the part of the holder thereof, be assumed by Digirad and cease to represent a right with respect to shares of ATRM Common Stock and shall be converted automatically into a right to receive a restricted share of Digirad Preferred Stock or restricted Digirad Preferred Stock unit (as applicable) subject only to time based vesting with respect to a number of shares of Digirad Preferred Stock, at a rate equal to three one-hundredths of a share, or 0.03 shares, of Digirad Preferred Stock, with any fractional shares of Digirad Preferred Stock rounded up to the next higher whole number of shares. Each Adjusted Restricted Share shall otherwise be subject to the same terms and conditions applicable to the converted Company Restricted Share under the ATRM’s stock plans and the agreements evidencing grants thereunder, including as to vesting and settlement.

Representations and Warranties 

The Merger Agreement contains representations and warranties made by ATRM to Digirad and by Digirad to ATRM. The assertions embodied in those representations and warranties were made solely for purposes of the Merger Agreement and may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating the terms of the Merger Agreement. Accordingly, ATRM shareholders should not rely on representations and warranties as characterizations of the actual state of facts or circumstances, and should bear in mind that the representations and warranties were made solely for the benefit of the parties to the Merger Agreement, were negotiated for purposes of allocating contractual risk among the parties to the Merger Agreement rather than to establish matters as facts and may be subject to contractual standards of materiality different from those generally applicable to shareholders. Moreover, information concerning the subject matter of such representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be reflected in public disclosures of ATRM and Digirad. This description of the representations and warranties is included to provide ATRM’s shareholders with information regarding the terms of the Merger Agreement. The representations and warranties in the Merger Agreement and the description of them in this joint proxy statement/prospectus should be read in conjunction with the other information contained in the reports, statements and filings ATRM and Digirad publicly file with the SEC. See “Where You Can Find Additional Information.”

In the Merger Agreement, ATRM and Digirad made a number of representations and warranties to each other. The parties’ reciprocal representations and warranties relate to, among other things:

In addition to the foregoing, the Merger Agreement contains representations and warranties made by ATRM to Digirad relating to, among other things:

Digirad also represented and warranted to ATRM that Digirad has or will have sufficient shares of authorized and unissued Digirad Preferred Stock and all funds necessary for the issuance and payment of the Merger Consideration and has funds available to it to satisfy its payment obligations under the Merger Agreement.

ATRM’s Conduct of Business Before Completion of the Merger 

From the date of the Merger Agreement until the effective time, ATRM has agreed, subject to certain exceptions, to conduct its business in the ordinary course. In addition, ATRM may not, among other things and subject to certain exceptions, without Digirad’s consent:

Digirad’s Forbearances Before Completion of the Merger 

From the date of the Merger Agreement until the effective time, Digirad has agreed not to take the following actions, among other things and subject to certain exceptions, without ATRM’s consent:

No Solicitation; Changes in Recommendations 

In the Merger Agreement, ATRM has agreed that the ATRM board of directors will recommend that ATRM’s shareholders approve the Merger Agreement, and that none of ATRM, the ATRM board of directors or any of its subsidiaries will, nor will any of ATRM, the ATRM board of directors or any of its subsidiaries authorize or permit any of its representatives to, directly or indirectly:

However, at any time prior to obtaining ATRM shareholder approval, if ATRM has complied with its non-solicitation obligations above, ATRM may participate or engage in discussions or negotiations with, furnish non-public information, and afford access to the business, properties, assets, books, records or other non-public information and access to ATRM’s personnel, to any person that makes a bona fide alternative proposal, but only if:

In addition, at any time prior to obtaining ATRM shareholder approval, if ATRM is then in receipt of a bona fide written alternative proposal that the ATRM board of directors concludes in good faith (after consultation with its financial advisor and outside legal counsel) constitutes a superior proposal or in connection with a fiduciary change (as defined below), the ATRM board of directors may:

In the circumstances set forth in the foregoing paragraph, the ATRM board of directors may effect a company recommendation change, if and only if:

The term “alternative proposal” means, any proposal, indication or offer, including any proposal, indication or offer from or to ATRM’s shareholders, made by any person or group (as defined under Rule 13(d) under the Exchange Act) other than Digirad or its subsidiaries and/or affiliates relating to, whether in a single transaction or series of related transactions, and whether directly or indirectly, any (i) transaction or series of transactions (including any merger, reorganization, share exchange, consolidation, business combination, joint venture, partnership, recapitalization, dissolution, liquidation or similar direct or indirect transaction) involving ATRM and/or any of its subsidiaries or the issuance or acquisition of shares of ATRM common stock or other equity securities of ATRM whose business or businesses constitute 20% (in number or voting power) or more of the assets, revenues or earnings of ATRM and its subsidiaries, taken as a whole, (ii) acquisition, license or purchase of assets of ATRM and/or its subsidiaries equal to 20% or more of the consolidated assets of ATRM and its subsidiaries or to which 20% or more of ATRM’s revenues or earnings on a consolidated basis are attributable or (iii) acquisition of beneficial ownership (as defined under Rule 13(d) under the Exchange Act) of equity interests representing a 20% or greater economic or voting interest in ATRM or tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in any person or group (as defined under Rule 13(d) under the Exchange Act) beneficially owning equity interests representing a 20% (in number or voting power) or greater economic or voting interest in ATRM.

