スターエクイティHDの四半期報告

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE QUARTERLY PERIOD ENDED	June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			FOR THE TRANSITION PERIOD FROM TO

Commission file number: 001-35947

Star Equity Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware

33-0145723

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)

53 Forest Ave., Suite 101,

Old Greenwich

06870

(Address of Principal Executive Offices)

(Zip Code)

(203) 489-9500

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	STRR	NASDAQ Global Market
Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share	STRRP	NASDAQ Global Market
Series C Participating Preferred Stock, par value $0.0001 per share Purchase Rights

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	o

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes No ☒

As of August 7, 2024, the registrant had 3,234,099 shares of Common Stock ($0.0001 par value) outstanding.

STAR EQUITY HOLDINGS, INC.

TABLE OF CONTENTS


IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS			4

PART I. FINANCIAL INFORMATION			5
Item 1. Financial Statements (Unaudited)			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures about Market Risk			38
Item 4. Controls and Procedures			38

PART II. OTHER INFORMATION			39
Item 1. Legal Proceedings			39
Item 1A. Risk Factors			39
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities			40
Item 3. Defaults Upon Senior Securities			40
Item 4. Mine Safety Disclosures			40
Item 5. Other Information			40
Item 6. Exhibits			41

Important Information Regarding Forward-Looking Statements

Portions of this Quarterly Report on Form 10-Q (including information incorporated by reference) include “forward-looking statements” based on our current beliefs, expectations, and projections regarding our business strategies, market potential, future financial performance, industry, and other matters. This includes, in particular, “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q, as well as other portions of this Quarterly Report on Form 10-Q. The words “believe,” “expect,” “anticipate,” “project,” “could,” “would,” and similar expressions, among others, generally identify “forward-looking statements,” which speak only as of the date the statements were made. The matters discussed in these forward-looking statements are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially from those projected, anticipated, or implied in the forward-looking statements. The most significant of these risks, uncertainties, and other factors are described in “Item 1A — Risk Factors” of this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission on March 22, 2024. Except to the limited extent required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

STAR EQUITY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) (In thousands, except for per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues:
Building Solutions**	$	13,483	$	8,893	$	22,601	$	21,239
Investments	—		—		—		—
Total revenues	13,483		8,893		22,601		21,239

Cost of revenues:
Building Solutions**	11,254		6,229		18,694		14,246
Investments	13		61		117		124
Total cost of revenues	11,267		6,290		18,811		14,370

Gross profit	2,216		2,603		3,790		6,869

Operating expenses:
Selling, general and administrative	5,339		4,209		9,433		7,893
Amortization of intangible assets	590		430		1,032		860


Total operating expenses	5,929		4,639		10,465		8,753

Income (loss) from continuing operations	(3,713)		(2,036)		(6,675)		(1,884)

Other income (expense):
Other income (expense), net	(334)		568		65		459
Interest income (expense), net	221		163		595		136

Total other income (expense), net	(113)		731		660		595

Income (loss) before income taxes from continuing operations	(3,826)		(1,305)		(6,015)		(1,289)
Income tax benefit (provision) from continuing operations	39		(61)		4		(61)
Income (loss) from continuing operations, net of tax	(3,787)		(1,366)		(6,011)		(1,350)
Income (loss) from discontinued operations, net of tax (Note 2)	—		26,957		—		27,376
Net income (loss)	(3,787)		25,591		(6,011)		26,026
Dividend on Series A perpetual preferred stock	(479)		(479)		(958)		(958)
Net income (loss) attributable to common shareholders	$	(4,266)	$	25,112	$	(6,969)	$	25,068

Net income (loss) per share
Net income (loss) per share, continuing operations
Basic and diluted*	$	(1.19)	$	(0.44)	$	(1.90)	$	(0.43)

Net income (loss) per share, discontinued operations
Basic and diluted*	$	—	$	8.68	$	—	$	8.82

Net income (loss) per share
Basic and diluted*	$	(1.19)	$	8.24	$	(1.90)	$	8.38




Net income (loss) per share, attributable to common shareholders
Basic and diluted*	$	(1.34)	$	8.09	$	(2.20)	$	8.08

Weighted-average common shares outstanding ***
Basic and diluted	3,172		3,104		3,170		3,104


Dividends declared per share of Series A perpetual preferred stock	$	0.25	$	0.25	$	0.50	$	0.50

*Earnings per share may not add due to rounding

**Formerly known as Construction

***All share amounts reflect 1 for 5 reverse stock split effective June 14, 2024, retroactively

See accompanying notes to the unaudited condensed consolidated financial statements.

STAR EQUITY HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)


	June 30, 2024 (unaudited)		December 31, 2023
Assets:
Current assets:
Cash and cash equivalents	$	2,457	$	18,326
Restricted cash	1,602		620
Investments in equity securities	3,833		4,838
Lumber derivative contracts	—		19
Accounts receivable, net of allowances of $230 and $191, respectively	6,213		6,004
Note receivable, current portion	399		399
Inventories, net	5,789		3,420
Other current assets	1,390		1,180
Assets held for sale	4,295		4,346

Total current assets	25,978		39,152
Property and equipment, net	10,513		3,482
Operating lease right-of-use assets, net	1,270		1,470
Intangible assets, net	20,377		12,518
Goodwill	7,878		4,438

Cost method investment	4,710		6,000
Notes receivable	8,640		8,427
Other assets	1,500		9

Total assets	$	80,866	$	75,496

Liabilities and Stockholders’ Equity:
Current liabilities:
Accounts payable	$	1,867	$	1,571
Accrued liabilities	2,628		1,506
Accrued compensation	1,065		1,772
Accrued warranty	47		44


Deferred revenue	845		1,377
Short-term debt	6,052		2,019
Operating lease liabilities	419		403
Finance lease liabilities	28		42


Total current liabilities	12,951		8,734
Long-term debt	8,275		—
Deferred tax liabilities	281		318
Operating lease liabilities, net of current portion	887		1,102
Finance lease liabilities, net of current portion	29		43


Total liabilities	22,423		10,197

Commitments and contingencies (Note 9)



Stockholders’ Equity:
Preferred stock, $0.0001 par value: 10,000,000 shares authorized: Series A Preferred Stock, 8,000,000 shares authorized, liquidation preference ($10.00 per share), 1,915,637 shares issued and outstanding at June 30, 2024. (Liquidation preference: $18,988,390 as of June 30, 2024 and December 31, 2023)	18,988		18,988
Series C Preferred stock, $0.0001 par value: 25,000 shares authorized; no shares issued or outstanding	—		—
Common stock, $0.0001 par value: 10,000,000 shares authorized; 3,224,550 and 3,165,243 shares issued and outstanding (net of treasury shares) at June 30, 2024 and December 31, 2023, respectively *	2		2
Treasury stock, at cost; 51,770 shares at June 30, 2024 and December 31, 2023, respectively *	(5,728)		(5,728)
Additional paid-in capital	159,281		160,126

Accumulated deficit	(114,100)		(108,089)
Total stockholders’ equity	58,443		65,299
Total liabilities and stockholders’ equity	$	80,866	$	75,496

*All share amounts reflect 1 for 5 reverse stock split effective June 14, 2024, retroactively

See accompanying notes to the unaudited condensed consolidated financial statements.

STAR EQUITY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (In thousands)


	Six Months Ended June 30,
	2024		2023
Operating activities
Net income (loss)	$	(6,011)	$	26,026
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation of property and equipment	451		623
Amortization of intangible assets	1,032		860
Non-cash lease expense	203		195
Provision for bad debt, net	(48)		77
Stock-based compensation	128		206

Amortization of loan issuance costs	—		45

Gain on sale of assets	—		(549)
Gain on disposal of discontinued operations	—		(26,680)

Impairment of Cost Method Investment	1,290		—
Deferred income taxes	(37)		(238)
Unrealized (gain) loss on equity securities and lumber derivatives	94		(1,094)
Changes in operating assets and liabilities:
Accounts receivable	604		5,057
Inventories	467		(440)
Other assets	(1,416)		46
Accounts payable	295		806
Accrued compensation	(707)		(1,099)
Deferred revenue and billings in excess of costs and estimated profit	(518)		88
Operating lease liabilities	(215)		(268)
Other liabilities	123		(1,796)
Net cash provided (used) by operating activities	(4,265)		1,865

Investing activities
Purchases of property and equipment	(263)		(209)
Proceeds from sale of discontinued operations	—		19,681
Proceeds from sale of property and equipment	—		1,272
Purchases of equity securities	(257)		(356)
Proceeds from sales of equity securities	527		9
Net cash received from (paid for) acquisition	(19,100)		—
Note receivable repayments	149		—
Net cash provided (used) by investing activities	(18,944)		20,397

Financing activities
Proceeds from borrowings	21,259		33,957
Repayment of debt	(11,951)		(36,928)


Proceeds from the sale of common stock, warrants, and exercise of over allotment options	—		1





Repayment of obligations under finance leases	(28)		(51)
Preferred stock dividends paid	(958)		(958)
Net cash provided (used) by financing activities	8,322		(3,979)
Net change in cash, cash equivalents, and restricted cash including cash within discontinued operations	(14,887)		18,283
Less: net change in cash classified within discontinued operations	—		1,381
Net change in cash, cash equivalents, and restricted cash	(14,887)		16,902
Cash, cash equivalents, and restricted cash at beginning of period	18,946		4,519
Cash, cash equivalents, and restricted cash at end of period	$	4,059	$	21,421

Reconciliation of cash, cash equivalents, and restricted cash at end of period
Cash and cash equivalents	$	2,457	$	21,368
Restricted cash	1,602		53


Cash, cash equivalents, and restricted cash at end of period	$	4,059	$	21,421
Supplemental Information
Cash paid during the period for interest	$	146	$	231
Cash paid during the period for income taxes	$	92	$	—

Non-Cash Investing Activities
Noncash note receivable	$	—	$	7,000
Noncash investment in private company	$	—	$	6,000

Non-Cash Financing Activities
Noncash property, plant, and equipment obtained in exchange for term loan	$	3,000	$	—

See accompanying notes to the unaudited condensed consolidated financial statements.

STAR EQUITY HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited) (In thousands)


	Perpetual Preferred Stock		Common stock					Treasury Stock	Additional paid-in capital				Accumulated deficit	Total stockholders’ equity
		Shares	Amount		Shares *	Amount
Balance at December 31, 2023		1,916	$	18,988	3,165	$	2		$	(5,728)	$	160,126		$	(108,089)	$	65,299
Stock-based compensation		—	—		—	—			—		58			—		58
Shares issued under stock incentive plans, net of shares withheld for employee taxes		—	—		4	—			—		(15)			—		(15)
Dividends to holders of preferred stock ($0.25 per share)		—	—		—	—			—		(479)			—		(479)

Net income (loss)		—	—		—	—			—		—			(2,224)		(2,224)
Balance at March 31, 2024		1,916	$	18,988	3,169	$	2		$	(5,728)	$	159,690		$	(110,313)	$	62,639
Stock-based compensation		—	—		—	—			—		70			—		70


Shares issued for fractional shares in conjunction with reverse stock split		—	—		55	—			—		—			—		—
Dividends to holders of preferred stock ($0.25 per share)		—	—		—	—			—		(479)			—		(479)
Net income (loss)		—	—		—	—			—		—			(3,787)		(3,787)
Balance at June 30, 2024		1,916	$	18,988	3,224	$	2		$	(5,728)	$	159,281		$	(114,100)	$	58,443


	Perpetual Preferred Stock			Common stock			Treasury Stock		Additional paid-in capital		Accumulated deficit		Total stockholders’ equity
	Shares	Amount		Shares *	Amount
Balance at December 31, 2022	1,916	$	18,988	3,036	$	1	$	(5,728)	$	161,715	$	(133,221)	$	41,755
Stock-based compensation	—	—		—	—		—		102		—		102
Shares issued under stock incentive plans, net of shares withheld for employee taxes	—	—		3	—		—		—		—		—
Dividends to holders of preferred stock ($0.25 per share)	—	—		—	—		—		(479)		—		(479)
Net income (loss)	—	—		—	—		—		—		435		435
Balance at March 31, 2023	1,916	$	18,988	3,039	$	1	$	(5,728)	$	161,338	$	(132,786)	$	41,813
Stock-based compensation	—	—		—	—		—		104		—		104
Shares issued under stock incentive plans, net of shares withheld for employee taxes	—	—		1	—		—		—		—		—
Dividends to holders of preferred stock ($0.25 per share)	—	—		—	—		—		(479)		—		(479)

Net income (loss)	—	—		—	—		—		—		25,591		25,591
Balance at June 30, 2023	1,916	$	18,988	3,040	$	1	$	(5,728)	$	160,963	$	(107,195)	$	67,029

*All share amounts reflect 1 for 5 reverse stock split effective June 14, 2024, retroactively

See accompanying notes to unaudited condensed consolidated financial statements.

STAR EQUITY HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation and Significant Policies

Basis of Presentation

The unaudited condensed consolidated financial statements included in this Form 10-Q have been prepared in accordance with the U.S. Securities and Exchange Commission (the “SEC”) instructions for Quarterly Reports on Form 10-Q. Accordingly, the condensed consolidated financial statements are unaudited and do not contain all the information required by U.S. Generally Accepted Accounting Principles (“GAAP”) to be included in a full set of financial statements. The unaudited condensed Consolidated Balance Sheet at December 31, 2023 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for a complete set of financial statements. The audited consolidated financial statements for our fiscal year ended December 31, 2023, filed with the SEC on Form 10-K on March 22, 2024, include a summary of our significant accounting policies and should be read in conjunction with this Form 10-Q. In the opinion of management, all material adjustments necessary to present fairly the results of operations, cash flows, and balance sheets for such periods have been included in this Form 10-Q. All such adjustments related to continuing operations are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results of continuing operations for the entire year.

On May 17, 2024, the Company entered into an Asset Purchase Agreement with Timber Technologies Inc. and Timber Properties, LLC ( collectively, “TT”) (see Note 12. “Mergers and Acquisitions”).

On June 12, 2024, the Company executed a one-for-five reverse stock split which became effective June 14, 2024. All of the Company’s historical share and per share information related to issued and outstanding common stock and outstanding options and warrants exercisable for common stock in these financial statements have been adjusted retroactively (see Note 15. “Equity Transactions”).

The Company

Star Equity Holdings, Inc. (“Star Equity,” the “Company,” “we,” or “our”) is a multi-industry diversified holding company with two divisions: Building Solutions (formerly known as Construction) and Investments. Our common stock and preferred stock are listed on the NASDAQ Global Market exchange as “STRR” and “STRRP,” respectively.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and disclosures made in the accompanying notes to the consolidated financial statements. Significant estimates and judgments include those related to revenue recognition, goodwill valuation, asset impairment, business combination accounting, and income taxes. Actual results could materially differ from those estimates.

Concentration of Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents and accounts receivable. We limit our exposure to credit loss by generally placing cash in high credit quality financial institutions or in major money market mutual funds offered through brokerage firms. Some of our cash balances are maintained at major banking institutions in the United States, a portion of which may, from time to time, exceed the regulatory limit of $250,000 insured by the Federal Deposit Insurance Corporation (FDIC). We have not experienced any credit losses associated with our cash balances. Additionally, we have established guidelines regarding diversification of our investments and their maturities, which are designed to maintain principal and maximize liquidity. As of June 30, 2024, we had $0.7 million of cash in excess of FDIC insured limits.

New Accounting Standards To Be Adopted

No new accounting standards were issued in the quarter ended June 30, 2024 that are expected to have a material impact on our financial statements.

Reclassifications

Certain balances in the audited consolidated financial statements for our fiscal year ended December 31, 2023 have been reclassified to conform with the current period presentation. Specifically, we have reclassified $4.3 million of net property and equipment to assets held for sale for comparability purposes (see Note 17. “Subsequent Events”).

Note 2. Discontinued Operations

On May 4, 2023, we entered into a Stock Purchase and Contribution Agreement (the “Purchase Agreement”), by and among the Company, Digirad Health Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Digirad Health”), TTG Imaging Solutions, LLC, a Pennsylvania limited liability company (“TTG”), and TTG’s parent, Insignia TTG Parent LLC, a Delaware limited liability company (the “Parent”). Pursuant to the Purchase Agreement, (i) TTG purchased 85% of the issued and outstanding shares of Digirad Health, on the terms and subject to the conditions set forth therein and (ii) the Company contributed to Parent 15% of the issued and outstanding shares of stock of Digirad Health (the “Contributed Shares”) in exchange for New Units (as defined in the Purchase Agreement) of Parent (the “TTG Transaction”). The total aggregate consideration payable to the Company for the TTG Transaction was $40 million, comprised of $19.7 million ($27 million less payoff of debt to Webster Bank (see Note 8. “Debt”) and transaction costs) in cash, a $7 million promissory note (see Note 5. “Supplementary Balance Sheet Information”), and $6 million of New Units in the Parent (see Note 5. “Supplementary Balance Sheet Information”). The Company completed the sale of Digirad Health simultaneously with entering into the Purchase Agreement.

We deemed the disposition of Digirad Health, which operated our Healthcare business unit, to represent a strategic shift that had a major effect on our operations and financial results. As of the date of these financial statements, the results of operations of the Healthcare business unit represent “discontinued operations” in accordance with GAAP (ASC 205-20-45-1B). As such, the assets and liabilities, as well as the earnings, of the discontinued operation are presented separately in the unaudited condensed consolidated financial statements, as applicable, for all periods presented. Unless otherwise noted, discussion within the notes to the unaudited condensed consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations relates to continuing operations.

Our variable interest entity (“VIE”), for which we were not the primary beneficiary, was disposed of as part of the sale of our Healthcare division. This VIE was in a small private company that is primarily involved in research related to new heart imaging technologies.

The following table presents financial results of our Healthcare division for the three and six months ended June 30, 2024 and 2023 (in thousands).


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Total revenues	$	—	$	4,603	$	—	$	17,962
Total cost of revenues	—		2,376		—		12,408
Gross profit	—		2,227		—		5,554

Operating expenses:
Selling, general and administrative	—		622		—		3,370

(Gain) loss on disposal of discontinued operations	—		(26,680)		—		(26,680)
Total operating expenses	—		(26,058)		—		(23,310)

Income (loss) from discontinued operations	—		28,285		—		28,864

Other (expense) income, net	—		(1,023)		—		(1,015)
Interest expense, net	—		(5)		—		(173)

Income (loss) from discontinued operations before income taxes	—		27,257		—		27,676
Income tax benefit (provision)	—		(300)		—		(300)
Income (loss) from discontinued operations	$	—	$	26,957	$	—	$	27,376

The following table presents the significant operating, investing and financing activities from discontinued operations for the six months ended June 30, 2024 and 2023 (in thousands):


	Six Months Ended June 30,
	2024		2023
Operating activities
Net income (loss) from discontinued operations	$	—	$	27,376
Depreciation	—		332


Write-off of borrowing costs	—		16
(Gain) loss on disposal of discontinued operations	—		(26,680)
Share-based compensation	—		1
(Gain) Loss on disposal of assets	—		135
Provision for bad debt	—		48
Deferred income taxes	—		(176)
Accounts receivable	—		1,304
Inventory	—		(681)
Other assets	—		786
Accounts payable	—		994
Accrued compensation	—		(580)
Deferred revenue	—		(101)
Operating lease liabilities	—		(10)
Other liabilities	—		(1,825)
Net cash provided by (used in) operating activities	—		939




Net cash provided by (used in) investing activities	—		—




Net cash provided by (used in) financing activities	—		442
Net increase (decrease) in cash and cash equivalents and restricted cash	$	—	$	1,381

Following is the reconciliation of purchase price (including a working capital adjustment) to the total gain recognized in income from discontinued operations as of June 30, 2023 (in thousands):



Proceeds of the disposition, net of transaction costs and indebtedness payoff	$	32,682
Assets of the businesses	(24,071)
Liabilities of the businesses	18,069

Pre-tax gain on the disposition	$	26,680

Note 3. Revenue

Disaggregation of Revenue

The following tables present our continuing revenues disaggregated by major source for the three and six months ended June 30, 2024 and 2023 (in thousands):


	Three Months Ended June 30, 2024		Three Months Ended June 30, 2023
	Building Solutions		Total		Building Solutions		Total
Major Goods/Service Lines





Building Solutions Revenue from Contracts with Customers	$	13,483	$	13,483	$	8,893	$	8,893

Total Revenues	$	13,483	$	13,483	$	8,893	$	8,893

Timing of Revenue Recognition

Services and goods transferred at a point in time	$	13,483	$	13,483	$	8,893	$	8,893
Total Revenues	$	13,483	$	13,483	$	8,893	$	8,893


	Six Months Ended June 30, 2024		Six Months Ended June 30, 2023
	Building Solutions		Total		Building Solutions		Total
Major Goods/Service Lines





Building Solutions Revenue from Contracts with Customers	$	22,601	$	22,601	$	21,239	$	21,239

Total Revenues	$	22,601	$	22,601	$	21,239	$	21,239

Timing of Revenue Recognition

Services and goods transferred at a point in time	$	22,601	$	22,601	$	21,239	$	21,239
Total Revenues	$	22,601	$	22,601	$	21,239	$	21,239

Deferred Revenue

Changes in deferred revenue, which consist primarily of customer deposits, for the six months ended June 30, 2024 are as follows (in thousands):


Balance at December 31, 2023	$	1,377
Revenue recognized that was included in balance at beginning of the year	(997)
Deferred revenue, net, related to contracts entered into during the year	465
Balance at June 30, 2024	$	845

Note 4. Basic and Diluted Net Income (Loss) Per Share

We present net income (loss) per share attributable to common stockholders in conformity with the two-class method required for participating securities, as the warrants are considered participating securities. We have not allocated net income (loss) attributable to common stockholders to warrants because the holders of our warrants are not contractually obligated to share in our income (loss). Basic net income (loss) per share attributable to common stockholders is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share attributable to common stockholders is calculated to give effect to all potential shares of common stock, including common stock issuable upon exercise of warrants, stock options, and restricted stock units (“RSUs”). In periods for which there is a net loss, diluted loss per common share is equal to basic loss per common share, since the effect of including any common stock equivalents would be antidilutive. All share amounts reflect 1 for 5 reverse stock split effective June 14, 2024, retroactively

The following table sets forth the reconciliation of shares used to compute basic and diluted net income (loss) per share for the periods indicated (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Numerator:
Income (loss) from continuing operations, net of tax	$	(3,787)	$	(1,366)	$	(6,011)	$	(1,350)
Income (loss) from discontinued operations, net of tax (Note 2)	—		26,957		—		27,376
Net income (loss)	(3,787)		25,591		(6,011)		26,026
Dividend on Series A perpetual preferred stock	(479)		(479)		(958)		(958)
Net income (loss) attributable to common shareholders	$	(4,266)	$	25,112	$	(6,969)	$	25,068

Denominator:
Weighted average common shares outstanding	3,172		3,039		3,170		3,039
Weighted average prefunded warrants outstanding	—		65		—		65
Weighted average shares outstanding - basic	3,172		3,104		3,170		3,104






Net income (loss) per share
Continuing operations
Basic and diluted	$	(1.19)	$	(0.44)	$	(1.90)	$	(0.43)

Discontinued operations
Basic and diluted	$	—	$	8.68	$	—	$	8.82

Net income (loss) per share
Basic and diluted	$	(1.19)	$	8.24	$	(1.90)	$	8.38




Net income (loss) per share, attributable to common shareholders
Basic and diluted	$	(1.34)	$	8.09	$	(2.20)	$	8.08

Antidilutive common stock equivalents are excluded from the computation of diluted income (loss) per share. The computation of diluted earnings per share excludes stock options, RSUs, and stock warrants that are antidilutive. The following common stock equivalents were antidilutive (in thousands):


	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023

Restricted stock units	34	60	27	52
Stock warrants	2,373	2,373	2,373	2,373
Total	2,407	2,433	2,400	2,425

*All share amounts reflect 1 for 5 reverse stock split effective June 14, 2024, retroactively

Note 5. Supplementary Balance Sheet Information

Inventories

The components of inventories are as follows (in thousands):


	June 30, 2024		December 31, 2023
Raw materials	$	2,126	$	1,394
Work-in-process	189		410
Finished goods	3,474		1,616
Total inventories	5,789		3,420
Less reserve for excess and obsolete inventories	—		—
Total inventories, net	$	5,789	$	3,420

Property and Equipment

Property and equipment consist of the following (in thousands):


	June 30, 2024		December 31, 2023
Land	$	795	$	548
Buildings and leasehold improvements	5,573		1,063
Machinery and equipment	6,135		3,474
Gross property and equipment	12,503		5,085
Accumulated depreciation	(1,990)		(1,603)
Total property and equipment, net	$	10,513	$	3,482

As of June 30, 2024, the non-operating land and buildings, held for investments, had a carry value of $1.0 million and was included within property and equipment on the condensed Consolidated Balance Sheet.

Warranty Reserves

Within our Building Solutions division, KBS Builders, Inc. (“KBS”) provides a limited assurance warranty on its residential homes that covers substantial defects in materials or workmanship for a period of 12 months after delivery to the owner. EdgeBuilder, Inc. (“EdgeBuilder”) provides a limited warranty on the sale of its wood foundation products that covers leaks resulting from defects in workmanship for a period of twenty-five years. Timber Technologies Solutions, Inc (“TT”) provides a fifty-year limited warranty to the original buyer of its products, qualified by the original buyer’s obligation to ensure that the products are properly handled, stored, and installed. Estimated future warranty costs are accrued and charged to cost of goods sold in the period that the related revenue is recognized.

Notes Receivable

Notes receivable consists of the following principal and interest balances as of June 30, 2024 and December 31, 2023 (in thousands):


	June 30, 2024		December 31, 2023
	Principal and interest		Principal and interest
TTG Note	$	7,821	$	7,459
MDOS Note	1,042		1,192
KBS Customer Note	176		176
	$	9,039	$	8,827

As a part of the TTG Transaction described further in Note 2. “Discontinued Operations,” we entered into a $7 million promissory note which represents an unsecured note receivable on our balance sheet. The note has a maturity date of May 3, 2029 with payment-in-kind (non-cash) interest on the outstanding principal balance hereof to accrue at the Interest Rate. The full balance is scheduled to be paid at the maturity date. The Interest Rate is defined as (i) during the period from the date of issuance of the note through the third anniversary of the date of issuance of the note, a per annum rate equal to the sum of (x) 5.0% per annum plus (y) the greater of 5.0% per annum and the weighted average term SOFR-based interest rate of outstanding loans under the Senior Loan Agreement (as defined in the Purchase Agreement) during such period, and (ii) during the period following the third anniversary of the date of issuance of the note, a per annum rate equal to the sum of (x) 5.0% per annum plus (y) the greater of 7.0% per annum and the weighted average term SOFR-based interest rate of outstanding loans under the Senior Loan Agreement during such period.

In 2021 we completed the sale of MD Office Solutions in exchange for a secured promissory note (the “MDOS Note”). This note, the principal of which is approximately $1.0 million at June 30, 2024, is included in “Notes receivable, current portion” and “Notes receivable” in our Consolidated Balance Sheet at June 30, 2024 for $0.2 million and $0.8 million, respectively. The MDOS Note requires quarterly installments of $74 thousand and incurs interest at a fixed rate of 5.0% through maturity in 2028.

In 2023, KBS issued a promissory note to a customer, incurring 12% interest per annum (the “KBS Customer Note”). The KBS Customer Note, which has a maturity date with full payment due of September 19, 2024, is included in “Notes receivable, current portion” in the Consolidated Balance Sheets at June 30, 2024.

Cost Method Investment

As a part of the sale of Digirad Health, we received $6.0 million in the common equity of TTG Parent LLC (our “Cost Method Investment”), which is held in our Investments Segment. We have elected the measurement alternative under ASC 321, Investments-Equity Securities. The measurement alternative election allows for equity securities that do not have readily determinable fair values to be recorded at cost, with adjustments for impairment and certain observable price changes reflected in earnings. Such securities are adjusted to fair value when an observable price change occurs or impairment is identified. As of June 30, 2024, we recorded an impairment to the Cost Method Investment in the amount of $1.3 million. We recorded this impairment as we considered the financial performance of TTG Parent LLC relative to the average earnings from comparable companies. This impairment is recorded as a part of selling, general and administrative expenses on the Consolidated Statement of Operations.

