Safeguard Scientifics Inc (SFE) 2009 Q1 法說會逐字稿

Greetings and welcome to the Safeguard Scientifics conference call. At this time, all participants are in listen-only mode.

A brief question-and-answer session will follow the formal presentation. (Operator Instructions)

As a reminder, this call is being recorded. It is now my pleasure to introduce your host, John Shave, VP of Business Development and Corporate Communications for Safeguard Scientifics. Thank you sir. You may begin.

Good morning and thank you for joining us for Safeguard Scientifics first-quarter 2009 earnings conference call. Joining me on today's call are Peter Boni, Safeguard's President and Chief Executive Officer; and Steve Zarrilli, Senior Vice President and Chief Financial Officer.

During today's call, Peter will review the quarter's highlights, then Steve will discuss financial results and strategies for Safeguard. Afterwards, we will open the phones for your questions.

Before we begin, I must remind you that today's presentation includes forward-looking statements. Reliance on forward-looking statements involve certain risks and uncertainties including but not limited to the uncertainty of future performance of our partner companies and the risks of acquisition or disposition of interest and partner companies, capital spending by customers and the effect of the economic conditions generally as well as the developments of the technology and life sciences markets of which Safeguard focuses. During the course of today's call, words such as expect, anticipate, believe and intend will be used in our discussion of goals or events in the future.

The Company cannot be certain that final outcomes will be as described today. Safeguards filings with the SEC including our Form 10-K describe in detail the risks and uncertainties associated with managing our business. You are encouraged to read these filings. The Company does not assume any obligations to update forward-looking statements made today. And here is Safeguards CEO, Peter Boni.

Thanks John. And thanks to all of you for joining us today for our Q1 2009 progress report not only on safeguard but also our 17 partner companies. We have substantial progress to report despite what we are observing in the macroeconomic environment.

Nationally, venture capital investment in the first quarter declined 61% to $3 billion compared to $7.7 billion for the same period last year. The number of deals completed in Q1 slumped 45% and was 549 transactions versus 997 deals in Q1 of 2008 according to Money Tree reports from Price Waterhouse Coopers, and the National Venture Capital Report based on data from Thomson Reuters.

Q1 saw double-digit deployment declines in every major industry (inaudible) lowest quarterly venture capital investment actually since 1997. Separately, projections persist for a VC shakeout over the next year or two and some VCs are having difficulty raising new funds as well adding to speculation of a shakeout. Yet after unprecedented volatility in late 2008, markets appear to be stabilizing in early 2009.

At Safeguard, we have identified potential opportunities for our existing partner companies to grow through targeted acquisitions. In addition, we believe there are several opportunities to deploy capital in new partner companies at more reasonable valuations.

Our evergreen source of capital is available for deployment. Deal teams in our healthcare and technology groups are active, albeit with temperance, as they evaluate high potential businesses with growth capital needs up to $25 million.

Of course in this macroeconomic environment, it presents a double-edged sword, if you will. This is a period of lower investment activity and it's not a particularly good time to sell.

Until capital markets loosen, we remain focused on enhancing value in our partner companies rather than pursuing exit simply for activity sake. Exit opportunities may arise from time to time, but in this challenging business climate, we are working to build value in our partner companies, drive their growth and keep their cash consumption plans in line.

Now we have said this before but it bears repeating. In 2009, Safeguard is disciplined yet poised to seize opportunities in a time when lingering uncertainty is creating compelling valuations. Now let's get caught up with the progress of Safeguard during the quarter.

The most significant development for Q1 was Clarient's private placement of up to $50 million in convertible preferred stock from Oak Investment Partners, a multistage investment firm based in Westport, Connecticut. The transaction creates both short-term and long-term benefits for each of Safeguard, Clarient and Oak.

For Safeguard, the deal has strengthened our balance sheet and increased our financial flexibility. Borrowing the second closing under the transaction later this month, $19.5 million in cash from our more mezzanine debt facility with Clarient will have been returned to Safeguard. $12.3 million in cash collateral which previously supported our guarantee of Clarient's third-party debt will have been released and we will have eliminated any contractual commitment to provide additional capital to Clarient.

For Clarient, the new capital from Oak allows it to extinguish all of its outstanding debt other than for receivables financing and provides additional working capital to fuel Clarient's robust topline growth and its geographic expansion. The private placement also propels Clarient towards its goal of achieving profitability in 2009 by eliminating $11 million in interest expense fees actually for the remainder of the year.

Furthermore Clarient and Safeguard gain a well-heeled strategic partner in Oak which gains a meaningful stake in Clarient as a result of the transaction. In addition, the fact that this placement was done at an 11% premium to its then market price and required no warrant coverage or dividend in this climate is both noteworthy and a testament to Clarient's ripe business future.