The term “superior proposal” means any bona fide alternative proposal (except that references to “20% or more” in the definition thereof will be deemed to be references to “50% or more”) made by any person that is on terms that the ATRM board of directors determines in good faith (after consultation with its financial advisor and outside legal counsel and after taking into account all legal, financial (including the financing terms thereof)), regulatory, timing and other aspects of the proposal are more favorable to ATRM’s shareholders from a financial point of view than the transactions contemplated by the Merger Agreement.

The term “fiduciary change” means the ATRM board of directors, prior to the approval of the Merger Agreement by the affirmative vote of two-thirds of the outstanding shares of ATRM Preferred Stock and a majority of the outstanding shares of ATRM Common Stock entitled to vote, determines it is obligated to make a company recommendation change because such a change is advisable to comply with its fiduciary duties to shareholders of the Company, including for circumstances as set forth in  Frontier Oil Corp. v. Holly Corp ., 2005 WL 1039027, (Del. Ch. Apr. 29, 2005).

The Merger Agreement provides that ATRM shall not take any of the actions described above unless ATRM has promptly notified Digirad if any alternative proposals are received by ATRM indicating, in connection with such notice, the material terms and conditions of any proposals or offers (including, if applicable, copies of any written requests, proposals or offers, including proposed agreements) and thereafter ATRM must keep Digirad reasonably informed, on a prompt basis, of the status and material terms of any such proposals or offers (including any material amendments thereto), including any change in ATRM’s intentions as previously notified. In addition, ATRM must promptly notify Digirad if any non-public information is requested from, or any discussions or negotiations are sought to be initiated or continued with, ATRM indicating, in connection with such notice, the status of any such discussions or negotiations, including any change in the ATRM’s intentions as previously notified.

The ATRM board of directors will not make a company recommendation change in connection with a fiduciary change unless it provides Digirad with written information describing such fiduciary change in reasonable detail as soon as reasonably practicable after become aware of it and keeps Digirad reasonably informed of developments with respect to such change. If a company recommendation change is made in connection with a fiduciary change ATRM must terminate the Merger Agreement and pay the termination fee.

Commercially Reasonable Efforts to Complete the Merger; Other Agreements 

Commercially Reasonable Efforts.     Digirad and ATRM have each agreed to use their commercially reasonable efforts (i) to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable law to consummate the transactions contemplated by the Merger Agreement and (ii) to promptly prepare, file and provide to third parties and governmental entities all applications, statements, notices, petitions, registrations, requests, declarations and filings which are necessary or advisable to consummate the transactions contemplated by the Merger Agreement (including the Merger), to obtain (and to cooperate with the other party to obtain) as promptly as practicable all material permits, consents, registrations, authorizations and exemptions of or from all third parties and governmental entities which are necessary or advisable to consummate the transactions contemplated by the Merger Agreement (including the Merger), and to comply with the terms and conditions of all such permits, consents, registrations, authorizations and exemptions of all such third parties and governmental entities.

Proxy Statement/Prospectus; Registration Statement; Shareholders’ Meeting.     Digirad and ATRM have agreed to prepare and file with the SEC this proxy statement/prospectus and the registration statement of which this proxy statement/prospectus forms a part as soon as is reasonably practicable after the execution of the Merger Agreement. Digirad and ATRM have also agreed to use commercially reasonable efforts to have the registration statement declared effective. The Merger Agreement also provides that ATRM will hold a meeting of its shareholders following SEC clearance of the proxy statement/prospectus and will recommend the approval of the Merger Agreement by shareholders, and ATRM will use commercially reasonable efforts to obtain such approvals.

Access to Information 

Under the Merger Agreement, until the effective time, subject to reasonable prior notice, applicable law and the confidentiality agreement between ATRM and Digirad dated June 6, 2018, ATRM agreed to provide Digirad’s authorized representatives access to the properties, books, contracts, commitments and records and to the officers, employees, accountants, counsel and other representatives of ATRM and its subsidiaries.

