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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Concerning Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about Safeguard Scientifics, Inc. (“Safeguard” or “we”), the industries in which we operate and other matters, as well as management's beliefs and assumptions and other statements regarding matters that are not historical facts. These statements include, in particular, statements about our plans, strategies and prospects. For example, when we use words such as “projects,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “should,” “would,” “could,” “will,” “opportunity,” “potential” or “may,” variations of such words or other words that convey uncertainty of future events or outcomes, we are making forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Our forward-looking statements are subject to risks and uncertainties. Factors that could cause actual results to differ materially include, among others, our ability to make good decisions about the deployment of capital, the fact that our ownership interests may vary from period to period, our substantial capital requirements and absence of liquidity from our ownership interests, fluctuations in the market prices of our publicly traded ownership interests, competition, our inability to obtain maximum value for our ownership interests, our ability to attract and retain qualified employees or external managers, our ability to execute our strategy, market valuations in sectors in which our ownership interests operate, our inability to control our ownership interests, the uncertainty of the outcomes of corporate strategic transactions, if any, our need to manage our assets to avoid registration under the Investment Company Act of 1940, and risks associated with our ownership interests and their performance, including the fact that most of the companies in which we have an ownership interest have a limited history and a history of operating losses, face intense competition and may never be profitable, the effect of economic conditions in the business sectors in which they operate, compliance with government regulation and legal liabilities, all of which are discussed in Item 1A. “Risk Factors.” Many of these factors are beyond our ability to predict or control. In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. All forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety by this cautionary statement. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this report might not occur.

Overview

Historically, Safeguard has provided capital and relevant expertise to fuel the growth of technology-driven businesses. Typically, we are actively involved in strategic and operational decisions through our board representation in addition to the influence we exert through our equity ownership. We also continue to hold relatively small equity interests in other enterprises where we do not exert significant influence and do not participate in management activities. In some cases, those ownership interests relate to residual interests from prior larger interests or from companies that acquired companies in which we had ownership interests.

In January 2018, Safeguard ceased deploying capital into new opportunities in order to focus on supporting the existing ownership interests and maximizing monetization opportunities to enable returning value to shareholders. We have considered and taken action on various initiatives including the sale of our ownership interests, the sale of certain or all of our ownership interests in secondary market transactions as well as other opportunities to maximize shareholder value. In December 2019, we declared and paid a $1.00 per share special dividend. In 2021, we repurchased 4.5 million shares through a combination of open market purchases and a tender offer for an aggregate of $40.7 million resulting in an average price of $8.95 per share. In 2022, we repurchased 711,481 shares for $2.9 million at an average price of $4.13 per share through subsequent open market repurchase plans. In December 2023, we declared and paid a $0.35 per share special dividend.

On December 15, 2023, Safeguard held a Special Meeting of Shareholders (the "Special Meeting") at which shareholders adopted amendments (the “Amendments”) to the Company's Second Amended and Restated Article of Incorporation, as amended (“Articles of Incorporation”), to effect a reverse stock split, followed immediately by a forward stock split, of the Company's common stock at a ratio (i) not less than 1-for-50 and not greater than 1-for-100, in the case of the reverse stock split, and (ii) not less than 50-for-1 and not greater than 100-for-1, in the case of the forward stock split. Upon the adoption of the Amendments to the Articles of Incorporation at the Special Meeting, on December 15, 2023, the Company’s Board of Directors (the “Board”) determined to effectuate the reverse stock split at the reverse stock split ratio of 1-for-100 and the forward stock split at the forward stock split ratio of 100-for-1 (collectively, “Stock Split Ratios”), which were within the ranges approved by the Company’s shareholders at the Special Meeting. The Company subsequently filed the Amendments to the Articles of Incorporation with the Pennsylvania Department of State to effectuate the stock splits with such Stock Split Ratios.

The stock splits had the effect of reducing the number of record holders of the Company’s common stock to a number below 300 (i.e., the level at or above which the Company is required to file reports with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). The actions the Company has taken to suspend, and events that occur as a result of such actions that have the effect of suspending, the Company’s reporting obligations under the Exchange Act, including effectuating the stock splits, delisting the Company’s common stock from trading on The Nasdaq Stock Market LLC (“Nasdaq”), as described below, terminating the registration of the Company’s common stock under Sections 12(b) and 12(g) of the Exchange Act and suspending the Company’s reporting obligations under Section 15(d) of the Exchange Act, are collectively referred to as the “Transaction.” The stock splits were undertaken as part of the Company’s plan to give effect to the Transaction.

As a result of the Transaction, the Company will no longer be subject to the reporting requirements under the Exchange Act or other requirements applicable to a public company, including requirements under the Sarbanes-Oxley Act of 2002 and the listing standards of any national securities exchange.

Safeguard will continue to actively work with our ownership interests to seek monetization opportunities.

Principles of Accounting for Ownership Interests

We account for our ownership interests using one of the following methods: Equity or Other. The accounting method applied is generally determined by the degree of our influence over the entity, primarily determined by our voting interest in the entity.

Equity Method. The Company accounts for ownership interests whose results are not consolidated, but over which it exercises significant influence, under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an ownership interest depends on an evaluation of several factors including, among others, representation on the board of directors and our ownership level, which is generally a 20% to 50% interest in the voting securities of a company, including voting rights associated with the Company’s holdings in common, preferred and other convertible instruments in the company. The Company records the initial ownership interest at cost. Under the equity method of accounting, the Company does not reflect a company’s financial statements within our Consolidated Financial Statements; however, our share of the income or loss of such company is reflected in Equity income (loss), net in the Consolidated Statements of Operations. The Company also adjusts the carrying value to reflect third party investments in the ownership interests, which typically result in a dilution gain. The Company includes the carrying value of equity method companies in Ownership interests and advances on the Consolidated Balance Sheets. Any excess of the Company’s cost over its underlying interest in the net assets of equity method companies that is allocated to intangible assets is amortized over the estimated useful lives of the related intangible assets. The Company reflects its share of the income or loss of the equity method companies on a one quarter lag. This reporting lag could result in a delay in recognition of the impact of changes in the business or operations of these companies.

When the Company’s carrying value in an equity method company is reduced to zero, the Company records no further losses in its Consolidated Statements of Operations unless the Company has an outstanding guarantee obligation or has committed additional funding to such equity method company. If such equity method company subsequently reports income, the Company will not record its share of such income until it exceeds the amount of the Company’s share of losses not previously recognized.

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Other Method. We account for ownership interests in companies that are not accounted for under the equity method that do not have a readily determinable fair value under the fair value measurement alternative. Under the fair value measurement alternative, these ownership interests are based on our original cost less impairments, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar interests of the same issuer. Under this method, our share of the income or losses of such companies is not included in our Consolidated Statements of Operations, however, the result of observable price changes, if any, are reflected in Other income (loss), net. We include the carrying value of these interests in Ownership interests and advances on the Consolidated Balance Sheets.

The Company accounts for ownership interests that are not accounted for under the equity method and have a readily determinable fair value at fair value based on the closing stock price on the last trading day of the reporting period. Under this method, the changes in fair value are reflected in Other income (loss), net. As of December 31, 2023 there were no ownership interests remaining following this accounting method.

Critical Accounting Policies and Estimates

Accounting policies, methods and estimates are an integral part of the Consolidated Financial Statements prepared by management and are based upon management’s current judgments. These judgments are normally based on knowledge and experience with regard to past and current events and assumptions about future events. Certain accounting policies, methods and estimates are particularly important because of their significance to the financial statements and because of the possibility that future events affecting them may differ from management’s current judgments. While there are a number of accounting policies, methods and estimates affecting our financial statements as described in Note 1 to our Consolidated Financial Statements, the most significant relate to impairment of ownership interests and advances.

Impairment of Ownership Interests and Advances

On a periodic basis, but no less frequently than quarterly, the Company evaluates the carrying value of its ownership interests and advances for possible impairment based on achievement of business plan objectives and milestones, the estimated fair value of each company relative to its carrying value, the financial condition and prospects of the company, and other relevant factors. The business plan objectives and milestones we consider include, among others, those related to financial performance, such as achievement of planned financial results or completion of capital raising activities, and those that are not primarily financial in nature, such as hiring of key employees or the establishment of strategic relationships. Management then determines whether there has been an other than temporary decline in the company. Impairment is measured as the amount by which the carrying value of an asset exceeds its estimated fair value.

The reduced carrying value a previously impaired company accounted for using the Equity method is not increased even if circumstances suggest the value of the company has subsequently recovered.

