UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report:
August 13, 2020
(Date of earliest event reported)

DIGIRAD CORPORATION
(Exact name of registrant as specified in its charter)

Delaware001-3594733-0145723
(State or other jurisdiction of incorporation)(Commission File Number)(IRS Employer
Identification No.)

1048 Industrial Court,
Suwanee, GA 30024
(Address of principal executive offices, including zip code)

(858) 726-1600
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange
on which registered
Common Stock, par value $0.0001 per shareDRADNASDAQ Global Market
Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share
DRADPNASDAQ Global Market
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§232.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth companyo



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o


Item 2.02.  Results of Operations and Financial Condition
On August 13, 2020, Digirad Corporation (the “Registrant”) issued a press release announcing financial results for the six months ended June 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing. The information in this report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.
Item 9.01.  Financial Statements and Exhibits
(d)  Exhibits:
Exhibit No.Description
Press Release of Digirad Corporation dated August 13, 2020
Information Related to the Use of Non-GAAP Financial Measures



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
DIGIRAD CORPORATION
By:/s/ MATTHEW G. MOLCHAN
Matthew G. Molchan
President and Chief Executive Officer
Date:  August 13, 2020


Document

Exhibit 99.1
News Release
For immediate release
August 13, 2020
Digirad Corporation Reports Financial Results for the
Second Quarter and Six Months Ended June 30, 2020
Suwanee, GA. - Digirad Corporation (Nasdaq: DRAD; DRADP) (“Digirad” or the “Company”) reported today its financial results for the second quarter (Q2) and six months (6M) ended June 30, 2020.
Q2 2020 Financial Highlights vs. Q2 2019*
•Total revenue decreased to $22.3 million from $25.8 million
•Gross profit decreased to $4.0 million from $5.0 million
•Net loss from continuing operations was $1.3 million (or $0.42 per basic and diluted share) compared to a net loss of $1.5 million (or $0.72 per basic and diluted share) **
•Non-GAAP adjusted EBITDA from continuing operations decreased to $1.8 million from $2.1 million
•Non-GAAP free cash outflow of $0.6 million versus inflow of $3.3 million
•Cash and cash equivalents and restricted cash of $9.3 million versus $1.0 million and net debt was $16.5 million versus $14.3 million

6M 2020 Financial Highlights vs. 6M 2019*
• Total revenue increased to $51.2 million from $49.7 million
• Gross profit decreased to $8.5 million from $9.0 million
• Net loss from continuing operations was $4.2 million (or $1.66 per basic and diluted share) compared to a net loss from continuing operations of $3.1 million (or $1.54 per basic and diluted share) **
• Non-GAAP adjusted EBITDA from continuing operations decreased to $2.3 million from $2.9 million

* Since September 10, 2019, Digirad has been operating as a diversified holding company (“HoldCo”) with three divisions: Healthcare, Building & Construction, and Real Estate & Investments. Digirad’s Q2 2020 and 6M 2020 results include financial and operational data for the two newly created divisions - Building & Construction and Real Estate & Investments. No operational or financial data was recorded in the 2019 corresponding periods for these two divisions.
** In May 28, 2020, Digirad completed a public offering through the issuance of 2,225,000 shares of its common stock. Per share amounts for Q2 2020 and 6M 2020 periods, reflect the new share count.
Jeff Eberwein, Chairman of Digirad, noted, “Our Q2 2020 operations and financial results were impacted by the nationwide shutdown due to COVID-19. Revenue for all three businesses of our Healthcare division declined as many doctor offices temporarily closed in mid-March and many hospitals temporarily suspended non-emergency scanning procedures. In late June, we noticed a slow but steady return to normal operations at both doctor offices and hospitals.”
“Our Building & Construction division experienced some startup delays in Q2 on several commercial projects, but our outlook for the rest of the year is strong. KBS was recently awarded two significant commercial projects – a $5.2 million contract to manufacture living units for the U.S. Army and a $2.0 million contract to manufacture housing units for military veterans. Deliveries for these projects are expected to be completed before year-end. To meet the higher manufacturing requirements for these two commercial projects, KBS recently hired back all factory employees previously furloughed due to COVID-19 and increased its work force by an incremental 20%. Our growth strategy for the Building & Construction division is to further expand the commercial construction business for KBS in the New England market. If KBS grows as expected in 2020, we will explore re-opening our Oxford, Maine plant, which we believe would effectively double KBS’s production capacity.”
Mr. Eberwein concluded, “We continue to execute on our HoldCo growth strategy and value enhancement initiatives to maximize stockholder value. Our HoldCo structure allows division CEOs to focus on operations and growth, while HoldCo management focuses on capital allocation. In addition to looking for attractive bolt-on acquisitions for our existing operating businesses, we will also look to create new business divisions in the future through the disciplined acquisition of businesses complementary to our HoldCo structure. Also, we are exploring the potential divestiture of non-strategic assets.”