Since this capital transaction with Oak was announced, Clarient's share value has appreciated by 67% and Safeguards share value has also appreciated by 76%. Now let's move on to other developments at our 17 partner companies.

In the aggregate, Safeguard and most of its partner companies posted solid performance during this quarter. Revenue growth continued to track on target with our guidance for 2009.

Healthcare partners grew slightly faster than we expected. Growth was slower among technology partner companies due largely to the weak US economy.

Consolidated revenue, that is revenue at majority-owned partner company Clarient, increased 41% year-over-year to $22.4 million while aggregate revenue for our other partner companies was in line with our previous guidance and on track for 2009 growth between 15 and 27% year-over-year. Our equity position in publicly traded Clarient is carried on our books at $21.1 million.

March 31, the end of the quarter, the market value for our position was approximately $105 million compared with $76 million at year-end 2008 and today it stands at $132 million. Clarient's topline continues to grow robustly due to new higher-margin cancer diagnostic services for tumors of the colon, prostate, breast and lung as well as increased testing volumes of higher Medicare reimbursement rates.

Furthermore, we expect Clarient to post significant EBITDA and profitability numbers this year along with not requiring any further capital from Safeguard. Moving on, let's review highlights at Safeguard's minority held partners.

We define the first set of seven partner companies as developmental stage companies, improving out technology, developing prototypes, refining their business models and building partnerships. Avid Radiopharmaceuticals is the leader in the development of molecular imaging products for neurodegenerative diseases.

The Company's lead product for imaging amyloid plaque in Alzheimer's disease patients is in now the Phase 3 of the FDA trial process. A new drug application filing is anticipated in 2010 with commercialization as early as 2011.

Avid anticipates being in Phase 2 trials for its Parkinson's disease imaging products later this year. Safeguard deployed $7.3 million of capital in AVid in May of 2007 and we have a 14% ownership position.

Garnet BioTherapeutics, our newest partner company, is preparing to launch a Phase 2 clinical trial of its lead product candidate. In preclinical studies, this product candidate reduced scarring and accelerated healing in surgical wounds.

Garnet's cell therapy is based on distinct bone marrow stem cell capable of reducing inflammation and promoting healing. Garnet's cost-effective, compliant manufacturing process derives a high number of dosage from a single adult donor. Safeguard deployed $2.5 million in November 2000 for a 31% position.

At Molecular Biometrics, the immediate focus is on Europe and Asia where the company plans to introduce its non-invasive process to lower the incidence of unintended multiple births from the in vitro fertilization. They will do that this year right on the heels of Octomom.

In the meantime, Molecular Biometrics is making progress domestically with a pivotal clinical trial underway for a late 2010 or early 2011 anticipated US product release. During 2009 we expect MB to shift from developmental to initial revenue stage.

The company's objective in the treatment of infertility is to reduce the [potential] of risks associated with multiple births while maintaining or improving pregnancy rates which will ultimately reduce healthcare costs. Safeguard deployed $4.4 million of capital in late 2008 and in first quarter of 2009 for a 38% position.

NuPathe specializes in therapeutics for the treatment of neurological and psychiatric disorders including migraines and Parkinson's disease. As planned, Phase 3 trials began this year for its transdermal patch for the relief of migraines, a condition suffered by an estimated 28 million people annually in the US alone.

[Interest] also was building a NuPathe preclinical proof of concept study for its novel approach in treating Parkinson's disease. Since late 2006, Safeguard has deployed $10 million of capital in NuPathe and we own 24%.

In addition to Safeguard, SR1, the venture capital arm of GlaxoSmithKline, the maker of the oral migraine medication, is also an investor. Tengion is a clinical stage organ regeneration company with products in our neurologic, vascular and renal regeneration based upon its proprietary organ regeneration platform.

In late 2008, the company completed a Phase 2 trial of the patented Tengion Neo-Bladder Augment for children neurogenic bladders due to spina bifida. A second Phase 2 trial with Neo-Bladder Augment in adults with neurogenic bladders due to spinal injuries has completed enrollment and in the next year, Tengion expects to begin its first human clinical trial with the Tengion Neo-Urinary Conduit for patients with bladder cancer. Safeguard owns 5% after deploying $7.5 million of capital in October 2008.

Strong growth of its user base and continued positive media attention characterizes the status of Swaptree.com, a new generation e-commerce company with an online platform for trading books, CDs, DVDs and video games. Then Safeguard deployed $3.4 million in capital in Swaptree in July of 2008.