The estimated fair value of privately held companies is generally determined based on the value at which independent third parties have invested or have committed to invest in these companies, or based on other valuation methods including discounted cash flows, valuations of comparable public companies and valuations of acquisitions of comparable companies.

Our companies operate in industries which are rapidly evolving and extremely competitive. It is reasonably possible that our accounting estimates with respect to the ultimate recoverability of the carrying value of ownership interests and advances could change in the near term and that the effect of such changes on our Consolidated Financial Statements could be material. While we believe that the current recorded carrying values of our equity and other method companies are not impaired, there can be no assurance that our future results will confirm this assessment or that a significant write-down or write-off will not be required in the future.

Total impairment charges related to our Ownership interests and advances were as follows:

Year Ended December 31,

(In thousands)

Impairment charges related to equity method companies are included in Equity income (loss), net in the Consolidated Statements of Operations. Impairment charges related to other ownership interests are included in Other income (loss), net in the Consolidated Statements of Operations.

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Results of Operations

We operate as one operating segment based upon the similar nature of our technology-driven companies, the functional alignment of the organizational structure, and the reports that are regularly reviewed by the chief operating decision maker for the purpose of assessing performance and allocating resources.

There is intense competition in the markets in which our companies operate. Additionally, the markets in which these companies operate are characterized by rapidly changing technology, evolving industry standards, frequent introduction of new products and services, shifting distribution channels, evolving government regulation, frequently changing intellectual property landscapes and changing customer demands. Their future success depends on each company’s ability to execute its business plan and to adapt to its respective rapidly changing market.

The following is a listing of certain of our ownership interests as of December 31, 2023 and 2022. The ownership percentages indicated below are presented for certain companies in which we held ownership interests and reflect the percentage of the vote we were entitled to cast at that date based on issued and outstanding voting securities (on a common stock equivalent basis), excluding the effect of options, warrants and convertible debt (primary ownership).

Clutch Holdings, Inc. 41.7 % 41.7 % Equity

InfoBionic, Inc. * 25.2 % Other

MedCrypt, Inc. * * Other

meQuilibrium 30.2 % 31.3 % Equity

Moxe Health Corporation 19.3 % 19.3 % Equity

Prognos Health Inc. 19.0 % 28.4 % Equity

*minimal ownership interest

Year ended December 31, 2023 versus year ended December 31, 2022

Year Ended December 31,

(In thousands)

General and administrative expense $ (5,683 ) $ (4,775 ) $ (908 )

General and Administrative Expense. Our general and administrative expenses consist primarily of employee compensation, stock based compensation, insurance, office costs and professional services. General and administrative expense increased $0.9 million, or 19%, for the year ended December 31, 2023 compared to the prior year due to severance expenses of $0.7 million and higher legal and other professional fees of $0.6 million. These increases were partially offset by lower stock based compensation costs of $0.3 million and various other lower costs. General and administrative expense includes stock based compensation expense of $1.1 million and $1.4 million for the years ended December 31, 2023 and 2022, respectively. Stock based compensation continues to include a significant proportion of management's overall compensation, including the settlement of amounts due pursuant to the annual management incentive plan, and Director compensation, which aggregated to $0.3 million and $0.7 million for the years ended December 31, 2023 and 2022, respectively.

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Other income (loss), net. Other income (loss), net increased by $5.3 million for the year ended December 31, 2023, compared to the prior year. During the year ended December 31, 2023, the primary component was an observable price change of $1.7 million at InfoBionic upon their recapitalization event. The Company also recorded $0.6 million of gains from the collection of uncertain escrow amounts and $0.2 million of impairment related to an Other ownership interest. During the year ended December 31, 2022, the primary component was unrealized losses resulting from the decline in the fair value of BHG common stock of $3.7 million.

Interest Income. Interest income increased $0.1 million for the year ended December 31, 2023 compared to the prior year due primarily to higher market interest rates on marketable securities during 2023.

Equity Income (Loss), net. Equity income (loss), net fluctuates with the number of companies accounted for under the equity method, our voting ownership percentage in those companies and the net results of operations of those companies. We recognize our share of losses to the extent we have cost basis in the equity of the company or we have outstanding commitments or guarantees. Certain amounts recorded to reflect our share of the income or losses of our companies accounted for under the equity method are based on estimates and on unaudited results of operations of those companies and may require adjustments in the future when audits of these entities are made final. We report our share of the results of our equity method companies on a one quarter lag basis.

Equity income (loss), net decreased $0.1 million for the year ended December 31, 2023 compared to the prior year. The components of equity income (loss), net for the years ended December 31, 2023 and 2022 were as follows:

Year Ended December 31,

(In thousands)

Gains on sales of ownership interests $ 610 $ 5,627 $ (5,017 )

Share of losses of our equity method companies, net (7,279 ) (17,897 ) 10,618

During the year ended December 31, 2023, the gains on sales of ownership interests related entirely to miscellaneous escrow collections. During the year ended December 31, 2022, the gains on sales of ownership interests are primarily related to Lumesis of $4.9 million.

The unrealized dilution gains for the year ended December 31, 2023 were a result of Prognos Health, who raised additional equity capital that diluted the Company's interest. The unrealized dilution gains for the year ended December 31, 2022 were related to Moxe, who raised additional equity capital that diluted the Company's interest in those entities.

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The decrease in our share of losses of our equity method companies for the 2023 year compared to the prior year period was primarily due to three ownership interests (Trice Medical, Syapse and meQuilibrium) whose equity method loss for the year ended December 31, 2023 decreased $8.0 million due to their carrying value being reduced to zero during 2022 or 2023, which results in the cessation of recording of our share of their operating losses.

Income Tax Benefit (Expense)

There was no income tax benefit (expense) for the years ended December 31, 2023 and 2022. We have recorded a valuation allowance to reduce our net deferred tax asset to an amount that is more likely than not to be realized in future years. Accordingly, the benefit of the net operating loss that would have been recognized in each year was offset by changes in the valuation allowance.

Liquidity And Capital Resources

As of December 31, 2023, the Company had $9.5 million of cash and cash equivalents.

In 2015, the Company's Board of Directors authorized us, from time to time and depending on market conditions, to repurchase up to $25.0 million of the Company's outstanding common stock. During the years ended December 31, 2023 and 2022, we did not repurchase any shares under this authorization.

In May 2021, the Company's Board of Directors authorized a $6.0 million share repurchase program (the "2021 Plan") using existing funds in accordance with the requirements of Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended. During the year ended December 31, 2021, the Company purchased 236,159 shares under the 2021 Plan at an aggregate cost of $1.6 million, or $6.94 per share. During October 2021, the Company suspended the 2021 Plan and completed a modified Dutch auction self-tender that resulted in the repurchase of 4.3 million common shares for an aggregate price of $38.7 million, or $9.00 per share.

In March 2022, the Company's Board of Directors replaced the 2021 Plan and authorized a separate $3.0 million share repurchase program (the "2022 Plan") using existing funds in accordance with the requirements of Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934, as amended. During the year ended December 31, 2022, the Company purchased 711,481 shares under the 2022 Plan at an aggregate cost of $2.9 million, or $4.13 per share. The Company completed the 2022 Plan in January 2023 by purchasing an additional 25,096 shares, resulting in an average price of $4.09 for the 2022 Plan.

We may consider additional stock repurchases or dividends in the future based on prevailing market conditions and other factors when and if additional liquidity becomes available.

Our ability to generate liquidity from transactions involving our ownership interests has been adversely affected from time to time by adverse circumstances in the U.S. capital markets and other factors. We may be requested to provide additional capital to our companies, which may cause us to face liquidity issues that will constrain our ability to execute our business strategy and limit our ability to provide financial support to all of our existing companies in the amounts that we desire. The transactions we enter into in pursuit of our strategy could increase or decrease our liquidity at any point in time. As we seek to provide additional funding to existing companies where we have an ownership interest or commit capital to other initiatives, we may be required to expend our cash or incur debt, which will decrease our liquidity. Conversely, as we dispose of our interests in our ownership interests, we may receive proceeds from such sales, which could increase our liquidity. From time to time, we are engaged in discussions concerning acquisitions and dispositions which, if consummated, could impact our liquidity, perhaps significantly. Accordingly, the Company could also pursue other sources of capital in order to maintain its liquidity. The Company believes that its cash and cash equivalents at December 31, 2023 will be sufficient to fund operations past one year from the issuance of these financial statements.