Note 6. Leases

Lessee

We have operating and finance leases for corporate offices, vehicles, and certain equipment. Our leases have remaining lease terms of 1 year to 10 years, some of which include options to extend the leases and some of which include options to terminate the lease within 1 year. Operating leases and finance leases are included separately in the condensed Consolidated Balance Sheets.

The components of lease expense are as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Operating lease cost	$	117	$	97	$	233	$	213

Finance lease cost:
Amortization of finance lease assets	$	21	$	23	$	38	$	45
Interest on finance lease liabilities	1		2		2		7
Total finance lease cost	$	22	$	25	$	40	$	52

Supplemental cash flow information related to leases from continuing operations was as follows (in thousands):


	Six Months Ended June 30,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	201	$	190
Operating cash flows from finance leases	$	2	$	5
Financing cash flows from finance leases	$	28	$	51

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	—	$	—

Supplemental balance sheet information related to leases was as follows:


	June 30, 2024		December 31, 2023














Weighted average remaining lease term (in years)
Operating leases	3.5		4.4
Finance leases	2.1		2.4

Weighted average discount rate
Operating leases	5.35	%	5.55	%
Finance leases	5.82	%	5.90	%

We are committed to making future cash payments on non-cancelable operating leases and finance leases (including interest). The future minimum lease payments due under both non-cancelable operating leases and finance leases having initial or remaining lease terms in excess of one year as of June 30, 2024 were as follows (in thousands):


	Operating Leases		Finance Leases
2024 (excludes the six months ended June 30, 2024)	$	235	$	19
2025	477		25
2026	387		16
2027	93		1
2028	95		—
2029 and thereafter	112		—
Total future minimum lease payments	1,399		61
Less amounts representing interest	93		4
Present value of lease obligations	$	1,306	$	57

Note 7. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Financial Accounting Standards Board’s authoritative guidance for fair value measurements establishes a three-level hierarchy based upon the inputs to the valuation model of an asset or liability. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are inputs other than quoted prices that are significant and observable; and Level 3 inputs are significant unobservable inputs to be used in situations where markets do not exist or are illiquid. The following table presents information about our financial assets that are measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation techniques we utilize to determine such fair value at June 30, 2024 and December 31, 2023 (in thousands):


	Fair Value as of June 30, 2024
	Level 1		Level 2		Level 3		Total
Assets (Liabilities):
Equity securities	$	3,833	$	—	$	—	$	3,833

Total	$	3,833	$	—	$	—	$	3,833


	Fair Value as of December 31, 2023
	Level 1		Level 2		Level 3		Total
Assets (Liabilities):
Equity securities	$	4,838	$	—	$	—	$	4,838
Lumber derivative contracts	19		—		—		19
Total	$	4,857	$	—	$	—	$	4,857

The investment in equity securities consists of common stock of publicly traded companies. The fair value of these securities is based on the closing prices observed on June 30, 2024 and December 31, 2023, respectively, and recorded in “Investments in equity securities” in the condensed Consolidated Balance Sheets. During the six months ended June 30, 2024 and 2023, we recorded an unrealized loss of $75 thousand and gain of $947 thousand, respectively, resulting from market fluctuations, recorded in other income (expense), net in the condensed Consolidated Statements of Operations.

We may enter into lumber derivative contracts in order to protect our gross profit margins from fluctuations caused by lumber price volatility. Such contracts, which are generally entered into to protect the gross margins on our wall panel contracts at EdgeBuilder and Glenbrook Building Supply, Inc. (“Glenbrook” and referred to jointly with EdgeBuilder as “EBGL”), are recorded within current assets or liabilities in the condensed Consolidated Balance Sheets. For the six months ended June 30, 2024 and 2023, we recorded a net loss of $65 thousand and a net gain of $4 thousand, respectively, in the cost of goods sold in the condensed Consolidated Statements of Operations. As of June 30, 2024, we had a net long (buying) position of 0 board feet under 0 lumber derivatives contracts. As of December 31, 2023, we had a net long (buying) position of 605,000 board feet under 22 lumber derivatives contracts.

Gains and losses from lumber derivative contracts are recorded in cost of goods sold of the condensed Consolidated Statements of Operations and included the following for the six months ended June 30, 2024 and 2023, respectively:


	June 30, 2024		June 30, 2023
Unrealized gain (loss) on lumber derivatives	$	(19)	$	147
Realized gain (loss) on lumber derivatives	(46)		(143)
Total gain (loss) on lumber derivatives	$	(65)	$	4

Gains and losses from investments in equity securities are recorded in other income (expense) of the condensed Consolidated Statements of Operations and included the following for the six months ended June 30, 2024 and 2023, respectively:


	June 30, 2024		June 30, 2023
Unrealized gain (loss) on equity securities	$	(75)	$	947
Realized gain (loss) on equity securities	34		—
Total gain (loss) on equity securities	$	(41)	$	947

Note 8. Debt

A summary of debt as of June 30, 2024 and December 31, 2023 is as follows (dollars in thousands):


	June 30, 2024			December 31, 2023
	Amount		Weighted-Average Interest Rate	Amount		Weighted-Average Interest Rate
Revolving Credit Facility - Premier EBGL	$	3,379	9.25%	$	2,019	9.25%
Revolving Credit Facility - KeyBank KBS	1,048		7.50%	—		—%

Total Short-term Revolving Credit Facilities	$	4,427	8.84%	$	2,019	9.25%
Bridgewater - TT Term Loan	$	1,400	7.85%	$	—	—%
Term Loan Secured by Mortgage	225		7.50%	—		—%
Total Short-term debt	$	6,052	8.45%	$	2,019	9.25%



Bridgewater - TT Term Loan, net of current portion	$	5,500	7.85%	$	—	—%
Term Loan Secured by Mortgage, net of current portion	2,775		7.50%	—		—%
Long Term Debt, net of current portion	$	8,275	7.75%	$	—	—%

Total Debt	$	14,327	8.08%	$	2,019	9.25%

Premier Facility

On August 16, 2023, EdgeBuilder and Glenbrook (referred to herein as the “EBGL Borrowers”), entered into a Revolving Credit Loan Agreement with Premier Bank (“Premier”), which was subsequently amended on December 5, 2023 to provide the EBGL Borrowers with a working capital line of credit of up to $6.0 million (the “Premier Loan Agreement”). Availability under the Premier Loan Agreement is based on a formula tied to the EBGL Borrowers’ eligible accounts receivable, inventory and equipment. Borrowings under the Premier Loan Agreement bear interest at the prime rate plus 0.75% (and a minimum interest rate of 6.75%), with interest payable monthly and the outstanding principal balance payable upon expiration of the term of the Premier Loan Agreement. The Premier Loan Agreement also provides for certain fees payable to Premier during its term. The initial term of the Premier Loan Agreement expires on December 5, 2024 but may be extended from time to time at the request of the EBGL Borrowers, subject to approval by Premier. The EBGL Borrowers’ obligations under the Premier Loan Agreement are guaranteed by the Company and secured by all of their inventory, equipment, accounts and other intangibles. As of June 30, 2024, availability under the Premier Loan Agreement was approximately $1.2 million.

Financial covenants associated with the Premier Loan Agreement require that the EBGL Borrowers annually maintain (a) a debt service coverage ratio for any calendar year of less than 1.25; (b) a debt-to-equity ratio at the end of each calendar year in excess of 1.65; (c) a fixed charge coverage ratio at the end of each calendar year of less than 1.10; (d) working capital of at least $2 million; and (e) a current ratio of at least 1.50. As of December 31, 2023, the EBGL Borrowers were not in compliance with the annual Premier Loan Agreement covenants. The EBGL Borrowers have obtained a waiver from Premier for the annual covenant breach as of December 31, 2023.

KeyBank Facility

On April 24, 2024, KBS entered into a Loan and Security Agreement (the “KeyBank Loan Agreement”) with KeyBank National Association (“KeyBank”) providing KBS with a working capital line of credit of up to $4.0 million, subject to the conditions and procedures set forth in the KeyBank Loan Agreement. All borrowings under the KeyBank Loan Agreement bear interest at the Adjusted Daily SOFR Rate (as defined in the KeyBank Loan Agreement) plus 3%, with interest payable monthly and the outstanding principal balance payable on April 30, 2025 (the “Maturity Date”). The KeyBank Loan Agreement also provides for certain fees payable to KeyBank during its term. The initial term of the KeyBank Loan Agreement expires on the Maturity Date but may be extended from time to time at the request of KBS, subject to approval by KeyBank. KBS’ obligations under the KeyBank Loan Agreement are guaranteed by the Company and secured by all of KBS’ inventory, equipment, accounts and other intangibles, and all proceeds of the foregoing. Simultaneous with the execution of the KeyBank Loan Agreement, the Company entered into that certain Guaranty, dated April 24, 2024 (the “Guaranty”), pursuant to which the Company agreed to guarantee all amounts borrowed by KBS under the KeyBank Loan Agreement.

Financial covenants require that KBS maintain a ratio of its Operating Cash Flow to its Total Fixed Charges of at least 1.25 to 1.0 measured quarterly for the preceding twelve month period, commencing with the fiscal quarter ending June 30, 2024, and for each subsequent fiscal quarter thereafter.

As of June 30, 2024, we were not in compliance with these financial covenants and have not obtained a waiver of compliance as of the filing date. Our balance outstanding under the line amounted to $1.0 million at June 30, 2024 and we repaid the balance in full subsequent to quarter end. Failure to regain compliance or obtain a waiver may impact our ability to borrow on the line.

Term Loan Secured by Mortgage

On June 28, 2024, in connection with our acquisition of substantially all of the assets used in the business of Timber Technologies, Inc. which closed on May 17, 2024, Timber Properties, LLC (“Timber Properties”), an affiliate of the Seller, sold to 106 Bremer, LLC, a wholly-owned subsidiary of the Company (“106 Bremer”), all of Timber Properties’ Owned Real Property pursuant to a Real Estate Sales Agreement for $3.0 million plus closing costs.

In connection with the purchase of the Owned Real Property, on June 28, 2024, 106 Bremer issued a Promissory Note in the principal amount of $3.0 million (the “TT Property Note”) secured by a Mortgage (the “TT Property Mortgage”) on the Owned Real Property to Timber Properties. All borrowings under the TT Property Note bear interest at 7.50%, with interest payable quarterly and the outstanding principal balance payable on June 29, 2034.

Bridgewater Facility

In connection with the completion of the TT Acquisition, on May 17, 2024, Timber Technologies Solutions, Inc., a wholly-owned subsidiary of the Company (the “Borrower”), entered into a Loan Agreement (the “Bridgewater Loan Agreement”) with Bridgewater Bank (“Bridgewater”) and issued a Term Promissory Note to Bridgewater in the amount of $7.0 million thereunder (the “Facility”). All borrowings under the Facility bear interest at 7.85%, with interest payable monthly and the outstanding principal balance payable on May 20, 2029 (the “Maturity Date”). The Bridgewater Loan Agreement also provides for certain fees payable to Bridgewater during its term, certain of which have been prepaid at closing. The Borrower’s obligations under the Facility are guaranteed by the Company and secured by all of the Borrower’s inventory, equipment, accounts and other intangibles, and all proceeds of the foregoing.

In connection with the Bridgewater Loan agreement, an amount of $1.0 million was required to be deposited with Bridgewater and be under the sole dominion and control of Bridgewater, and the Company shall not have any control over the use of, or any right to withdraw any amount of the restricted deposit. In the event that the Company maintains compliance with all of the financial covenants set forth in the Bridgewater Loan Agreement for a certain period of time, Bridgewater shall release a portion of the deposit. The $1.0 million deposit is recorded in Other Assets in the condensed Consolidated Balance Sheets.

Financial covenants require that TT maintain (i) a ratio of Cash Flow to Total Fixed Charges of not less than 1.30 to 1.00 as measured on each applicable Measurement Date on a trailing twelve (12) month basis; the first Measurement Date is September 30, 2024; (ii) maintain a ratio of Senior Funded Debt to trailing twelve (12) month Adjusted EBITDA not to exceed 3.00 to 1.00 as measured on each applicable Measurement Date for a Measurement Period; the first Measurement Date is June 30, 2025; (iii) maintain a ratio of Total Funded Debt to trailing twelve (12) month adjusted EBITDA not to exceed 4.00 to 1.00 as measured on each applicable Measurement Date for a Measurement Period; the first Measurement Date is June 30, 2025.

Webster Credit Facility

On March 29, 2019, the Company entered into a Loan and Security Agreement (the “Webster Loan Agreement”) by and among certain subsidiaries of the Company, as borrowers, the Company, as guarantor, and Sterling National Bank (“Sterling”). On February 1, 2022, Sterling became part of Webster Bank, N.A. (“Webster”), and Webster became the successor in interest to the Webster Loan Agreement. The Webster Loan Agreement was also subject to a limited guarantee by Mr. Eberwein, the Executive Chairman of our board of directors.

The Webster Loan Agreement was a five-year credit facility maturing in March 2024, with a maximum credit amount of $20.0 million for revolving loans (the “Webster Credit Facility”). In connection with the sale of our Healthcare business on May 4, 2023, we paid all amounts due and closed the Webster Credit Facility.

eCapital Credit Facilities

The EBGL Borrowers were parties to a Loan and Security Agreement with eCapital Asset Based Lending Corp. (“eCapital”) providing for a $4.0 million credit facility with a maturity date of June 2023 and an auto-renewal of one year thereafter. KBS was a party to a Loan and Security Agreement with eCapital, providing up to $4.0 million in working capital, which was scheduled to mature and renew automatically for a period of one year moving forward. During the second quarter of 2023, we closed these two credit facilities and have no remaining debt balance with eCapital.

eCapital Term Loan

We and certain of our Investments subsidiaries were party to a Loan and Security Agreement with eCapital, as successor in interest to Gerber Finance, Inc., which provided for a credit facility with borrowing availability of up to $2.5 million, bearing interest at the prime rate plus 3.5% per annum, and maturing on January 31, 2025, unless terminated in accordance with the terms therein. During the second quarter of 2023, we closed this credit facility and have no remaining debt balance with eCapital.

Note 9. Commitments and Contingencies

In the normal course of business, we have been and will likely continue to be subject to litigation or administrative proceedings incidental to our business, such as claims related to compliance with regulatory standards, customer disputes, employment practices, wage and hour disputes, product liability, professional liability, malpractice liability, commercial disputes, licensure restrictions or denials, and warranty or patent infringement. Responding to litigation or administrative proceedings, regardless of whether they have merit, can be expensive and disruptive to normal business operations. We are not able to predict the timing or outcome of these matters but currently do not expect that the resolution of these matters will have a material adverse effect on our financial position or results of operations.

The outcome of litigation and the amount or range of potential loss at particular points in time may be difficult to ascertain. Among other things, uncertainties can include how trial and appellate courts will apply the law and interpret facts, as well as the contractual and statutory obligations of other indemnifying and insuring parties. The estimated range of reasonably possible losses, and their effect on our financial position is based on currently available information and is subject to significant judgment and a variety of assumptions, as well as known and unknown uncertainties.

Note 10. Income Taxes

We provide for income taxes under the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of differences between the tax basis of assets or liabilities and their carrying amounts in the financial statements. We provide a valuation allowance for deferred tax assets if it is more likely than not that these items will expire before we are able to realize their benefit. We calculate the valuation allowance in accordance with the authoritative guidance relating to income taxes, which requires an assessment of both positive and negative evidence regarding the realizability of these deferred tax assets, when measuring the need for a valuation allowance. Significant judgment is required in determining any valuation allowance against deferred tax assets. We continue to record a full valuation allowance against our deferred tax assets and intend to maintain a valuation allowance until sufficient positive evidence exists to support its reversal.

Intraperiod tax allocation rules require us to allocate our provision for income taxes between continuing operations and other categories of comprehensive income, such as discontinued operations.

For the three months ended June 30, 2024 and 2023, we recorded an income tax benefit of $39 thousand and an income tax expense of $61 thousand within continuing operations. We also recorded an income tax expense of $300 thousand within discontinued operations for the three months ended June 30, 2023.

For the six months ended June 30, 2024 and 2023, we recorded an income tax benefit of $4 thousand and an income tax expense of $61 thousand within continuing operations. For the six months ended June 30, 2023 we also recorded an income tax expense of $300 thousand within discontinued operations.

The tax benefit of $4 thousand for the six months ended June 30, 2024 and income tax benefit of $39 thousand relate to retroactive favorable state tax law changes which decreased our cash taxes for December 31, 2023.

The tax expense for the six months ended June 30, 2023 primarily relates to our January 2022 ownership change under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), which required us to establish an additional valuation allowance on net operating losses that the Company cannot utilize in the future.

As of June 30, 2024, we had unrecognized tax benefits of approximately $300 thousand related to uncertain tax positions. Included in the unrecognized tax benefits were $300 thousand of tax benefits that, if recognized, would reduce our annual effective tax rate, subject to the valuation allowance.

Note 11. Segments

Our reportable segments are based upon our internal organizational structure, the manner in which our operations are managed, the criteria used by our Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”), to evaluate segment performance, the availability of separate financial information, and overall materiality considerations. Effective as of the consummation of the sale of our Healthcare business on May 4, 2023, our business divisions are organized into the following two reportable segments, reflecting the manner in which our CODM assesses performance and allocates resources:

1.Building Solutions

2.Investments

Prior to the sale of Digirad Health on May 4, 2023, we also had a Healthcare segment.

Our reporting segments have been determined based on the nature of the products and services offered to customers or the nature of their function in the organization. We evaluate performance based on gross profit and operating income (loss). Our operating costs included in our shared service functions primarily consist of senior executive officers, finance, human resources, legal, and information technology. Star Equity shared service corporate costs have been separated from the reportable segments. Prior period presentation previously disclosed conforms to current year presentation.

Segment information for the three and six months ended June 30, 2024 and 2023 is as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue by segment:
Building Solutions	$	13,483	$	8,893	$	22,601	$	21,239
Investments	194		158		382		316
Intersegment elimination	(194)		(158)		(382)		(316)
Consolidated revenue	$	13,483	$	8,893	$	22,601	$	21,239

Gross profit (loss) by segment:
Building Solutions	$	2,229	$	2,664	$	3,907	$	6,993
Investments	181		97		265		192
Intersegment elimination	(194)		(158)		(382)		(316)
Consolidated gross profit	$	2,216	$	2,603	$	3,790	$	6,869

Income (loss) from operations by segment:
Building Solutions	$	(842)	$	199	$	(1,740)	$	1,981
Investments	(1,191)		(437)		(1,147)		(456)
Corporate, eliminations and other	(1,680)		(1,798)		(3,788)		(3,409)
Segment income (loss) from operations	$	(3,713)	$	(2,036)	$	(6,675)	$	(1,884)

Depreciation and amortization by segment:
Building Solutions	$	774	$	510	$	1,341	$	1,015
Investments	13		61		117		124
Star Equity corporate	8		8		25		12
Total depreciation and amortization	$	795	$	579	$	1,483	$	1,151

Note 12. Mergers and Acquisitions

Timber Technologies Solutions

On May 17, 2024, we acquired, through certain wholly owned subsidiaries, substantially all of the assets of Timber Technologies Inc. and, on June 28, 2024, the real assets of Timber Properties, LLC (collectively, “TT”) for total consideration of $23.1 million consisting of cash paid at closing of $19.1 million, $1.0 million of escrow funds included in accrued liabilities, plus a Term Loan Secured by a Mortgage of $3.0 million. The initial purchase price is subject to a standard working capital adjustment and other customary closing adjustments to be settled within 45 days post close. The Company is also subject to payments due to the sellers contingent upon the achievement of certain EBITDA metrics over a 2-year period and may result in total payments not to exceed $4.1 million, 50% of which is payable in cash and 50% of which is payable in Series A Preferred Stock. These payments are also contingent upon the continued employment of the individuals. The Company has concluded that these payments are akin to compensation and will be recorded if and as such compensation is earned. The Company has restricted $1.0 million of cash associated with the escrow funds payable to the sellers within 12 months after the acquisition as defined in the escrow agreement.

In accordance with ASC 805, Business Combinations, we accounted for this transaction as a business combination and recorded the acquired assets of TT at fair value. The valuation of assets acquired and liabilities assumed has not yet been finalized as of June 30, 2024. The purchase price allocation is preliminary and subject to change, including the valuation of property and equipment, intangible assets, income taxes, and goodwill, among other items. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value. This business is reported as part of our Building Solutions segment.

The following table sets forth the purchase price allocation of TT to the estimated fair value of assets acquired as of the acquisition date (in thousands):


	As of Acquisition Date
Accounts receivable, net	$	766
Inventory, net	2,836
Other current assets	2
Property and equipment, net	7,156
Intangibles	8,900
Net assets acquired	19,660
Goodwill	3,440
Purchase price	$	23,100

The $8.9 million of identified intangible assets was allocated as follows (in thousands):


	Fair Value		Useful Life (years)
Trade Names	$	1,970	15
Customer Relationships	6,640		10
Backlog	290		1
Fair value of identified intangible assets	$	8,900

Goodwill and intangibles of $3.4 million and $8.9 million, respectively, were assigned to the Building Solutions segment. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of TT. As of June 30, 2024, there were no changes in the recognized amounts of goodwill resulting from the acquisition of TT.

The Company recognized $0.2 million of acquisition related costs including legal and accounting that were expensed in 2024.

The following represents certain information from the unaudited pro forma condensed Consolidated Statement of Operations as if TT had been included in the consolidated results of the Company for the three and six months ending June 30, 2024 and 2023 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue	$	18,145	$	13,933	$	31,296	$	30,699
Gross profit	5,491		4,871		8,987		11,868
Net income (loss) from continuing operations, net of tax	(2,065)		588		(2,943)		1,508

These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of TT to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant, and equipment and intangible assets had been applied on January 1, 2024, together with the consequential tax effects.

Big Lake Lumber

On October 31, 2023, we acquired, through certain wholly owned subsidiaries, the assets and liabilities of Big Lake Lumber Inc. (“BLL”) for consideration consisting of cash of $2.8 million and an earn-out provision of up to $0.5 million. As a result of this transaction, EBGL expanded its market share of the Greater Minneapolis area. BLL’s operations were integrated into and became part of Glenbrook’s operations. The earn-out provision, which is accounted for as a contingent liability, is based on a specific gross profit threshold with a measurement period of two years to begin one year after the closing date of the acquisition and can potentially amount to up to $0.3 million for each of the two years, subject to certain limitations. The estimated fair value of the earn-out, which is determined using estimates of forecasted operations and other assumptions, was $0.2 million as of the acquisition date. No change to the fair value of the earn-out was recorded in Accrued Liabilities on our condensed consolidated balance sheet through June 30, 2024.

In accordance with ASC 805, we accounted for this transaction as a business combination and recorded the assets and liabilities of BLL at fair value. The fair value of the net assets acquired amounted to approximately $4.1 million at the date of acquisition, and as a result, we recorded a gain of $1.2 million on our 2023 Consolidated Statement of Operations related to the excess of the fair value of the net assets acquired over the acquisition price. This excess is referred to as a “bargain purchase.” This bargain purchase indicates that the fair value of the net assets acquired (which represents the price at which the assets would be exchanged between a willing buyer and seller) was in excess of the amount for which we acquired such net assets. As a result of the bargain purchase, we reassessed the recognition and measurement of net identifiable assets acquired and determined the valuation procedures applied and resulting measurements of the net identifiable assets were appropriate. We believe the seller was motivated to complete the sale as part of its overall business strategy of exiting the market segment.

The following table sets forth the purchase price allocation of BLL to the estimated fair value of assets acquired as of the acquisition date (in thousands):


	As of Acquisition date
Purchase Price
Cash Paid to Sellers	$	2,770
Fair Value of Earn-out Provision	169
Total consideration	2,939

Purchase Price allocation
Inventories, net	438
Accounts receivable	578
Property and equipment	2,654
Intangible assets	900
Deferred tax liability	(461)
Fair value allocated to net assets acquired	4,109
Bargain purchase gain	$	(1,170)

The following represents certain information from the unaudited pro forma condensed Consolidated Statement of Operations as if BLL had been included in the consolidated results of the Company for the three and six months ending June 30, 2023 (in thousands):


	Three Months Ended June 30,			Six Months Ended June 30,
		2023			2023
Revenue		$	11,842		$	24,743
Gross profit (loss)		3,192			7,740
Net income (loss) from continuing operations, net of tax		(1,103)			(1,086)

Note 13. Related Party Transactions

As of June 30, 2024, Mr. Eberwein, the Executive Chairman of our Board of Directors, owned 812,498 shares of Common Stock, representing approximately 25.20% of our outstanding Common Stock. In addition, as of June 30, 2024, Mr. Eberwein owned 1,182,414 shares of Series A Preferred Stock.

Note 14. Perpetual Preferred Stock

Holders of shares of our Series A Preferred Stock are entitled to receive, when, as, and if, authorized by the Company’s board of directors (or a duly authorized committee of the Company’s board of directors) and declared by the Company out of funds legally available for the payment of dividends, preferential cumulative cash dividends at the rate of 10.0% per annum of the liquidation preference of $10.00 per share. Dividends are payable quarterly, in arrears, by the last calendar day of March, June, September and December to holders of record at the close of business on the first day of each payment month. The Series A Preferred Stock is not convertible and does not have any voting rights, except when dividends are in arrears for six or more consecutive quarters, then the holders of those shares together with holders of all other series of preferred stock equal in rank would be entitled to vote separately as a class for the election of two additional directors to board of directors, until all dividends accumulated on such shares of Series A Preferred Stock for the past dividend periods and the dividend for the current dividend period shall have been fully paid or declared and a sum sufficient for the payment thereof set apart for payment. The Company may redeem the Series A Preferred Stock upon the occurrence of a change of control, subject to certain conditions. The Company may also voluntarily redeem some or all of the Series A Preferred Stock on or after September 10, 2024.

On February 16, 2024, our board of directors declared a cash dividend to holders of our Series A Preferred Stock of $0.25 per share, for an aggregate amount of approximately $0.5 million. The record date for this dividend payment was March 1, 2024 and the payment date was March 11, 2024. On May 21, 2024, our board of directors declared a cash dividend to holders of our Series A Preferred Stock of $0.25 per share, for an aggregate amount of approximately $0.5 million. The record date for this dividend payment was June 1, 2024 and the payment date was June 11, 2024. As of June 30, 2024, we are current on our preferred dividend payments.

Note 15. Equity Transactions

On June 12, 2024, we filed a Certificate of Amendment to the Company’s Restated Certificate of Incorporation (the “Amendment”) with the Secretary of State of the State of Delaware in order to effect a reverse stock split of our common stock at a ratio of one-for-five (the “Reverse Split”). The Amendment does not affect the par value of our common stock.

The Reverse Split became effective on June 14, 2024, at 5:00 p.m. Eastern Time, at which time every five shares of the Company’s issued and outstanding common stock were automatically combined into one share of common stock.. Additionally, all stock options and warrants of the Company outstanding immediately prior to the Reverse Split were proportionally adjusted.

As of June 30, 2024, of the warrants issued through the public offering we closed on January 24, 2022, There were 10.9 million warrants outstanding at an exercise price of $7.50, and no prefunded warrants outstanding. The 0.3 million prefunded warrants were exercised at $0.01 per share in the third quarter of 2023. For every 1 warrant .20 of a share shall be issued,

Note 16. Preferred Stock Rights

On June 2, 2021, the board of directors adopted a tax benefit preservation plan in the form of a Section 382 Rights Agreement (the “382 Agreement”). The 382 Agreement is intended to diminish the risk that our ability to use our net operating loss carryforwards to reduce future federal income tax obligations may become substantially limited due to an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as amended. The board of directors authorized and declared a dividend distribution of one right for each outstanding share of Common Stock to stockholders of record as of the close of business on June 14, 2021. Each right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series C Participating Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock”), at an exercise price of $12.00 per one one-thousandth of a share of Series C Preferred Stock, subject to adjustment.