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Revenue

The Company’s total Q2 2020 revenue decreased by 13.4% to $22.3 million from $25.8 million in the second quarter of the prior year. 6M 2020 total revenue of $51.2 million slightly increased from 6M 2019 revenue of $49.7 million.
Revenue in $ millionQ2 2020Q2 2019% change 6M 20206M 2019% change
Healthcare$17,305  $25,798  (32.9)%$40,647  $49,710  (18.2)%
Building & Construction5,035  —  — %10,519  —  — %
Real Estate & Investments161  —  — %350  —  — %
Corporate, eliminations and other(159) —  — %(317) —  — %
Total Revenue$22,342  $25,798  (13.4)%$51,199  $49,710  3.0 %

Revenue for the Healthcare division for Q2 2020 decreased from Q2 2019 by $8.5 million, offset by a $5.0 million increase in Building and Construction revenue. The decrease in revenue for the Healthcare division was due to the COVID-19 pandemic as many doctors’ offices were temporarily closed and many hospitals stopped performing non-emergency procedures, tests, and scans.

Gross Profit
Gross Profit in $ millionQ2 2020Q2 2019% change6M 20206M 2019% change
Healthcare$3,036  $5,181  (41.4)%$7,109  $9,162  (22.4)%
Building & Construction1,053  —  — %1,456  —  — %
Real Estate & Investments95  (177) (153.7)%218  (177) (223.2)%
Corporate, eliminations and other(158) —  — %(316) —  — %
Total Gross Profit$4,026  $5,004  (19.5)%$8,467  $8,985  (5.8)%

Q2 2020 gross profit for the Healthcare division decreased by 41.4% from the prior year’s quarter due to reduced revenue as a result of the COVID-19 pandemic.
Operating Expenses
Q2 2020 marketing, sales, general and administrative (MSG&A) expenses decreased by 2.4% or $0.1 million from the prior year period, mainly due to costs savings from lower travelling costs and marketing and selling expenses offset by MSG&A expenses for the Building and Construction division. Our 6M 2020 MSG&A expenses increased by 13.2% or $1.3 million, compared to the same period of 2019 due to the addition of MSG&A in the Building and Construction division.
Non-GAAP Adjusted EBITDA
Q2 2020 non-GAAP adjusted EBITDA from continuing operations decreased to $1.8 million from $2.1 million in the same quarter of the prior year due to lower revenue generated from high-margin mobile scanning services because of the COVID-19 pandemic. 6M 2020 non-GAAP adjusted EBITDA from continuing operations decreased to $2.3 million, compared to $2.9 million in the prior year period, reflecting COVID-19 impact.
Net Loss
Q2 2020 net loss from continuing operations for the second quarter was $1.3 million, or $0.42 per basic and diluted share, compared to net loss of $1.5 million, or $0.72 per basic and diluted share, in the same period in the prior year. Q2 2020 non-GAAP adjusted net loss from continuing operations was $0.3 million, or $0.11 per basic and diluted share, compared to adjusted net income of $0.1 million, or $0.04 per basic and diluted share, in the prior year period.
6M 2020 net loss from continuing operations was $4.2 million, or $1.66 per basic and diluted share, compared to net loss from continuing operations of $3.1 million, or $1.54 per basic and diluted share, in the same period in the prior year. 6M 2020 non-GAAP adjusted net loss from continuing operations decreased to $2.0 million, or $0.78 per basic and diluted share, compared to adjusted net loss of $0.9 million, or $0.46 per basic and diluted share, in the prior year period.
Operating cash flow
Q2 2020 cash flow from operations was an outflow of $0.6 million, compared to an inflow of $2.6 million for the same period in the prior year. 6M 2020 cash flow from operations was an inflow of $49 thousand, compared to an inflow of $0.4 million for the prior year period.