Director and Officer Indemnification and Insurance 

The Merger Agreement provides that from and after the effective time, each of Digirad and ATRM, as the surviving company shall, jointly and severally:

The Merger Agreement further provides that, as of the effective time of the Merger, ATRM shall or, if ATRM is unable to, Digirad shall cause the surviving company in the Merger to, obtain and fully pay the premium for the non-cancellable extension of the directors’ and officers’ liability coverage of ATRM’s existing directors’ and officers’ insurance policies and ATRM’s existing fiduciary liability insurance policies (collectively, “D&O Insurance”), in each case for a claims reporting or discovery period of at least six years from and after the effective time of the Merger with respect to any claim related to any period of time at or prior to the effective time of the Merger from an insurance carrier with the same or better credit rating as the Company’s current insurance carrier with respect to D&O Insurance with terms, conditions, retentions and limits of liability that are no less favorable than the coverage provided under ATRM’s existing policies with respect to any actual or alleged error, misstatement, misleading statement, act, omission, neglect, breach of duty or any matter claimed against a director or officer of ATRM by reason of him or her serving in such capacity that existed or occurred at or prior to the effective time of the Merger (including in connection with the Merger Agreement or the transactions or actions contemplated thereby), provided that the annual premium therefor shall not exceed $100,000. If such “tail policy” cannot be obtained, ATRM as the surviving company is required to maintain D&O Insurance in effect for a period of six years subject to an annual cap of $100,000 per year and the other terms and conditions of the Merger Agreement.

Employee Matters 

The Merger Agreement provides that, for a period of one year from and after the effective time of the Merger, Digirad will provide to those employees of ATRM and its subsidiaries who are employed immediately prior to the effective time of the Merger who remain employed by Digirad after the effective time of the Merger (the “continuing employees”) compensation and benefits arrangements that are no less favorable in the aggregate than the compensation and benefit arrangements that are provided to similarly situated employees of Digirad, provided that in no event shall such compensation and benefits be less favorable in the aggregate than such continuing employee’s current compensation and benefits arrangements. The Merger Agreement also provides that Digirad will give continuing employees who remain employed by Digirad after the effective time of the Merger, full credit for purposes of determining eligibility and vesting under any employee benefit plans or arrangements maintained by Digirad (other than any defined benefit or equity-based plans) for such continuing employee’s service with ATRM or its subsidiaries, waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to the continuing employees under any welfare benefit plan maintained by Digirad to the same extent waived by ATRM and its subsidiaries or otherwise not subject to limitation by ATRM and its subsidiaries, provide credit under any such welfare plan for any co-payments, deductible and out-of-pocket expenditures for the remainder of the coverage period during which any transfer of coverage occurs, and honor in accordance with their terms all employee benefit plans or arrangements maintained by ATRM immediately prior to the effective time of the Merger.

Definition of Material Adverse Effect 

A “material adverse effect” is defined with respect to any entity as (i) a material adverse effect on the business, results of operations or financial condition of such entity and its subsidiaries, taken as a whole or (ii) a material adverse effect on the ability of such entity to consummate the transactions contemplated by the Merger Agreement on a timely basis, excluding any effect on the entity or its subsidiary relating to or arising in connection with:

Conditions of the Merger 

Mutual Conditions. The obligations of ATRM, Digirad and the Merger Sub to consummate the Merger are subject to the satisfaction or waiver of various conditions on or prior to the effective time, including the following:

Digirad Conditions.   Digirad’s and Merger Sub’s obligations to consummate the Merger are subject to the satisfaction or waiver of additional conditions, which include the following:

ATRM Conditions.   ATRM’s obligations to complete the Merger are subject to the satisfaction or waiver of additional conditions, which include the following:

The Merger Agreement provides that certain of the conditions described above may be waived. Neither Digirad nor ATRM currently expects to waive any material condition to the completion of the Merger.

Termination; Termination Fees; Expenses 

Termination.     The Merger Agreement may be terminated, and the Merger may be abandoned at any time prior to its completion:

If the Merger Agreement is terminated as described in “The Merger Agreement—Termination of the Merger Agreement” above, the Merger Agreement will be void, and there will be no liability or obligation of any party except that:

Termination Fees.     ATRM has agreed to pay Digirad a termination fee of $725,000 and an amount up to $225,000 of Digirad’s reasonable, documented, out-of-pocket expenses incurred in connection with the Merger Agreement if the Merger Agreement is terminated:

Expenses.     If ATRM fails promptly to pay any termination fee due to Digirad, ATRM will also be obligated to pay the costs and expenses (including reasonable legal fees and expenses) incurred by Digirad in connection with any legal action take to collect payment, together with interest on the amount of any unpaid fee or obligation from the date such fee was required to be paid. Except as described above, all costs and expenses incurred in connection with the Merger Agreement will be paid by the party incurring the cost or expense.