The rights will become exercisable following (i) 10 days after a public announcement that a person or group has become an Acquiring Person (as defined in the 382 Agreement); and (ii) 10 business days (or a later date determined by the board of directors) after a person or group begins a tender or an exchange offer that, if completed, would result in that person or group becoming an Acquiring Person.

In addition, upon the occurrence of certain events, the exercise price of the rights would be adjusted and holders of the rights (other than rights owned by an acquiring person or group) would be entitled to purchase common stock at approximately half of market value. Given the potential adjustment of the exercise price of the rights, the rights could cause substantial dilution to a person or group that acquires 4.99% or more of common stock on terms not approved by the board of directors.

As of June 2, 2024, the 382 Agreement has expired. No rights were exercisable at June 30, 2024. There is no impact to financial results as a result of the adoption of the 382 Agreement for the six months ended June 30, 2024.

Note 17. Subsequent Events

Sale Leaseback Transactions

On July 16, 2024 we closed on the sale and leaseback transaction that we entered into on May 6, 2024, and sold our facility at 300 Park Street, South Paris, Maine, (the “Maine Premises”), together with any fixtures and other items of real property, to MAG Capital Partners Acquisition LLC (“300 Park Buyer”). The total net consideration, after closing costs, related to the 300 Park Sale Leaseback Agreement was $4.5 million in cash, net of closing costs, withholding taxes and security deposits, which was paid at the closing. Simultaneously we entered into a commercial single-tenant triple net lease (the “300 Park Lease Agreement”) with 300 Park Buyer, pursuant to which KBS Builders, Inc., our wholly-owned subsidiary, leased back from 300 Park Buyer the Maine Property for a 20 year term, unless earlier terminated or extended for an additional 10 years in accordance with the terms of the 300 Park Lease Agreement. Pursuant to the terms of the 300 Park Lease Agreement, the Company will be responsible for an initial monthly base rent of $43,750, and all monthly expenses related to the Maine Property, including insurance premiums, taxes, utilities, and other expenses. As of June 30, 2024, the Maine Premises has a carrying value of $1.8 million and is included in Assets held for sale on the unaudited condensed consolidated balance sheet. We expect to recognize a gain on the sale of the Maine Premises in the third quarter of 2024 of approximately $2.6 million.

On July 19, 2024, we closed on the sale and leaseback transaction that we entered into on May 6, 2024, and sold our facility at 791 Rose Drive, Big Lake, Minnesota, (the “Big Lake Premises”), together with any fixtures and other items of real property, to HJ Development L.L.P. The total net consideration, after closing costs, related to the 791 Rose Sale and Leaseback Agreement was $2.7 million in cash, net of closing costs, withholding taxes and security deposits, which was paid at the closing. Simultaneously we entered into a commercial single-tenant triple net lease (the “791 Rose Lease Agreement”) with 791 Rose Buyer, pursuant to which Edgebuilder, Inc. and Glenbrook Supply Inc., our wholly-owned subsidiaries, leased back from 791 Rose Buyer the Big Lake Property for a 20 year term, unless earlier terminated or extended for an additional 10 years in accordance with the terms of the 791 Rose Lease Agreement. Pursuant to the terms of the 791 Rose Lease Agreement, the Company will be responsible for an initial monthly base rent of $19,555, and all monthly expenses related to the Big Lake Property, including insurance premiums, taxes, utilities, and other expenses. As of June 30, 2024, the Big Lake Premises has a carrying value of $2.5 million and is included in Assets held for sale on the unaudited condensed consolidated balance sheet. We expect to recognize a gain on the sale of the Big Lake Premises in the third quarter of 2024 of approximately $0.2 million

Enservco Transaction

On August 9, 2024, the Company completed an investment in Enservco Corporation (“Enservco” or “ENSV”) in which it agreed to issue 250,000 shares of its 10% Series A Cumulative Perpetual Preferred Stock (“STRRP”) representing $2.5 million of value at STRRP’s $10.0 per share par value, to Enservco in exchange for a combined 12.5 million ENSV common shares and Cumulative Mandatorily Convertible Series A preferred shares. Enservco agreed to appoint one Company representative to the Enservco board of directors. The Company also issued a short-term $1 million promissory note to Enservco to facilitate Enservco’s acquisition of Buckshot Trucking, LLC (“Buckshot”). The promissory note is collateralized by the STRRP shares issued to Enservco. The Company is currently evaluating the accounting implications of this transaction.

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis of financial condition and results of operations (“MD&A”) contains forward-looking statements that involve risks and uncertainties. Please see “Important Information Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks, and assumptions that may cause our actual results to differ materially from those discussed in the forward-looking statements. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and related notes thereto for the fiscal year ended December 31, 2023, which were included in our Annual Report on Form 10-K, filed with the SEC on March 22, 2024.

The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods.

Overview

Star Equity Holdings, Inc. (“Star Equity,” the “Company,” “we,” “our”) is a diversified multi-industry holding company with two divisions. Our Building Solutions division, formerly called our “Construction” division, is our largest division and operates in the construction industry, a key sector of the economy. In addition, we have an Investments division. On May 4, 2023, we completed the sale of our former healthcare division, Digirad Health, Inc. (“Digirad Health”). Until the sale of Digirad Health, we were organized into three divisions.

Our Building Solutions division is currently made up of the following operating businesses: KBS Builders, Inc. (“KBS”); EdgeBuilder, Inc. (“EdgeBuilder”), and Glenbrook Building Supply, Inc. (“Glenbrook”), with the latter two managed together and referred to jointly as “EBGL”. During this quarter, we acquired Timber Technologies Solutions, Inc. (“TT”), adding an additional business to the division. KBS is based in Maine and manufactures modular buildings, typically in the single and multi-family residential segments, servicing principally the New England market. EBGL is based in the Minneapolis-Saint Paul area and principally serves the Upper Midwest region. Together, the EBGL businesses manufacture and deliver structural wall panels, primarily for multi-family residential buildings, and other engineered wood-based products. EBGL also distributes building materials from two lumberyard locations primarily focused on professional builder customers. TT is based outside the Minneapolis-St. Paul area and manufactures glue-laminated timber products (“glulam”) for various end markets and applications, including agriculture, industrial, infrastructure, and building construction (commercial and residential).

As of June 30, 2024 our Investments division held and managed our corporate-owned real estate, including two manufacturing facilities in Maine that were leased to KBS, one operating facility in Minnesota that was leased to Glenbrook, and one manufacturing facility in Wisconsin that was leased to TT. The Investments division also manages internally-funded, concentrated minority investments in a number of public companies. It also holds and manages a $7.0 million promissory note and a $4.7 million private equity stake in TTG Parent LLC, the parent entity of TTG Imaging Solutions, LLC. We acquired these interests in May 2023 as a result of the sale of Digirad Health (see Note 2. “Discontinued Operations” for further information).

Strategy

Star Equity Holdings, Inc.

We believe our diversified multi-industry holding company structure allows Star Equity management to focus on capital allocation, strategic leadership, mergers and acquisitions, capital markets, and investor relations, as well as management of our Investments division. Our structure frees up our operating company management teams to focus on their respective businesses, look for organic and bolt-on growth opportunities, and improve operations with less distraction and administrative burden associated with running a public company.

We continue to explore strategic alternatives to improve our market position and the profitability of our product offerings, generate additional liquidity, and enhance our common stock valuation. We may pursue our goals through organic growth and through strategic alternatives, such as selective acquisitions of businesses, divestitures of assets or businesses, equity offerings, debt financings, or corporate restructuring.

Operating Business

We believe that our operating companies are well positioned for growth in large addressable markets. The key elements of our growth strategy include the following:

•Organic growth from our core businesses. We believe that we operate in markets and geographies that will allow us to continue to grow our core businesses, allowing us to benefit from our scale and strengths. We plan to focus our efforts on markets in which we already have a presence in order to leverage the personnel, infrastructure, and brand recognition we have in these areas.

•Introduction of new services. In the Building Solutions division, we will consider opportunities to augment our service offerings to better serve our customer base. We have done this in the New England market with our entry into the commercial multi-family segment. Other areas might include logistics, on-site installation, and manufacturing of sub-components.

•Acquisition of complementary businesses. We plan to continue to look at complementary businesses that meet our acquisition growth criteria. We believe there are many potential small public and private targets that can be acquired over time and integrated into our platform. We will also look at larger, more transformational mergers and acquisitions if we believe the appropriate mix of value, risk, and return is present for our stockholders. The timing of these potential transactions will always depend on market conditions, available capital, and valuation. In general, we want to be “value” buyers, and will not pursue any transaction unless we believe the post-transaction potential value is high for stockholders.

Current Market Conditions

The target customers for our Building Solutions division include professional home builders, general contractors, project owners, developers, and design firms. Despite a higher interest rate environment, we are continuing to see significant demand for our products, although there have been execution delays as customers secure and finalize project financing. We have benefited from implementing both price increases and margin protection language in our contracts, and these changes have had a positive effect on our profitability. We have experienced slower business activity over the last four quarters and related lower revenues, but believe this slowdown is temporary. Our sales pipelines continue to indicate strong potential demand for our services, but we can give no assurances as to our ability to compete for these opportunities, or the periods during which successfully negotiated projects will be completed.

Trends and Drivers

The Modular Building Institute has estimated that permanent modular construction increased as a percentage of the construction industry from 2.14% in 2015 to 6.64% as of the end of 2023. In turn, in our Building Solutions division, we continue to see a greater acceptance of offsite or prefab construction in single-family and multi-family residential building projects in our target markets. Our modular units and structural wall panels offer builders a number of benefits over traditional onsite or “stick built” construction. These include shorter time to market, higher quality, reduced waste, and potential cost savings. Additionally, technological advancements including 3D modeling software and developments in engineered wood products offer greater design flexibility for higher-end applications. The need for more affordable housing solutions also presents opportunities for the continued growth of factory-built housing.

Risks arising from global economic instability and conflicts, wars, and health crises could impact our business. In addition, the inflation caused by such events may impact demand for our products and services and our cost to provide products and services.

Discontinued Operations

As discussed in detail in Note 2. “Discontinued Operations,” we completed the sale of Digirad Health on May 4, 2023, for total aggregate consideration of $40 million, comprised of $27 million in cash, a $7 million promissory note, and $6 million in common stock in the combined entity, TTG, which is currently valued at $4.7 million. We deemed the disposition of Digirad Health, which was our entire Healthcare business unit, to represent a strategic shift that will have a major effect on our operations and financial results. As of the date of these financial statements, the results of operations of the Healthcare business unit represent “discontinued operations” in accordance with U.S. generally Accepted Accounting Practices (“GAAP”) (ASC 205-20-45-1B). As such, the assets and liabilities, as well as the earnings, of the discontinued operation are presented separately in the unaudited condensed consolidated financial statements for all periods presented. Unless otherwise noted, discussion within the notes to the unaudited condensed consolidated financial statements and this MD&A relates to continuing operations.

Segments

Our reportable segments are based upon our internal organizational structure, the manner in which our operations are managed, the criteria used by our Chief Executive Officer / Chief Operating Decision Maker (“CODM”), to evaluate segment performance, the availability of separate financial information, and overall materiality considerations. Effective as of the consummation of the sale of Digirad Health on May 4, 2023, our business divisions are organized into the following two reportable segments, reflecting the manner in which our CODM assesses performance and allocates resources.

•Building Solutions (formerly known as our Construction division)

•Investments

Prior to the May 4, 2023 sale of Digirad Health we had an additional reportable segment for our Healthcare division.

Building Solutions

Our Building Solutions division services residential and commercial construction projects via our KBS, EdgeBuilder, Glenbrook, and TT brands, through which we manufacture modular housing units, structural wall panels, permanent wood foundation systems and other engineered wood products, supply general contractors and retail customers with building materials, and manufacture glue-laminated timber products (“glulam”).

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

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

Glenbrook (inclusive of Big Lake Lumber Inc. (“BLL”), acquired in 2023) is a supplier of lumber, windows, doors, cabinets, drywall, roofing, decking, and other building materials to professional builders. Glenbrook conducts its operations in Oakdale, Minnesota and Big Lake, Minnesota with an operational facility in Hudson, Wisconsin. EdgeBuilder and Glenbrook operate as one business with a single management team and we refer to them together as EBGL.

TT manufactures glulam for various end markets and applications, including agriculture, industrial, infrastructure, and building construction (commercial and residential). Its glulam products have superior strength, durability, and environmental sustainability compared to solid timber and other building materials. Operating in a niche industry and benefiting from secular tailwinds, TT’s glulam products have been taking market share from less sustainable building materials such as steel, concrete, and aluminum.

Investments

At June 30, 2024, we held four real estate assets in our portfolio which we leased to our Building Solutions subsidiaries (KBS, EBGL, and TT); two properties were leased to KBS, one property to EBGL, and one property to TT . These include their principal production and sales facilities in South Paris, Maine, Big Lake, Minnesota, and Colfax, Wisconsin, respectively. Also, we continue to expand our investment activities and have established minority positions in the equity securities of a small number of publicly traded companies, as well as the debt and equity holdings in TTG, and one other note receivable. In the third quarter of 2024, we completed the sale of two of these facilities to third parties with immediate leaseback of each of the respective properties.

Critical Accounting Policies and Estimates

In preparing our financial statements, we make estimates, assumptions and judgments that can have a significant impact on our revenue and net income or loss, as well as on the value of certain assets and liabilities on our condensed Consolidated Balance Sheets. We believe that the estimates, assumptions, and judgments involved in the accounting policies described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 have the greatest potential impact on our financial statements, so we consider them to be our critical accounting policies and estimates.

Results of Continuing Operations

Comparison of the Three Months Ended June 30, 2024 and 2023

The following table summarizes our results for the three months ended June 30, 2024 and 2023 (in thousands):


	Three Months Ended June 30,
	2024		Percent of Revenues		2023		Percent of Revenues		Change from Prior Year
									Dollars		Percent *
Total revenues	$	13,483	100.0	%	$	8,893	100.0	%	$	4,590	51.6	%
Total cost of revenues	11,267		83.6	%	6,290		70.7	%	4,977		79.1	%
Gross profit	2,216		16.4	%	2,603		29.3	%	(387)		(14.9)	%
Total operating expenses	5,929		44.0	%	4,639		52.2	%	1,290		27.8	%
Income (loss) from operations	(3,713)		27.5	%	(2,036)		22.9	%	(1,677)		(82.4)	%
Total other income (expense)	(113)		0.8	%	731		8.2	%	(844)		(115.5)	%
Income (loss) before income taxes	(3,826)		28.4	%	(1,305)		14.7	%	(2,521)		(193.2)	%
Income tax benefit (provision)	39		0.3	%	(61)		0.7	%	100		163.9	%
Net income (loss)	$	(3,787)	28.1	%	$	(1,366)	15.4	%	$	(2,421)	(177.2)	%

Percentage may not add due to rounding

Revenues

Building Solutions

Building Solutions revenue is summarized as follows (in thousands):


	Three Months Ended June 30,
	2024		2023		Change		% Change

Building Solutions Revenue	$	13,483	$	8,893	$	4,590	51.6	%

Building Solutions revenues increased in the second quarter of 2024 versus the second quarter of 2023 as a result of the inclusion of revenues from TT from the date of acquisition and the inclusion of full year revenues from BLL which we acquired in the fourth quarter of 2023. These were partially offset by slower business activity at both KBS and EBGL. Economic headwinds, higher interest rates, and project delays contributed to the slowdown which we continue to believe is temporary. Specifically, some of our largest commercial projects expected to commence in the first half of 2024 were delayed into future periods. Our backlog and sales pipeline indicate continued strong demand for new projects, although the revenue impact and timing are uncertain.

Gross Profit

Building Solutions Gross Profit

Building Solutions gross profit and margin is summarized as follows (in thousands):


	Three Months Ended June 30,
	2024			2023			$ Change		% Change
Building Solutions gross profit (loss)	$	2,229		$	2,664		$	(435)	(16.3)	%
Building Solutions gross margin	16.5		%	30.0		%

Building Solutions gross profit and gross margin decreased primarily due to fixed costs remaining at constant levels regardless of the decline in revenue at KBS and EBGL as discussed above. Gross profit and gross margin were also negatively impacted by the one time purchase price accounting adjustment of $574 thousand recorded related to the Timber Technologies acquisition.

Investments Gross Loss

Investments gross loss is summarized as follows (in thousands):


	Three Months Ended June 30,
	2024		2023		$ Change		% Change
Investments gross profit (loss)	$	(13)	$	(63)	$	50	79.4	%

Investments gross loss relates to depreciation expense associated with the four commercial facilities that we own. These consist of the two manufacturing facilities at KBS in Maine, one lumberyard/showroom at BLL in Minnesota (“BLL facility”, and one manufacturing facility at TT in Wisconsin (“TT facility”) . Depreciation expense decreased in 2024 versus 2023 primarily due to the elimination of depreciation expense related to an additional manufacturing facility in Maine that we sold in June 2023, partially offset by the acquisition of the BLL facility in October 2023 and the acquisition of the TT facility in May 2024.

Operating Expenses

Operating expenses are summarized as follows (in thousands):


	Three Months Ended June 30,								Percent of Revenues
	2024		2023		Change				2024		2023
					Dollars		Percent
Selling, general and administrative	$	5,339	$	4,209	$	1,130	26.8	%	39.6	%	47.3	%
Amortization of intangible assets	590		430		160		37.2	%	4.4	%	4.8	%

Total operating expenses	$	5,929	$	4,639	$	1,290	27.8	%	44.0	%	52.1	%

On a consolidated basis, there was a $1.1 million increase in sales, general and administrative expenses (“SG&A”). The major driver of this increase in the second quarter of 2024 was an impairment of our TTG cost method investment of approximately $1.3 million recorded in the second quarter of 2024. SG&A, as a percentage of revenue, increased to 39.6% for the three months ended June 30, 2024 versus 37.2% in the prior year period.

Total Other Income (Expense)

Total other income (expense) is summarized as follows (in thousands):


	Three Months Ended June 30,
	2024		2023
Other income (expense), net	$	(334)	$	568
Interest income (expense), net	221		163


Total other income (expense), net	$	(113)	$	731

Other income (expenses), net, for the three months ended June 30, 2024 and 2023 is predominately comprised of unrealized gains and losses from available for sale securities recorded in our Investments division and finance costs.

Interest income (expense), net, for the three months ended June 30, 2024 increased substantially compared to 2023 due to our favorable net cash position and the seller’s note acquired as a result of the sale of Digirad Health in May 2023.

Income Tax Expense

For the three months ended June 30, 2024 and 2023 we recorded a $39 thousand income tax benefit and a $61 thousand income tax expense, respectively, within continuing operations. See Note 10. “Income Taxes” within the notes to our condensed consolidated financial statements for further information related to the income taxes.

Income from Discontinued Operations

See Note 2. “Discontinued Operations” to our unaudited condensed consolidated financial statements for information regarding discontinued operations.

Results of Continuing Operations

Comparison of the Six Months Ended June 30, 2024 and 2023

The following table summarizes our results for the six months ended June 30, 2024 and 2023 (in thousands):


	Six Months Ended June 30,
	2024		Percent of Revenues		2023		Percent of Revenues		Change from Prior Year
									Dollars		Percent *
Total revenues	$	22,601	100.0	%	$	21,239	100.0	%	$	1,362	6.4	%
Total cost of revenues	18,811		83.2	%	14,370		67.7	%	4,441		30.9	%
Gross profit	3,790		16.8	%	6,869		32.3	%	(3,079)		(44.8)	%
Total operating expenses	10,465		46.3	%	8,753		41.2	%	1,712		19.6	%
Loss from operations	(6,675)		(29.5)	%	(1,884)		(8.9)	%	(4,791)		254.3	%
Total other income (expense)	660		2.9	%	595		2.8	%	65		10.9	%
Loss before income taxes	(6,015)		(26.6)	%	(1,289)		(6.1)	%	(4,726)		366.6	%
Income tax provision	4		—	%	(61)		(0.3)	%	65		(106.6)	%
Net loss from continuing operations	$	(6,011)	(26.6)	%	$	(1,350)	(6.4)	%	$	(4,661)	345.3	%

*Percentage may not add due to rounding

Revenues

Building Solutions

Building Solutions revenue is summarized as follows (in thousands):


	Six Months Ended June 30,
	2024		2023		Change		% Change
Building Solutions	$	22,601	$	21,239	$	1,362	6.4	%

Building Solutions revenue increased in 2024 versus 2023 as a result of the inclusion of revenues from TT from the date of acquisition and the inclusion of full year revenues from BLL which we acquired in the fourth quarter of 2023. These were partially offset by slower business activity at both KBS and EBGL. Economic headwinds, higher interest rates, and project delays contributed to the slowdown which we believe is temporary. Our backlog and sales pipeline indicate continued strong demand for new projects, although the revenue impact and timing are uncertain.

Building Solutions Gross Profit (Loss)

Building Solutions gross profit and margin is summarized as follows (in thousands):


	Six Months Ended June 30,
	2024			2023			Change		% Change
Building Solutions gross profit (loss)	$	3,907		$	6,993		$	(3,086)	(44.1)	%
Building Solutions gross margin	17.3		%	32.9		%

The decrease in Building Solutions gross profit for the first six months of 2024 of 44.1% was due to fixed costs remaining at constant levels regardless of the decline in revenue at KBS and EBGL as discussed above. Gross profit and gross margin were also negatively impacted by the one time purchase price accounting adjustment of $574 thousand recorded related to the Timber Technologies acquisition.

Investments Gross Loss

Investments gross loss is summarized as follows (in thousands):


	Six Months Ended June 30,
	2024		2023		$ Change		% Change
Investments gross profit (loss)	$	(117)	$	(63)	$	(54)	(85.7)	%

Investment gross profit (loss) principally relates to depreciation expense associated with the four manufacturing facilities. We sold one of these three facilities during the second quarter of 2023.

Operating Expenses

Operating expenses are summarized as follows (in thousands):


	Six Months Ended June 30,								Percent of Revenues
	2024		2023		Change				2024		2023
					Dollars		Percent
Selling, general and administrative expenses	$	9,433	$	7,893	$	1,540	19.5	%	41.7	%	37.2	%
Amortization of intangible assets	1,032		860		172		20.0	%	4.6	%	4.0	%

Total operating expenses	$	10,465	$	8,753	$	1,712	19.6	%	46.3	%	41.2	%

On a consolidated basis, there was a $1.5 million increase in SG&A. The major driver of this increase in the first six months of 2024 was an impairment of our TTG cost method investment of approximately $1.3 million recorded in the second quarter of 2024. As a percentage of revenue, SG&A increased to 41.7%, versus 37.2% in the prior year period..

Total Other Income (Expense)

Total other income (expense) is summarized as follows (in thousands):


	Six Months Ended June 30,
	2024		2023
Other income (expense), net	$	65	$	459
Interest income (expense), net	595		136


Total other income (expense)	$	660	$	595

Other income (expense), net for the six months ended June 30, 2024 and 2023 is predominately comprised of unrealized losses and gains from available for sale securities recorded in our Investments division. 2023 also included the gain on the sale of our Waterford, Maine facility.

Interest income (expense), net, for the six months ended June 30, 2024 and 2023 is predominantly comprised of interest earned on the TTG Note and interest bearing assets in our Investments division, offset by interest costs and the related amortization of deferred issuance costs on our debt.

Income Tax Expense

For the six months ended June 30, 2024 and 2023, we recorded income tax benefits of $4 thousand and $61 thousand, respectively, within continuing operations. See Note 10. “Income Taxes” within the notes to our unaudited condensed consolidated financial statements for further information related to the income taxes.

Income from Discontinued Operations

See Note 2. “Discontinued Operations” to our condensed consolidated financial statements for information regarding discontinued operations.

Liquidity and Capital Resources

Overview

Summary Cash Flows

The following table shows cash flow information for the six months ended June 30, 2024 and 2023 (in thousands):


	Six Months Ended June 30,
	2024		2023
Net cash provided by (used in) operating activities	$	(4,265)	$	1,865
Net cash provided by (used in) investing activities	$	(18,944)	$	20,397
Net cash provided by (used in) financing activities	$	8,322	$	(3,979)

Cash Flows from Operating Activities

For the six months ended June 30, 2024, net cash used in operating activities was $4.3 million, compared to $1.9 million in net cash provided by operating activities in 2023. The decrease in net cash provided by operating activities is attributable to lower results from operations, particularly in our Building Solutions division, and increased net working capital expenditures.

Cash Flows from Investing Activities

For the six months ended June 30, 2024, net cash used in investing activities was $18.9 million, an increase over 2023 net cash provided by investing activities of $20.4 million, primarily attributable to cash paid for the acquisition of TT in 2024 of $19.1 million, including new debt facilities entered into to support the TT acquisition.

Cash provided by investing activities in 2023 included cash received for the sale of Digirad of $19.7 million.

Cash Flows from Financing Activities

For the six months ended June 30, 2024, net cash provided by financing activities was $8.3 million, compared to net cash used in financing activities of $4.0 million in 2023. The increase in cash provided by financing activities relates to higher net debt utilization on our credit facilities.

Sources of Liquidity

Our principal sources of liquidity are our existing cash and cash equivalents and cash generated from operations. As of June 30, 2024, we had $2.5 million of cash and cash equivalents. In connection with the sale of our Healthcare business on May 4, 2023, we paid the credit facility pursuant to the Webster Loan Agreement (as defined below) in full, using some of the proceeds from that sale. We closed out all credit facilities with eCapital and paid all remaining amounts outstanding on any eCapital balances during the second quarter of 2023. As discussed in Note 8, “Debt,” we have approximately $14.3 million in debt at June 30, 2024.

Common Stock Equity Offering

As of June 30, 2024, of the warrants issued through the public offering we closed on May 28, 2020, 1.0 million warrants were exercised and 1.4 million warrants remained outstanding, which represents 0.1 million shares of common stock equivalents, at an exercise price of $11.25. As of June 30, 2024, of the warrants issued through the public offering we closed on January 24, 2022, there were 10.9 million warrants and no prefunded warrants outstanding at an exercise price of $7.50 and $0.01, respectively.

See Note 15. “Equity Transactions” in the accompanying notes to the unaudited condensed consolidated financial statements for further details.

Credit Facilities

Premier Facility

On August 16, 2023, EdgeBuilder and Glenbrook (the “EBGL Borrowers”), entered into a Revolving Credit Loan Agreement with Premier Bank (“Premier”) providing the EBGL Borrowers with a working capital line of credit of up to $4.0 million, which was subsequently increased to $6.0 million pursuant to a subsequent agreement on December 5, 2023 (the “Premier Loan Agreement”). Availability under the Premier Loan Agreement is based on a formula tied to the EBGL Borrowers’ eligible accounts receivable, inventory and equipment. Borrowings under the Premier Loan Agreement bear interest at the prime rate plus 0.75% (and a minimum interest rate of 6.75%), with interest payable monthly and the outstanding principal balance payable upon expiration of the term of the Premier Loan Agreement. The Premier Loan Agreement also provides for certain fees payable to Premier during its term. The initial term of the Premier Loan Agreement expires on December 5, 2024 but may be extended from time to time at the request of the EBGL Borrowers, subject to approval by Premier. The EBGL Borrowers’ obligations under the Premier Loan Agreement are guaranteed by the Company and secured by all of their inventory, equipment, accounts and other intangibles. $6.1 million was outstanding under the Premier Loan Agreement at June 30, 2024.

Financial covenants associated with the Premier Loan Agreement require that the EBGL Borrowers maintain (a) a debt service coverage ratio for any calendar year of less than 1.25; (b) a debt-to-equity ratio at the end of each calendar year in excess of 1.65; (c) a fixed charge coverage ratio at the end of each calendar year of less than 1.10; (d) working capital of at least $2 million; and (e) a current ratio of at least 1.50. As of December 31, 2023, the EBGL Borrowers were not in compliance with the Premier Loan Agreement covenants. The EBGL Borrowers have obtained a waiver from Premier for the annual covenant breach as of December 31, 2023.