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Free Cash Flow
The Company calculates a non-GAAP measure of free cash flow. The Company defines free cash flow as net cash provided by (used in) operating activities, less purchases of property and equipment, plus net dispositions of property and equipment, and the acquisition-related net working capital. The Company believes this measure of free cash flow provides management and investors further useful information about cash generation (or use) in our primary operations.

Q2 2020 non-GAAP free cash flow was an outflow of $0.6 million, compared to an inflow of $3.3 million in the same quarter in the prior year period. 6M 2020 non-GAAP free cash flow was an outflow of $38 thousand, compared to an inflow of $1.2 million in the prior year period.
Net Operating Loss Carryforward (NOL)
Digirad Corporation has approximately $91.6 million of usable net operating losses (“NOL”) in the U.S. as of year end 2019, which the Company considers to be a very valuable asset for its stockholders. In order to protect the value of the NOL for all stockholders, the Company has a charter amendment in place limiting beneficial ownership of Digirad common stock to 4.99%. Stockholders who wish to own more than 4.99% of Digirad common stock, or who already own more than 4.99% of Digirad common stock and wish to buy more, may only acquire additional shares with the Board’s prior written approval.
Conference Call Information
A conference call is scheduled for 11:00 a.m. ET (8:00 a.m. PT) on August 13, 2020 to discuss the results and management’s outlook. The call may be accessed by dialing 1-877-407-9039 (international callers: +1-201-689-8470) five minutes prior to the scheduled start time and referencing Digirad. A simultaneous webcast of the call may be accessed online from the Events & Presentations link on the Investor Relations page at http://ir.digirad.com/events-presentations; an archived replay of the webcast will be available within 15 minutes of the end of the conference call.

If you have any questions, either prior to or after our scheduled Earnings Conference call, please e-mail ir@digirad.com or lcati@equityny.com.

Use of Non-GAAP Financial Measures by Digirad Corporation

This release presents the non-GAAP financial measures “adjusted net income (loss),” “adjusted net income (loss) per basic and diluted share,” “free cash flow”, and “adjusted EBITDA from continuing operations.” The most directly comparable measure for these non-GAAP financial measures are “net income and basic and diluted net income per share”, and “cash flows from operating activities”. The Company has included below unaudited adjusted financial information, which presents the Company’s results of operations after excluding acquired intangible asset amortization, one time transaction costs, litigation costs, restructuring costs, loss on sale of buildings, COVID-19 protection equipment, unrealized gain (loss) on available-for-sale securities, non-recurring costs related to sales and use tax and income tax adjustments. Further excluded in the measure of adjusted EBITDA are interest, taxes, depreciation, amortization, and stock-based compensation.