Total registered users have grown almost 1000%. Monthly unique visitors have increased 460%. Monthly page views and monthly trades have increased by approximately five and six times respectively. Safeguard owns 29% of Swaptree and during 2009, we expect Swaptree to move from the developmental stage to the initial revenue stage as well.

Six of Safeguard's 10 healthcare partners are at the revenue stage, three at the initial revenue stage -- Alverix, Cellumen and Rubicor Medical. These partner companies are developing customer relationships, starting to penetrate their target markets, rounding out their management teams, organizations and infrastructures.

Alverix is an optical electronics company developing low-cost, handheld reader devices the accuracy and precision of laboratory instruments for use right at the point of care. The company has scalable design and manufacturing facilities in both California and Malaysia and they are working with diagnostic partners.

Alverix recently applied for an FDA -- for clearance in its reader devices which could lead to domestic sales later in 2009. Safeguard deployed $3.9 million in capital in Alverix beginning in October 2007 and we hold a 50% stake.

Cellumen is penetrating the market with its cellular level tools that indicate that drug toxicity earlier in (technical difficulty) discovery and development process. The company recently added a former Pfizer R&D executive to its board and we are encouraged by Cellumen's healthy pipeline of big pharma and biotech customers including Eli Lilly, and Mitsubishi Tanabe. Safeguard deployed $6.3 million of capital in Cellumen in June of 2007 and February 2009 and we own 51%.

Rubicor Medical is a medical devices company with FDA-approved, minimally-invasive breast biopsy and tissue removal technologies. A CEO search is advancing as are initiatives to secure additional funding.

In the meantime, operations have been suspended. We deployed $20 million of capital in August 2006 and own 45%.

Four of our eight technology companies are expansion-stage companies. They include two that are IT healthcare firms, Advantedge Healthcare Solutions and Portico; also, our Beyond.com and Authentium.

Advantage Healthcare Solutions uses a proven proprietary software platform to deliver medical billing solutions to physician groups. AHS is gaining meaningful scale through both organic growth and strategic acquisitions.

We deployed $9 million in capital in AHS in November of 2006 and May of 2008 and have a 38% ownership position. Authentium develops software and services to protect consumers in a connected world.

The company's core technologies are used by leading software providers including Google, Microsoft, Symantec, and others to create or enhance industry-leading computer security products. In addition, banks and financial services institutions leverage Authentium SafeCentral software providing the customers with protected e-commerce transactions through the world's first secure Internet and an end-to-end secured online environment.

Recently, Authentium was included in Gartner's Cool Vendors in Infrastructure Protection 2009 report and that highlighted companies with real-world usability and infrastructure protection that continued to provide security innovation. Safeguard deployed $9.3 million of capital in Authentium since April 2006 and Safeguard has a 20% ownership position.

Beyond.com is one of the largest networks for online niche career communities with more than 15,000 websites. During the quarter, job seekers clicked on Beyond.com's site in record numbers, driving up traffic 43% from Q4 levels to an average of 4.2 million visitors per month.

Sectors with increased online job postings in the first quarter were healthcare, IT and sales according to Beyond.com's quarterly trends analysis. Beyond.com is gained market share in 2008 over larger competitors and remains well positioned with long-term growth drivers intact. Safeguard deployed $13.5 million in capital in Beyond.com in March of 2007 for a 37% stake.

Portico Systems sells software and services to health plans to help them reduce administrative medical and IT costs. Portico is growing revenues at double-digit annual rates and building on its momentum from 2008 which was marked by several strategic investments and acquisitions.

And they recently announced that they had acquired Choreo suite of provider contracting solutions from Kryptiq Corporation. Now that expands Portico's customer base from 17 to 33 healthcare customers which serves 30 million members nationally. Safeguard deployed $8.8 million of capital in Portico in 2006 and February of 2008 and we have a 46% ownership position.

Safeguard's high-traction stage partners -- Advanced BioHealing, Bridgevine, GENBAND and Clarient are reporting solid growth, nearing breakeven or driving further bottom-line profitability and gaining commercial traction and I summarized Clarient's progress earlier. Advanced BioHealing is the leader in regenerative medicine, developing and marketing cell-based and tissue-engineered products for would healing.

ABH performed very strongly for the quarter and demand continues to surge in the US for ABH's FTA-approved product Dermagraft which is anticipated for treatment for diabetic foot ulcers. Safeguard deployed $10.8 million in capital in ABH in February and May of 2007 and we have a 20% ownership position.