KeyBank Facility

Term Loan Secured by Mortgage

Bridgewater Facility

In connection with the completion of the TT Acquisition, on May 17, 2024, Timber Technologies Solutions, Inc., a wholly-owned subsidiary of the Company (the “Borrower”), entered into a Loan Agreement (the “Bridgewater Loan Agreement”) with Bridgewater Bank (“Bridgewater”) and issued a Term Promissory Note to Bridgewater in the amount of $7.0 million thereunder (the “Facility”). All borrowings under the Facility bear interest at 7.85%, with interest payable monthly and the outstanding principal balance payable on May 20, 2029 (the “Maturity Date”). The Bridgewater Loan Agreement also provides for certain fees payable to Bridgewater during its term. The Borrower’s obligations under the Facility are guaranteed by the Company and secured by all of the Borrower’s inventory, equipment, accounts and other intangibles, and all proceeds of the foregoing.

Webster Credit Facility

eCapital Credit Facilities

eCapital Term Loan

Off-Balance Sheet Arrangements

As of June 30, 2024, there were no off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934, as amended (the “Exchange Act”), reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of our management, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

At December 31, 2023, Management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of BLL. BLL’s financial results are included in the 2023 consolidated financial statements of the Company and constituted 2% of both total and net assets, as of December 31, 2023 and 3% of revenues and less than 1% of net income, for the year. The effectiveness of BLL’s controls will be assessed in 2024.

At December 31, 2023, Management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of TT. Management has not yet determined whether the effectiveness of these controls will be assessed in 2024.

Management’s Report on Internal Control over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Management conducted an assessment of the effectiveness of the Company's internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013 Framework). Based on this assessment, our management concluded that, as of December 31, 2023, our internal control over financial reporting was effective based on those criteria.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

See Note 9. “Commitments and Contingencies” within the notes to our condensed consolidated financial statements for a summary of legal proceedings.

ITEM 1A.RISK FACTORS

In evaluating us and our common stock, we urge you to carefully consider the risks and other information in this Quarterly Report on Form 10-Q, as well as the risk factors disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which we filed with the SEC on March 22, 2024. Except as noted below, the risks and uncertainties described in “Item 1A - Risk Factors” of our Annual Report on Form 10-K have not materially changed. Any of the risks discussed in this Quarterly Report on Form 10-Q or any of the risks disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition.

Our business strategy includes acquisitions, and acquisitions entail numerous risks, including the risk of management diversion and increased costs and expenses, all of which could negatively affect the Company’s profitability.

Our business strategy includes, among other things, strategic acquisitions, as well as potential opportunistic acquisitions and strategic actions with respect to our existing investments, such as restructurings, strategic partnerships and collaborations, and activist activity. This overall acquisition and investment strategy entails several potential risks, including diverting management’s attention from other business concerns, incurring substantial legal and other advisory fees (including, in the case of activist activity, proxy solicitation fees), and financing such acquisitions with additional equity and/or debt. Additionally, to the extent that we are already invested in the entities that are the subject of our acquisitions and other activities, our actions may be temporarily disruptive to the value of the investments, which could adversely affect our financial condition.

In addition, once completed, acquisitions may entail further risks, including: unanticipated costs and liabilities of the acquired businesses, including environmental liabilities, that could materially adversely affect our results of operations. These include: increased regulatory compliance relating to the acquired business; difficulties in assimilating acquired businesses, their personnel and their financial reporting systems, which would prevent the expected benefits from the transaction from being realized within the anticipated timeframe; negative effects on existing business relationships with suppliers and customers; and loss of key employees of the acquired businesses. In addition, any future acquisitions could cause us to incur additional debt and related interest expense, as well as contingent liabilities and amortization expense related to intangible assets, which could have a material adverse effect on our business, financial condition, operating results and cash flows, or the issuance of additional equity, which could dilute our stockholder’s equity interests.

There can be no assurance that we will be able to negotiate any pending acquisition successfully, receive the required approvals for any acquisition or otherwise conclude any acquisition successfully, or that any acquisition will achieve the anticipated synergies or other positive results. Overall, if our acquisition strategy is not successful or if acquisitions are not well integrated into our existing operations, the Company’s profitability, business, and financial condition could be negatively affected.

We may sustain losses in our investment portfolio, which could have an adverse effect on our results of operations, financial condition and liquidity.

A portion of our assets consists of equity securities which are adjusted to fair value each period, as well as other investments. An adverse change in economic conditions or setbacks to such companies, their operations or business models may result in a decline in the value of these investments. Such declines in value are principally recognized in net income or loss in accordance with GAAP. Any adverse changes in the financial markets and declines in value of our investments may result in additional losses and could have an adverse effect on our results of operations, financial condition and liquidity.

Risks Related to our Common Stock and our Company Preferred Stock

If we cannot continue to satisfy the Nasdaq Global Market continued listing standards and other Nasdaq rules, our Common Stock could be delisted, which would harm our business, the trading price of our Common Stock, our ability to raise additional capital and the liquidity of the market for our Common Stock.

Our Common Stock is currently listed on the Nasdaq Global Market. To maintain the listing of our Common Stock on The Nasdaq Global Market, we are required to meet certain listing requirements, including, among others, either: (i) a minimum closing bid price of $1.00 per share, a market value of publicly held shares (excluding shares held by our executive officers, directors and 10% or more stockholders) of at least $5.0 million and stockholders’ equity of at least $10 million; or (ii) a minimum closing bid price of $1.00 per share, a market value of publicly held shares (excluding shares held by our executive officers, directors and 10% or more stockholders) of at least $15.0 million and total assets of at least $50.0 million and total revenue of at least $50.0 million (in the latest fiscal year or in two of the last three fiscal years).

There is no assurance that we will be able to maintain compliance with these requirements.

On February 14, 2024, we received a letter from the Listing Qualifications staff of The Nasdaq Stock Market (“Nasdaq”) notifying us that we were no longer in compliance with the minimum bid price requirement for continued listing on the Nasdaq Global Market, as the bid price of our common stock had been below $1.00 for a period of 30 consecutive business days. The notification letter had no immediate effect on our listing on the Nasdaq Global Market. Nasdaq has provided us with 180 days, or until August 12, 2024, to regain compliance with the minimum bid price requirement by having a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days. If our Common Stock were to be delisted from Nasdaq and was not eligible for quotation or listing on another market or exchange, trading of our Common Stock could be conducted only in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it could become more difficult to dispose of, or obtain accurate price quotations for, our Common Stock, and there would likely also be a reduction in our coverage by securities analysts and the news media, which could cause the price of our Common Stock to decline further. On July 2, 2024 we received a letter from the Listing Qualifications Department of The NASDAQ Stock Market (“Nasdaq”) advising us that we had regained compliance with Nasdaq's minimum bid price requirements as our common stock closed above the $1.00 minimum bid price for the 10 consecutive business days ended July 1, 2024.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

Security Trading Plans of Directors and Executive Officers

None of the Company's directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company's fiscal quarter ended June 30, 2024, as such terms are defined under Item 408(a) or Regulation S-K..

ITEM 6.EXHIBITS


Exhibit Number						Description

3.1						Certificate of Amendment of the Restated Certificate of Incorporation of Star Equity Holdings, Inc. (incorporated by reference to Exhibit 3.1 to Star Equity Holdings, Inc.’s Current Report on Form 8-K dated Ju ne 12 , 2024 (File No. 001-35947).
10.1						Purchase and Sale Agreement of 300 Park, dated as of May 6, 2024 , by and between 300 Park Street LLC and MAG Capital Partners Acquisition LLC (incorporated by reference to Exhibit 10.1 to Star Equity Holdings, Inc.’s Current Report on Form 8-K dated May 7, 2024 (File No. 001-35947).
10.2						Commercial Purchase Agreement of 791 Rose, dated as of May 6, 2024 , by and between Rose Drive, LLC and HJ Development L.L.P. (incorporated by reference to Exhibit 10.2 to Star Equity Holdings, Inc.’s Current Report on Form 8-K dated May 7, 2024 (File No. 001-35947).
10.3						Promissory Note Secured By Mortgage dated June 28, 2024, by and among Timber Technologies, LLC and 106 Bremer Ave, LLC (incorporated by reference to Exhibit 10.1 to Star Equity Holdings, Inc.’s Current Report on Form 8-K dated July 3 , 2024 (File No. 001-35947).
10.4						Mortgage dated June 28, 2024, by and among Timber Technologies, LLC and 106 Bremer Ave, LLC (incorporated by reference to Exhibit 10.2 to Star Equity Holdings, Inc.’s Current Report on Form 8-K dated July 3 , 2024 (File No. 001-35947).
10.5*						C ommercial S ingle-T enant T riple N et L ease , dated as of May 6, 2024, by and between Star Equity Holdings, Inc., MAG Capital Partners Acquisition LLC and its investors, and Park Street Maine Industrial, LLC .
10.6*						Commercial Single-Tenant Triple Net Lease, dated as of May 6, 2024, by and between Star Equity Holdings, Inc. and Big Lake Industrial 2024, LLC .
10.7*						L ease Agreement, dated June 28 , 202 4 , by and between Timber Technologies Solutions , Inc.. and 106 Bremer Ave , LLC.
10.8						Asset Purchase Agreement, dated as of May 17, 2024 , by and among Star Equity Holdings, Inc., Timber Technologies Inc., and Tom Niska and Dale Schiferl, et. al. (incorporated by reference to Exhibit 10.1 to Star Equity Holdings, Inc.’s Current Report on Form 8-K dated May 20 , 2024 (File No. 001-35947).
10.9						Loan Agreement, dated May 17, 2024, by and between Star Equity Holdings, Inc. and Bridgewater Bank (incorporated by reference to Exhibit 10.2 to Star Equity Holdings, Inc.’s Current Report on Form 8-K dated May 20, 2024 (File No. 001-35947).
10.10						Term Promissory Note , dated May 17, 2024 , by and between Timber Technologies Solutions , Inc. and Bridgewater Bank (incorporated by reference to Exhibit 10.3 to Star Equity Holdings, Inc.’s Current Report on Form 8-K dated May 20, 2024 (File No. 001-35947).
10.11						Guaranty, dated May 17, 2024, by Star Equity Holdings, Inc in favor of Bridgewater Bank (incorporated by reference to Exhibit 10.4 to Star Equity Holdings, Inc.’s Current Report on Form 8-K dated May 20, 2024 (File No. 001-35947).
10.12						Form of Real Estate Sales Agreement (incorporated by reference to Exhibit 10.5 to Star Equity Holdings, Inc.’s Current Report on Form 8-K dated May 20, 2024 (File No. 001-35947).
10.13						Loan and Security Agreement , dated as of April 24, 2024 , by and between KBS Builders, Inc. and Keybank National Association (incorporated by reference to Exhibit 10.1 to Star Equity Holdings, Inc.’s Current Report on Form 8-K dated April 26 , 2024 (File No. 001-35947).
10.14						Guaranty, dated April 24, 2024, by Star Equity Holdings, Inc. and Keybank National Association (incorporated by reference to Exhibit 10.2 to Star Equity Holdings, Inc.’s Current Report on Form 8-K dated April 26, 2024 (File No. 001-35947).
31.1*						Certification of the Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated pursuant to the Securities Exchange Act of 1934, as amended.
31.2*						Certification of the Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated pursuant to the Securities Exchange Act of 1934, as amended.
32.1**						Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**						Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*						XBRL Instance Document
101.SCH*						Inline XBRL Taxonomy Extension Schema
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase
101.LAB*						Inline XBRL Taxonomy Extension Labels Linkbase
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase
104.1						Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

_________________

* Filed herewith.

** This certification is being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of Star Equity Holdings, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

STAR EQUITY HOLDINGS, INC.

Date:

August 13, 2024

By:

/s/ RICHARD K. COLEMAN, JR.

Richard K. Coleman, Jr.

Chief Executive Officer

(Principal Executive Officer)

/s/ DAVID J. NOBLE

David J. Noble

Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-10.5 2 netleaseagreementsp.htm EX-10.5 netleaseagreementsp

IN TESTIMONY WHEREOF, the parties have hereunto set their hands effective as of the day and year first above written. (P2260067.I I 93915476.14 "Landlord" Park Street Maine Industrial, LLC, LLC, a Delaware limited liability company By: /s/ Dax T.S. Mitchell _ Name: Dax T.S. Mitchell Title: President Bradford Huntley Myers and Victoria Ann Myers, Trustees of the Myers I 992 Trust By: /s/ Bradford Huntley Myers _ _Name: Bradford Huntley Myers Title: Trustee By: /s/ Victoria Ann Myers _ Name: Victoria Ann Myers Title: Trustee "Tenant" KBS Builders, Inc., a Delaware corporation By: /s/ Thatcher Butcher _ Name: Thatcher Butcher Title: President S-1

EX-10.6 3 netleasebiglakeindustria.htm EX-10.6 netleasebiglakeindustria

{P2210636.1} 1 NET LEASE AGREEMENT THIS NET LEASE AGREEMENT (this “Lease”) made as of this ____ day of July, 2024 (the “Commencement Date”), by and between Big Lake Industrial 2024, LLC, a Minnesota limited liability company (the “Landlord”), having its principal office at 2655 Cheshire Lane North, Plymouth, MN and Glenbrook Building Supply, Inc., a Delaware corporation and Edge Builder Inc., a Delaware corporation (collectively, the “Tenant”), with its principal office addresses at 791 Rose Drive, Big Lake, MN 55309 and 5215 Gershwin Ave. N., Oakdale, MN 55128 respectively . WHEREAS, Landlord is taking title to the Premises as of the date of this Lease in accordance with the terms and conditions of that certain Commercial Purchase Agreement with Leaseback, made as of May 6, 2024 (the “CPA”) entered into by Landlord or its affiliate, as the buyer of the Premises, and Tenant’s affiliate, 791 Rose Drive, LLC, a Delaware limited liability company as the seller of the Premises, and, immediately after taking title, Landlord is leasing to Tenant the Premises in accordance with the terms of this Lease. NOW, THEREFORE, in consideration of the foregoing statements, and the within covenants, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, for themselves, legal representatives, successors, and permitted assigns, hereby covenant and agree as follows: In addition to the capitalized words and phrases defined elsewhere in this Lease when first used, the following capitalized terms shall have the meanings ascribed to them below: A. “Business Day” means any day other than a Saturday, Sunday or legal holiday in the State of Minnesota. B. “Default Rate” means an annual rate of interest equal to the greater of (i) five percent (5%) per annum over the Wall Street Journal (or any successor publication) prime rate, or (ii) twelve percent (12%) per annum; provided, however, that in no event shall the Default Rate exceed the highest lawful rate of interest that may be charged on past due amounts due under applicable law. C. “Environmental Laws” shall mean all Laws: (a) relating to the environment, human health, or natural resources; (b) regulating, controlling, or imposing liability or standards of conduct concerning any Hazardous Materials; (c) relating to Remedial Action; and (d) requiring notification or disclosure of releases of Hazardous Materials or of the existence of any environmental conditions on or at the Premises, as any of the foregoing may be amended, supplemented, or supplanted from time to time. D. “Fee Mortgage” shall mean any financing obtained by Landlord, as evidenced by any mortgage, deed of trust, assignment of leases and rents, or other instruments, and secured by the fee interest of Landlord in the Property, including any extensions, modifications, amendments, replacements, supplements, renewals, refinancings, and consolidations thereof. 9th 2 E. “Fee Mortgagee” shall mean the holder of a Fee Mortgage. F. “Fixed Annual Rent” means Two Hundred Thirty-four Thousand Six Hundred Fifty-four Dollars ($234,654.00), as increased as provided in Section 3 of the Lease. G. “FMRV” means, for any period the then fair market rental value of the Premises for such period, for their highest and best use (as if the Premises(s) are unencumbered and free and clear of (i) the existence of this Lease, (ii) any default by Tenant hereunder. H. “GAAP” means generally accepted accounting principles, applied on a “consistent basis”, as set forth in Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board and/or their respective successors and which are applicable in the circumstances as of the date in question. I. “Governmental Authority” means the United States of America, the State of Minnesota, the County of Sherburne, the Town of Big Lake, any political subdivision of any of the foregoing, and any other governmental or regulatory authority, agency, board, department, or any other public or quasi-public authority having jurisdiction over the Premises or the matter at issue. J. “Hazardous Materials” means any and all substances, materials, chemicals, or wastes that now or hereafter are classified or considered to be hazardous or toxic under any Environmental Law, or that are or become regulated by any Governmental Authority because of toxicity, infectiousness, radioactivity, explosiveness, ignitability, corrosiveness, or reactivity under any Environmental Law applicable to the Premises, and shall also include: (a) gasoline, diesel fuel, and any other petroleum hydrocarbons; (b) asbestos and asbestos containing materials, in any form, whether friable or non-friable; (c) polychlorinated biphenyls; (d) radon gas; and (e) flammable liquids and explosives. K. “Improvements” means all buildings and other improvements now located, or hereafter constructed, on the Premises, together with all fixtures, excluding Trade Fixtures, currently or in the future installed or erected in or upon the Premises. L. “Law” or “Laws” means any present or future applicable law, statute, ordinance, regulation (including zoning regulations), code, building code, judgment, injunction, arbitration award, order, rule, directive, common law, codes and ordinances of any Governmental Authorities, easement, covenant, restriction, or other agreement of record affecting the Premises as of the Commencement Date or subsequent thereto. 3 M. “Leasehold Mortgage” means any loan financing obtained by Tenant, as evidenced by any mortgage, deed of trust, or other instrument and secured by Tenant’s interest in this Lease and the Leasehold estate created hereby, including any extensions, modifications, amendments, replacements, supplements, renewals, and refinancing thereof. N. “Leasehold Mortgagee” means the holder of a Leasehold Mortgage. O. “Permitted Use” means the design and manufacture of construction materials, panel construction, general construction, modular building, transportation, any work permitted to be performed in an office environment and related uses concerning all of the aforementioned. P. “Person” means any individual, corporation, limited liability company, business trust, association, company, partnership, joint venture, governmental authority, or other entity. Q. “Premises” means the building(s), improvements and real property located at the addresses described on Schedule “A”, which real property is more fully described in the legal description included on Schedule “A”. R. “Release” means the release or threatened release of any Hazardous Materials into or upon or under or above any land, water, or air, or otherwise into the environment, including by means of burial, disposal, discharge, emission, spillage, leakage, seepage, leaching, or dumping. S. “Remedial Action” means the investigation, response, clean up, remediation, prevention, mitigation, or removal of any Hazardous Materials necessary to comply with any Environmental Laws. T. “Renewal Option” has the meaning set forth in Section 6 of this Lease. U. “State” means the State of Minnesota. V. “Tangible Net Worth” means, with respect to any Person, as of any date of determination and as supported by reasonable documentation, the difference between (a) the sum of the total assets less the total liabilities of such Person, minus (b) the intangible assets of such Person, all as determined in accordance with GAAP or IFRS (as defined elsewhere in this Lease); provided, however, that in no event shall Tangible Net Worth be greater than the calculation of tangible net worth provided by such Person to its principal lending group pursuant to its credit agreement with such lenders. 4 W. “Trade Fixtures” means, any fixtures listed in Schedule E, or any replacement or upgrade to an item found therein, and any additions to Schedule E as may be amended from time to time via mutual agreement between Tenant and Landlord. 1. DEMISE. Landlord hereby demises and lets to Tenant and Tenant hereby leases from Landlord, on a triple-net basis, the Premises, pursuant to the terms and conditions set forth herein. This Lease is intended to be a triple-net lease of the Premises. 2. TERM. The initial term (the “Initial Term”) of this Lease shall commence on the Commencement Date and shall end on the last day of the one hundred eightieth full calendar month thereafter (the “Expiration Date”) (and, for avoidance of doubt, if the Commencement Date is not the first day of a calendar month, the partial calendar month during which the Commencement Date occurs shall be included in the Initial Term in addition to said 180 full calendar month period). The Initial Term may be extended pursuant to Section 6 of this Lease, and the term “Expiration Date” shall refer to the last day of the Term, as it may be so extended. The “Term” means, collectively, the Initial Term and the Renewal Term (as defined in Section 6 of this Lease) that Tenant properly exercises in accordance with Section 6. 3. FIXED ANNUAL RENT. (a) Tenant shall pay the Fixed Annual Rent for the Premises in equal monthly installments during the Term. All payments of Fixed Annual Rent and additional rent under this Lease shall be made by Tenant to Landlord or as may otherwise from time to time be directed by notice from Landlord upon no less than ten (10) Business Days prior written notice from Landlord to Tenant. Monthly installments of Fixed Annual Rent shall be due and payable, in advance, on the first Business Day of each month during the Term without notice or demand and without any abatement, setoff or deduction whatsoever. Tenant shall initiate and pay all amounts payable under this Lease by electronic funds transfer of immediately available funds to the following account for Landlord or such other account as Landlord may identify in written notice by Landlord to Tenant for deposit of Rent: Big Lake Industrial 2024, LLC 2655 Cheshire Lane North Plymouth MN 55447 Bank: Royal Credit Union 200 Riverfront Terrace Eau Claire, WI 54703 Routing No : 291880411 Checking Account : 4575962289 (b) Subject to (c) below, on the first (1st) anniversary of the Commencement Date and on each anniversary of the Commencement Date, and on the commencement of the Renewal Term, if any, and on each anniversary of the Commencement Date during the Renewal Term, the Fixed

5 Annual Rent as then in effect shall be increased by an amount equal to the product of (i) two percent (2%) multiplied by (ii) the Fixed Annual Rent then in effect, before taking into account any rent abatements or rent credits then in effect. Notwithstanding the foregoing, if the Commencement Date occurs on a day other than the first day of a calendar month, then the first rent increase pursuant to this paragraph shall occur on the first (1st) anniversary of the first day of the calendar month following the partial month during which the Commencement Date occurs, and each subsequent rent increase pursuant to this paragraph shall occur on the anniversary of such initial rent increase date. (c) Notwithstanding any provision in this Section 3 to the contrary, if this Lease commences or terminates on a day which is not the first or the last day of a calendar month, as the case may be, then Fixed Annual Rent for the calendar month in which this Lease commences or terminates shall be prorated. (d) So long as Tenant pays the Fixed Annual Rent and other rent provided in this Lease, and performs all of the terms, covenants and conditions on its part contained herein, Tenant shall have, subject to the terms and conditions set forth herein, the right to the peaceful and quiet enjoyment and occupancy of the Premises. 4. ADDITIONAL RENT. (a) In addition to the Fixed Annual Rent, Tenant shall also pay and discharge, as additional rent, all other amounts, liabilities and obligations of whatever nature relating to the Premises, before any fine, penalty, interest or cost may be added thereto for the non-payment thereof, including all taxes, assessments, licenses and permit fees, charges for public utilities, and all governmental charges, of any kind and nature whatsoever which during the Term may be imposed upon or become due and payable in respect of, or become a lien on, the Premises or any part thereof. Notwithstanding the foregoing, Tenant shall not be responsible for payment of the fees, costs and expenses related to any indebtedness of Landlord or income taxes assessed against Landlord. Additional rent shall include, without limitation, all Impositions (as hereafter defined) affecting the Premises, and all amounts required to be paid under any covenants, requirements, easements or restrictions of record pertaining to the Premises existing as of the Commencement Date, and all interest and penalties that may accrue thereon (unless accrued due to Landlord’s act or omission), and all damages, costs and reasonable out of pocket expenses which Landlord may incur by reason of any default of Tenant or failure on Tenant’s part to comply with the terms of this Lease, all of which Tenant hereby agrees to pay upon demand or as is otherwise provided herein. Upon any failure on the part of Tenant to pay any of the additional rent (subject to Tenant’s notice and cure rights set forth herein), Landlord shall have all legal, equitable and contractual rights, powers and remedies provided either in this Lease or by statute or otherwise in the case of non-payment of the Fixed Annual Rent, except as otherwise provided in this Lease. Fixed Annual Rent and additional rent sometimes are referred to in this Lease, collectively, as “Rent”. (b) Subject to Tenant’s right to contest or dispute sums constituting additional rent as provided in this Lease, Tenant shall pay and discharge any additional rent referred to in Section 4(a) when the same shall become due; provided that amounts that are billed to Landlord or any third 6 party, but not to Tenant, shall be paid within ten (10) Business Days after notice is given of Landlord’s demand for payment thereof. If Tenant fails to pay any such amount within fifteen (15) Business Days of the date due and Tenant is not contesting or disputing the same as provided in this Lease, Landlord may, at its option, pay such amount and Tenant shall reimburse Landlord for such amount as additional rent hereunder within ten (10) Business Days after notice is given of Landlord’s payment of and demand therefor. 5. NET LEASE; TRUE LEASE. (a) This Lease is intended to be and shall be deemed and construed to be an absolutely “net lease” and Tenant shall pay to Landlord, absolutely net throughout the Term, the Fixed Annual Rent, free of any charges, assessments, impositions or deductions of any kind and without abatement, deduction or set-off whatsoever. Under no circumstances or conditions, whether now existing or hereafter arising, or whether beyond the present contemplation of the parties, shall Landlord be required to make any payment of any kind or be under any other obligation whatsoever with respect to the Premises. Tenant shall pay all costs, expenses and charges of every kind and nature relating to the Premises during the Term (except for expenses related to any indebtedness of Landlord and income taxes of Landlord excluded from additional rent in Section 4(a) above), whether such amounts are ordinary or extraordinary and irrespective as to whether such amounts could have been reasonably anticipated by the parties. Except as otherwise provided in this Lease, the obligations of Tenant hereunder shall not be affected by reason of any damage to or destruction of the Premises or any part thereof, any taking of the Premises or any part thereof by condemnation or otherwise, any restriction or prevention of Tenant’s use of the Premises or for any reason, any interruption or failure of utilities servicing the Premises, any matter affecting title to the Premises, any eviction by paramount title or otherwise, or any other cause whether similar or dissimilar to the foregoing and whether or not Tenant shall have notice or knowledge thereof and whether or not such cause shall now be foreseeable. (b) Landlord and Tenant intend this Lease to be a true lease, and the business relationship created by this Lease and any related documents is solely that of a long-term commercial lease between Landlord and Tenant and has been entered into by both parties in reliance upon the economic and legal bargains contained herein. 6. RENEWAL OPTION. (a) Provided that this Lease is not previously cancelled or terminated as provided in this Lease (and the Term shall not have otherwise expired) and that no Event of Default exists on the date of exercise of the Renewal Option (defined below) and on the date that the Renewal Term (defined below) commences, Tenant shall have one (1) option to extend the Term of this Lease for a renewal term of ten (10) years, “Renewal Term”). Tenant may exercise its option for the Renewal Term (each, a “Renewal Option”) by providing irrevocable written notice (each, a “Renewal Notice”) to Landlord of Tenant’s election to exercise such Renewal Option in accordance with the provisions of this Section 6. The Renewal Notice must be given, if at all, not later than twelve (12) months prior to the Expiration Date of the Initial Term (“Renewal Option Deadline”), provided however, that if Tenant has failed to give a Renewal Notice by the applicable Renewal Option Deadline, Tenant 7 automatically shall have a grace period of sixty (60) days following such Renewal Option Deadline within which to give such Renewal Notice. If Tenant fails to exercise its Renewal Option for the Renewal Term within the time provided in this Section 6, then Tenant’s Renewal Option shall be deemed to have been waived. (b) The Fixed Annual Rent to be paid by Tenant during the Renewal Terms shall be as described in Section 3 of this Lease, subject to escalations described in Section 3 of this Lease. (c) Time shall be of the essence as to the giving of notices under this Section 6. (d) If Tenant elects not to renew this Lease by providing written notice to Landlord or by failing to provide notice to Landlord of Tenant’s election to exercise its option to renew this Lease pursuant to this Section 6, then Landlord will have the right during the remainder of the Term then in effect and, in any event, Landlord will have the right during the last eighteen (18) months of the final Renewal Term, to (i) advertise the availability of the Premises for sale or re-letting and to erect upon the Premises signs indicating such availability provided such signs do not interfere with Tenant’s operations at the Premises, and (ii) upon no less than two (2) Business Days’ prior written notice, to show the Premises to prospective purchasers or tenants or their agents during normal business hours. 7. IMPOSITIONS. (a) Subject to subsection (b) below, Tenant will pay and discharge when due: all taxes (including real and personal property, franchise, sales, use, gross receipts and rent or lease taxes); all assessments and levies; all fines, penalties and other costs in connection with noncompliance with any applicable law of the Premises or Tenant; all permit, inspection and license fees; all rents and charges for water, sewer, utility and communication services; all other public charges, imposed upon or assessed against (i) Tenant as a result of or arising in respect of the occupancy, leasing, use or possession of the Premises or any activity conducted on the Premises during the Term of this Lease, (ii) Tenant’s interest in the Premises, (iii) the Premises, (iv) Landlord as a result of or arising in respect of the ownership, occupancy, leasing, use, or possession of the Premises, any activity conducted on the Premises, or the Rent payable hereunder, or (v) any lender to Tenant by reason of any note, mortgage, assignment or other document evidencing or securing a loan with respect to Tenant’s interest in the Premises (collectively, “Impositions”); provided that nothing herein shall obligate Tenant to pay (A) income, franchise, excess profits or other taxes of Landlord (or any lender) or other charges or assessments imposed upon Landlord (or any lender to Landlord) which are determined on the basis of Landlord’s (or such lender’s) revenues, net income, net worth or organizational status (unless such taxes are in lieu of or a substitute for any other tax, assessment or other charge upon or with respect to the Premises which, if it were in effect, would be payable by Tenant under the provisions hereof or by the terms of such tax, assessment or other charge), or (B) any interest or other mortgage expense of Landlord. Upon expiration of the Term (or any earlier termination of this Lease), Tenant shall pay Landlord for unpaid taxes which are due or accrued through such date of expiration or earlier termination of the Term, and if the tax bill is not yet available for the period during which such expiration or early termination occurs, Landlord shall make a reasonable estimate of such unpaid 8 taxes based on the prior year’s tax bills, and shall perform a reconciliation promptly after the actual information becomes available. Landlord shall have the right to require Tenant to pay, together with scheduled installments of Fixed Annual Rent, the amount of the gross receipts or rent tax, if any, payable with respect to the amount of such installment of Fixed Annual Rent. If any Imposition may be paid in installments without interest or penalty, Tenant will have the option to pay such Imposition in installments, provided such option to pay any Imposition in installments shall not hinder or prevent Landlord from exercising any of its rights set forth in this Lease. Tenant shall prepare and file all tax reports required by governmental authorities which relate to the Impositions, and Landlord shall reasonably cooperate with Tenant regarding such preparation at Tenant’s sole cost and expense. Tenant shall deliver to Landlord (i) copies of all settlements and notices pertaining to the Impositions which may be issued by any governmental authority (other than routine bills for real estate taxes or other recurring Impositions) within ten (10) Business Days after Tenant’s receipt thereof, (ii) receipts for or other evidence of (if available from the taxing authority) payment of all taxes required to be paid by Tenant hereunder within thirty (30) days after the due date thereof, and (iii) receipts for payment of all other Impositions within ten (10) Business Days after Landlord’s request therefor. (b) Tenant shall prepare and timely file all required personal property declaration forms for Tenant’s Personal Property at the Premises, and shall pay on or before the due date thereof, all personal property taxes directly to the governing authorities. Within thirty (30) days after Landlord’s request therefor, Tenant shall deliver to Landlord receipts (if available from the taxing authority) or other evidence of payment of all personal property taxes paid by Tenant. (c) Tenant authorizes Landlord to obtain the bills for Impositions directly from the appropriate authority or entity. (d) All such payments when due shall be deemed to be additional rent due hereunder. (e) Tenant, at Tenant’s sole cost and expense, shall have the right, at any time, to (x) seek a reduction in the assessed valuation of the Premises, (y) contest any Impositions or other amounts that are to be paid by Tenant as additional rent, or (z) contest any laws or regulations applicable to the Premises; provided, however, that in cases of (x) or (y) in this subsection (e), Tenant shall (i) give Landlord written notice of any such intention to contest at least fifteen (15) days before any delinquency could occur; (ii) indemnify and hold Landlord harmless from all liability on account of such contest; (iii) take such action as is necessary to remove the effect of any lien which attached to the Premises due to such contest, or in lieu thereof, at Landlord’s reasonable election, furnish Landlord with adequate security for the amount of the taxes due plus interest and penalties; and (iv) in the event of a final determination adverse to Tenant prior to enforcement, foreclosure or sale, pay the amount involved together with all penalties, fines, interest costs, and expenses which may have accrued. Tenant may use any means allowed by statute to protest Impositions or other sums payable by Tenant as additional rent as long as Tenant remains current (within the applicable notice and cure periods) as to all other terms and conditions of this Lease. If Tenant seeks a reduction or contests any Impositions or other additional rent, the failure on Tenant’s part to pay the same shall not constitute a default as long as Tenant complies with the provisions of this Section.