A discussion of the reasons why management believes that the presentation of non-GAAP financial measures provides useful information to investors regarding Digirad’s financial condition and results of operations is included as Exhibit 99.2 to Digirad’s report on Form 8-K filed with the Securities and Exchange Commission on August 13, 2020.
About Digirad Corporation
Digirad Corporation is a diversified holding company with three divisions: Healthcare, Building & Construction, and Real Estate & Investments.
Healthcare Division (Digirad Health)
Digirad Health designs, manufactures, and distributes diagnostic medical imaging products and services. Digirad Health operates in three businesses: Diagnostic Imaging, Diagnostic Services, and Mobile Healthcare. The Diagnostic Imaging business designs, manufactures, and sells proprietary solid-state gamma cameras. It also services the installed base of these proprietary cameras. The Diagnostic Services business offers imaging and monitoring services to healthcare providers as an alternative to purchasing equipment or outsourcing procedures. The Mobile Healthcare business provides contract diagnostic imaging, including computerized tomography (“CT”), magnetic resonance imaging (“MRI”), positron emission tomography (“PET”), PET/CT, and nuclear medicine and healthcare expertise through a convenient, mobile service.
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Building & Construction Division (ATRM)
ATRM Holdings, Inc. (“ATRM”) manufactures modular housing units for commercial and residential real estate projects. ATRM operates in two businesses: (i) modular building manufacturing and (ii) structural wall panel and wood foundation manufacturing, including building supply retail operations. The modular building manufacturing business is operated by KBS Builders, Inc. (“KBS”), the structural wall panel and wood foundation manufacturing segment is operated by EdgeBuilder, Inc. (“EdgeBuilder”), and the retail building supplies are sold through Glenbrook Building Supply, Inc. (“Glenbrook”). KBS, EdgeBuilder, and Glenbrook are wholly-owned subsidiaries of ATRM, which is a wholly-owned subsidiary of Digirad.
Real Estate & Investments Division
This business division manages the Company’s real estate assets and investments.

Forward-Looking Statements

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this release that are not statements of historical fact are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking Statements include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to acquisitions and related integration, development of commercially viable products, novel technologies, and modern applicable services, (ii) projections of income (including income/loss), EBITDA, earnings (including earnings/loss) per share, free cash flow (FCF), capital expenditures, cost reductions, capital structure or other financial items, (iii) the future financial performance of Digirad Corporation or acquisition targets and (iv) the assumptions underlying or relating to any statement described above. Moreover, forward-looking statements necessarily involve assumptions on the Company’s part. These forward-looking statements generally are identified by the words “believe”, “expect”, “anticipate”, “estimate”, “project”, “intend”, “plan”, “should”, “may”, “will”, “would”, “will be”, “will continue” or similar expressions. Such forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon the Company's current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which the Company has no control over. Actual results and the timing of certain events and circumstances may differ materially from those described above as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, the substantial amount of debt of the Company and the Company’s ability to repay or refinance it or incur additional debt in the future; the Company’s need for a significant amount of cash to service and repay the debt and to pay dividends on the Company preferred stock; the restrictions contained in the debt agreements that limit the discretion of management in operating the business; the length of time associated with servicing customers; losses of significant contracts; disruptions in the relationship with third party vendors; accounts receivable turnover; insufficient cash flows and resulting in liquidity; the Company's inability to expand the Company's business; unfavorable changes in the extensive governmental legislation and regulations governing healthcare providers and the provision of healthcare services and the competitive impact of such changes (including unfavorable changes to reimbursement policies); high costs of regulatory compliance; the liability and compliance costs regarding environmental regulations; the underlying condition of the technology support industry; the lack of product diversification; development and introduction of new technologies and intense competition in the healthcare industry; existing or increased competition; risks to the price and volatility of the Company’s common stock and preferred stock; stock volatility and in liquidity; risks to preferred stockholders of not receiving dividends and risks to the Company’s ability to pursue growth opportunities if the Company continues to pay dividends according to the terms of the Company preferred stock; the Company’s ability to execute on its business strategy (including any cost reduction plans); the Company’s failure to realize expected benefits of restructuring and cost-cutting actions; the Company’s ability to preserve and monetize its net operating losses; risks associated with the Company’s possible pursuit of acquisitions; the Company’s ability to consummate successful acquisitions and execute related integration, including to successfully integrate ATRM’s operations and realize the synergies from the acquisition of ATRM, as well as factors related to the Company’s business (including ATRM) including economic and financial market conditions generally and economic conditions in the Company’s markets; failure to keep pace with evolving technologies and difficulties integrating technologies; system failures; losses of key management personnel and the inability to attract and retain highly qualified management and personnel in the future; and the continued demand for and market acceptance of the Company’s services. For a detailed discussion of cautionary statements and risks that may affect the Company’s future results of operations and financial results, please refer to the Company’s filings with the Securities and Exchange Commission, including, but not limited to, the risk factors in the Company’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. This release reflects management’s views as of the date presented.