Specific Performance; Remedies 

The parties to the Merger Agreement agreed that irreparable damage would occur if any provision of the Merger Agreement were not performed in accordance with its terms and that the parties will be entitled to an injunction or injunctions to prevent breaches of the Merger Agreement or to enforce specifically the performance of its terms and provisions in addition to any other remedy to which they are entitled at law or in equity.

Amendment; Extension and Waiver 

Any provision of the Merger Agreement may be amended or waived prior to the effective time if such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to the Merger Agreement or, in the case of a waiver, by each party against whom the waiver is to be effective. After the ATRM shareholder approval has been obtained, however, there will be no amendment or waiver that would require the further approval of ATRM shareholders under Minnesota law without such approval having been first obtained.

Governing Law; Venue 

The Merger Agreement is governed by and will be construed in accordance with the laws of the State of Delaware. The parties to the Merger Agreement have submitted to exclusive jurisdiction and venue of the courts of the State of Delaware or of the United States of America located in Delaware.

FINANCING

General

Digirad intends to finance the repayment of existing indebtedness of ATRM and pay its fees and expenses incurred in connection with the transactions contemplated by the Merger Agreement with Digirad debt, cash on hand and the proceeds of the Private Placement described below.

Private Placement

Before the completion of the Merger, Digirad expects to conduct a private placement of Digirad Preferred Stock for gross proceeds to Digirad of no less than $3,000,000. Digirad will use commercially reasonable efforts to complete the Private Placement. The net proceeds of the Private Placement, after the payment of any expenses incurred in connection with the negotiation and consummation of the Private Placement, will be applied toward the costs and expenses of the Merger, including the repayment of ATRM debt. The completion of the Private Placement is a condition to Digirad’s completion of the transactions contemplated by the Merger Agreement. In the event Digirad is unable to complete the Private Placement on terms acceptable to it, Digirad is not required to complete the Merger, unless the Private Placement condition is waived by Digirad.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated combined financial statements (“pro forma financial statements”) have been prepared to reflect the Merger, based on the acquisition method of accounting, with Digirad treated as the acquirer. The pro forma financial statements utilize the historical consolidated financial statements of Digirad and ATRM, which are included in this proxy statement/prospectus. The historical consolidated financial statements have been adjusted to give effect to pro forma events that are directly attributable to the Merger and factually supportable and, in the case of the statement of income, which are expected to have a continuing impact. The unaudited pro forma condensed combined statements of income, which have been prepared for the three months ended March 31, 2019 and the year ended December 31, 2018, give effect to the Merger as if it had occurred on January 1, 2018. The unaudited pro forma condensed combined balance sheet has been prepared as of March 31, 2019 and gives effect to the Merger as if it had occurred on that date.

As of the date of this proxy statement/prospectus, Digirad has not finalized the detailed valuation studies necessary to arrive at the required fair market value of the ATRM assets to be acquired and the liabilities to be assumed and the related allocations of the purchase price. As indicated in Note 1 to the pro forma financial statements, Digirad has made certain pro forma adjustments to the historical book values of the assets and liabilities of ATRM to reflect certain preliminary estimates of the fair value of the net assets acquired, with the excess of the estimated purchase price over the estimated fair values of ATRM’s acquired assets and assumed liabilities recorded as goodwill. Actual results are expected to differ from these preliminary estimates once Digirad has determined the final purchase price for ATRM and completed the valuation studies necessary to finalize the required purchase price allocations. There can be no assurances that such finalization of the valuation studies will not result in material changes. Digirad performed a preliminary assessment of accounting policies and financial statement presentation which has identified certain adjustments necessary to conform information in ATRM’s historical financial statements to Digirad’s accounting policies and presentation. The review of the accounting policies and presentation is not yet complete and additional policy differences may be identified when completed.

These pro forma financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes of Digirad and ATRM, included in this proxy statement/prospectus.

The pro forma financial statements are not intended to represent or be indicative of the consolidated results of operations or financial condition of the combined company that would have been reported had the Merger been completed as of the dates presented and should not be taken as representative of the future consolidated results of operations or financial condition of the combined company.

The pro forma financial statements do not include the realization of future cost savings or synergies or restructuring charges that are expected to result from Digirad’s acquisition of ATRM.

All share and per share amounts pertaining to Digirad or the pro forma combined companies in the pro forma financial statements below reflect the Reverse Stock Split.

See accompanying notes to the unaudited pro forma condensed combined financial statements.