Analysis of Consolidated Cash Flows

Cash flow activity was as follows:

Year Ended December 31,

(In thousands)

Net cash used in operating activities $ (3,308 ) $ (3,258 ) $ (50 )

Net cash provided by (used in) investing activities 5,721 (4,662 ) 10,383

Net cash used in financing activities (6,252 ) (3,488 ) (2,764 )

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Net Cash Used In Operating Activities

Year ended December 31, 2023 versus year ended December 31, 2022. Net cash used in operating activities increased for the year ended December 31, 2023 compared to the prior year. The activity during the year ended December 31, 2023 was primarily the result of various non-cash adjustments to net loss, including $6.1 million of equity loss and $1.2 million of impairment losses. The activity during the year ended December 31, 2022 was primarily the result of various non-cash adjustments to net loss, including $7.0 million of equity loss and a $3.7 million unrealized loss on the decrease in fair value of Bright Health common stock.

Net Cash (Used in) provided by Investing Activities

Year ended December 31, 2023 versus year ended December 31, 2022. Net cash (used in) provided by investing activities increased by $10.4 million for the year ended December 31, 2023 compared to the prior year. During the year ended December 31, 2023, the Company deployed an aggregate of $3.3 million to Prognos Health and Trice Medical, Inc. as compared to aggregate of $5.7 million to Syapse, Inc, Prognos Health, Clutch Holdings, meQuilibrium and Trice Medical, Inc. During the year ended December 31, 2023, the Company received $0.9 million from the collection of escrowed amounts related to the 2022 Lumesis transaction, $0.8 million from the sale of its ownership interest in BHG, $0.5 million from the resolution of escrow contingencies resulting from the 2021 Flashtalking transaction, $0.4 million from the secondary sale of a subordinated promissory note issued by Aktana and additional amounts from other earn-outs or contingencies.

Net Cash Used In Financing Activities

Year ended December 31, 2023 versus year ended December 31, 2022. Net cash used in financing activities increased by $2.8 million for the year ended December 31, 2023 compared to the prior year. The increase was primarily the $5.8 million special dividend offset by lower share repurchases in 2023 as the Company completed the 2022 Plan.

Contractual Cash Obligations and Other Commercial Commitments

Payments Due by Period

(In millions)

Contractual Cash Obligations:

Operating leases (a) $ 1.4 $ 0.6 $ 0.8 $ — $ —

Total Contractual Cash Obligations (b) $ 1.4 $ 0.6 $ 0.8 $ — $ —

(a) In 2015, we entered into an agreement for the lease of our former principal executive offices which expires in April 2026. Payments pursuant to this lease are approximately $1.4 million through expiration, however, in March 2019 we entered into a sublease for this office space which is expected to result in future aggregate sublease receipts of $1.4 million through April 2026.

(b) We are involved from time to time in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of any of these matters which are currently pending will not have a material adverse effect on our consolidated financial position or results of operation.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not applicable for a smaller reporting company.

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Item 8. Financial Statements and Supplementary Data

The following Consolidated Financial Statements, and the related Notes thereto, of Safeguard Scientifics, Inc. and the Reports of Independent Registered Public Accounting Firm are filed as a part of this Form 10-K.

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248) 21

Consolidated Balance Sheets as of December 31, 2023 and 2022 22

Notes to Consolidated Financial Statements 26

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Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Safeguard Scientifics, Inc

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Safeguard Scientifics, Inc. (a Pennsylvania corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment of ownership interests and advances

The Company evaluates the carrying value of its ownership interests and advances for possible impairment. This evaluation requires management to apply significant judgment particularly related to the achievement of business plan objectives and milestones, the financial condition and prospects of the portfolio company, market conditions and other relevant factors. Based on the above, management then determines whether there has been an other-than-temporary decline in the value of its ownership interest in or advance to the portfolio company. If the Company identifies an other-than-temporary decline in value, management may use valuation methods such as discounted cash flows and the market approach including valuation of comparable public companies and evaluation of recent acquisitions of similar companies. During the year ended December 31, 2023, the Company recorded $1.0M of other than temporary impairment charges. The identification and valuation of other than temporary impairment of ownership interests and advances was determined to be a critical audit matter.

The principal consideration for our determination that the identification and valuation of other-than-temporary impairment of ownership interests and advances is a critical audit matter is due to it being an area of the financial statements requiring significant auditor judgment and subjectivity in assessing the results of management’s impairment analysis. Ownership interests and advances held by the Company are primarily comprised of early-stage privately-held companies in industries that are rapidly evolving, where evaluation of other than temporary declines in value requires significant judgment by management.

Our audit procedures related to identification and valuation of other than temporary impairment of ownership interests and advances included the following, among others:

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2021.

Philadelphia, Pennsylvania

March 26, 2024

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SAFEGUARD SCIENTIFICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

As of December 31,

ASSETS

Current Assets:

Restricted cash 19 25

Marketable securities — 5,956

Ownership interests — 860

Prepaid expenses and other current assets 394 1,251

LIABILITIES AND EQUITY

Current Liabilities:

Accounts payable $ 107 $ 16

Accrued compensation and benefits 854 507

Accrued expenses and other current liabilities 596 865

Lease liability - current 489 429

Lease liability - non-current 760 1,249

Other long-term liabilities 50 50

Commitments and contingencies (Note 11)

Equity:

Preferred stock, $0.10 par value; 1,000 shares authorized — —

Accumulated other comprehensive loss (25 ) (25 )

See Notes to Consolidated Financial Statements.

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SAFEGUARD SCIENTIFICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Year Ended December 31,

General and administrative expense $ 5,683 $ 4,775

Net (loss) before income taxes (9,828 ) (14,263 )

Income tax benefit (expense) — —

Net (loss) per share:

Weighted average shares used in computing net (loss) per share:

See Notes to Consolidated Financial Statements.

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SAFEGUARD SCIENTIFICS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(In thousands)

Total Deficit Loss Shares Amount Capital Shares Amount

Stock-based compensation 736 — — — — 736 — —

Repurchases of common stock (2,940 ) — — — — — 712 (2,940 )

Stock-based compensation 680 — — — — 680 — —

Repurchases of common stock (75 ) — — — — — 25 (75 )

Dividends paid (5,819 ) — — — — (5,819 ) — —

See Notes to Consolidated Financial Statements.

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SAFEGUARD SCIENTIFICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended December 31,

Cash Flows from Operating Activities:

Adjustments to reconcile to net cash used in operating activities:

Amortization of right of use asset 319 271

Impairments of ownership interests and advances 1,173 —

Gain from observable price changes (1,661 ) (553 )

Gain from sales of ownership interests (542 ) —

Change in fair value of ownership interests — 3,689

Other, net (7 ) 76

Stock-based compensation, including liability classified awards 1,121 1,445

Changes in assets and liabilities:

Prepaid expenses and other current assets (146 ) (534 )

Accounts payable, accrued expenses, and other current liabilities 178 (374 )

Net cash used in operating activities (3,308 ) (3,258 )

Cash Flows from Investing Activities:

Acquisitions of ownership interests (3,000 ) —

Proceeds from sales and distributions from ownership interests 2,851 6,879

Advances and loans to ownership interests (250 ) (5,670 )

Purchase of marketable securities (8,530 ) (11,871 )

Proceeds from sales and maturities in marketable securities 14,650 6,000

Net cash provided by (used in) investing activities 5,721 (4,662 )

Cash Flows from Financing Activities:

Payment of dividend (5,819 ) —

Repurchases of common stock (75 ) (2,939 )

Tax withholdings related to equity-based awards (358 ) (549 )

Net cash used in financing activities (6,252 ) (3,488 )

Net change in cash, cash equivalents and restricted cash (3,839 ) (11,408 )

Cash, cash equivalents and restricted cash at end of year $ 9,517 $ 13,356

See Notes to Consolidated Financial Statements.

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SAFEGUARD SCIENTIFICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. General

Liquidity And Capital Resources

As of December 31, 2023, Safeguard Scientifics, Inc. ("the Company" or "Safeguard") had $9.5 million of cash and cash equivalents.

In January 2018, Safeguard ceased deploying capital into new opportunities in order to focus on supporting the existing ownership interests and maximizing monetization opportunities to enable returning value to shareholders. We have considered and taken action on various initiatives including the sale of our ownership interests, the sale of certain or all of our ownership interests in secondary market transactions as well as other opportunities to maximize shareholder value. As we seek to provide additional funding to existing companies where we have an ownership interest, we may be required to expend our cash or incur debt, which will decrease our liquidity. From time to time, we are engaged in discussions concerning acquisitions and dispositions which, if consummated, could impact our liquidity, perhaps significantly. Accordingly, the Company could also pursue other sources of capital in order to maintain its liquidity.