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All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations, and, therefore, you are cautioned not to place undue reliance on such statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

For more information contact:
Digirad CorporationThe Equity Group
Jeffrey E. EberweinLena Cati
Chairman of the BoardThe Equity Group
203-489-9501212-836-9611
ir@digirad.comlcati@equityny.com


(Financial tables follow)
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Digirad Corporation
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(In thousands, except for per share amounts)
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenues:
Healthcare
$17,305  $25,798  $40,647  $49,710  
Building and Construction
5,035  —  10,519  —  
Real Estate and Investments
2  —  33  —  
Total revenues
22,342  25,798  51,199  49,710  
Cost of revenues:
Healthcare
14,268  20,617  33,538  40,548  
Building and Construction
3,982  —  9,063  —  
Real Estate and Investments
66  177  131  177  
Total cost of revenues
18,316  20,794  42,732  40,725  
Gross profit4,026  5,004  8,467  8,985  
Operating expenses:
Marketing, sales and general and administrative expenses
4,751  4,867  10,979  9,700  
Amortization of intangible assets
801  283  1,618  566  
Merger and finance costs
—  1,000  —  1,000  
Total operating expenses
5,552  6,150  12,597  11,266  
Loss from operations(1,526) (1,146) (4,130) (2,281) 
Other income (expense):
Other income (expense), net
672  (5) 832  (203) 
Interest expense, net
(383) (254) (858) (435) 
Loss on sale of building
—  (232) —  (232) 
Loss on extinguishment of debt
—  —  —  (151) 
Total other income (expense)289  (491) (26) (1,021) 
Loss before income taxes(1,237) (1,637) (4,156) (3,302) 
Income tax (expense) benefit
(50) 162  (84) 170  
Net loss from continuing operations(1,287) (1,475) (4,240) (3,132) 
Net income from discontinued operations—  266  —  266  
Net loss(1,287) (1,209) (4,240) (2,866) 
    Deemed dividend on Series A redeemable preferred stock(484) —  (968) —  
Net loss attributable to common shareholders$(1,771) $(1,209) $(5,208) $(2,866) 
Net (loss) income per share - basic and diluted
    Net loss per share, continuing operations attributable to common shareholders$(0.58) $(0.72) $(2.04) $(1.54) 
    Net income per share, discontinued operations attributable to common shareholders—  0.13  —  0.13  
Net loss per share, attributable to common shareholders — basic and diluted:$(0.58) $(0.59) $(2.04) $(1.41) 
Weighted-average shares outstanding – basic and diluted3,041  2,038  2,547  2,034  
Net loss$(1,287) $(1,209) $(4,240) $(2,866) 
Other comprehensive income (loss):
Reclassification of tax provision impact —  —  —  22  
Total other comprehensive income—  —  —  22  
6