9 (f) Landlord shall not be required to join in any proceeding or contest brought by Tenant unless the provisions of the law require that the proceeding or contest be brought by or in the name of Landlord or the owner of the Premises (i.e., Landlord is a necessary party to the proceeding). In that case, Landlord shall join in the proceeding or contest or permit it to be brought in Landlord’s name as long as Landlord is, in its reasonable judgment, adequately indemnified against any risk, liability, or cost arising out of such joinder. 8. UTILITIES. (a) Tenant shall pay directly to the appropriate service provider, all charges for any utilities or services used and/or consumed at the Premises, including, without limitation, gas, electricity, telephone, cable and water during the Term. (b) Landlord shall not be required to furnish light, electricity, heat or any other utilities or services to the Premises. Landlord shall not be liable to Tenant or any other Person for any failure of the water supply, electricity, gas or any other utility or service in and about the Premises or for injury or damage to persons or property caused by any such failure or caused by the elements or by any other person in and about the Premises (other than Landlord, its employees, or agents). 9. USE. (a) Tenant shall use and occupy the Premises only for the Permitted Use, in compliance with all zoning regulations and all applicable laws, rules, and regulations and as set forth in this Lease. Tenant must obtain and maintain in full force and effect, at its own expense, all government licenses and permits required for the lawful use, occupancy and operation of the Premises, and each portion thereof, including, without limitation, the conduct of Tenant’s business on the Premises, and Tenant will, at all times, comply with the terms of such licenses and permits. Upon receipt of written request from Landlord, Tenant shall provide Landlord with copies of all government licenses and permits in Tenant’s possession in effect for the Premises. (b) Tenant shall not use or occupy or permit the Premises to be used or occupied, nor do or permit anything to be done in or on the Premises, in a manner which would (i) violate any Governmental Regulations (as defined below), (ii) make void or voidable or cause any insurer to cancel any insurance required by this Lease, or (iii) cause structural injury to any of the improvements. 10. “AS IS”; COMPLIANCE WITH LAWS. (a) Tenant acknowledges that the Premises have not been previously owned by Landlord. Landlord does not make any representation or warranty regarding the condition or occupancy thereof or the fitness of the Premises for the Permitted Use. Tenant acknowledges that it has inspected the Premises and accepts the same in their present condition, and subject to all matters of record and all occupancies, licensees or tenancies as of the date hereof (and together with any subsequent replacements therefor), “AS IS”, with no representations or warranties whatsoever and on the terms and conditions set forth in this Lease. 10 (b) Tenant shall comply promptly, at Tenant’s expense, with all present and future laws, codes and ordinances and other notices, requirements, orders, rules and regulations (whatever the nature thereof) of all federal, state and local governmental authorities and recommendations of the board of fire underwriters or any insurance organizations, associations or companies in respect to the Premises (collectively, “Governmental Regulations”). Furthermore, Tenant agrees that it will defend, indemnify and hold harmless Landlord for all actual costs that Landlord incurs by reason of Tenant’s failure to comply with Governmental Regulations at the Premises. The provisions hereof shall survive the expiration or termination of this Lease. (c) Tenant acknowledges that the Premises are demised and let subject to (i) any mortgage affecting Landlord’s interest in the Premises in effect from time to time (except that this Lease shall not be subordinate or subject to any such mortgage unless the holder of any such mortgage shall have entered into a subordination and non-disturbance agreement with Tenant upon usual and customary terms in transactions of this type, including that all rights of Tenant under this Lease, including rights in the event of fire or other casualty or in the event of condemnation, shall be recognized by such holder, its successors, and assigns, and shall not be disturbed unless Tenant is in default under this Lease beyond the expiration of all applicable notice and cure periods), (ii) the state of title of the Premises as of the Commencement Date, (iii) any state of facts which an accurate survey or physical inspection of the Premises might show, and (iv) all Governmental Regulations, including any existing violations of any thereof. (d) Without limiting Tenant’s obligations under Section 9 above, Tenant, at its sole cost and expense, will at all times promptly and faithfully abide by, discharge and perform all of the covenants and restrictions contained in any easement agreement, declaration, deed covenant or restriction, permit or license related directly to the Premises in effect as of the Commencement Date, on the part of Landlord to be kept and performed thereunder. Tenant will not enter into any new easement agreement that would survive the termination of this Lease without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed so long as such proposed agreement shall not materially impair the then-current use of the Premises. (e) If any improvement, now or hereafter constructed, shall (i) encroach upon any setback or boundary line or street or right-of-way adjoining the Premises, (ii) exist in violation of applicable zoning restrictions, including, without limitation, height or set-back restrictions, or the provisions of any restrictive covenant affecting the Premises, or (iii) hinder or obstruct any easement agreement to which the Premises are subject, Tenant shall, promptly after receiving notice or otherwise acquiring knowledge of any such matters, either (A) obtain from all necessary parties waivers or settlements of all claims resulting from such encroachment, violation, hindrance, or obstruction, or (B) take such action as shall be necessary to remove all such encroachments, violations, hindrances or obstructions, including, if necessary, making alterations; provided, however, that if any of the foregoing matters exist with respect to any of the improvements constructed on the Premises as of the Commencement Date, then Tenant’s obligation to promptly perform the actions described in clauses “(A)” or “(B)” of this paragraph shall arise only in the event that a claim is being asserted as a result of the aforementioned matters. 11 11. ENVIRONMENTAL. (a) Tenant warrants and agrees that, during the entire Term of this Lease and at its expense, Tenant shall comply with all Environmental Laws. Such compliance shall include Tenant's obligation to take Remedial Action when required by such Environmental Laws and to pay all fines, penalties, interest, or other costs imposed by any Governmental Authorities in connection with any violation or requirement of any Environmental Law. (b) Tenant shall notify Landlord promptly in writing if: (i) Tenant becomes aware of the presence or Release of any Hazardous Material at, on, under, over, emanating from, or migrating to the Premises in any quantity or manner which could reasonably be expected to violate in any material respect any Environmental Law or give rise to any material Liability or the obligation to take Remedial Action; or (ii) Tenant receives any written notice, claim, demand, request for information, or other communication from a Governmental Authority regarding the presence or Release of any Hazardous Material at, on, under, over, emanating from, or migrating to the Premises. (c) Tenant shall take and complete any Remedial Action with respect to the Premises in full compliance with all Laws and shall, when such Remedial Action is completed, submit to Landlord written confirmation from the applicable Governmental Authority that no further Remedial Action is required. (d) Tenant shall provide Landlord with copies of all tests, studies, notices, claims, demands, requests for information, or other communications relating to the presence or Release of any Hazardous Materials at, on, under, over, emanating from, or migrating to the Premises. 12. INSURANCE. (a) Insurance. It is the intent of the parties that all risk of loss for the Premises be shifted to insurance to the maximum extent practicable. Accordingly, unless Landlord otherwise agrees in its sole discretion, Tenant shall maintain, or cause to be maintained, insurance covering the risks enumerated below. The premiums for such insurance shall be paid by Tenant. Such insurance shall be written on an occurrence basis unless Landlord otherwise consents in writing, but for errors and omissions insurance issued on a claims-made basis. The policy(ies) shall provide that: (a) such insurance shall be primary coverage without reduction or right of offset or contribution on account of any insurance provided by Landlord to itself or its officers, officials, or employees; (b) such insurance shall not be altered or cancelled without ten (10) days’ written notice to Landlord; (c) such insurance shall name Landlord as an additional insured; and (d) any Fee Mortgagee and Leasehold Mortgagee shall be named as: (i) a loss payee or mortgagee on Tenant's property damage insurance policy under a standard mortgagee clause; and (ii) an additional insured on Tenant's liability insurance policies. The insurance policies purchased by Tenant must be issued by a company authorized to conduct business in the State. (b) Workers' Compensation and Employer's Liability. At all times prior to the expiration or earlier termination of this Lease, Tenant shall maintain, and cause its contractors to 12 maintain, Workers' Compensation Insurance as required by the Laws of the State. Tenant shall require all subcontractors performing work under this Lease to obtain an insurance certificate showing proof of Workers' Compensation and Employer's Liability Insurance. (c) Property/Business Interruption. Tenant shall, at its sole cost and expense throughout the entire Term of this Lease: (i) Keep the Improvements insured against loss or damage by fire, windstorm, flood, earthquake, and such other, further and additional risks as now are or hereafter may be embraced by the ISO special form and Builder's Risk extended coverage form or endorsements, with a deductible of no more than Twenty-Five Thousand and 00/100 Dollars ($25,000.00) per occurrence, in each case in amounts equal to the full replacement cost of the Improvements from time to time (less slab, foundation, supports, and other customarily excluded improvements); and (ii) Maintain business interruption insurance covering loss of revenues or other income by Tenant due to total or partial suspension of, or interruption in, the operation of the Premises caused by damage or destruction of the Premises in an amount sufficient to meet Rent payments and other recurring payments for six (6) months, subject to the reasonable discretion of Landlord. (d) General Commercial Liability. At all times during the Term of this Lease, Tenant shall maintain a primary commercial general liability insurance ("CGL") policy covering all claims for bodily injury (including death) and property damage, including loss of use thereof, in an amount not less than Two Million and 00/100 Dollars ($2,000,000.00) per occurrence for bodily or personal injury (including death) and [Three Million and 00/100 Dollars ($3,000,000.00)] in respect of property damage, or in such higher amounts as Landlord may reasonably require from time to time, written on an occurrence Basis. In addition, Tenant, at Tenant’s expense, shall obtain and keep in full force during the Term of this Lease an umbrella or excess liability policy in an amount of not less than Five Million and 00/100 Dollars ($5,000,000.00). The CGL policy shall include contractual liability coverage, which shall be endorsed to state that indemnity obligations specified in this Lease are insured by the carrier. (e) Delivery of Insurance Certificates. Upon the commencement of this Lease and at each policy renewal date, Tenant shall furnish to Landlord, any Fee Mortgagee, and any Leasehold Mortgagee, at the addresses set forth in Section 28 of this Lease, insurance certificates or renewal certificates or, if requested by Landlord, Fee Mortgagee, or Leasehold Mortgagee, certified copies of policies, evidencing all insurance required to be carried by Tenant in accordance with the Lease. Such certificates or policies shall name Landlord as an insured and shall name any Fee Mortgagee and Leasehold Mortgagee as mortgagee and loss payee, in accordance with the requirements contained in this Section 12. The insurance certificate(s) or polices, as applicable, must document that the liability insurance coverage purchased by the Tenant includes contractual liability coverage to insure the indemnity agreement as stated.

13 13. MAINTENANCE; CASUALTY; RESTORATION. (a) Tenant, at its expense, shall make all repairs (including structural) and provide all maintenance and replacements required to keep the Premises and all buildings, personal property, and improvements located at the Premises in a good and safe operating condition and in compliance with all laws and regulations, including maintenance, repairs, painting and replacements made necessary by reason of ordinary wear and tear, damage by the elements, and obsolescence. Tenant shall (i) keep the sidewalks and curbs located on or adjacent to the Premises, as well as all driveways and parking areas on the Premises, in good and safe condition and free from snow, ice and obstructions, and (ii) keep the yard area free of trash, junk and debris. Repairs and replacements shall be done in a good and workmanlike manner with materials of a quality and class equal to or better than the materials existing at the time that the damage or injury occurred. Tenant shall commit no act of waste to the Premises. (b) In the event of damage to the Premises from fire or other casualty, Tenant shall give Landlord prompt written notice thereof and shall commence and complete, at Tenant’s cost and expense (subject to all insurance proceeds deposited with Landlord or Landlord’s lender being made available to Tenant for restoration as hereinafter provided) the restoration of such damage so as to render the Premises in the same or better condition as they were immediately prior to such fire or other casualty. Tenant is not entitled to any rent abatement during or resulting from any partial or total destruction of the Premises from any casualty, and except as provided below, Tenant shall not be entitled to terminate this Lease as a result thereof. (c) Following and during the continuation of any Event of Default, the provisions of this Section 13(c) shall apply: Landlord in its discretion and upon notice to Tenant may adjust, collect and compromise all claims under any of the insurance policies obtained by Tenant with respect to the Premises (except commercial general liability and workers compensation insurance claims payable to a person other than Tenant, Landlord or Landlord’s lender) and execute and deliver on behalf of Tenant all necessary proofs of loss, receipts, vouchers and releases required by the insurers. Tenant agrees to assign all such proofs of loss, receipts, vouchers and releases as Landlord may direct. If Landlord so requests, Tenant shall adjust, collect and compromise any and all such claims, and Landlord and Landlord’s lender shall have the right to join with Tenant therein. Any adjustment, settlement or compromise of any such claim shall be subject to the prior written approval of Landlord, and Landlord shall have the right to prosecute or contest, or to require Tenant to prosecute or contest, any such claim, adjustment, settlement or compromise. Following and during the continuation of an Event of Default, each insurer is hereby authorized and directed to make payment under said policies, including return of unearned premiums, directly to Landlord, and Tenant hereby appoints Landlord as Tenant’s attorney-in-fact to endorse any draft therefor. The rights of Landlord under this Section 13(c) shall be extended to Landlord’s lender if and to the extent that any mortgage so provides. (d) If Tenant shall fail to comply with its obligations under this Lease beyond the expiration of the applicable notice and cure period(s), then Landlord or its agent may enter upon the Premises in order to take such remedial action as is necessary and may charge the cost of repair to Tenant as additional rent due with Tenant’s next monthly installment of Fixed Annual Rent. Tenant’s 14 failure to pay such charges within ten (10) Business Days of Landlord’s demand shall be treated as a failure to pay Rent when due and subject to the same remedies. (e) Tenant shall provide Landlord with an engineering or property condition report (at Tenant’s sole cost and expense and in reasonable form and substance), not more than ten (10) months prior to the Expiration Date of the then-current Term (and, if the Term is extended through the Renewal Term, not more than twenty-four (24) months nor less than eighteen (18) months prior to the end of the Renewal Term (a “Property Condition Report”). If (i) such Property Condition Report lists replacements of any roofs, other structural elements of any improvements on the Premises, or the HVAC systems as being required on the Premises during the remainder of the Initial Term or applicable Renewal Term, or (ii) an alteration or repair to the Premises is required by any Governmental Regulation during the last eighteen (18) months of the Initial Term or applicable Renewal Term, then unless Landlord otherwise agrees to accept an “Apportionment” from Tenant for Landlord to complete the alterations or repairs after expiration of the then current Term in lieu of Tenant’s replacement during the then remaining Term, Tenant will bear the full cost of such alteration or repair, including any reasonable costs incurred by Landlord to ensure that such alteration or repair is completed, and such alteration or repair shall be made in accordance with Section 19 of this Lease. For purposes of this subsection (e) if Landlord determines to accept an apportionment of funds in lieu of a required repair or replacement otherwise required of Tenant hereunder then the calculation of the amount of the apportionment “Apportionment” to be paid by Tenant to Landlord shall be equal to the cost of such alteration or repair multiplied by a fraction, the numerator of which shall be the remainder of the Term, and the denominator of which shall be the anticipated useful life of such alteration or repair. (f) In the case of any restoration after damage or destruction from fire or other casualty costing in excess of One Hundred Thousand Dollars ($100,000.00) (which amount shall increase by two percent (2.0%) per calendar year during the Term), Landlord (or Landlord’s lender if required by any mortgage) shall hold the net insurance proceeds in a fund (the “Restoration Fund”), to be used for the restoration of the Premises and shall disburse amounts from the Restoration Fund only in accordance with the following conditions: (i) Tenant shall commence the restoration as soon as reasonably practical and diligently pursue completion of such restoration to completion; (ii) prior to commencement of restoration, (A) the architects’ or engineers’ contracts, contractors, plans and specifications, and detailed budget for the restoration shall have been approved by Landlord, which approval shall not be unreasonably withheld, conditioned, or delayed, and (B) Landlord and Landlord’s lender shall be provided by Tenant with mechanics’ lien insurance, “owner contractor’s protective liability insurance” (if available), builder’s risk completed value insurance; (iii) at the time of any disbursement, (A) no Event of Default shall exist (B) all materials installed and work and labor performed (except to the extent being paid out of the requested disbursement) in connection with the restoration shall have been paid in full (subject to 15 any applicable retainages pursuant to any contracts relating to such work) and (C) no mechanics’ or materialmen’s liens or stop orders or notices of pendency shall have been filed or threatened against the Premises and remain undischarged or the same shall be fully bonded or indemnified against to the satisfaction of Landlord; (iv) disbursements shall be made no more frequently than once a month and be in an amount not exceeding the cost of the work completed since the last disbursement, upon receipt of (A) evidence satisfactory to Landlord, including architects’ or engineer’s certificates, of the stage of completion, the estimated total cost of completion and performance of the work to date in a good and workmanlike manner in accordance with the contracts, plans and specifications, (B) waivers of liens or partial waivers of liens, as the case may be, for the work completed through the last disbursement, (C) contractors’ and subcontractors’ sworn statements as to completed work and the cost thereof for which payment is requested, (D) a bringdown certificate of title insurance satisfactory to Landlord and (E) other evidence of cost and payment so that Landlord and Landlord’s lender can verify that the amounts disbursed from time to time are represented by work that is completed, in place and free and clear of mechanics’ and materialmen’s lien claims; (v) each request for disbursement shall be accompanied by (A) a certificate of Tenant, describing the work for which payment is requested, stating the cost incurred in connection therewith, stating that Tenant has not previously received payment for such work and, upon completion of the work, also stating that the work has been fully completed and complies with the applicable requirements of this Lease and with all Governmental Regulations, and (B) waivers of liens or partial waivers of liens, as the case may be, for the work completed through the last disbursement; (vi) Landlord may retain five percent (5.0%) of the Restoration Fund until the work is fully completed; (vii) such other reasonable conditions as Landlord or Landlord’s lender may impose; including, without limitation, if the costs of restoration would exceed $1,000,000 and Landlord so requests, a requirement that Tenant hire a third party construction manager or consultant reasonably acceptable to Landlord; and (viii) prior to commencement of restoration and at any time during restoration, if the estimated cost of completing the restoration work free and clear of all liens, as determined by Landlord, exceeds the amount in the Restoration Fund available for such restoration, the amount of such excess shall, upon demand by Landlord, be paid by Tenant to Landlord to be added to the Restoration Fund. Any sum so added by Tenant which remains in the Restoration Fund upon completion of restoration shall be refunded to Tenant. (g) Notwithstanding anything herein to the contrary, if (i) within the last two (2) years of the Term then in effect there is damage or destruction to the Premises that will cost to repair in excess of the greater of (x) $1,000,000, or (y) fifty (50%) of the fair market value of the 16 improvements located on the Premises, or (ii) at any time during the Term there is damage or destruction to the Premises and restoration of the Premises to its previous use is prohibited by applicable governing authorities (including zoning boards or Tenant’s inability to obtain proper permits and approvals), Landlord and Tenant each shall have the separately exercisable option to elect, in its sole discretion, to terminate this Lease and, in such event, Tenant shall assign and deliver to Landlord any insurance payments received by Tenant with respect to such damage or destruction together with payment by Tenant of any deductible with respect to such insurance proceeds; provided, however, that if Landlord shall have given a notice of termination in accordance with clause (i) of this subsection (g) and Tenant shall thereafter be permitted under this Lease to effect a Renewal Option, and the Renewal Option is exercised, then Landlord’s termination notice shall not have any effect. 14. CONDEMNATION. (a) Tenant shall give Landlord written notice of Tenant’s receipt of a condemnation notice. Landlord shall give Tenant written notice of Landlord’s receipt of a condemnation notice. If the whole or any substantial part of the Premises (to the extent such partial taking would have a material adverse effect on the business then being conducted on the Premises as reasonably determined by Tenant and Landlord) shall be acquired or condemned by eminent domain, then, and in that event, (i) the Term of this Lease shall cease and terminate from the date of title vesting, and (ii) Tenant shall have no claim against Landlord for the value of any unexpired Term of this Lease. Except if the condemnation award is a single award as hereinafter provided and except for any award expressly attributed to Tenant’s Condemnation Value, Landlord and Landlord’s lender shall have exclusive authority to collect, settle and compromise, in their sole and absolute discretion, the amount of any award. Except if the condemnation award is a single award as hereinafter provided and except to the extent the award is attributed to Tenant’s Condemnation Value, no part of any award shall belong to Tenant, except that Tenant may make a separate claim with the condemning authority for, or shall be entitled to that portion of the award expressly attributed to, (i) Tenant’s then book value of leasehold improvements made to the Premises by Tenant, (ii) Tenant’s Personal Property or the cost of removal thereof, (iii) the interruption of Tenant’s business and Tenant’s relocation/moving costs, and (iv) Tenant’s enterprise or business value (collectively, “Tenant’s Condemnation Value”). Notwithstanding the foregoing, if the condemnation award is a single award, inclusive of the fee and leasehold interest of the parties, but without any allocations as between the two estates, then the portion of the award that Tenant is entitled to shall be limited to: (1) Tenant’s then book value of Tenant’s leasehold improvements made to the Premises by Tenant, (2) Tenant’s then book value of Tenant’s Personal Property and or the cost of removal thereof, (3) any relocation/moving costs of Tenant. In the event there is any Contamination for which Tenant is responsible under Section 11 at the Premises which is subject to a condemnation proceeding, notwithstanding such condemnation proceeding, as between Landlord and Tenant, Tenant shall continue to be responsible to Remediate any and all such Contamination in accordance with the terms of this Lease. (b) If, however, the condemnation does not result in termination of this Lease as provided in Section 14(a), then (i) the Term of this Lease and the Fixed Annual Rent payable by Tenant hereunder shall remain the same and unaffected by such condemnation, (ii) Tenant shall be entitled to