The Company believes that its cash and cash equivalents at December 31, 2023 will be sufficient to fund operations past one year from the issuance of these consolidated financial statements.

Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Safeguard and all of its wholly-owned subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.

Principles of Accounting for Ownership Interests in Companies

The Company accounts for its ownership interests using one of the following methods: Equity or Other. The accounting method applied is generally determined by the degree of the Company's influence over the entity, primarily determined by our voting interest in the entity.

In addition to holding voting and non-voting equity and debt securities, the Company also periodically makes advances to its companies in the form of promissory notes which are included in Ownership interests and advances on the Consolidated Balance Sheets.

Equity Method. The Company accounts for ownership interests whose results are not consolidated, but over which it exercises significant influence, under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an ownership interest depends on an evaluation of several factors including, among others, representation on the board of directors and our ownership level, which is generally a 20% to 50% interest in the voting securities of a company, including voting rights associated with the Company’s holdings in common, preferred and other convertible instruments in the company. The Company records the initial ownership interest at cost. Under the equity method of accounting, the Company does not reflect a company’s financial statements within our Consolidated Financial Statements; however, our share of the income or loss of such company is reflected in Equity income (loss), net in the Consolidated Statements of Operations. The Company also adjust the carrying value to reflect third party investments in the ownership interests, which typically result in a dilution gain. The Company includes the carrying value of equity method companies in Ownership interests and advances on the Consolidated Balance Sheets. Any excess of the Company’s cost over its underlying interest in the net assets of equity method companies that is allocated to intangible assets is amortized over the estimated useful lives of the related intangible assets. The Company reflects its share of the income or loss of the equity method companies on a one quarter lag. This reporting lag could result in a delay in recognition of the impact of changes in the business or operations of these companies.

The Company accounts for ownership interests that are not accounted for under the equity method and have a readily determinable fair value at fair value based on the closing stock price on the last trading day of the reporting period. Under this method, the changes in fair value are reflected in Other income (loss), net. As of December 31, 2023 there were no remaining ownership interests following this accounting method.

Comprehensive Income (loss)

During the years ended December 31, 2023 or 2022, there were no items of comprehensive income (loss).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Accounting Estimates

The preparation of the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect amounts reported in the financial statements and accompanying notes. Actual results may differ from these estimates. These estimates include the evaluation of the recoverability of the Company’s ownership interests and advances, the recoverability of deferred tax assets, stock-based compensation and commitments and contingencies. Management evaluates its estimates on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances.

Certain amounts recorded to reflect the Company’s share of income or losses for companies accounted for under the equity method are based on unaudited results of operations of those companies and may require adjustments in the future when audits of these entities’ financial statements are completed.

It is reasonably possible that the Company’s accounting estimates with respect to the ultimate recoverability of the carrying value of the Company’s ownership interests and advances could change in the near term and that the effect of such changes on the consolidated financial statements could be material. At December 31, 2023, the Company believes the carrying value of the Company’s ownership interests and advances is not impaired, although there can be no assurance that the Company’s future results will confirm this assessment, that a significant write-down or write-off will not be required in the future or that a significant loss will not be recorded in the future upon the sale of a company.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist of deposits that are readily convertible into cash. The Company has not experienced any significant losses on cash equivalents and does not believe it is exposed to any significant credit risk on cash and cash equivalents.

Restricted Cash

Restricted cash represents cash required to be set aside by a contractual agreement as a shareholder representative. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Statements of Cash Flows:

(In thousands)

Restricted cash 19 25

Total cash, cash equivalents and restricted cash $ 9,517 $ 13,356

Financial Instruments

The Company’s financial instruments (principally cash and cash equivalents, marketable securities, accounts receivable, notes receivable, accounts payable and accrued expenses) are carried at cost, which approximates fair value due to the short-term maturity of these instruments.

Right-of-use asset

Right-of-use assets represent an operating lease for office facilities. The right-of-use assets are reduced over the remaining term of the applicable lease ( April 2026) in a manner that results in a straight-line lease expense, when combined with the interest factor on the lease liability.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Lease liability

The initial lease liability represents the present value of the fixed escalating lease payments through April 2026 associated with the Company's prior corporate headquarters operating office lease. The discount rate used to calculate the lease liability was based on the Company's incremental borrowing rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease, which was approximately 12%, at the transition to the guidance of ASU No.2016-02,Leases. Subsequent values of the lease liability reflect the reduction in the lease liability for operating lease payments less an amount representing interest, which is included in the straight-line lease expense. There is no residual value guarantee associated with this operating lease arrangement. The Company has incurred operating lease expenses and operating cash outflows of $0.5 million for each of the years ended December 31, 2023 and 2022, respectively, and $0.6 million for each of the years ended December 31, 2023 and 2022.

In March 2019, the Company entered into a sublease of its prior corporate headquarters office space. The term of the sublease is through April 2026, the same as the Company's underlying lease. Fixed sublease payments to the Company are escalating over the term of the sublease and are reported as a component of general and administrative expenses.

A summary of the Company's expected operating lease cash flows at December 31, 2023 follows:

Operating lease payments Expected sublease receipts

(In thousands)

Thereafter — —

Total future minimum lease payments 1,439 1,362

Less imputed interest (190 )

Total operating lease liabilities $ 1,249

Impairment of Ownership Interests and Advances

On a periodic basis, but no less frequently than quarterly, the Company evaluates the carrying value of its ownership interests and advances for possible impairment based on achievement of business plan objectives and milestones, the estimated value of each company relative to its carrying value, the financial condition and prospects of the company and other relevant factors. The business plan objectives and milestones the Company considers include, among others, those related to financial performance, such as achievement of planned financial results or completion of capital raising activities, and those that are not primarily financial in nature, such as hiring of key employees or the establishment of strategic relationships.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Management then determines whether there has been an other than temporary decline in the value of its ownership interest in the company. Impairment is measured as the amount by which the carrying value of an asset exceeds its estimated fair value.

The estimated fair value of privately held companies is generally determined based on the value at which independent third parties have invested or have committed to invest in these companies or based on other valuation methods, including discounted cash flows, valuation of comparable public companies and the valuation of acquisitions of similar companies.

Impairment charges related to equity method companies are included in Equity income (loss), net in the Consolidated Statements of Operations. Impairment charges related to non-equity method companies and funds are included in Other income (loss), net in the Consolidated Statements of Operations.

The reduced cost basis of a previously impaired company accounted for using the Equity method are not written-up if circumstances suggest the value of the company has subsequently recovered.

Income Taxes

The Company accounts for income taxes under the asset and liability method whereby deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company measures deferred tax assets and liabilities using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled. The Company recognizes the effect on deferred tax assets and liabilities of a change in tax rates in income in the period of the enactment date. The Company provides a valuation allowance against the net deferred tax asset for amounts which are not considered more likely than not to be realized.

Net Income (Loss) Per Share

The Company computes net income (loss) per share using the weighted average number of common shares outstanding during each year. The Company includes in diluted net income (loss) per share common stock equivalents (unless anti-dilutive) which would arise from the exercise of stock options and conversion of other convertible securities and adjusted, if applicable, for the effect on net income (loss) of such transactions. Diluted net income (loss) per share calculations adjust net income (loss) for the dilutive effect of common stock equivalents and convertible securities issued by the Company’s consolidated or equity method companies.

Segment Information

The Company operates as one operating segment based upon the similar nature of its technology-driven companies, the functional alignment of the organizational structure, and the reports that are regularly reviewed by the chief operating decision maker for the purpose of assessing performance and allocating resources.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

2. Ownership Interests and Advances

The following summarizes the carrying value of the Company’s ownership interests and advances.

(In thousands)

Equity Method:

Private equity funds 97 97

Other Method:

Companies, fair value — 860

Companies, fair value measurement alternative 2,555 1,067

Private equity funds, fair value measurement alternative 250 250

During the year ended December 31, 2023, the Company recorded an impairment of $1.0 million related to the Moxe ownership interest, which is accounted for under the equity method. The impairment was determined based on declines in the fair value of our ownership interest resulting from lower forward looking revenue expectations. There were no impairments during the year ended December 31, 2022. The measurement of fair value for the impairment was estimated based on evaluating several valuation inputs available, primarily including the valuation of comparable public companies, the valuation of acquisitions of similar companies and the present value of our expected outcomes. Assumptions considered within these methods include determining which public companies are comparable, projecting forward revenues for the measured ownership interest, discounts to apply for the lack of marketability or lack of comparability, other factors and the relative weight to apply to each valuation input available. Due to the unobservable nature of some of these inputs, we have determined these fair value estimates to be non-recurring Level 3 fair value measurements.