Comprehensive loss$(1,287) $(1,209) $(4,240) $(2,844) 
7

Digirad Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share amounts)
June 30,
2020		December 31,
2019
Assets:
Current assets:
Cash and cash equivalents$9,111  $1,821  
Restricted cash169  240  
Equity securities27  26  
Accounts receivable, net14,523  18,571  
Inventories, net7,638  7,097  
Other current assets1,433  1,794  
Total current assets32,901  29,549  
Property and equipment, net19,210  22,138  
Operating lease right-of-use assets4,907  4,827  
Intangible assets, net21,286  22,903  
Goodwill9,978  9,978  
Other assets997  1,165  
Total assets$89,279  $90,560  
Liabilities, Mezzanine Equity and Stockholders’ Equity
Current liabilities:
Accounts payable$5,807  $8,932  
Accrued compensation4,132  4,579  
Accrued warranty272  421  
Deferred revenue2,185  1,786  
Short-term debt and current portion of long-term debt4,459  4,036  
Payable to related parties2,155  1,920  
Operating lease liabilities, current portion1,980  1,866  
Other current liabilities3,270  4,638  
Total current liabilities24,260  28,178  
Long-term debt, net of current portion19,124  17,038  
Deferred tax liabilities89  23  
Operating lease liabilities, net of current portion3,024  3,073  
Other liabilities1,102  1,551  
Total liabilities47,599  49,863  
Preferred stock, $0.0001 par value: 10,000,000 shares authorized: 10% Series A Cumulative Redeemable preferred stock, 8,000,000 shares liquidation preference ($10.00 per share), 1,915,637 shares issued or outstanding at June 30, 2020 and December 31, 2019, respectively20,570  19,602  
Stockholders’ equity:
Common stock, $0.0001 par value: 30,000,000 shares authorized; 4,692,451 and 2,050,659 shares issued and outstanding (net of treasury shares) at June 30, 2020 and December 31, 2019, respectively—  —  
Treasury stock, at cost; 258,849 shares at June 30, 2020 and December 31, 2019, respectively(5,728) (5,728) 
Additional paid-in capital149,607  145,352  
Accumulated deficit(122,769) (118,529) 
Total stockholders’ equity21,110  21,095  
Total liabilities, mezzanine equity and stockholders’ equity$89,279  $90,560  

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Digirad Corporation
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Net loss from continuing operations$(1,287) $(1,475) $(4,240) $(3,132) 
Acquired intangible amortization801  283  1,618  566  
Unrealized (gain) loss on equity securities (1)
(6) 5  20  (23) 
Litigation costs (2)
19  —  179  —  
Restructuring costs (3)
—  62  —  62  
Loss on extinguishment of debt—  —  —  151  
Loss on sale of buildings—  232  —  232  
Write-off of DMS assets due to litigation (4)
—  —  135  —  
Write-off of Star Real Estate Holding assets —  143  —  143  
Transaction cost (5)
—  726  115  956  
Write-off of preferred stock issuance cost (6)
—  273  —  273  
COVID -19 protection equipment (7)
29  —  29  —  
Sales and use tax costs (8)
73  —  73  —  
Income tax expense (benefit) 50  (162) 84  (170) 
Non-GAAP adjusted net (loss) income from continuing operations$(321) $87  $(1,987) $(942) 
Net loss per diluted share from continuing operations$(0.42) $(0.72) $(1.66) $(1.54) 
Acquired intangible amortization0.26  0.14  0.64  0.28  
Unrealized (gain) loss on equity securities (1)
—  —  0.01  (0.01) 
Litigation costs (2)
0.01  —  0.07  —  
Restructuring costs (3)
—  0.03  —  0.03  
Loss on extinguishment of debt—  —  —  0.07  
Loss on sale of buildings—  0.11  —  0.11  
Write-off of DMS assets due to litigation (4)
—  —  0.05  —  
Write-off of Star Real Estate Holding assets—  0.07  —  0.07  
Transaction cost (5)
—  0.36  0.05  0.47  
Write-off of preferred stock issuance cost (6)
—  0.13  —  0.13  
COVID -19 Protection Equipment (7)
0.01  —  0.01  —  
Sales and use tax costs (8)
0.02  —  0.03  —  
Income tax expense (benefit) 0.02  (0.08) 0.03  (0.08) 
Non-GAAP adjusted net (loss) income per basic and diluted share from continuing operations (9)
$(0.11) $0.04  $(0.78) $(0.46) 

(1)Reflects change in fair value of investments in equity securities.
(2)Reflects one time litigation costs.
(3)Reflects severance related costs.
(4)Reflects write-off of assets related to litigation.
(5)Reflects legal and other costs related to the ATRM merger and HoldCo conversion.
(6)Reflects write-off of costs related to a potential offering of preferred stock the Company did not complete.
(7)Reflects purchases related to COVID -19 Protection Equipment.
(8)Reflects additional sales and use tax as a result of a South Dakota sales tax audit.
9