17 the entire award in connection therewith, and (iii) Tenant shall, to the extent of the award, repair such damage and restore the Premises to a useful condition. 15. LANDLORD RIGHT OF ENTRY. (a) Landlord shall not be required to render any services to Tenant or to make any repairs or replacements to the Premises, except to the extent of damage (if any) caused by Landlord, its employees or agents. (b) Upon reasonable prior written notice (other than during the existence of an emergency, for which no notice shall be required), Landlord, for itself and its agents, reserves the right to enter the Premises during normal business hours for the purposes of examining and inspecting and ensuring Tenant’s compliance with all applicable laws and the terms and conditions of this Lease and to make any necessary repairs to the Premises, provided however that Landlord shall not interfere with the business activities being conducted on the Premises during any such period of entry. Except for liability arising out of the negligence or other misconduct of Landlord, its employees or agents in entering upon the Premises, Landlord shall not be liable in any manner to Tenant by reason of such entry or the performance of repair work in the Premises and the obligations of Tenant hereunder shall not be thereby affected. 16. SUBORDINATION. This Lease is subject and subordinate to all mortgages or other security instruments which may now or hereafter affect this Lease or the Premises, and to all renewals, modifications, consolidations, replacements, extensions, substitutions or assignments thereof, provided that any such mortgagor and secured party shall enter into a recognition and non- disturbance agreement as provided in Section 10(c). 17. ASSIGNMENT AND SUBLETTING. (a) Except as otherwise expressly permitted herein, Tenant shall not assign, pledge, mortgage or otherwise transfer its interest in this Lease, the Premises or any part thereof, without first obtaining Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. In the event of any permitted assignment, subletting, or leasehold mortgaging, Tenant shall continue to remain jointly and severally liable to Landlord, along with its transferee, for the performance of all of Tenant’s obligations, including the payment of Rent, for the remainder of the Term of this Lease. Any purported assignment of this Lease which is in violation of this Section 17 shall be null and void ab initio. In no event shall any such assignment, subletting and/or transfer release Tenant or any prior assignee or transferee from the obligations of Tenant under this Lease (as it may be amended), which shall remain applicable through the Term of this Lease. Upon request, Tenant shall provide to Landlord copies of any assignments hereafter entered into by Tenant. (b) Tenant shall not be permitted to sublet the Premises in whole or in part without the Landlord’s prior written consent, which shall not be unreasonably withhold.. Tenant shall provide written notice (the “Sublet Notice”) of any such proposed subletting to Landlord, which notice shall include each sub-lessee’s name, address and phone number, the use to be conducted in the Premises, 18 the square footage of the Premises to be sublet and financials of the proposed sublessee. If Landlord fails to indicate its approval or disapproval of such sublet within such thirty (30) days after receipt of the Sublet Notice, Landlord shall be deemed to have disapproved the requested assignment. . In the event of Tenant’s surrender of this Lease or the termination of this Lease, all sub-tenancies shall terminate. No merger shall result from Tenant’s sublease of the Premises under this Section, Tenant’s surrender of this Lease, or the termination of this Lease. Notwithstanding anything to the contrary in this subsection 17.(b), if Tenant proposes to sublet the entirety of the Premises Landlord shall have the right to terminate this Lease and recapture the Premises by giving Tenant written notice of its election to recapture the Premises (the “Recapture Notice”) to be given by Landlord within fifteen (15) days are receipt of the Sublet Notice. If Landlord exercises this recapture right then ninety (90) days after the date of the Recapture Notice to Tenant (unless Landlord states an earlier termination date in the Recapture Notice) the Lease shall terminate and the parties shall have no further rights or liabilities under this Lease except those rights and obligations that survive termination of the Lease. (c) If the Premises or any part of the Premises is sublet or occupied by anyone other than Tenant, Landlord may, after an Event of Default has occurred and for so long as it is continuing, collect rent from the under-tenant or occupant, and apply the net amount collected to the Rent herein reserved, but no such underletting, occupancy or collection shall be deemed a waiver of this covenant, or the acceptance of the under-tenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained. (d) Each and every sublease, occupancy agreement and/or license entered into from and after the Commencement Date must provide that (i) the same is subject and subordinate to all of the terms and conditions of this Lease, (ii) in the event of the termination of this Lease for any reason prior to the expiration date of such agreement, the sublease, occupancy agreement and/or license shall terminate immediately and absolutely and such subtenant, occupant or licensee shall immediately vacate and surrender the Premises to Landlord in accordance with the terms and conditions of this Lease as if such cancellation or termination date were the Expiration Date hereunder, (iii) the same shall not extend past the day which immediately precedes the Expiration Date of the then-current Term of this Lease (or any Renewal Term(s) available to Tenant, provided that any extension of such sublease, occupancy agreement, and/or license beyond the expiration of the then-current Term of this Lease is subject to the extension of the Term of this Lease for such Renewal Term(s)), and (iv) the sub-lessee, occupant or licensee shall quit and surrender peaceably and quietly, to Landlord, its agent or attorney, possession of the demised premises, vacant (free of all occupants), broom clean and in good condition, except for ordinary wear and tear and free of violations, and shall surrender all keys for the demised premises to Landlord. (e) Notwithstanding anything to the contrary set forth in this Lease, Landlord’s consent to a proposed assignment of Tenant’s entire right, title and interest in, to and under this Lease shall not be unreasonably withheld, conditioned or delayed if the proposed assignee (i) has a Tangible Net Worth at the time of the assignment equal to or greater than the greater of (A) the Tangible Net Worth of Tenant on the Commencement Date, and (B) the Tangible Net Worth of Tenant immediately prior to assignment, and (ii) agrees to assume all responsibilities and liabilities of Tenant under this Lease from and after the date of such assignment. In the event that Tenant desires to assign its interest 19 in accordance with the previous sentence, Tenant shall provide Landlord written notice of its request for consent, which request shall contain evidence reasonably satisfactory to Landlord that the conditions in the previous sentence have been met. (f) Notwithstanding anything to the contrary set forth in this Lease, Tenant shall be permitted to assign, collectively, its interest in this Lease and the Premises without Landlord’s consent, if the assignee (i) is an affiliate of Tenant, and (ii) agrees to assume all responsibilities and liabilities of Tenant under this Lease. In the event that Tenant assigns its interest in accordance with the previous sentence, Landlord shall not be bound by such assignment unless and until Tenant shall provide Landlord written notice of the assignment, which notice shall contain evidence reasonably satisfactory to Landlord that the conditions in the previous sentence have been met. (g) Any act required to be performed or any term required to be observed by Tenant pursuant to the terms of this Lease may be performed or observed by any assignee of Tenant or by any subtenant and the performance of such act or observance of such term shall be deemed to be acceptable to Landlord as Tenant’s performance or observance thereof. (h) Notwithstanding anything to the contrary set forth in this Lease, Tenant shall be permitted to provide reasonable access and certain rights of entry and possession to any lender providing funds to Tenant (“Tenant Lender”). Landlord shall within a written agreement executed between Tenant Lender and Landlord, agree to standard terms, providing a right of entry to Tenant Lender to allow Tenant Lender upon the Premises to take possession of Tenant Lender’s collateral, in exchange for payment of rent during the period the Tenant Lender is in possession of the Premises or holds a right to enter the Premises, and other rights and responsibilities found within similar Landlord waivers. (i) To the extent Landlord is required to consent to (i) an increase in the maximum outstanding allowable principal balance provided by a Tenant Lender or (ii) the term of any financing provided by a Tenant Lender, such consent shall be deemed granted unless an Event of Default is occurring, and such consent by the Landlord will not be unreasonably withheld, conditioned, or delayed. 18. NO LIENS. Tenant shall not perform or fail to perform, as applicable, any act, or fail to perform its obligations under any contract, that results in the creation of, or may create or be a foundation for, any lien (including mechanics or materialman’s liens) or other encumbrance upon any interest of Landlord in the Premises. If any such lien is filed, then Tenant, as soon as reasonably possible but not later than thirty (30) days after the earlier of Tenant’s receipt of notice of filing or Tenant otherwise obtaining actual knowledge of such filing, shall cause any such lien or encumbrance to be discharged of record, unless Tenant is contesting such lien or encumbrance in good faith and provides reasonable assurances to Landlord against any impairment of Landlord’s interest in the Premises during the pendency of such contest. Landlord may post such non-responsibility notice(s) as it deems appropriate and consistent with applicable law. 20 19. ALTERATIONS. Tenant may, at its sole cost and expense, alter, replace, or remodel any Improvements upon the Premises (“Alterations”), provided any Alterations or additions to any buildings or permanent improvements shall be made in a good, workmanlike manner, in compliance with all Laws, and in compliance with all insurance policies required to be maintained by Tenant under this Lease, and, unless Landlord otherwise elects at its option, shall upon installation become the property of Landlord and Tenant shall have no right or interest therein except to continue to use same during the remainder of the Term of this Lease. Any Alterations shall not materially diminish the Value of the Premises and shall be completed by Tenant in compliance with the construction standards set forth below: (a) All improvements and Alterations shall be performed, in accordance with the following standards ("Construction Standards"): (i) Construction of Improvements or Alterations shall be performed in a good and workmanlike manner in accordance with good industry practice for the type of work in question. (ii) Construction of Improvements or Alterations shall be done in compliance with all applicable deed restrictions, building codes, ordinances and other laws or regulations of Governmental Authorities. (iii) Tenant shall not commence construction of any Improvements or Alterations until all licenses, permits and authorizations required for such Improvements or Alterations by all Governmental Authorities having jurisdiction have been obtained (iv) Tenant shall have obtained and shall maintain in force and effect the insurance coverage required in Section 12 with respect to any Improvements or Alterations. (v) Prior to commencement of any Improvements or Alterations Tenant shall give Landlord a list of all contractors and subcontractors with contracts in excess of $100,000 that will perform work on the Premises so Landlord may provide a notice of Non-Responsibility. (vi) After commencement, construction of Improvements or Alterations shall be prosecuted with due diligence to completion. (vii) Following, completion of the Improvements and issuance of the certificate of occupancy, within thirty (30) days of receipt of written request from Landlord, Tenant will provide Landlord with a copy of the Final Plans for the Improvements together with all General Contractor mark-up modifications, and certified copies of all permits issued by governmental authorities authorizing Tenant’s use and occupancy of the Improvements. Further, upon written request of the Landlord after completion of construction of any Alterations, Tenant will provide Landlord with a copy of the final Plans for the Alterations together with a copy of the close out permit issued by governmental authorities authorizing Tenants use and occupancy of the Premises with the Alterations.

21 20. DEFAULT. Landlord and Tenant agree that each of the provisions of this Lease is a material and substantial condition of the agreement between the parties relating to the lease of the Premises. The occurrence of any one or more of the following (after expiration of any applicable cure period) shall, at the sole option of Landlord, constitute an “Event of Default” under this Lease: (a) Tenant shall (i) fail to pay any installment of Fixed Annual Rent for more than five (5) Business Days after written notice, provided, however, that Landlord shall not be required to send more than one (1) notice of non-payment of a monthly installment of Fixed Annual Rent within any twelve (12) month time period and any failure to pay any subsequent monthly installment of Fixed Annual Rent when due during said twelve (12) month period shall be an Event of Default, or (ii) shall fail to pay within ten (10) Business Days after written notice any additional rent payable under Section 4; (b) Tenant shall fail to perform and observe any other provision of this Lease not otherwise specifically mentioned in this Section 20, and such failure continues beyond the date that is thirty (30) days from the date on which Tenant receives notice of such default or, if such default cannot be cured within such thirty (30) day period and delay in the exercise of a remedy would not (in Landlord’s reasonable judgment) (1) cause material, adverse harm or material, adverse prejudice to Landlord or any portion of the Premises, (2) result in the forfeiture of any portion of the Premises or result in criminal liability to Landlord or any of its officers, directors or employees, or (3) result in an un-curable default under or give rise to an un-curable right of termination under any deed, restriction, easement or other instrument affecting the Premises as of the Commencement Date (or otherwise consented to by Tenant) or any portion thereof, the cure period shall be extended for the period reasonably required to cure the default, provided that Tenant shall have commenced to cure the default within thirty (30) days after receipt of notice from Landlord and shall actively and diligently and in good faith proceed with and continue the curing of the default until earlier fully cured; (c) Tenant shall fail to comply with the requirements of Section 12 (Insurance) and such failure continues for more than three (3) Business Days after notice from Landlord; (d) Tenant shall enter into a transaction or series of transactions in violation of Section 17 (Assignment and Subletting); (e) Tenant shall (A) voluntarily be adjudicated as bankrupt or insolvent, (B) seek or consent to the appointment of a receiver or trustee for itself or for all or any part of the Premises and such appointment is not rescinded within ninety (90) days of such appointment, (C) file a petition seeking relief under the bankruptcy or other similar laws of the United States, any state or any jurisdiction, or (D) make a general assignment for the benefit of creditors; (f) a court shall enter an order, judgment or decree appointing, without the consent of Tenant, a receiver or trustee for it or for all or any part of the Premises or approving a petition filed 22 against Tenant which seeks relief under the bankruptcy or other similar laws of the United States, any state or any jurisdiction, and such order, judgment or decree shall remain undischarged or un-stayed ninety (90) days after it is entered; (g) Tenant shall be liquidated or dissolved or shall voluntarily begin proceedings towards its liquidation or dissolution; or (h) the estate or interest of Tenant in all or any part of the Premises shall be levied upon or attached in any proceeding and such estate or interest is about to be sold or transferred or such process shall not be vacated or discharged within ninety (90) days after it is made. 21. EVENT OF DEFAULT; DAMAGES; REMEDIES. (a) From and after the occurrence of an Event of Default, Landlord may give notice to Tenant of Landlord’s intention to either (x) terminate this Lease and the estate hereby granted and all rights of Tenant hereunder, or (y) terminate Tenant’s right of possession, on the date specified in such notice, which date shall be no earlier than twenty-five (25) days following the date of such notice (the “Termination Date”). Until and including the Termination Date, Tenant shall have the right to restore the terms of this Lease (“Tenant’s Restoration Right”) by curing all outstanding defaults and, if any such default is a monetary default, by providing Landlord a cash security deposit in an amount equal to (x) one (1) month of the Fixed Annual Rent then in effect if such monetary default is cured within five (5) Business Days of the giving of notice, (y) two (2) months of the Fixed Annual Rent then in effect if such monetary default is cured after five (5) Business Days but not more than ten (10) Business Days of the giving of notice, and (z) three (3) months of the Fixed Annual Rent then in effect if such default is cured at any time after ten (10) Business Days of the giving of notice through the end of the aforesaid twenty-five (25) day period. The requirement to provide such security deposit in the applicable amount (as described in the preceding sentence) shall apply each time Landlord delivers to Tenant a notice of Landlord’s intention to terminate this Lease following an Event of Default. If Tenant fails to cure all outstanding Events of Default and restore this Lease as provided above and Landlord elects to terminate this Lease, then this Lease, the estate hereby granted and all rights of Tenant hereunder shall expire and terminate upon the Termination Date. Upon such termination, Tenant shall immediately surrender and deliver possession of the Premises to Landlord in the condition required by the terms of this Lease as if such date was the Expiration Date. If Tenant does not so surrender and deliver possession of the Premises, Landlord may re-enter and repossess the Premises not surrendered by any available legal process. Upon or at any time after taking possession of the Premises, Landlord may, by legal process, remove any persons or property therefrom. Except to the extent of Landlord’s negligence or other misconduct, Landlord will be under no liability for or by reason of any such entry, repossession or removal. If Tenant fails to cure all outstanding Events of Default and restore this Lease as provided above and Landlord elects to terminate Tenant’s right of possession, then Tenant’s right to possess the Premises shall be terminated on the Termination Date, whereupon Landlord may repossess and re-enter the Premises by any available legal process without thereby 23 releasing Tenant from any liability hereunder and, except as required by applicable law, without further demand or notice of any kind to Tenant and without terminating this Lease. After repossession of the Premises pursuant hereto, Landlord will have the right to relet the Premises to such tenant or tenants, for such term or terms, for such rent, on such conditions and for such uses as Landlord in its sole discretion may determine, and collect and receive any rents payable by reason of such re-letting, and Tenant shall be and remain liable to Landlord for any rental shortfall between the Rent payable hereunder by Tenant and the rent received by Landlord as a result of any re-letting and all costs and expenses incurred by Landlord in connection with such reletting including, without limitation, brokerage fees, and attorney’s fees and expenses. Landlord hereby agrees to use diligent and commercially reasonable efforts to mitigate its damages arising out of any default by Tenant, but such obligation shall not require Landlord to prioritize the reletting of the Premises over other vacant premises of Landlord or its affiliate entities. Landlord may make such alterations in connection with such re-letting as it may deem advisable in its sole discretion. Notwithstanding any such termination of Tenant’s right of possession of the Premises, Landlord may at any time thereafter elect to terminate this Lease and in such event Landlord will have the rights and remedies specified in the paragraph immediately above. (b) In addition, from and after the occurrence of an Event of Default, Landlord may, but is not obligated to, exercise self-help to cure such Event of Default (and enter upon the Premises in connection therewith if necessary) in Tenant’s name and on Tenant’s behalf, without being liable for any claim for damages therefor, and any and all costs that Landlord incurs in connection with such self-help shall be additional rent hereunder and shall be payable by Tenant upon demand by Landlord. For example (and not by way of limitation), Tenant shall be responsible for paying all costs of Remedial Action that Landlord incurs in connection with performing Remedial Action that Tenant was responsible for performing under this Lease and for which Tenant failed to perform. (c) In the event this Lease is terminated pursuant to Section 21(a), Tenant shall be responsible for the following: (i) Rent up to the time as of which Landlord recovers possession of the Premises; and (ii) Default Rent (as such term is hereinafter defined), to accrue from and after the time of such possession, which shall be accelerated and due and payable as of the date of the Event of Default, but not including any of the Rent otherwise described in Section 21(c)(i) above that would be duplicative. As used herein, the term “Default Rent” means the difference (but not below 0) between 1. The sum of (x) Rent due for the balance of the then remaining Term (but not including any Renewal Term(s) to the extent that such Renewal Term(s) have not yet commenced), discounted to present value at the rate of 6.0%, 24 plus, (y) an amount equal to the sums actually incurred or reasonably estimated to be incurred by Landlord in putting the Premises (or any portion thereof) in good order or preparing the same for re-rental, including brokerage and advertising fees, plus (z) reasonable attorneys’ fees and expenses actually incurred by Landlord in the enforcement of this Lease or in defending any claim brought against Landlord by Tenant against which Landlord successfully defends; and 2. FMRV for the balance of the then remaining Term (but not including any Renewal Term(s) to the extent that such Renewal Term(s) have not yet commenced), discounted to present value at the rate of 6.0%. Notwithstanding the sole and exclusive calculation of damages for lost Rent set forth in this Section 21(c), the foregoing limitation of remedies is without prejudice to Landlord’s right to enforce Tenant’s other obligations under this Lease with respect to claims, damages and liabilities (other than Fixed Annual Rent and additional rent) resulting to Landlord by or through Tenant’s use and operation of the Premises, and is without prejudice to Landlord’s right to enforce those provisions set forth in Section 21(a) and (b) herein. Landlord and Tenant agree that such damages amounts described in this Section 21(c) constitute a good faith reasonable estimate of the damages for lost Rent that may be suffered by Landlord upon the occurrence of an Event of Default, and that it is impossible to estimate more precisely such damages. Landlord’s receipt of the damages calculated as described in this Section 21(c) is intended not as a penalty but as full liquidated damages for lost Rent. For avoidance of doubt, the pursuit by Landlord of the remedies set forth in this Section 21 shall be exclusive with respect to lost Rent, and Landlord shall not thereafter pursue any other remedies at law or in equity against Tenant with respect to lost Rent. Except as provided in this Section 21, (x) all remedies are cumulative and concurrent and no remedy is exclusive of any other remedy; (y) each remedy may be exercised at any time an Event of Default has occurred and may be exercised from time to time; and (z) no remedy shall be exhausted by any exercise thereof. (d) In the event there is a bankruptcy filing by or against Landlord and this Lease is rejected pursuant to 11 U.S.C. § 365 or any other provision of applicable bankruptcy law, such rejection shall constitute a breach of this Lease and, if Tenant so elects, shall entitle Tenant to terminate this Lease and recover Tenant’s damages on account of such breach. (e) Tenant shall be responsible for the reimbursement to Landlord of all legal fees and expenses incurred by Landlord in enforcing the terms of the Lease. (f) The obligations of Tenant under this Section shall survive the expiration or termination of this Lease.

25 22. LATE CHARGES. Any money owed by Tenant to Landlord after the due date and cure period(s) therefor shall bear interest at the Default Rate, from the due date until the date paid. 23. SURRENDER; HOLDOVER. (a) Except as otherwise provided in this Lease, Tenant shall quit and surrender peaceably and quietly, to Landlord, its agent or attorney, possession of the Premises at the expiration or other termination of this Lease, vacant (free of all occupants, including, without limitation, permitted sub-lessees, occupants, and licensees), broom clean and in good condition, except for ordinary wear and tear, and free of violations. In the event of Tenant’s failure to so vacate, including, without limitation, its failure to cause permitted sub-lessees, occupants or licensees to vacate, Tenant agrees to pay all of Landlord’s actual out of pocket costs and reasonable counsel fees and expenses resulting therefrom, including, without limitation, those that arise in connection with eviction, ejection, or dispossession remedies that Landlord pursues against Tenant, permitted sub-lessees, occupants or licensees. (b) If Tenant holds over or remains in possession of the Premises after the expiration of the Term of this Lease, or after any termination hereof, in violation of the terms of this Lease without any written agreement being made or entered into between Landlord and Tenant, such holding over or continued possession shall be deemed to be a tenancy from month to month of the Premises at a monthly rental equal to one hundred twenty-five percent (125%) of the then last monthly installments of Fixed Annual Rent and additional rent under this Lease which accrues, arises or otherwise becomes payable during the Term for the first thirty (30) days of such holdover period and thereafter, one hundred fifty percent (150%) of the then last monthly installments of Fixed Annual Rent and additional rent under this Lease which accrues, arises or otherwise becomes payable during the Term, and otherwise shall be upon the terms and conditions of this Lease, and such tenancy shall be terminable at the end of any month by either party upon written notice delivered to the other party at least thirty (30) days prior to the end of such month. 24. WAIVERS. (a) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER. IN THE EVENT LANDLORD COMMENCES ANY DISPOSSESSION PROCEEDING FOR POSSESSION OF THE PREMISES BASED UPON A DEFAULT BY TENANT IN THE PAYMENT OF FIXED ANNUAL RENT OR ADDITIONAL RENT, TENANT WILL NOT INTERPOSE ANY COUNTERCLAIM OF ANY NATURE OR DESCRIPTION IN SUCH PROCEEDING. IN CONNECTION WITH ANY SUCH 26 PROCEEDING, OR IN ANY OTHER ACTION OR PROCEEDING TO ENFORCE THIS LEASE OR OBTAIN POSSESSION OF THE PREMISES, THE PREVAILING PARTY SHALL BE ENTITLED TO RECOVER ITS COSTS, EXPENSES AND ATTORNEYS’ FEES FROM THE NON-PREVAILING PARTY. (b) Tenant hereby waives and surrenders, for itself and all those claiming under it, including creditors of all kinds (i) any right and privilege which it or any of them may have under any present or future law to redeem the Premises or to have a continuance of this Lease after termination of this Lease or of Tenant’s right of occupancy or possession pursuant to any court order or any provision hereof, and (ii) the benefits of any present or future law which exempts property from liability for debt. 25. INDEMNIFICATION. Tenant hereby releases and agrees to indemnify and hold harmless Landlord and all its trustees, officers, employees, directors, agents, and consultants (hereinafter collectively referred to as the “Indemnitees”) of and from any and all claims, demands, Liabilities, losses, costs, or expenses for any loss including but not limited to bodily injury (including death), personal injury, property damage, expenses, and attorneys' fees, caused by, growing out of, or otherwise happening in connection with this Lease, due to any negligent or intentional act or omission on the part of Tenant, its agents, employees, or others working at the direction of Tenant or on its behalf, or due to the application or violation of any pertinent federal, state, or local laws except for the gross negligence or intentional misconduct of the Indemnitees. In case any action or proceeding is brought against Landlord by reason of any claim mentioned in this Section 25, Tenant, upon notice from Landlord, shall, at Tenant’s expense, resist or defend such action or proceeding in Landlord's name, if necessary, by counsel for the insurance company, if such claim is covered by insurance, or otherwise by counsel approved by Landlord. Landlord agrees to give Tenant prompt notice of any such claim or proceeding. This indemnification is binding on the successors and assigns of the Tenant, and this indemnification survives the expiration or earlier termination of the Lease, or the dissolution or, to the extent allowed by Law, the bankruptcy of Tenant. This indemnification does not extend beyond the scope of this Lease and does not extend to claims exclusively between the undersigned parties arising from the terms, or regarding the interpretation of this Lease. 26. LIMITATION OF LIABILITY; LANDLORD’S RIGHT OF ASSIGNMENT. (a) Tenant agrees that the liability of Landlord under this Lease and all matters pertaining to or arising out of the tenancy and the use and occupancy of the Premises, shall be limited to Landlord’s interest in the Premises, and in no event shall Tenant make any claim against or seek to impose any personal liability upon any corporate parent or affiliate, officer or employee of Landlord. (b) Notwithstanding anything contained in this Lease to the contrary, neither Landlord nor Tenant shall be entitled to recover from the other party any indirect, consequential, special, punitive, incidental, speculative or exemplary damages of any kind arising under, related to or in connection with this Lease or the transactions contemplated hereby. 27 (c) Subject to Section 40 hereof, Landlord shall be free at all times, without need of consent or approval by Tenant, to assign its interest in this Lease and/or to convey its fee or leasehold interest in the Premises, including, without limitation, by means of mortgage and/or deed of trust. Landlord shall give prior written notice to Tenant of any such conveyance. Each conveyance by Landlord of Landlord’s interest in this Lease or the Premises prior to the expiration or termination of this Lease shall be subject to this Lease and, provided the transferee assumes all obligations of the grantor hereunder, shall relieve the grantor of any further obligations or liability as Landlord first arising after the date of such conveyance, and Tenant shall look solely to Landlord’s successor in interest for all obligations of Landlord accruing from and after the date of the conveyance. 27. BROKER. Each of Landlord and Tenant warrants and represents to the other that it has dealt with no broker, real estate salesperson, or person acting as broker or finder, in connection with this Lease. Each party shall defend, indemnify, and hold the other party harmless of and from any and all claims, liabilities, and/or damages that are based upon a claim by any broker, person, firm, or corporation for brokerage commission and/or other compensation by reason of having dealt with such party. The provisions hereof shall survive the expiration or termination of this Lease. 28. NOTICES. All notices, demands, requests, consents, approvals, offers, statements and other instruments or communications required or permitted to be given pursuant to the provisions of this Lease shall be in writing and shall be deemed to have been given and received for all purposes when delivered in person or by FedEx or other reliable 24-hour delivery service with a confirmation of delivery, or five (5) Business Days after being deposited in the United States mail, by registered or certified mail, with return receipt confirming delivery, addressed to the other party at the address set forth below or when delivery is refused, and such notices shall be addressed as follows: To Landlord: Big Lake Industrial 2024, LLC 2655 Cheshire Lane North Plymouth, MN 55447 Attn: Jeffry J. Carriveau, Manager With a copy to: Gerstein-Timm, PLLC Attn: Beth G. Tarasar, Esq. 100 Prairie Center Drive, Suite 201 Eden Prairie, MN 55344 To Tenant: Glenbrook Building Supply, Inc. Edge Builder Inc 5215 Gershwin Avenue N., Oakdale, MN 55128 Attn.: President 28 With a copy to: Star Equity Holdings, Inc. 53 Forest Avenue Old Greenwich, CT 06870 Attn.: Chief Financial Officer and General Counsel For the purposes of this Section, any party may substitute another address by giving five (5) days’ notice of the new address to the other party, in the manner provided above. 29. NO WAIVER. (a) Landlord’s right to require strict performance shall not be affected by any previous waiver or course of dealings. (b) The receipt and acceptance of Rent by Landlord with knowledge of an Event of Default under this Lease shall not be deemed a waiver of such Event of Default and Landlord retains all of its rights under this Lease resulting from such Event of Default. (c) No payment by Tenant or receipt by Landlord of a lesser amount than the monthly rent stipulated herein shall be deemed to be other than on account of the earliest stipulated monthly rent or item of additional rent outstanding, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent or additional rent be deemed an accord and satisfaction and Landlord may accept any such check or payment without prejudice to Landlord’s rights to recover the balance due or to pursue any other remedy. 30. ESTOPPEL CERTIFICATES. At any time and from time to time, within ten (10) Business Days after the giving of written request by Landlord, Tenant will certify to Landlord and any mortgagee or purchaser, or any other person specified in such notice, to the effect (i) that Tenant is in possession of the Premises; (ii) that this Lease is unmodified and in full force and effect (or if there has been modification, that the same is in full force and effect as modified and setting forth such modification); (iii) whether or not there are, to Tenant’s knowledge, then existing set-off or defenses against the enforcement of any duty or obligation of Tenant (and if so, specifying the same); (iv) the dates, if any, to which any Fixed Annual Rent or other charges have been paid in advance; and (v) such other matters as Landlord may reasonably request. 31. BINDING EFFECT. This Lease shall be binding upon and inure to the benefit of the parties hereto, their respective successors and permitted assigns. This Lease may be executed in any number of counterparts, each of which when executed and delivered is an original, but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of this Lease by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of an original. Time is of the essence of this Lease. 32. NO MODIFICATION. No waiver, modification, change or alteration of the provisions of this Lease, or any of the rights or remedies of either of the parties hereto shall be