During 2023, the Company has received $0.9 million from the collection of escrowed amounts related to the 2022 Lumesis transaction, $0.8 million from the sale of its ownership interest in BHG, $0.5 million from the resolution of escrow contingencies resulting from the 2021 Flashtalking transaction, $0.4 million from the secondary sale of a subordinated promissory note issued by Aktana and additional amounts from other earn-outs or contingencies.

In September 2022, Lumesis, Inc. was acquired by another entity for cash. The Company received $5.5 million in cash proceeds in connection with this transaction, excluding holdbacks and escrows. This transaction resulted in a gain of $4.9 million, including $0.8 million other receivable related to an indemnification escrow during the year ended December 31,2022.

During the year ended December 31, 2022, the Company recognized $0.5 million as gain on sale as the result of the 2021 WebLinc transaction from the collection of additional amounts and as contingencies were resolved, those amounts were recorded as gain on the sale and included within Equity income (loss).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

As of December 31, 2023, the Company held ownership interests accounted for using the equity method in 4 non-consolidated companies.

Certain of the Company’s ownership interests as of December 31, 2023 and 2022 included the following:

Safeguard Primary Ownership as of December 31,

Clutch Holdings, Inc. 41.7 % 41.7 % Equity

InfoBionic, Inc. * 25.2 % Other

MedCrypt, Inc. * * Other

meQuilibrium 30.2 % 31.3 % Equity

Moxe Health Corporation 19.3 % 19.3 % Equity

Prognos Health Inc. 19.0 % 28.4 % Equity

*minimal ownership interest

Summarized Financial Information

The following table provides summarized financial information for ownership interests accounted for under the equity method for the periods presented and has been compiled from respective company financial statements, reflect certain historical adjustments, and are reported on a one quarter lag. Results of operations are excluded for periods prior to their acquisition and subsequent to their disposition. Historical results are not adjusted when the Company exits or writes-off a company.

As of December 31,

(In thousands)

Balance Sheets:

Total liabilities and shareholders’ deficit $ 59,438 $ 181,115

Number of equity method ownership interests 4 8

Year Ended December 31,

(In thousands)

Results of Operations:

As of December 31, 2023, the Company’s carrying value in equity method companies, in the aggregate, exceeded the Company’s share of the net assets of such companies by approximately $1.1 million. Of this excess, $1.0 million was allocated to goodwill and $0.1 million was allocated to intangible assets.

3. Acquisitions of Ownership Interests

2023 Transactions

The Company deployed $3.0 million to Prognos Health during the three months ended June 30, 2023. The Company had previously deployed an aggregate of $14.6 million. Prognos is a healthcare platform company transforming the ability to access, manage and analyze healthcare data in partnership with life sciences brands, payers, and clinical diagnostics organizations.

The Company funded $0.3 million of convertible loans to Trice Medical during the three months ended March, 31 2023. During the three months ended September 30,2023, Trice Medical completed a recapitalization transaction in which Safeguard declined to participate that resulted in Safeguard retaining a small, subordinated debt position and a de minimis ownership interest. The Company had previously deployed an aggregate of $12.0 million. Trice Medical is focused on orthopedic diagnostics using fully integrated camera-enabled technologies to provide clinical solutions to physicians.

During the three months ended September 30, 2023, InfoBionic completed a recapitalization transaction, in which Safeguard declined to participate, that reduced our ownership position to approximately 5% and resulted in a $1.7 million observable price change gain to reflect the fair value of the ownership interest. InfoBionic provides a remote patient monitoring platform delivering on-demand, actionable monitoring data and analytics directly to physicians.

2022 Transactions

The Company funded $1.6 million of convertible loans to Syapse, Inc. The Company had previously deployed an aggregate of $25.0 million. Syapse drives healthcare transformation through precision medicine, enabling provider systems to improve clinical outcomes, streamline operations, and shift to new payment models.

The Company funded $2.0 million of convertible loans to Prognos Health Inc. The Company had previously deployed an aggregate of $12.6 million.

The Company funded $1.4 million of convertible loans to Clutch Holdings, Inc. The Company had previously deployed an aggregate of $16.9 million. Clutch provides customer intelligence and personalized engagements that empower consumer-focused businesses to identify, understand and motivate each segment of their customer base.

The Company funded $0.5 million of convertible loans to meQuilibrium. The Company had previously deployed an aggregate of $14.0 million. meQuilibrium is a digital coaching platform that delivers clinically validated and highly personalized resilience solutions to employers, health plans, wellness providers, and consumers increasing engagement, productivity and performance, as well as improving outcomes in managing stress, health and well-being.

The Company funded $0.1 million of convertible loans to Trice Medical. The Company had previously deployed an aggregate of $11.8 million. The Company also committed to provide another $0.3 million under certain conditions pursuant to a subordinated line of credit. At December 31, 2022, the Company's obligation under this line of credit is included in accrued expenses. During the year ended December 31, 2023, the Company funded $0.3 million in accordance with this line of credit.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

4. Fair Value Measurements

The Company categorizes its financial instruments into a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

Cash, cash equivalents and restricted cash approximate fair value due to their short term nature. The Company did not have any Level 2 or Level 3 financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2023.

Carrying Fair Value Measurement at December 31, 2023

Value Level 1 Level 2 Level 3

(in thousands)

Cash and cash equivalents $ 9,498 $ 9,498 $ — $ —

Restricted cash $ 19 $ 19 $ — $ —

Carrying Fair Value Measurement at December 31, 2022

Value Level 1 Level 2 Level 3

(In thousands)

Cash and cash equivalents $ 13,331 $ 13,331 $ — $ —

Restricted cash $ 25 $ 25 $ — $ —

Marketable securities—held-to-maturity:

U.S. Government securities $ 5,956 $ 5,956 $ — $ —

Ownership interests $ 860 $ 860 $ — $ —

Ownership interests accounted for at fair value as of December 31, 2022 consist of approximately 1.3 million common shares of Bright Health. The securities are carried at fair value based on the closing stock price on the last trading day of the reporting period.

5. Equity

In July 2015, the Company's Board of Directors authorized the Company, from time to time and depending on market conditions, to repurchase up to $25.0 million of the Company's outstanding common stock. During the years ended December 31, 2023 and 2022, the Company did not repurchase any shares under the existing authorization.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

6. Stock-Based Compensation

Equity Compensation Plans

The 2014 Equity Compensation Plan has 4.1 million shares authorized for issuance. During 2023 and 2022, the Company issued no stock-based awards outside of existing plans. To the extent allowable, service-based options are incentive stock options. Options granted under the plans are at prices equal to or greater than the fair market value at the date of grant. Upon exercise of stock options, the Company issues shares first from treasury stock, if available, then from authorized but unissued shares. At December 31, 2023, the Company had reserved 1.5 million shares of common stock for possible future issuance under its 2014 Equity Compensation Plan and other previously expired equity compensation plans.

Classification of Stock-Based Compensation Expense

Stock-based compensation consists of time based awards to employees, financial liability based awards to employees and non-employees to be settled in stock, performance based awards to employees, and financial liability based awards to Directors for quarterly and annual services. Stock-based compensation expense was recognized in the Consolidated Statements of Operations as follows:

Year Ended December 31,

(In thousands)

General and administrative expense $ 1,121 $ 1,445

Stock-based compensation expense of $1.1 million and $1.4 million was recognized during the years ended December 31, 2023 and 2022, respectively, related to annual and quarterly Board fees, time based management awards and management bonuses earned during the year that were subsequently settled in stock. For the years ended December 31, 2023 and 2022, the Company issued 377 thousand and 165 thousand, respectively, of restricted shares to Directors for their annual and quarterly services. The annual grants vest over a one year period, or are vested at issuance for directors 65 or older, while quarterly amounts are paid in arrears. The Company vested 275 thousand and 110 thousand shares during the years ended December 31, 2023 and 2022. The Company vested 125 thousand and 22 thousand shares during the years ended December 31, 2023 and 2022, respectively, for time based management compensation. The Company settled in stock other management bonuses resulting in the issuance of 51 thousand and 82 thousand vested shares for the years ended December 31, 2023 and 2022, respectively. The Company issued 0 thousand and 15 thousand vested shares to a non-employee for services during the years ended December 31, 2023 and 2022. The Company had liabilities of $0.1 million and $0.4 million as of December 31, 2023 and 2022, respectively, that were settled through the issuance of common stock in the subsequent period.