(9)Per share amounts are computed independently for each discrete item presented. Therefore, the sum of the quarterly per share amounts will not necessarily equal to the total for the year, and sum of individual items may not equal the total.
Digirad Corporation
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(In thousands)
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Net loss from continuing operations$(1,287) $(1,475) $(4,240) $(3,132) 
Unrealized (gain) loss on equity securities (1)
(6) 5  20  (23) 
Litigation costs (2)
19  —  179  —  
Restructuring costs (3)
—  62  —  62  
Loss on extinguishment of debt—  —  —  151  
Depreciation and amortization2,374  1,851  4,782  3,660  
Stock-based compensation151  190  260  302  
Write-off of DMS assets due to litigation (4)
—  —  135  —  
Write-off of Star Real Estate Holding assets—  143  —  143  
Loss on sale of building—  232  —  232  
Interest expense, net383  254  858  435  
Transaction cost (5)
—  726  115  956  
Write-off of preferred stock issuance cost (6)
—  273  —  273  
COVID -19 protection equipment (7)
29  —  29  —  
Sales and use tax costs (8)
73  —  73  —  
Income tax expense (benefit) 50  (162) 84  (170) 
Non-GAAP adjusted EBITDA from continuing operations$1,786  $2,099  $2,295  $2,889  

(1)Reflects change in fair value of investments in equity securities.
(2)Reflects one time litigation costs.
(3) Reflects severance related costs.
(4)Reflects write-off of assets related to litigation.
(5)Reflects legal and other costs related to the ATRM merger and HoldCo conversion.
(6)Reflects write-off of costs related to a potential offering of preferred stock the Company did not complete.
(7)Reflects purchases related to COVID -19 Protection Equipment.
(8)Reflects additional sales and use tax as a result of a South Dakota sales tax audit.

10

Digirad Corporation
Reconciliation of Operating Cash Flow to Free Cash Flow
(Unaudited)
(In thousands)
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Net cash (used in) provided by operating activities$(574) $2,553  $49  $368  
Less purchases of property and equipment(128) (1,059) (286) (1,446) 
Gross free cash flow(702) 1,494  (237) (1,078) 
Plus net dispositions61  1,063  84  1,320  
Plus merger related net working capital adjustment—  726  115  956  
Free cash flow$(641) $3,283  $(38) $1,198  

11

Digirad Corporation
Supplemental Debt Information
(Unaudited)
(In thousands)
A summary of the Company’s credit facilities and related party notes are as follows (in thousands):
June 30, 2020December 31, 2019
AmountWeighted-Average Interest RateAmountWeighted-Average Interest Rate
Revolving Credit Facility - Gerber KBS$1,180  6.00 %$1,111  7.50 %
Revolving Credit Facility - Premier—  — %2,925  6.25 %
Total Short Term Revolving Credit Facilities$1,180  6.00 %$4,036  6.59 %
Revolving Credit Facility - SNB$11,785  2.66 %$17,038  4.26 %
Revolving Credit Facility - Gerber EBGL1,374  6.00 %—  — %
Total Long Term Revolving Credit Facilities$13,159  3.01 %$17,038  4.26 %
LSV Co-Invest I Promissory Note (“January Note”)$668  12.00 %$595  12.00 %
LSV Co-Invest I Promissory Note (“June Note”)1,150  12.00 %1,023  12.00 %
LSVM Note337  12.00 %302  12.00 %
Total Notes Payable From Related Parties$2,155  12.00 %$1,920  12.00 %
Short Term Paycheck Protection Program Notes$2,518  1.00 %$—  — %
Long Term Paycheck Protection Program Notes4,130  1.00 %—  — %
Total Paycheck Protection Program Notes$6,648  1.00 %$—  — %

Term Loan Facilities
The following table presents the Star and Premier term loans balance net of unamortized debt issuance costs as of June 30, 2020 (in thousands):
June 30, 2020
Amount
Gerber - Star Term Loan$2,125  
Premier - Term Loan897  
Total Principal3,022  
Unamortized debt issuance costs(426) 
Total$2,596  