29 valid, unless such waiver, modification, change or alteration is in writing, and signed by the party against whom enforcement is sought. 33. GOVERNING LAW. This Lease shall be governed by, and construed in accordance with, the laws of the state in which the Premises are located. 34. PARTIAL INVALIDITY. In the event any provision of this Lease is declared illegal, invalid, or unenforceable or contrary to law, it shall not affect any other part. 35. ENTIRE AGREEMENT. This Lease constitutes the entire agreement between the parties with regards to the subject matter hereof, and there is no other agreement or understanding between the parties, except as expressly set forth herein. 36. AUTHORITY. The persons executing this Lease on behalf of Tenant and Landlord, respectively, have authority to execute and deliver this Lease. Each party has had the opportunity to review this Lease with its counsel and has participated in the negotiation of this Lease, and this Lease is not to be construed against the drafter. 37. NO RECORDING. Tenant shall not record this Lease, but the parties agree to execute, acknowledge and deliver a memorandum of this Lease for recording in the applicable registry of deeds for the locality in which the Premises are located indicating the names and addresses of Landlord and Tenant, a legal description of the Premises and the Lease Term and any other information that is required by applicable law to provide legal notice of Tenant’s interest in the Premises, but omitting rent and such other terms of this Lease as Landlord may not desire to disclose to the public so long as such omission does not invalidate the effect of such legal notice. Tenant agrees to execute and acknowledge a termination of lease in recordable form to be held by Landlord and not recorded until the expiration or sooner termination of the Term. 38. OFAC CERTIFICATION. Tenant hereby represents and warrants that neither Tenant nor any of its subsidiaries or any director, officer, employee, agent, or affiliate of Tenant or any of its subsidiaries is a Person that is, or is owned or controlled by, Persons that are: (i) the subject of any sanctions administered or enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) or the U.S. Department of State, (collectively, “Sanctions”), or (ii) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions, including, without limitation Cuba, Iran, North Korea, Sudan and Syria. 39. SURVIVAL. The provisions of this Lease which by their terms, nature and content, or by any reasonable interpretation thereof, are intended to survive any termination, cancellation or expiration of this Lease, including, but not limited to, Tenant’s indemnity obligations, shall so survive and continue after such termination, cancellation or expiration. 40. FINANCIAL STATEMENTS/ANNUAL SALES REPORTS Tenant shall provide Landlord with its annual financials certified to be true and correct within 120 days after the end of each fiscal year. Further, if requested by Landlord due to (i) a proposed sale of the 30 Premises; or (ii) if Landlord is refinancing and lender requires it for underwriting purposes; or (iii) Tenant has a history of late payment of Rent more than two times in a calendar year, then Tenant shall furnish Landlord with its most recent financial statements (including income statements and balance sheets) certified to be true and correct, but in no event more than once per calendar year. If the financial statements are unaudited, then the statements shall be certified as true and correct by an officer, managing partner or managing member of Tenant. Landlord shall maintain all statements, documents, files and other information shared by Tenant with Landlord as confidential and shall use such information solely under a duty of confidentiality with any potential purchaser or lender of the Premises. 41. NOTICE OF SALE. Landlord agrees that in the event that Landlord intends to list the Premises for sale that it will provide at least thirty (30) days prior written notice to Tenant of its intention to list the Premises for sale before listing it for sale. [SIGNATURE PAGE FOLLOWS] 31 IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be duly executed as of the date first written above. LANDLORD: BIG LAKE INDUSTRIAL 2024, LLC, a Minnesota limited liability company By: Name: Jeffrey J. Carriveau Title: Manager TENANT: Edge Builder, Inc., a Delaware corporation By: Name:_______________________________ Title: Glenbrook Building Supply, Inc., a Delaware corporation By: Name:_______________________________ Title: /s/ Jeffrey J. Carriveau /s/ Ron Schumacher Ron Schumacher President /s/ Ron Schumacher Ron Schumacher President

EX-10.7 4 a106bremerlease.htm EX-10.7 a106bremerlease

LEASE AGREEMENT THIS LEASE AGREEMENT (this “Lease”) is made this 28th day of June, 2024 (the “Commencement Date”), by and between 106 BREMER AVE, LLC, a Wisconsin limited liability company with a mailing address of 53 Forest Ave., Suite 101, Old Greenwich, CT 06092 (“Landlord”), and TIMBER TECHNOLOGIES SOLUTIONS, INC. a Delaware corporation with a mailing address of 106 Bremer Ave, Colfax, WI (“Tenant”), and Star Equity Holdings, Inc, its parent (“Parent”). The parties hereby agree as follows: LEASE INFORMATION AND DEFINITIONS The following information and definitions are incorporated into and made a part of this Lease: Leased Premises: Certain land located in the Town of Colfax, County of Dunn, and State of Wisconsin, and being more particularly described on Exhibit A, attached hereto and made a part hereof, together with all improvements thereon and all rights and easements appurtenant thereto (the “Leased Premises” or the “Real Property”). Term: The “Term” means: (a) an “Initial Term,” being a period commencing on the Commencement Date and ending at 5:00 p.m. on a day the Termination Date, June 27, 2034, subject to adjustment and earlier termination as provided in the Lease; and (b) if Tenant duly exercises its option to extend the term of this Lease for one or both Extension Terms as provided in the Lease, then also each such Extension Term for which Tenant has duly exercised such option. Extension Terms: The Extension Terms shall be two (2) separate, consecutive sixty (60) month periods (hereinafter referred to as "First Extension Term” and the “Second Extension Term,” respectively, and also referred to in the singular as an “Extension Term” and in the plural as the “Extension Terms”), all on the terms and conditions set forth in the Lease. Rent Commencement Date: Tenant’s obligations to pay Base Rent shall commence on June 28, 2024 (the “Rent Commencement Date”) Base Rent: (a) The Base Rent for the Leased Premises during the Initial Term shall be as set forth on Exhibit B, attached -2- hereto and made a part hereof. (c) The Base Rent for the Leased Premises for each year of each Extension Term shall be shall be an amount which is equal to 100% of the prevailing market rates in effect at the time of Tenant’ s exercise of its extension right for property comparable to the Leased Premises in the vicinity of the Leased Premises (and, for clarity, shall include annual escalators consistent with such prevailing market), all as determined by a licensed commercial real estate broker or appraiser doing business in the greater Eau Claire, Wisconsin vicinity and chosen by Landlord, but in no event shall Base Rent for any year of any Extension Term be less than the Base Rent payable for the immediately preceding year of the Term. Rent: The term “Rent” means Base Rent and all other sums payable by Tenant under this Lease. Taxes: Without limiting the “net” nature of this Lease as provided in herein, Tenant shall pay all Taxes (as defined in this Lease). Utilities: Without limiting the “net” nature of this Lease as provided herein, Tenant shall contract for and pay for all Utilities (as defined in this Lease). Operating Expenses; Maintenance and Repairs: Without limiting the “net” nature of this Lease as provided herein, Tenant shall pay 100% of all costs and expenses associated with the use, occupancy, operation, maintenance, repair, and/or replacement of the Leased Premises. Permitted Use: Subject in all events to the terms and conditions of the Lease, the Leased Premises shall be used only for purposes of a facility for the manufacture of wood products and other components of building construction and associated administrative and general business offices of Tenant in connection therewith. 1. Leased Premises. Landlord leases to Tenant, in consideration of the Rent to be paid by Tenant and subject to the terms and conditions set forth herein, the Leased Premises. Tenant acknowledges that Tenant was the owner of the Leased Premises prior to the Commencement Date and has conveyed the Leased Premises to Landlord on the Commencement Date. Accordingly, Tenant agrees that Tenant accepts and is leasing the Leased Premises in their “as is” condition. 2. Commencement and Term. The term of this Lease shall commence on the -3- Commencement Date and shall be the Lease Term, unless earlier terminated or extended by mutual agreement of the parties or as otherwise provided in this Lease. 3. Rent; Net Lease. (a) Tenant covenants and agrees to pay to Landlord at its address as set forth in the preamble to this Lease or at such other place as Landlord shall from time to time designate in writing, during the Lease Term, the Base Rent, without holdback or set-off, in advance, commencing on the Rent Commencement Date and continuing thereafter on the first day of each calendar month during the Lease Term. All other items of Rent shall be paid, without holdback or set-off, in accordance with the terms of this Lease. If any payment of Rent is received by Landlord more than five (5) days after the date when such payment is due, a late charge of five percent (5%) of the past due payment shall be assessed, due and payable immediately and without notice. (b) Landlord and Tenant acknowledge and agree that this Lease is intended to constitute, and shall constitute, an absolutely ‘net” Lease such that the Rent shall provide Landlord with a “net” return for the Term, free of all expenses and charges with respect to the Leased Premises, all of which shall be Tenant’s responsibility. Accordingly, Tenant shall pay as additional Rent and discharge, at the times specified herein, or if no time is specified, before failure to pay the same shall give rise to any interest or penalty or create any risk of lien or forfeiture, each and every item of expense, of every kind and nature whatsoever, foreseen or unforeseen, ordinary or extraordinary, related to or arising from the Leased Premises, or by reason of, or in any manner connected with or arising from, the development, leasing, operation, management, maintenance, repair, replacement, use, and/or occupancy of the Leased Premises. 4. (Reserved.) 5. (Reserved.) 6. Permitted Use; Compliance with Laws. (a) Tenant agrees to use and occupy the Leased Premises for the Permitted Use, and for no other purpose without the written consent of Landlord, and further agrees not to use the Leased Premises for any purpose deemed extra hazardous or not covered by insurance. Tenant acknowledges and agrees that Landlord shall have the right to adopt reasonable rules and regulations for the use and/or occupancy of the Leased Premises and Tenant agrees that it shall at all times observe and comply with such rules and regulations. (b) Tenant agrees to abide by and comply with all Laws (as hereafter defined) applicable to the Leased Premises and/or the use or occupancy of the Leased Premises. It is the responsibility of Tenant to determine all zoning information and secure all necessary permits, licenses, and approvals for Tenant’s use and occupancy of the Leased Premises. Without limiting the generality of the foregoing, Tenant agrees to maintain in full force and effect, during the Lease Term, at Tenant’s cost and expense, all permits, licenses, registrations, and approvals required under applicable Laws for the use and/or occupancy of the Leased Premises. Without /s/ Tom Niska -4- limiting the “AS IS” nature of this Lease, Tenant acknowledges and agrees that Landlord has not made and is not making any representations or warranties as to the suitability of, or the ability to obtain any permits or approvals for, Tenant’s intended use of the Leased Premises. (c) As used in this Lease, the term “Laws” means all federal, state, municipal or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law). 7. Taxes. (a) Tenant shall be responsible for the prompt payment of all taxes, levies, betterments, and assessments, and governmental impositions of every kind or nature, whether now existing or hereafter created, general or special, ordinary or extraordinary, foreseen or unforeseen, that may be charged, assessed, laid, levied, or imposed upon, or become a lien or liens against, the Leased Premises or this Lease, including any amount that Landlord may be required to pay to any governmental authority as sales tax, gross receipt tax, or any tax of like nature specifically measured as a percentage of, or fraction of, or other factors based upon the all or any portion of the Rent payable hereunder (whether in lieu of, or in addition to the current system of real estate taxation) (all amounts payable under this Section being referred to herein as “Taxes”). (b) Tenant shall pay all Taxes, at Landlord’s option, either (i) to Landlord as additional Rent in estimated monthly installments, with the actual amount of Taxes reconciled against such estimated monthly installments annually and, within thirty (30) days of such reconciliation, Landlord remitting to Tenant the amount by which the payment of estimated Taxes exceeds the actual Taxes for such annual period (provided Tenant is not then in breach of this Lease), or Tenant paying to Landlord the amount by which the actual Taxes for such annual period exceeds the estimated payments made by Tenant to Landlord; or (ii) to Landlord within thirty (30) days after Landlord makes demand therefor, with copies of any bills for Taxes; or (iii) directly to the taxing authority, in which event Tenant shall provide to Landlord evidence of the prompt payment of all Taxes prior to the date the same are due without the accrual of any interest on such Taxes. 8. Utilities. (a) Tenant shall make arrangements for, and pay on or before the date the same become due, all charges for or relating to gas, oil, electricity, water, sewer, septic, telecommunications, and all other services used at or supplied to the Leased Premises (collectively, “Utilities”). (b) Landlord shall in no way be liable for any loss, expense, or damage (whether direct or indirect) that Tenant may sustain or incur by reason of any change, failure, interference, disruption, interruption, or defect in the supply or character of any Utilities serving the Leased Premises, regardless of its duration, or if the quantity or character of Utilities become unavailable to the Leased Premises or no longer suitable for Tenant’s requirements. Additionally, any such change, failure, interference, disruption, interruption, defect, unavailability, or unsuitability mentioned in this Section shall not: (i) constitute an actual or constructive eviction of Tenant, in whole or in part; (ii) entitle Tenant to any abatement or

-5- diminution of Rent, or any other costs due from Tenant pursuant to this Lease; (iii) relieve or release Tenant from any of its obligations under this Lease; or (iv) entitle Tenant to terminate this Lease. 9. Operation, Maintenance and Repairs. (a) Tenant agrees that from and after the Commencement Date, Tenant will keep neat and clean and maintain in good and safe order, condition and repair, and in compliance with all Laws the entirety of the Leased Premises, including any and all alterations or improvements to the Leased Premises occurring after the date of this Lease. Tenant agrees to pay the costs for cleaning and janitorial services relating to the Leased Premises (including trash removal and trash hauling), which services shall be provided or caused to be provided by Tenant. Tenant shall be responsible for the plowing, shoveling, and treatment of snow and ice and all grounds keeping, including all landscaping and sweeping of pavement and other hardscaped surfaces. Tenant shall be responsible for all items of maintenance and all repairs to and replacements (except as otherwise provided in Section 18) of all buildings and improvements and all Building Systems (as hereafter defined), and all foundations, structural supports, walls, ceilings, windows (including plate glass), siding, roof structure, roofing materials, doors, plate glass, driveways, parking areas, fences and signs located in, on or at the Leased Premises) that the Leased Premises may require from time to time during the Term, whether interior or exterior, structural or non-structural, ordinary or extra-ordinary, foreseen or unforeseen, all to keep the Leased Premises in good and safe order, condition, and repairs, and in at least as good condition as the Leased Premises are in on the Commencement Date. The term “Building Systems” means all heating systems, ventilating systems, air conditioning systems, fire alarm systems, sprinkler systems, and other life safety systems, septic systems, water supply systems (including any water treatment or filtration systems), plumbing systems, electrical systems, storm water management facilities, and all other systems located at or serving the Real Property. (b) Without limiting the generality of sub-section (a) of this Section, Tenant shall procure and maintain, with qualified vendors reasonably acceptable to Landlord, contracts providing for periodic inspections and maintenance of the heating, ventilating, and air conditioning (HVAC) systems, fire alarm, sprinkler, and life safety systems, the septic system, the crane(s) and related appurtenances in the building, at such intervals as are reasonably required by Landlord, but in all events at least annually. (c) Without limiting the generality of sub-section (a) of this Section, Tenant shall promptly after the Commencement Date undertake all investigations (including an evaluation by a structural engineer and a roofing surveyor) with respect to, and promptly undertake all work necessary to repair, the roof (including roof framing) of the building on the Leased Premises and all damage and other adverse conditions associated with or arising out of the condition of the roof of the building, including any damage to the flooring, walls, siding, windows, ceilings (including drop ceilings), and trim of the building and any Building Systems that may have been adversely affected by any damage to or leaks in the roof of the Building. Tenant shall keep Landlord informed as to the results of all inspections and shall provide all plans and specifications for the foregoing repair work, which will be subject to the approval of Landlord, which will not be unreasonably withheld. -6- 10. Alterations, Renovations and Improvements. Tenant shall not make any alterations, renovations or improvements to the Leased Premises without obtaining Landlord’s prior written consent to the plans and specifications therefor and the contractor(s) to be retained by Tenant to perform such work, which shall not be unreasonably withheld, conditioned, or delayed in the case of cosmetic renovations that do not affect the structural elements of the improvements, the roof(s) of any buildings, or any of the Building Systems, but otherwise shall be in Landlord’s sole discretion. Prior to any contractor or subcontractor (of any tier) providing or furnishing any labor, materials, or services in connection with any alterations, renovations, or improvements, Tenant shall obtain and furnish to Landlord the name and address of each such contractor and subcontractor. In addition, prior to any such labor, materials, or services being provided or furnished, Tenant shall furnish to Landlord a mechanic’s lien waiver and notice to prevent lien in a form prescribed by Landlord, duly executed by each such contractor or subcontractor who will furnish or provide labor, materials, and/or services. Tenant shall ensure that all such alterations, renovations and improvements are performed in a good and workmanlike and in compliance with all applicable Laws. In the event any lien is filed against the Leased Premises in connection with or arising out of any work performed at or materials, labor or other services supplied to the Leased Premises, Tenant shall cause the same to be discharged within thirty (30) days after such lien is filed. Tenant shall indemnify and hold Landlord harmless from and against all claims, demands, liabilities, liens, losses, costs and expenses (including reasonable attorneys’ fees) which may arise or be incurred by Landlord as a direct or indirect result of or in connection with such alterations, renovations and improvements, and Tenant shall be responsible for all costs, liabilities, and expenses arising out of such alterations, renovations and/or improvements. All alterations, renovations and improvements which may be made or installed by or on behalf of Tenant upon the Leased Premises and which in any manner are attached to the floors, walls or ceilings shall, at Landlord's option, remain upon the Leased Premises, and, upon termination of this Lease, shall be surrendered with the Leased Premises as a part thereof without disturbance, molestation or injury, provided, however, that Tenant’s furniture, equipment, other personal property, and trade fixtures (which, for avoidance of doubt, shall in no event include the crane(s) or related appurtenances located at the Leased Premises) may be removed by Tenant from the Leased Premises upon the expiration or termination of this Lease, subject to the provisions relating to removal thereof as provided in this Lease. 11. Signs. Tenant shall have the right to maintain the existing signage at the Real Property as of the Commencement Date and shall have the right to install additional signage that does not affect the structural elements of the improvements, the roof(s) of any buildings, or any of the Building Systems, provided, however, that all signage shall be at Tenant’s sole cost and expense, and shall comply with all applicable Laws. 12. Surrender; Holdover. Tenant shall vacate and surrender the Leased Premises to Landlord at the expiration or sooner termination of the Lease Term and the same shall be in the same condition as Tenant is required to maintain the same during the Lease Term, free of all of Tenant’s personal property except as may otherwise be provided herein, “broom clean,” and otherwise in accordance with the provisions of the Lease. Tenant shall have no right to holdover beyond the expiration of the Lease Term. If Tenant continues to occupy the Leased Premises -7- after the end of the Lease Term, such continued occupancy shall be deemed a tenancy-at- sufferance even if Landlord accepts any payment from Tenant, but in the event that a court of competent jurisdiction deems such acceptance of a payment to constitute acceptance of “rent”, such acceptance shall create no rights in Tenant beyond a tenancy-at-will under the terms and conditions stated herein but at a Base Rent rate equal to one hundred fifty percent (150%) of the Base Rent applicable immediately preceding the end of the Lease Term, plus all additional Rent, until (i) Tenant shall vacate the Leased Premises; (ii) the termination of the tenancy-at-will; or (iii) Landlord shall give notice of a different rental amount. Nothing contained in this Section shall be deemed to (a) constitute consent by Landlord to such occupancy or holdover by Tenant; (b) confer any rights on Tenant as more than a tenant-at-sufferance or, if Landlord accepts any rental payments applicable to such period of holding over, a tenant-at-will; or (c) relieve Tenant from liability for damages suffered by Landlord as a result of such holding over. 13. Removal of Tenant’s Property. Tenant’s trade fixtures, personal property, furniture and equipment, other than those items which are to remain or which Landlord elects to have remain at the Leased Premises as provided in Section 10 of this Lease, may be removed by Tenant at the termination of this Lease, provided (a) Tenant is not then be breach of any provision of this Lease; (b) such removal shall not cause any material damage to any portion of the Leased Premises, and any other damage created by such removal shall be repaired by Tenant at Tenant's expense prior to the expiration of the Lease Term to at least as good condition as existed when possession of the Leased Premises was delivered to Tenant; and (c) such removal shall be made before the termination of the Lease Term. 14. Subletting and Assignment. Tenant shall not assign this Lease, in whole or in part, or sublet the Leased Premises or any portion thereof, or encumber the leasehold interest created by this Lease in any manner without the prior written consent of Landlord, which may be withheld in Landlord’s sole discretion during the first twenty-four full calendar months of the Term, and thereafter will not be unreasonably withheld. No assignment or sublease shall operate to release Tenant from any of its obligations under this Lease. Each sublease of the Leased Premises or any portion thereof must contain a release of and waiver of claims against Landlord and the other Releasees (as that term is defined in this Lease), in form and content acceptable to Landlord, and must require the subtenant’s property insurer to issue in favor of Landlord and the other Releasees waiver of subrogation rights endorsements to all policies of property insurance carried in connection with the Leased Premises and the contents thereof. Every transfer by levy or sale on execution, or other legal process, every transfer in bankruptcy, every transfer by merger, consolidation, or by operation of Law, every transfer of a controlling interest in Tenant, and every transfer under any compulsory procedure or order of court shall be deemed to constitute an “assignment” within the meaning of this Lease. Any attempted assignment or sublease in violation of this Section shall, at Landlord’s option, be void and shall constitute a default under this Lease. Consent by Landlord to an assignment or sublease in one instance shall not operate to release the requirement that consent from Landlord be obtained for any further or subsequent assignment or sublease. Tenant shall pay all fees and expenses, including reasonable attorneys’ fees, incurred by Landlord in connection with any proposed subletting or assignment, irrespective of whether Landlord’s consent is in fact granted. 15. Indemnification and Insurance. -8- (a) Tenant agrees to maintain in full force during the Lease Term insurance as follows: (i) commercial general liability insurance, written on an occurrence basis, with a deductible in an amount not to exceed $10,000.00, and providing: (A) minimum limits of (y) $1,000,000.00 per occurrence with $3,000,000.00 annual aggregate limit for bodily injury (including death) and property damage; and (z) $3,000,000.00 in the annual aggregate with respect to products and completed operations; (B) coverage for damages arising out of bodily injury (including death) sustained by any person or persons or arising out of damage to or destruction of property; (C) coverage for damages arising out of premises liability, personal injury and advertising injury; (D) pollution liability coverage for sudden and accidental pollution; (E) for extension of such coverage to include liability for the operation of non-owned motor vehicles; (F) specific coverage for Tenant’s indemnification obligations under this Lease (but neither this provision nor such coverage shall be deemed to limit any of Tenant’s obligations under this Lease); (G) that Tenant’s commercial general liability insurance is provided on a primary and non-contributory basis; (H) that Landlord, Landlord’s mortgagee(s) of the Leased Premises from time-to-time (if any), and any other persons reasonably designated in writing by Landlord from time-to-time are named as additional insureds by an endorsement provided on ISO Form 2026 (1185) or its equivalent, without modification, or such other endorsement as is acceptable to Landlord, acting reasonably; and (I) for waiver of subrogation in favor of Landlord, Landlord’s mortgagee(s) of the Leased Premises from time-to-time (if any), and any other persons reasonably designated in writing by Landlord from time-to-time. (ii) Automobile liability insurance covering all motor vehicles owned, leased, or licensed by Tenant, covering injury to or death of one or more persons or