The Company has previously granted certain performance-based stock units that vest based on the achievement of targeted capital returns based on net cash proceeds received by the Company on the sale, merger or other exit transaction of certain identified companies. The requisite service periods for these performance-based awards were based on the Company’s estimate of when the performance conditions will be met. Compensation expense was recognized for performance-based awards for which the performance condition is considered probable of achievement. During the years ended December 31, 2023 and 2022, respectively, zero and 92 thousand performance-based stock units pursuant to these targeted capital return pools were canceled or forfeited. In January 2022, the Company granted the CEO restricted stock units that may vest based on certain performance targets and criteria determined by the Board of Directors. Such performance-based stock units represent the right to receive shares of the Company’s common stock, on a one-for-one basis at target for certain specified thresholds. For the year ended December 31, 2022, the Company recognized stock based compensation expense of $0.2 million and vested 64 thousand shares pursuant to this arrangements.

Unrecognized compensation expense related to performance stock units and restricted stock at December 31, 2023 was immaterial.

While there were no stock options granted during 2023 and 2022, the Company had outstanding options that vest based on two different types of vesting schedules:

1) performance-based; and

2) service-based.

Performance-based option awards also entitled participants to vest in a number of awards determined by achievement by the Company of target capital returns based on net cash proceeds received by the Company upon the sale, merger or other exit transaction of certain identified companies. Compensation expense is recognized over the requisite service periods using the straight-line method but is accelerated if capital return targets are achieved earlier than estimated. The Company did not issue any performance-based units during the years ended December 31, 2023 and 2022. During the years ended December 31, 2023 and 2022, respectively, there were no performance-based options vested and no compensation cost was recognized. During the years ended December 31, 2023 and 2022, respectively, 0 thousand and 11 thousand performance-based options were canceled or forfeited. The maximum number of unvested options at December 31, 2023 attainable under these grants was zero shares.

Service-based awards generally vest over four years after the date of grant and expire eight years after the date of grant. Compensation expense is recognized over the requisite service period using the straight-line method. The requisite service period for service-based awards is the period over which the award vests. During the years ended December 31, 2023 and 2022, respectively, the Company issued no service-based options to employees and recorded zero compensation expense from the vesting of previously issued awards. During the years ended December 31, 2023 and 2022, respectively, 10 thousand and 0 thousand service-based options were canceled or forfeited.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Option activity of the Company is summarized below:

(In thousands) (In years) (In thousands)

Options granted — —

Options exercised — —

Options canceled/forfeited (11 ) 14.48

Options granted — —

Options exercised — —

Options canceled/forfeited (10 ) 17.11

Shares available for future grant 1,482

At December 31, 2023, total unrecognized compensation cost related to non-vested service-based options was immaterial. At December 31, 2023, total unrecognized compensation cost related to non-vested performance-based options was immaterial.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Deferred stock unit, performance-based stock unit and restricted stock activity are summarized below:

Shares Weighted Average Grant Date Fair Value

(In thousands)

7. Employee Benefit Plan

The Company maintains a qualified 401(k) retirement plan for eligible employees. The Plan’s matching formula is 100% of the first5% of participants’ qualified compensation. Compensation expense related to our matching contributions to the Plan for the years ended December 31, 2023 and 2022, were $0.1 million and $0.1 million, respectively.

8. Income Taxes

The federal and state provision (benefit) for income taxes was $0.0 million for the years ended December 31, 2023 and 2022.

The total income tax provision (benefit) differed from the amounts computed by applying the U.S. federal income tax rate of 21.0% for the years ended December 31, 2023 and 2022 to net income (loss) before income taxes as a result of the following:

Year Ended December 31,

Statutory tax expense (benefit) (21.0 )% (21.0 )%

Increase (decrease) in taxes resulting from:

Nondeductible expenses (0.4 ) (2.6 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows:

As of December 31,

(In thousands)

Deferred tax asset:

Carrying values of ownership interests and other holdings $ 24,370 $ 33,222

Disallowed interest carryforwards 6,613 6,891

Accrued expenses 13 47

Stock-based compensation (3 ) 180

Net deferred tax asset $ — $ —

As of December 31, 2023, the Company and its subsidiaries had federal net operating and capital loss carryforwards for tax purposes of approximately $332 million, of which approximately $59 million have an indefinite life. These carryforwards expire as follows:

Total

(In thousands)

In assessing the recoverability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has determined that it is more likely than not that certain future tax benefits may not be realized as a result of current and future income. Accordingly, a valuation allowance has been recorded against substantially all of the Company’s deferred tax assets.

The Company recognizes in its Consolidated Financial Statements the impact of a tax position if that position is more likely than not to be sustained upon examination, based on the technical merits of the position. All uncertain tax positions relate to unrecognized tax benefits that would impact the effective tax rate when recognized.

The Company does not expect any material increase or decrease in its income tax expense, in the next twelve months, related to examinations or changes in uncertain tax positions.

There were no changes in the Company’s uncertain tax positions for the years ended December 31, 2023 and 2022.

The Company files income tax returns in the U.S. federal jurisdiction, and various state jurisdictions. Tax years 2019 and forward remain open for examination for federal tax purposes and the Company’s more significant state tax jurisdictions. To the extent utilized in future years’ tax returns, net operating loss carryforwards at December 31, 2023 will remain subject to examination until the respective tax year is closed. The Company recognizes penalties and interest accrued related to income tax liabilities in income tax benefit (expense) in the Consolidated Statements of Operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

9. Net Income (Loss) Per Share

The calculations of net income (loss) per share were:

Year Ended December 31,

(In thousands, except per share data)

Basic:

Weighted average common shares outstanding 16,221 16,337

Net (loss) per share $ (0.61 ) $ (0.87 )

Diluted:

Weighted average common shares outstanding 16,221 16,337

Net (loss) per share $ (0.61 ) $ (0.87 )

Basic and diluted average common shares outstanding for purposes of computing net income (loss) per share includes outstanding common shares and vested deferred stock units (DSUs).

If an equity method company has dilutive stock options, unvested restricted stock, DSUs, or warrants, diluted net income (loss) per share is computed by first deducting from net income (loss) the income attributable to the potential exercise of the dilutive securities of the company from net income (loss). Any impact is shown as an adjustment to net income (loss) for purposes of calculating diluted net income (loss) per share.

Diluted income (loss) per share for the years ended December 31, 2023 and 2022 do not reflect the following potential shares of common stock that would have an anti-dilutive effect or have unsatisfied performance or market conditions:

10. Related Party Transactions

In the normal course of business, the Company’s officers and employees hold board positions with companies in which the Company has a direct or indirect ownership interest.

11. Commitments and Contingencies

The Company and the companies in which it holds ownership interests are involved in various claims and legal actions arising in the ordinary course of business. In the current opinion of the Company, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position or results of operations, however, no assurance can be given as to the outcome of these actions, and one or more adverse rulings could have a material adverse effect on the Company’s consolidated financial position and results of operations or that of its companies. The Company records costs associated with legal fees as such services are rendered.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The Company has provided a guarantee, which is fully funded by escrowed funds held by a third party, of $3.8 million at December 31, 2023 which related to one of the Company's private equity holdings.

The Company has agreements with certain employees that provide for severance payments to the employee in the event the employee is terminated without cause or an employee terminates his employment for "good reason". The Company has recorded severance expenses of $0.7 million during the year ended December 31, 2023, which is expected to be paid during 2024.

In 2018, the Board of Directors (the “Board”) of the Company adopted a long-term incentive plan, which was amended in February 2019 and June 2020, known as the Amended and Restated Safeguard Scientifics Transaction Bonus Plan (the “LTIP”). The purpose of the LTIP is to promote the interests of the Company and its shareholders by providing an additional incentive to employees to maximize the value of the Company in connection with the execution of the business strategy that the Company adopted and announced in January 2018. The June 2020 amendment lowered the level of the first threshold and the resulting bonus pool percentage as an incentive to employees to accelerate actions consistent with the business strategy. Under the LTIP, participants, which includes certain current and former employees, have received awards that may result in cash payments in connection with sales of the Company’s ownership interests (“Sale Transaction(s)”). The LTIP provides for a bonus pool corresponding to: (i) specified vesting thresholds or (ii) specified events. In the first case, the bonus pool will range from an amount equal to 0.2% (previously 1.0%) of received proceeds at the first threshold to 1.3% at higher thresholds. In the second case, a minimum pool will be created and paid under specified circumstances. The bonus pool will be allocated and paid to participants in the LTIP based on the product of (i) the participant’s applicable bonus pool percentage and (ii) the bonus pool calculated as of the vesting date, minus any previously paid portion of the bonus pool. Any portion of the bonus pool available as of the applicable vesting date that is reserved will be allocated in connection with each vesting date so that the entire bonus pool available as of such vesting date is allocated and payable to participants. Subject to the terms of the LTIP, payments under the LTIP will be paid in cash within 60 days of the applicable vesting date. All current officers and employees of the Company are eligible to participate in the LTIP. The Board, in its sole discretion, will determine the participants to whom awards are granted under the LTIP. The Company recorded no compensation expense during each of the years ended December 31, 2023 and 2022, respectively. The Company has not paid any amounts during the years ended December 31, 2023 and 2022 and has no amounts accrued under the LTIP as of December 31, 2023.