12

Digirad Corporation
Supplemental Segment Information
(Unaudited)
(In thousands)
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenue by segment
Diagnostic Services$7,140  $12,318  $17,954  $24,044  
Diagnostic Imaging2,333  3,049  5,194  5,572  
Mobile Healthcare7,832  10,431  17,499  20,094  
Building and Construction5,035  —  10,519  —  
Real Estate and Investments161  —  350  —  
Corporate, eliminations and other(159) —  (317) —  
Consolidated revenue$22,342  $25,798  $51,199  $49,710  
Gross profit by segment:
Diagnostic Services$953  $2,805  $2,958  $5,386  
Diagnostic Imaging1,232  1,080  2,101  1,866  
Mobile Healthcare851  1,296  2,050  1,910  
Building and Construction1,053  —  1,456  —  
Real Estate and Investments95  (177) 218  (177) 
Corporate, eliminations and other(158) —  (316) —  
Consolidated gross profit$4,026  $5,004  $8,467  $8,985  
Income (loss) from continuing operations by segment:
Diagnostic Services$515  $1,957  $1,539  $3,693  
Diagnostic Imaging934  565  1,455  908  
Mobile Healthcare135  439  312  (184) 
Building and Construction130  —  (729) —  
Real Estate and Investments10  (199) 116  (199) 
Corporate, eliminations and other(158) (2,908) (316) —  
Unallocated corporate and other expenses(3,092) —  (6,507) (5,499) 
Segment loss from operations(1,526) (146) (4,130) (1,281) 
Merger and finance costs—  (1,000) —  (1,000) 
Consolidated loss from operations$(1,526) $(1,146) $(4,130) $(2,281) 
Depreciation and amortization by segment:
Diagnostic Services$307  $305  $637  $609  
Diagnostic Imaging66  73  129  151  
Mobile Healthcare1,364  1,438  2,742  2,865  
Building and Construction571  —  1,143  —  
Real Estate and Investments66  35  131  35  
Total depreciation and amortization$2,374  $1,851  $4,782  $3,660  


13
Document

Exhibit 99.2
Use of Non-GAAP Financial Measures
In addition to financial results calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), information containing non-GAAP financial measures for Digirad Corporation (the “Company”) was disclosed in the Company's press release (the “Press Release”) dated August 13, 2020 announcing results for the three and six months ended June 30, 2020 that accompanied a conference call held by the Company on August 13, 2020. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. Management encourages readers to rely upon the GAAP numbers, but includes the non-GAAP financial measures as supplemental metrics to assist readers. Definitions of the non-GAAP financial measures are included in the Press Release.
In the Press Release, the Company presented the non-GAAP financial measures “adjusted net income (loss),” “adjusted net income (loss) per basic and diluted share,” “adjusted EBITDA,” and "free cash flow." Company management uses these non-GAAP financial measures to evaluate the Company's performance. As the Company's core business is providing healthcare services and products to the healthcare industry, Company management finds it useful to use financial measures that do not include acquired intangible asset amortization, one time transaction costs, litigation costs, restructuring costs, acquisition related adjustments, unrealized gain (loss) on available-for-sale securities, loss on sale of buildings, COVID-19 protection equipment, and non-recurring related income tax adjustments. While we may have these types of items and charges in the future, Company management believes that they are not reflective of the day-to-day offering of its products and services and relate more to strategic, multi-year corporate actions, without predictable trends, and that may obscure the trends and financial performance of the Company's core business. In the case of “adjusted EBITDA,” Company management believes the exclusion of goodwill impairment, interest, taxes, depreciation, amortization, and stock-based compensation is a very common measure utilized in the investment community and it helps Company management benchmark its operations and results with the industry.
The limitation associated with using these non-GAAP financial measures is that these measures exclude items that impact the Company's current period operating results. This limitation is best addressed by using these non-GAAP financial measures in combination with “net income (loss),” “net income (loss) per basic and diluted share,” and "operating cash flow" (the most comparable GAAP measures) because these non-GAAP financial measures do not reflect items that impact current period operating results and may be higher or lower than the most comparable GAAP measure.