-9- damage to or destruction of property, with a minimum limit of liability of $3,000,000.00 for each accident. (iii) Workers compensation insurance in accordance with the requirements of all applicable Laws, and employers liability insurance with limits of at least $1,000,000.00, with such workers compensation insurance and employers liability insurance providing for waiver of subrogation in favor of Landlord, its mortgagee(s) of the Leased Premises from time-to-time (if any), and any other persons reasonably designated in writing by Landlord from time-to-time. (iv) Umbrella excess liability insurance in a minimum amount of [$5,000,000.00], on a following form basis over the insurance described in clauses (i) through (iii), above. (v) Special causes of loss form (also sometimes known as “all risk”) property insurance insuring, on a replacement cost basis (without any deduction for depreciation), all personal property and trade fixtures owned by or within the care, custody or control of Tenant, with limits in an amount of not less than one hundred percent (100%) of the full replacement cost of such property, without co-insurance provisions, and with a deductible of not more than $10,000.00, and with Landlord (and Landlord’s mortgagee(s) of the Leased Premises from time-to-time) named as additional insured(s). Such policy(ies) of property insurance must insure against fire, sprinkler leakages, and earthquake, flood and collapse, and all other perils as are from time to time included in the standard special causes of loss form (also sometimes known as “all risk”) coverage; (vi) Until such time, if any, as Landlord elects to carry property insurance for the buildings and improvements located on the Leased Premises, special causes of loss form (also sometimes known as “all risk”) property insurance insuring, on a replacement cost basis (without any deduction for depreciation), all buildings and improvements (including fixtures) located on the Leased Premises, with limits in an amount of not less than one hundred percent (100%) of the full replacement cost of such buildings and improvements, and in all events sufficient at all times to avoid causing the insured to be or become a co-insurer, and with a deductible of not more than $10,000.00, and with Landlord (and Landlord’s mortgagee(s) of the Leased Premises from time-to- time) named as loss payee(s) and additional insured(s). Notwithstanding the foregoing, the insurance policy(ies) required by this sub-section may insure the building on an actual cash value basis during those portions of the Term for which Landlord has provided prior consent to the policy(ies) providing coverage on such basis. Such policy(ies) of property insurance must insure against fire, sprinkler leakages, and earthquake, flood and collapse, and all other perils as are from time to time included in the standard special causes of loss form (also sometimes known as “all risk”) coverage; (vii) business interruption insurance covering all of Tenant’s obligations under this Lease with respect to the payment of Rent for a period of at least eighteen (18) months. -10- (viii) Such other insurance policies, such other endorsements, such other deductibles, and/or such other insurance policy limits as may from time to time be reasonably required by Landlord, provided that, at the time, such other insurance policies, endorsements, deductibles, and/or insurance policy limits are commonly carried for premises and/or buildings or improvements similar in construction, design, general location, use, operation, and occupancy to those located on or appurtenant to the Leased Premises or for operations similar to those conducted on or from the Leased Premises. (b) Without limiting the exculpatory provisions of this Lease, each policy of property insurance maintained by Tenant under this Lease shall contain waivers of subrogation in favor of Landlord and all other Releasees. (c) All insurance required to be obtained and maintained by Tenant pursuant to this Section must be with insurers authorized to transact insurance business and cover risks in the State of Minnesota and that are rated "A-" or better by A.M. Best Company, Inc. or other insurance companies of recognized responsibility acceptable to Landlord, acting reasonably. (d) The policies of insurance required to be maintained by Tenant under this Lease shall be endorsed to require that each policy will not be cancelled or materially changed without at least thirty (30) days prior written notice to Landlord. (e) Tenant shall deliver to Landlord copies of each policy of insurance (including all endorsements) required to be maintained by Tenant under this Lease or such other evidence of each such policy of insurance (and all required endorsements) as is acceptable to Landlord, acting reasonably. (f) If Tenant fails to obtain, maintain and/or pay for the insurance required by this Lease at the times and for the amounts and duration specified herein, Landlord has the right, but not the obligation, at any time and from time to time, to obtain such insurance and/or pay the premiums for such insurance, without limiting any other rights or remedies available to Landlord for such failure. In such event, Tenant shall repay Landlord, immediately upon demand, all sums so paid by Landlord and all costs and expenses incurred by Landlord in connection therewith (including reasonable attorneys’ fees), all without prejudice to any other rights or remedies available to Landlord. (g) Landlord shall have the right, at any time during the Term, to elect, by giving written notice to Tenant, to carry property insurance for the buildings and improvements located on the Leased Premises, in which event, Tenant shall pay to Landlord the amount of all premiums for such property insurance procured and maintained by Landlord with respect to the Real Property. Tenant shall pay such amounts to Landlord in estimated monthly installments, with the actual amount of incurred by Landlord for such premiums being reconciled against such estimated monthly installments annually and, within thirty (30) days of such reconciliation, Landlord remitting to Tenant the amount by which the payment of estimated premiums exceeds the actual premiums for such annual period (provided Tenant is not then in breach of this Lease), -11- or Tenant paying to Landlord the amount by which the actual premiums for such annual period exceeds the estimated payments made by Tenant to Landlord. (h) Tenant acknowledges and agrees that such property insurance as Landlord elects to purchase with respect to the Real Property shall be for the sole benefit of Landlord and that such insurance shall not cover any personal property, trade fixtures, leasehold improvements, or other property or appurtenances owned by or within the care, custody, or control of Tenant, or otherwise located in the Leased Premises (collectively, “Tenant’s Property”) and that in the event of damage to or loss of any of Tenant’s Property, neither Landlord, its mortgagee(s) of the Leased Premises from time-to-time (if any), nor any of the shareholders, members, directors, managers, officers, employees, or agents of Landlord or any such mortgagee(s) (each in the singular “Releasee”, and in the plural, “Releasees”) shall have any obligation to repair or replace the same. Notwithstanding any exception to Tenant’s indemnification obligations under this Lease, Tenant does hereby expressly release all Releasees of and from, and agrees to indemnify, hold harmless, and defend Releasees from and against, any and all claims for damages to or loss of any of Tenant’s Property, regardless of the cause thereof, including, damage or loss due to any Releasee’s negligence. (i) Tenant shall indemnify and hold all Releasees harmless and, if requested by Landlord, defend such Releasee(s) with counsel reasonably satisfactory to Landlord, from and against any and all liabilities, losses, claims, causes of action, damages, costs, and expenses (including reasonable attorney’s fees) incurred by or threatened against any Releasee arising out of (i) any occurrence on the Leased Premises or the use of the Leased Premises by Tenant, its employees, agents, licensees, or invitees, except to the extent caused by the negligence or willful misconduct of Landlord (but such exception shall not apply to limit the application of sub- section (h) of this Section); or (ii) Tenant’s breach of any provision of this Lease. Tenant agrees that the foregoing agreement to indemnify, defend, and hold harmless extends to liabilities, losses, claims, causes of action, damages, costs and expenses (including reasonable attorney’s fees) arising out of claims of Tenant's employees without regard to any immunity, statutory or otherwise, including any immunity under the workers compensation Laws of Minnesota or any other applicable jurisdiction, which immunity Tenant hereby waives, but only for the purposes of Tenant’s obligations to the Releasees under this sub-section. Tenant's obligations under this sub- section shall survive the termination of this Lease. 16. Hazardous Materials. Tenant covenants and agrees that Tenant will not permit any Hazardous Substances (as hereafter defined) to be stored, generated, or released from the Leased Premises, other than Hazardous Substances incidental to Tenant’s use, maintenance, and operation of the Leased Premises for the Permitted Use provided that Tenant shall store, generate, handle, and dispose of all such Hazardous Substances in full compliance with all applicable laws. Tenant hereby covenants and agrees to indemnify, hold harmless, and, if requested by Landlord, defend, Landlord from and from and against any and all demands, claims, causes, of action, losses, liabilities, damages, fines, costs, and expenses (including reasonable attorneys’ fees, court costs and clean-up costs) that may arise out of any Hazardous Substances located at or generated or released from the Leased Premises, irrespective of whether first occurring prior to or after the Commencement Date. The term “Hazardous Substances” means any flammables, explosives, radioactive materials, gasoline, oil, other petroleum products, -12- lead paint, urea formaldehyde (including urea formaldehyde foam insulation), asbestos, asbestos containing materials, polychlorinated biphenyls, and any other hazardous materials, hazardous waste, hazardous matter, hazardous or toxic substances, chemical pollutants, and other materials or substances defined in or regulated by Environmental Laws. The term “Environmental Laws” means (A) the Clean Water Act; (B) the Clean Air Act; (C) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act; (D) the Toxic Substance Control Act; (E) the Resource Conservation and Recovery Act; (F) the Hazardous Materials Transportation Act; and/or (G) any similar state Laws regulating pollution or contamination of the environment The obligations of Tenant under this Section shall survive the termination of this Lease. 17. Right to Enter. Tenant agrees to permit Landlord or its duly authorized agents to enter on the Leased Premises during Tenant's normal business hours, with reasonable prior notice, to examine the condition of said Leased Premises, exercise any rights of Landlord under this Lease, and/or to show the same to prospective tenants, lenders, or purchasers, provided such access to the Leased Premises shall not unnecessarily interfere with Tenant's use of the Leased Premises or the conduct of Tenant's business activities thereon. Notwithstanding the foregoing, Landlord shall have the right (but not the obligation) to enter the Leased Premises without prior notice in the event of an emergency in which prior notice is not practicable in the circumstances. 18. Total or Partial Destruction. (a) In the event the improvements on the Real Property (including any Building Systems) are damaged or destroyed by fire or other peril (a “Casualty”), Tenant shall give Landlord notice of such Casualty as soon as reasonably possible after the Casualty. Landlord shall have the right to elect whether to have such improvements rebuilt or restored. In the event that Landlord elects not to have the improvements rebuilt or restored, and the nature of the Casualty is such as would, absent such rebuilding or restoration, materially impair Tenant’s ability to use and occupy such Leased Premises in substantially the same manner as they were used prior to the Casualty, this Lease shall terminate effective as of the date of the Casualty. In the event that Landlord elects to have the improvements rebuilt or restored, this Lease shall remain in effect without reduction or abatement of Rent, and the following provisions shall apply: (i) Landlord shall, with reasonable promptness rebuild or restore such improvements to at least substantially the same condition, quality, and class as existed prior to the Casualty, using the proceeds of insurance covering such improvements, provided, however, that in no event shall Landlord be obligated to expend for any such rebuilding or restoration an amount in excess of the insurance proceeds actually collected by Landlord on account of the Casualty, less the costs and expenses (including reasonable attorneys’ fees) incurred by Landlord in collecting such proceeds. (ii) Notwithstanding the preceding clause (i), Landlord shall have the right to elect, by giving written notice to Tenant, to have Tenant rebuild or restore the Leased Premises, in which event Tenant shall, with reasonable promptness, and in all events within twelve (12) months of the date of Landlord’s election notice, rebuild or restore

-13- such improvements to at least substantially the same condition, quality, and class as existed prior to the Casualty, using the proceeds of insurance covering such improvements. The selection of all engineers, architects, and contractors engaged in connection with such rebuilding or restoration and all plans and specifications for such rebuilding or restoration, shall be subject to review and approval by Landlord. In the event that Landlord makes the election to have Tenant rebuild or restore as provided in this clause (ii), all proceeds payable by reason of any Casualty under all applicable policies of insurance (whether Tenant is carrying such insurance, or Landlord has elected to do so as provided in this Lease) shall be paid to Landlord or its mortgagee, and such proceeds will be held by Landlord or its mortgagee in an interest-bearing account and, provided Tenant is not in breach of this Lease, shall be made available for rebuilding or restoring the improvements, and shall be paid by Landlord (or such mortgagee) from time- to-time during the progress of construction for the costs of such reconstruction or repair, all subject to and in accordance with reasonable terms, conditions, and construction disbursement procedures specified by Landlord and/or such mortgagee. Any excess proceeds of insurance (and accrued interest) remaining after the completion of the restoration or reconstruction of the Leased Premises shall be paid to Landlord. (b) (Reserved.) (c) Tenant shall be responsible for all insurance deductibles applicable to any Casualty affecting any of the improvements on the Real Property (including Building Systems). (d) The provisions of this Section shall be subject and subordinate to the provisions of any mortgage now or hereafter placed upon the Real Property and the requirements of any mortgagee holding such mortgage. 19. Condemnation. (a) “Condemnation” means any taking of title to or any interest in the Leased Premises or any part thereof or any other property used in connection with the Leased Premises (including for ingress, egress, parking, septic service, water supply or other services or utilities) by exercise of any right of eminent domain by, or by any similar proceeding or act of, any person having the power and legal authority to do so (or by purchase in lieu thereof). For the purposes of this definition, the effective date of any Condemnation shall be deemed to be the later of: (i) the date when title to the Leased Premises or part thereof or such other property is transferred by such proceeding or act of the condemning authority, and (ii) the date when Tenant o is no longer permitted to occupy the Leased Premises or to use such other property. (b) “Substantial Condemnation” means any Condemnation that affects all or a substantial portion of the Leased Premises or any Condemnation that has or is reasonably likely to have a materially adverse effect on any business operations then being conducted on the Leased Premises. Tenant may waive its right to treat as a Substantial Condemnation any Condemnation that would otherwise qualify as such. (c) “Insubstantial Condemnation” means any Condemnation that is not a -14- Substantial Condemnation. (d) If a Substantial Condemnation occurs, this Lease shall terminate upon the effective date of the Substantial Condemnation. (e) If an Insubstantial Condemnation occurs, then this Lease shall continue in full force and effect without reduction or abatement of Rent. (f) In the event of any Condemnation, Landlord shall be entitled to receive and retain the amounts awarded for the Leased Premises, and Tenant shall be entitled to receive and retain any amounts which may be specifically awarded to it in any such condemnation proceedings because of its business loss or the taking of its trade fixtures, furniture, or other property. 20. Force Majeure. In any case where either party is required to perform any act pursuant to this Lease, except for Tenant’s monetary obligations hereunder, the time for the performance thereof shall be extended by a period of time equal to the period of any delay caused by or resulting from an act of God, war, civil commotion, fire or other casualty, labor difficulties, shortages of energy or labor, government regulations, or delays caused by one party to the other, whether such period be designated by a fixed date, a fixed time, or as a reasonable date or time. 21. Quiet Enjoyment. Tenant, on paying the Rent and performing and observing the covenants in this Lease, may hold and enjoy the Leased Premises for the Term without unreasonably interference from any person claiming by, through, or under Landlord, subject and subordinate to all provisions of this Lease. 22. Default. (a) In the event that: (i) Tenant shall fail to pay when due the Rent or any other sums payable hereunder when due and such failure remains uncured for five (5) days after Landlord delivers a default notice to Tenant for such failure to pay rent; or (ii) any petition in bankruptcy shall be filed by Tenant or any guarantor hereof or other petition or proceeding shall be filed or commenced by Tenant or any guarantor hereof to declare Tenant insolvent, or to delay, reduce or modify Tenant’s or any such guarantor’s debts or obligations, or Tenant or any such guarantor admits its inability to pay its debts, or Tenant or any such guarantor makes an assignment for the benefit of creditors; or (iii) any bankruptcy petition or proceeding shall be filed against Tenant or any guarantor hereof or to otherwise declare Tenant or any guarantor hereof bankrupt or insolvent or to delay, reduce or modify Tenant’s or any such guarantor’s debts or obligations or a receiver, trustee or other similar type of appointment or court appointee or nominee is appointed for Tenant or any such guarantor or any of the property of Tenant or any such guarantor, and -15- such petition, appointment or proceeding is not dismissed within sixty (60) days after it is commenced; or (iv) the leasehold interest of Tenant is levied upon or attached by process of law, including the filing of any mechanic’s lien, and such levy, lien, or attachment is not dissolved within thirty (30) days after it is made; or (v) Tenant shall abandon the Leased Premises during the Lease Term; or (vi) Tenant shall assign this Lease or sublet any portion of the Leased Premises, or attempt to do either of the foregoing, in violation of this Lease; or (vii) Tenant violates or fails to observe or comply with any Laws applicable to the Leased Premises, Tenant’s use thereof, or Tenant's operations, activities or conduct of business at or from the Leased Premises; or (viii) any other event, occurrence, act, or omission described in any provision of this Lease as constituting a “default” or an “Event of Default” occurs; (ix) Tenant shall neglect or fail to perform or observe any of the other covenants, terms, provisions or conditions contained in this Lease and, if the neglect or failure is capable of being cured, such neglect or failure continues for more than thirty (30) days after written notice thereof (provided, however, that if such neglect or failure is capable of being cured, but is not capable of being cured within said thirty (30) day period, then Tenant shall have such additional period of time, not to exceed an additional sixty (60) days, as is reasonably necessary to cure the same provided Tenant commences to cure within said thirty (30) day period and diligently and continuously prosecutes the cure to completion); or (x) there is a default by Tenant under any lease or other agreement , pertaining to property located in the State of Wisconsin, and any such default continues beyond the expiration of applicable notice and cure periods (if any), then, and in any of said cases (notwithstanding any license of any former breach of covenant or waiver of the benefit hereof or consent in a former instance), and without limitation of any other remedies that might be available to Landlord under this Lease, at law, or in equity, Landlord lawfully may, immediately or at any time thereafter, terminate this Lease by sending written notice of termination to Tenant, or, subject to compliance with applicable Laws, enter into and upon the Leased Premises or any part thereof in the name of the whole and repossess the same as of its former estate, and expel Tenant and those claiming through or under it and remove it or their effects without being deemed guilty of any manner of trespass, in each case without prejudice to any rights or remedies which might otherwise be available to Landlord for collection of Rent and other damages for breach of covenant, and upon entry as aforesaid or upon sending of such notice, this Lease shall terminate. (b) Without limiting other remedies of Landlord at law or in equity for any breach of or on account of termination of this Lease, Tenant covenants that in case of such -16- termination under sub-section (a) of this Section, Tenant shall pay to Landlord the unpaid Rent owed to Landlord through the time of termination, plus interest thereon at the rate of 18% per annum from the date the same was due until paid; and (ii) at the election of Landlord, either: (1) the present value of a sum which, at the time of such termination of this Lease is equal to (A) the aggregate of the Rent which would have been payable by Tenant for the period commencing upon such termination of this Lease and continuing through the date this Lease would have terminated had there been no default by Tenant; minus (B) the fair market rental value of the Leased Premises (after deducting reasonable projections for Landlord’s costs and expenses of re-letting the Leased Premises, including advertising expenses, brokerage commissions, reasonable attorneys’ fees, and commercially reasonable costs of repairing, renovating, or otherwise altering the Leased Premises to suit the new tenant); or (2) for the period of time commencing upon such termination of this Lease and continuing through the date this Lease would have terminated had there been no default by Tenant hereunder, the difference, if any, between the Rent which would have been due had there been no such termination and the amount being received by Landlord as rent from a replacement Tenant of Leased Premises, if any. In addition, Tenant shall pay to Landlord all costs and expenses of such re-letting, including advertising expenses, brokerage commissions, reasonable attorneys’ fees, and commercially reasonable costs of repairing, renovating, or otherwise altering the Leased Premises to suit the new tenant. (c) If Tenant shall default in the performance or observance of any covenant, agreement, or condition in this Lease contained on its part to be performed or observed and shall not cure any such default as provided herein, Landlord may, at its option, without waiving any claim for damages or any other right or remedy for breach of this Lease, at any time thereafter, cure such default. Any amount paid or any liability incurred by Landlord in so doing shall be deemed paid or incurred for the account of Tenant, and Tenant agrees to immediately reimburse Landlord therefor, as additional Rent. (d) Tenant shall pay all reasonable attorneys’ fees incurred by Landlord in connection with the enforcement of Tenant’s obligations under this Lease. (e) Landlord shall in no event be in default in the performance of any of its obligations hereunder unless and until Landlord shall have failed to perform, or failed diligently to attempt to perform, such obligations within thirty (30) days or such additional time as is reasonably required to correct any such default after notice by Tenant to Landlord properly specifying wherein Landlord has failed to perform any such obligation. (f) In no event shall Landlord be liable to Tenant for incidental, consequential, or punitive damages in connection with any matter arising out of this Lease or the Leased Premises. Without in any way limiting or impairing the effect of the other provisions of this Lease, Tenant shall neither assert nor seek to enforce any claim arising out of this Lease or out of the use or occupancy of the Leased Premises against Landlord, its shareholders, directors, officers, employees, or agents, or any of its or their assets other than the value of Landlord’s interest in the Leased Premises and Tenant agrees to look solely to such interest and insurance

-17- coverage for the satisfaction of any claim arising out of this Lease or out of the use or occupancy of the Leased Premises. 23. Sale or Mortgage; Estoppel; Subordination. (a) Nothing contained in this Lease shall limit Landlord's right to sell, mortgage, or otherwise encumber its fee interest in the Leased Premises, or affect Landlord's right to assign this Lease or the Rent payable under this Lease, whether as further security under a fee mortgage or otherwise. Any such assignment of this Lease or of the Rent payable under this Lease shall be honored by Tenant. (b) In the event Landlord shall sell, transfer, or otherwise convey the Leased Premises, Landlord, upon the written assumption by the transferee of the obligations arising hereunder after the date of such transfer, shall be entirely freed and relieved of all covenants and obligations of Landlord hereunder. Nothing in the preceding sentence shall be construed to impair Tenant’s leasehold interest under this Lease so long as Tenant performs and observes the covenants and terms of this Lease on its part to be performed and observed. (c) This Lease shall, at Landlord’s option, be subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation or security now or hereafter placed upon the Leased Premises, and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. Notwithstanding such subordination, Tenant's right to quiet possession of the Leased Premises shall not be disturbed if Tenant is not in default and so long as Tenant shall pay the Rent and observe and perform all of the provisions of this Lease. If any mortgagee, trustee, or ground lessor shall elect to have this Lease made prior to the lien of its mortgage, deed of trust or ground lease, and shall give written notice thereof to Tenant, this Lease shall be deemed prior to such mortgage, deed of trust, or ground lease, whether this Lease is dated prior to or subsequent to the date of said mortgage, deed of trust, or ground lease or the date of recording thereof. Tenant agrees to execute any documents required to effectuate an attornment, a subordination, or to make this Lease prior to the lien of any mortgage, deed of trust or ground lease, as the case may be. Tenant's failure to execute such documents within ten (10) days after written demand shall constitute an Event of Default by Tenant hereunder. (d) At any time, and from time to time, upon the written request of Landlord or any mortgagee or prospective purchaser of the Leased Premises, Tenant, within ten (10) business days after such written request, agrees to execute, acknowledge and deliver to Landlord and/or mortgagee, without charge, an estoppel certificate which shall contain (i) a certification that this Lease is unmodified and in full force and effect or, if modified, a statement of the nature of any such modification and a certification that this Lease, as so modified, is in full force and effect; (ii) a certification of the date to which the Rent payable by Tenant are paid (including any payments in advance); (iii) a certification that Tenant is not in default hereunder and that there are not, to Tenant's knowledge, any uncured events of default on the part of Landlord hereunder, or a specification of such events of default if any are claimed by Tenant; and (iv) such other commercially reasonable certifications as are identified in such request. Tenant's failure to deliver such estoppel certificate within the time frame set forth above shall, at Landlord’s option, -18- constitute an Event of Default hereunder and shall, at Landlord’s option, be conclusive proof that this Lease is in full force and effect without modification except as may be represented by Landlord, that there are no uncured defaults in Landlord's performance of Landlord's obligations under this Lease, and that not more than one month's Rent has been paid in advance. (e) If Landlord desires to finance, refinance, or sell the Leased Premises, Tenant hereby agrees to deliver to any lender or purchaser designated by Landlord, and cause any guarantor to so deliver, such financial statements and other financial information pertaining to Tenant and such guarantor as may be reasonably required by such lender or purchaser. Tenant's failure to provide such information or cause such information to be provided within ten (10) days after written demand shall constitute an Event of Default by Tenant hereunder. 24. Notices. Any notice, request, demand, approval or consent given or required to be given under this Lease shall be, unless otherwise stated, in writing and shall be deemed to have been given (i) when hand delivered to the other party; or (ii) on the day on which the same shall have been mailed by United States registered or certified mail, return receipt requested, with all postage prepaid, or by Federal Express or similar nationally-recognized overnight courier service that provides evidence of delivery, to the address of the party to receive such notice as set forth in the preamble hereof, provided that either party may, by such manner of notice, add or substitute one or more persons or addresses for provision of such notice. 25. Tenant Representations. (a) Neither Tenant nor any key personnel of Tenant nor any of Tenant’s underlying beneficial owners have engaged in any dealings or transactions, directly or indirectly, (i) in contravention of any U.S., international or other anti-money laundering regulations or conventions, including without limitation the United States Bank Secrecy Act, the United States Money Laundering Control Act of 1986, the United States International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, Trading with the Enemy Act (50 U.S.C. §1 et seq., as amended), any foreign asset control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 and the regulations promulgated thereunder (collectively, the “Patriot Act”), or any order issued with respect to anti-money laundering by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”); or (ii) in contravention of Executive Order No. 13224 issued by the President of the United States on September 24, 2001 (Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), as may be amended or supplemented from time to time (“Executive Order 13224”); or (iii) on behalf of terrorists or terrorist organizations, including those persons or entities that are included on any relevant lists maintained by the United Nations, North Atlantic Treaty Organization, Organization of Economic Cooperation and Development, OFAC, Financial Action Task Force, U.S. Securities & Exchange Commission, U.S. Federal Bureau of Investigation, U.S. Central Intelligence Agency, U.S. Internal Revenue Service, or any country or organization, all as may be amended from time to time. -19- (b) Neither Tenant nor any key personnel of Tenant nor any of the underlying beneficial owners of Tenant is or will be a person or entity (i) that is listed in the Annex to or is otherwise subject to the provisions of Executive Order 13224; or (ii) whose name appears on OFAC’s most current list of “Specially Designated Nationals and Blocked Persons,” (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); or (iii) who commits, threatens to commit or supports “terrorism”, as that term is defined in Executive Order 13224; or (iv) who has been associated with or is otherwise affiliated with any entity or person listed above. (c) Tenant represents that it has all requisite power and authority to enter into this Lease and the person executing this Lease on behalf of Tenant represents that he or she has all requisite power and authority to do so. 26. Miscellaneous Provisions. (a) Invalidity of Particular Provisions. If any term or provision of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by applicable Laws. (b) Governing Law. This Lease, and all claims or causes of action (whether arising in contract, in tort, or by statute) that may be based upon, arise out of or relate to this Lease, shall be governed by and enforced in accordance with the internal Laws of the State of Wisconsin, including its statutes of limitations, without regard or reference to conflicts of law principles. (c) Interpretation. Whenever the word “include,” “includes,” or “including” is used in this Lease, it is deemed to be followed by the words “without limitation.” The terms “this Lease,” “hereof,” “herein,” “hereby,” “hereunder” and similar expressions refer to this Lease as a whole and not to any particular section of this Lease unless the context otherwise requires. The word “person” includes any individual, corporation, firm, association, partnership (general or limited), joint venture, limited liability company, trust, estate or other legal entity. The section and sub-section headings throughout this instrument are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify, or aid in the interpretation, construction, or meaning of the provisions of this Lease. Whenever in this Lease provision is made for the doing of any act by any party, it is understood and agreed that said act shall be done by such party at its own cost and expense, unless a contrary intent is expressed. (d) Entire Agreement; Binding Effect. All negotiations, considerations, representations, and understandings between Landlord and Tenant are incorporated herein and may be modified or altered only by agreement in writing between Landlord and Tenant, and no act or omission of any employee or agent of Landlord shall alter, change, or modify any of the provisions hereof. All rights, obligations and liabilities contained herein given to, or imposed upon, Landlord and Tenant shall extend to and bind the several respective administrators, -20- trustees, receivers, legal representatives, successors, heirs and permitted assigns of Landlord and Tenant. If the “Tenant” under this Lease consists of more than one person or entity, each such person and/or entity shall be bound jointly and severally by the terms, covenants and agreements herein and jointly and severally liable for all obligations arising hereunder. (e) Language. Words of any gender used in this instrument shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires. (f) Recording; Notice of Lease. Landlord and Tenant agree that this Lease shall not be recorded. The parties agree that at the request of either party, they will execute, acknowledge, and deliver a notice or memorandum of this Lease in recordable form for recording in the applicable county Registry of Deeds. The requesting party shall bear the expense of recording such notice or memorandum. The Memorandum of Lease shall not be construed to vary the terms and conditions hereof. Landlord and Tenant also agree that, upon the request of either party, they will execute, acknowledge, and deliver a commercially reasonable instrument in recordable form with respect to the termination date of this Lease. (g) Timeliness of Landlord’s Notices. Landlord's failure during the Lease Term to prepare or deliver any of the statements, notices, or bills, or invoices for any sum payable by Tenant under this Lease shall not in any way cause Landlord to forfeit or surrender its rights to collect any amount that may have become due and owing from Tenant during the Lease Term. (h) Waiver of Jury Trial. Tenant, for itself and its heirs, successors, and assigns, does hereby WAIVE THE RIGHT TO A TRIAL BY JURY in any action or proceeding based upon, or related to, the subject matter of this Lease. This waiver is knowingly, intentionally, and voluntarily made by Tenant and Tenant acknowledges that neither Landlord nor any person acting on behalf of Landlord has made any representations of fact to induce this waiver of trial by jury or in any way to modify or nullify its effect. Tenant further acknowledges that it has been represented (or has had the opportunity to be represented) in the signing of this Lease and in the making of this waiver by independent legal counsel, selected of its own free will, and that it has had the opportunity to discuss this waiver with counsel. Tenant further acknowledges that it has read and understands the meaning and ramifications of this waiver provision. 27. (Reserved.)

-21- IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed by their duly authorized undersigned representatives as an instrument under seal as of the day and year first written above. WITNESS: LANDLORD: 106 BREMER AVE, LLC By: Name: David Noble Title: President /s/ David Noble -22- TENANT: TIMBER TECHNOLOGIES SOLUTIONS, INC. By: Printed Name: Thomas Niska Its: Co-President List of Exhibits Exhibit A – Description of the Leased Premises Exhibit B – Base Rent /s/ Tom Niska

EX-31.1 5 star10q-q22024xex311.htm EX-31.1 Document

EXHIBIT 31.1

CERTIFICATION OF

PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Richard K. Coleman, Jr., certify that:

1.I have reviewed this quarterly report on Form 10-Q of Star Equity Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 13, 2024


/s/ Richard K. Coleman, Jr.
Richard K. Coleman, Jr.
Chief Executive Officer (Principal Executive Officer)

EX-31.2 6 star10q-q22024xex312.htm EX-31.2 Document

EXHIBIT 31.2

CERTIFICATION OF

PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, David J. Noble, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Star Equity Holdings, Inc.;

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 13, 2024


/s/ David J. Noble
David J. Noble
Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1 7 star10q-q22024xex321.htm EX-32.1 Document

EXHIBIT 32.1

CERTIFICATION OF

PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

In connection with the accompanying Quarterly Report on Form 10-Q of Star Equity Holdings, Inc. for the period ended June 30, 2024, I, Richard K. Coleman, Jr., Chief Executive Officer of Star Equity Holdings, Inc., hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)such Quarterly Report on Form 10-Q of Star Equity Holdings, Inc. for the period ended June 30, 2024, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)the information contained in such Quarterly Report on Form 10-Q of Star Equity Holdings, Inc. for the period ended June 30, 2024, fairly presents, in all material respects, the financial condition and results of operations of Star Equity Holdings, Inc. at the dates and for the periods indicated.

This certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

August 13, 2024


/s/ Richard K. Coleman, Jr.
Richard K. Coleman, Jr.
Chief Executive Officer (Principal Executive Officer)

A signed copy of this written statement required by Section 906 has been provided to Star Equity Holdings, Inc. and will be retained by Star Equity Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2 8 star10q-q22024xex322.htm EX-32.2 Document

EXHIBIT 32.2

CERTIFICATION OF

PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

In connection with the accompanying Quarterly Report on Form 10-Q of Star Equity Holdings, Inc. for the period ended June 30, 2024, I, David J. Noble, Chief Financial Officer of Star Equity Holdings, Inc., hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

This certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

August 13, 2024


/s/ David J. Noble
David J. Noble
Chief Financial Officer (Principal Financial and Accounting Officer)