In June 2011, Advanced BioHealing, Inc. (“ABH”) was acquired by Shire plc (“Shire”). Prior to the expiration of the escrow period in March 2012, Shire filed a claim against all amounts held in escrow related to the sale based principally upon a United States Department of Justice (“DOJ”) false claims act investigation relating to ABH (the “Investigation”). In connection with the Investigation, in July 2015 the Company received a Civil Investigation Demand-Documentary Material (“CID”) from the DOJ regarding ABH and Safeguard’s relationship with ABH. Pursuant to the CID, the Company provided the requested materials and information. To the Company’s knowledge, the CID was related to multiple qui tam (“whistleblower”) actions, one of which was filed in 2014 by an ex-employee of ABH that named the Company and one of the Company’s employees along with other entities and individuals as defendants. At this time, the DOJ has declined to pursue the qui tam action as it relates to the Company and such Company employee. In addition, in connection with the above matters, the Company and other former equity holders in ABH entered into a settlement and release with Shire during 2017, which resulted in the release to Shire of all amounts held in escrow related to the sale of ABH.

12. Supplemental Cash Flow Information

During the years ended December 31, 2023 and 2022, the Company converted $1.5 million and zero, respectively, of advances into ownership interests.

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SAFEGUARD SCIENTIFICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

13. Segment Reporting

As of December 31, 2023 and 2022, all of the Company’s assets were located in the United States.

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SAFEGUARD SCIENTIFICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

14. Selected Quarterly Financial Information (Unaudited)

Three Months Ended

March 31 June 30 September 30 December 31

(In thousands, except per share data)

Income tax benefit (expense) — — — —

Net income (loss) per share (a)

Income tax benefit (expense) — — — —

Net income (loss) per share (a)

15. Subsequent Events

On January 12, 2024, the Company completed a reverse stock split at a ratio of 1-for-100, followed by a forward stock split at a ratio of 100-for-1 (collectively referred to as "stock splits"). In conjunction with the stock splits, certain fractional shareholders aggregating to approximately 6,000 shares for $9 thousand were repurchased for cash resulting in a reduction in the Company's shareholders of record.

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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including the Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures as of December 31, 2023 were effective.

(b) Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023. In making this assessment, management used the framework established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). As a result of this assessment and based on the criteria in the COSO framework, management has concluded that, as of December 31, 2023, the Company’s internal control over financial reporting was effective.

No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Names of Directors and other Information

Career Highlights:

— Chief Investment Officer of Rainin Group, LLC (2020 – present)

— Board Observer of FREDsense Technologies (2017 – present)

— Board Member of Desalitech, Inc. (2017 – 2020)

— Board Member of Sierra Monitor Corp. (2018 – 2019)

— Associate – Mergers and Acquisitions at Presidio Strategies, LLC (1998 – 1999)

— Financial Analyst – Investment Banking at J.P. Morgan, Inc. (1996 – 1998)

Experience and Qualifications: Mr. DeMont is currently Chief Investment Officer at the Rainin Group, Inc., which manages the assets of both a family office and the investments of the Kenneth Rainin Foundation. Previously, Mr. DeMont was a Managing Member and Portfolio Manager of Midwood Capital Management, a private investment partnership making concentrated investments in public companies. Before this role, Mr. DeMont was an Associate at Igoe Capital Partners, a hybrid public/private equity investment firm with a primary focus on the small- and micro-cap sectors. Mr. DeMont also worked at Presidio strategies in Mergers and Acquisitions and JP Morgan with a focus on Corporate Finance and Mergers and Acquisitions. He previously served on multiple Boards of Directors, including Desalitech, a private, venture backed company selling into the industrial water treatment industry and Sierra Monitor Corp. (Ticker: SRMC), focused on device connectivity and environmental instrumentation. Mr. DeMont graduated from Connecticut College with a BA in both Economics and Government and earned an MBA from the Tuck School of Business at Dartmouth.

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Career Highlights:

— Analyst with Kidder, Peabody & Co., an investment banking firm (1984 – 1986)

— Received A.B. in Economics from Princeton University

— Received M.B.A. from Stanford Graduate School of Business

Experience and Qualifications: Mr. Glass has experience relating to private equity, investment banking and serving as chief executive officer of a public company. Mr. Glass has experience serving on the boards of several public and private companies in a wide range of industries.

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Career Highlights:

Experience and Qualifications: Mr. Manko has experience serving on the boards of several companies and has participated in numerous shareholder value creation strategies and monetizations.

Career Highlights:

— Partner of Cartesian Capital Group (2022 – present)

— Senior Managing Director of Cartesian Capital Group (2006 – 2022)

— Vice President at PH Capital/ AIG Capital Partners (1999 – 2006)

— Associate at Wasserstein Perella Emerging Markets (1996 – 1999)

— Received Bachelor of Arts with distinction from the University of Michigan

Experience and Qualifications: Ms. Michelson is a private equity investor with more than two decades of building businesses globally. In addition to having served on audit and compensation committees, Ms. Michelson is also a Chartered Financial Analyst and has structured and deployed over $500 million of investment capital.

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Skills and Qualifications of Director Nominees

The following table includes the skills and qualifications of each director nominee that led our Board to conclude that the director nominee is qualified to serve on our Board.

Ross D. DeMont Russell D. Glass Joseph M. Manko, Jr. Beth S. Michelson

Operational / Direct Management Experience ✓ ✓ ✓ ✓

Capital Markets Experience ✓ ✓ ✓ ✓

Private Equity / Venture Capital Experience ✓ ✓ ✓ ✓

Financial Expertise / Literacy ✓ ✓ ✓ ✓

C-level Experience ✓ ✓ ✓ ✓

Other Public / Private Director Experience ✓ ✓ ✓ ✓

Audit Committee. The Audit Committee held four meetings during 2023. The Audit Committee’s responsibilities, which are described in detail in its charter, include, among other duties, the responsibility to:

☐ Review and approve related party transactions; and

The Audit Committee has the sole authority to retain, set compensation and retention terms for, terminate and oversee the relationship with Safeguard’s independent registered public accounting firm (which reports directly to the Audit Committee). The Audit Committee also oversees the activities of the internal auditor, reviews the effectiveness of the internal audit function and approves the appointment of the internal auditor. The Audit Committee has the authority to obtain advice, counsel and assistance from internal and external legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties and to receive appropriate funding from Safeguard for such advice and assistance. Although the Audit Committee has the powers and responsibilities set forth in its charter, its role is oversight, and management has primary responsibility for the financial reporting process of Safeguard.

The Board has determined that each member of the Audit Committee meets the independence requirements established by SEC regulations, Nasdaq listing standards and our Corporate Governance Guidelines. The Board has also determined that Mr. DeMont, Mr. Glass, Mr. Manko and Ms. Michelson are “audit committee financial experts” within the meaning of the SEC regulations, and the Board has determined that each member of the Audit Committee has accounting and related financial management expertise within the meaning of the Nasdaq listing standards.

Code of Business Conduct and other Charters.

Safeguard’s Corporate Governance Guidelines, Code of Business Conduct and Ethics, Audit Committee Charter, Compensation Committee Charter and Nominating & Corporate Governance Committee Charter are available at https://ir.safeguard.com/corporate-governance/documents-charters/. The Code of Business Conduct and Ethics is applicable to all employees of Safeguard, including each of our executive and financial officers, and the members of our Board. Safeguard has posted any applicable information regarding amendments to or waivers from our Code of Business Conduct and Ethics (to the extent applicable to Safeguard’s directors or executive officers) in the Corporate Governance section of our website. Our website is not part of this report. All references to our website address are intended to be inactive textual references only.

Section 16(a) Beneficial Ownership Reporting Compliance.

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and greater than 10% holders of our common stock to file with the SEC reports of ownership of our securities and changes in ownership of our securities. Based solely on our review of the copies of reports we have received and upon written representations from the reporting persons that no Form 5 reports were required to be filed by those persons, Safeguard believes there were no late filings by our directors and executive officers during 2023. Except as disclosed in SEC reports, there were no known holders of greater than 10% of our common stock during 2023 who failed to file the required reports.

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Item 11.Executive Compensation

Compensation Discussion and Analysis

Executive Summary

Our Compensation Committee (for purposes of this discussion, the “Committee”) is responsible for establishing our company-wide compensation philosophy and practices, for determining the compensation for our “named executive officers” and for approving the compensation for our other senior executives, based on the recommendations of our Chief Executive Officer. This Compensation Discussion and Analysis describes our executive compensation program and the compensation decisions made for 2023 for our named executive officers.

In January 2018, Safeguard ceased deploying capital into new opportunities in order to focus on supporting its existing ownership interests (such companies are referred to throughout this Compensation Discussion and Analysis (“CD&A”) as our “companies” or Safeguard’s or its “companies”) and maximizing monetization and other strategic opportunities to enable Safeguard to return value to its shareholders. This strategy is sometimes referred to in this CD&A as the “Strategy.”

At December 31, 2023, there were two individuals serving as named executive officers of Safeguard:

Eric Salzman Chief Executive Officer

Mark A. Herndon Senior Vice President and Chief Financial Officer

Following such time, Mr. Salzman and Mr. Herndon ceased serving in such positions and, effective January 1, 2024, Mark Dow of Rock Creek (as defined below) was named as Safeguard’s Chief Executive Officer, Chief Financial Officer and Secretary.

Key 2023 Compensation and Management Changes

Effective Corporate Governance Principles

Below is a summary of what we did and what we did not do relating to executive compensation during 2023:

WHAT WE DID:

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WHAT WE DIDN’T DO:

Provide any material perquisites

The Committee reviews our compensation philosophy each year to ensure that its principles and objectives are aligned with our overall business strategy and aligned with the interests of our shareholders. We seek to apply a consistent philosophy across our executive group, not just among our named executive officers.

Compensation Philosophy and Objectives

Our overall goals in compensating our executives in 2023 were as follows:

● Provide a mix of fixed and variable at-risk cash and equity compensation; and

Role of the Compensation Committee in Compensation Decisions

The Committee is responsible for the design of our executive compensation program and for making decisions regarding our named executive officers’ compensation. The Committee also makes, or has final approval authority regarding, all compensation decisions for our other senior executives. Annually, the Committee reviews executive compensation practices, including the methodology for setting total named executive officers’ compensation, the goals of the program and the overall compensation philosophy for Safeguard. The Committee believes that the overall objectives of its compensation philosophy are better achieved through flexibility. The Committee ultimately makes decisions regarding executive compensation based on its assessment of Safeguard’s performance and the achievement of its companies’ and corporate goals.

The Committee is also responsible for approving and granting equity awards to our directors, executives, employees and, from time to time, other independent advisors and consultants. The Committee’s responsibilities are more fully described in its charter, which is available at https://ir.safeguard.com/corporate-governance/documents-charters/.

Role of Executive Officers in Compensation Decisions

Within the parameters approved by the Committee each year and any applicable existing employment agreements, our Chief Executive Officer is responsible for evaluating and recommending compensation for our other employees, including annually assessing the performance of each other employee. In determining the compensation of our executives, the Committee considers our Chief Executive Officer’s assessment and recommendations. However, other than for compensation that has been established contractually or under quantitative formulas established by the Committee each year under our management incentive program, the Committee exercises its own discretion in determining whether to accept or modify our Chief Executive Officer’s recommendations. These individuals are not present when the Committee and our Chief Executive Officer review their performance or when the Committee makes its determinations concerning their compensation.

Setting Executive Compensation

The Committee believes that a significant portion of each executive’s total compensation should be variable or “at-risk.” The Committee also believes that a significant portion of our Chief Executive Officer’s total compensation should be paid in the form of equity. It is the view of the Committee that the greater the ability of an executive (based on role and responsibilities at Safeguard) to impact Safeguard’s achievement of its short- and long-term objectives, the greater the percentage of such executive’s overall compensation that should be “at-risk” or paid in the form of equity. In 2023, the Committee principally utilized variable/at-risk equity-based compensation to pursue its objectives in this regard. For further discussion of setting executive compensation, see “The Strategy - Changes in Compensation Policies and Practices” below.

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Outcome of the 2023 Say-on-Pay Vote and Shareholder Outreach

At our 2023 annual meeting of shareholders, our shareholders approved the compensation of our named executive officers, with approximately 82% of shareholder votes being cast in favor of our say-on-pay proposal on executive compensation.

2023 Compensation Program

During 2023, the Committee used the following principal elements of executive compensation to meet its overall goals:

Compensation Element Objective Key Features Performance / At Risk?

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Base Pay. Base pay is established initially on the basis of several factors, including market competitiveness; past practice; individual performance and experience; the level of responsibility assumed; the level of skills and experience that can be leveraged across our companies to facilitate their growth and success; and individual employment negotiations with executives. Each of our executive officers in 2023 had an agreement with us that sets a minimum base salary.

Base salaries typically are reviewed annually (at the end of one year and the beginning of the upcoming calendar year) by the Committee, as well as in connection with a promotion or other changes in job responsibilities. Neither Mr. Salzman nor Mr. Herndon received increases in their base salaries for the 2023 calendar year.

The Committee does not typically make adjustments to the base salary levels for our executives based on cost-of-living types of factors.

Incentives.

Incentive Opportunity for Chief Executive Officer.

Effective April 1, 2020, Safeguard appointed Mr. Salzman to the position of Chief Restructuring Officer to succeed Brian Sisko, Safeguard’s then President and Chief Executive Officer. Later, on December 21, 2020, Safeguard appointed Mr. Salzman to the position of Chief Executive Officer. Mr. Salzman did not participate in Safeguard’s Management Incentive Program (“MIP”). Instead, Mr. Salzman received significant equity-based compensation.

On January 1, 2022, Mr. Salzman received a restricted stock award of 60,000 shares of Safeguard’s common stock, which vested and was paid ratably on a monthly basis through December 31, 2022, and a performance stock unit grant representing a right to receive 80,000 shares of Safeguard’s common stock, which would vest based on the Committee’s discretion and if certain performance criteria were achieved by December 31, 2022, subject to Mr. Salzman’s continued employment. After reviewing Safeguard’s performance against such criteria, in January 2023 the Committee approved the vesting of 64,000 of such performance stock units.

On January 17, 2023, Mr. Salzman received an restricted stock award of 125,000 shares of Safeguard’s common stock, which vested and was paid ratably on a monthly basis through December 31, 2023. Effective March 15, 2023, Mr. Salzman received a performance stock unit grant representing a right to receive 125,000 shares of Safeguard’s common stock, which would vest based on the Committee’s discretion and if certain performance criteria were achieved by December 31, 2023, subject to Mr. Salzman’s continued employment. After reviewing Safeguard’s performance against such criteria, in December 2023 the Committee approved the vesting of all 125,000 of such performance stock units.

Incentive Opportunity for other Officers.

The Committee annually awards bonuses to our other executives under the MIP. The MIP is designed to provide a variable short-term incentive to our named executive officers and our other executives and employees principally based on Safeguard’s annual performance and/or individual achievement. These awards are determined annually following the end of each calendar year based on the Committee’s assessment of the achievement of objectives established at the beginning of the year. Payments may be made in cash and/or equity, in the Committee’s discretion. The awards for the 2023 calendar year were paid in cash. Neither the actual awards to be made under the MIP nor the minimum long-term value of any equity grants made is guaranteed.

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For 2023, the Committee determined that our named executive officers and other senior executives participating in the MIP would be eligible to receive an award under the MIP based on the achievement by Safeguard of corporate objectives. Other employees also participated in our 2023 MIP based on the achievement by Safeguard of corporate objectives.

2023 MIP Performance Measures.

Safeguard Scientifics Inc SFES US Equity

SFES · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors, Executive Officers and Corporate Governance

Item 11.Executive Compensation

Safeguard Scientifics Inc SFES US Equity☆

SFES · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors, Executive Officers and Corporate Governance

Item 11.Executive Compensation

Safeguard Scientifics Inc SFES US Equity