Bridgevine is a leading Internet marketing company that enables online consumers to compare and purchase digital services such as Internet, phone, VoIP, TV, wireless, music entertainment and more. Despite reduced activity in the housing market, the company continues to expand its pipeline of products and services to grow its merchant base. Safeguard deployed $10 million of capital in Bridgevine in August of 2007 and March of 2009 for a 24% stake.

GENBAND merged with Safeguard partner company NexPoint Networks in late 2008 to bolster its position as a market leading developer of next-generation IP infrastructure solutions. GENBAND's high-performance gateway solutions are deployed in more than half of the world's 100 largest fixed and mobile telecommunications providers. We have a 2.2% ownership position in GENBAND.

On that note, I'll turn the call over to Steve Zarrilli, our CFO, and Steve will review our financial strategy and performance.

Thanks Peter. Our earnings news release and financial statements were distributed earlier and I would be happy to elaborate on those details during the Q&A period.

Balance sheet strength and prudent use of cash remain Safeguard's top priorities for 2009. We intend to continue to evaluate and pursue opportunities to reduce operating expenses where possible, opportunistically repurchase our outstanding convertible debt at a discount, manage cash deployments conservatively in our support of partner companies and augment existing capital with alternative pools of capital.

At March 31, we had $90.8 million in cash, cash equivalents and marketable securities excluding cash held in escrow of $6.9 million. Our cash balance modestly increased by $2.9 million from December 31 primarily related to the net impact of the following items -- cash operating expenses for the quarter of $4.2 million, deployment of $3.5 million during the quarter to support growth of existing partner companies, and the net repayment of $9.7 million by Clarient of amounts outstanding under the Safeguard mezzanine facility.

As we discussed earlier, the mezzanine facility will be extinguished but the completion with the second tranche of the Clarient-Oak private placement of which there exists an approximate outstanding balance of $5.5 million under this facility. This facility was also reduced in size from $30 million of aggregate availability to $10 million of availability upon the closing of the first tranche of the Clarient-Oak private placement transaction.

The first priority in our use of cash remains to support our current partner companies in their value building activities. Given today's macroeconomic climate, we have assumed that no exits will occur during 2009 although a few opportunities may develop for later in the year. We can be nimble and flexible, changing as external conditions warrant.

Expense control initiatives during 2008 reduced annual operating expenses by 19%. In the first quarter of 2009, operating expenses including stock-based compensation and depreciation expenses were down 18% to $4.4 million in comparison to Q1 of 2008.

Principal elements related to this change include lower employee costs, lower facility expenses, and lower professional fees. During the first quarter, there were no (inaudible) repurchases. However to date, we have repurchased an aggregate of $64 million in face value of our convertible senior debentures at an aggregate discount of 23%.

The outstanding balance of these debentures as of March 31 was $86 million. We have remained focused on opportunistically repurchasing the remaining balance at discounts to face and we continue to evaluate alternatives to refinance, replace or even pay off these debentures.

In February, we announced that Safeguard entered into a $50 million two-year credit facility with Silicon Valley Bank. While we anticipate no additional short-term borrowing needs, our facility with SVB is flexible with borrowing capacity based on both cash on hand and other asset values related to our equity ownership in partner companies. We also believe that Silicon Valley Bank can be a valuable leading source for our partner companies as their capital needs change.

Our revenue guidance for 2009 is unchanged. We expect aggregate revenue of Safeguard's partner companies to be in the range of $200 million and $220 million for the year.

For our life science partner companies, we expect the group's 2009 aggregate revenue to be between 145 and $155 million. For the technology group, we anticipate aggregate revenue to be between 55 and $65 million. GENBAND is not included in our revenue guidance and our partner companies, Avid, Garnet, NuPathe and Tengion are pre-revenue companies and will not impact our aggregate revenue expectations.

As you may recall, there was a one-quarter lag in reporting or interest in the results of minority health companies. And with that, let me turn the floor back over to Peter for the Q&A period.

Okay thanks, Steve. Ryan, let's open the phones up and get some questions.

(Operator Instructions) Bob Labick, CJS Securities.

A couple of ones. I'll ask the obvious one first.

Your market cap is currently below that of your value in the Clarient stock that you own. Can you discuss any actions you could take to address that? And maybe also talk about your long-term plans for Clarient, if exiting is an option and how you would think about going about that process further from this Oak deal which is obviously a terrific deal that you need.

Backwards, first we were very pleased with the Oak transaction and I think in this climate, valuation it seems is improved with balance sheet improvement and both Clarient and Safeguard saw with that balance sheet improvement, they improved their valuation substantially ahead of the market, substantially ahead of the peers. We have always stated that every one of our companies is ultimately going to be exited and we will continue to replenish that portfolio of companies.

In the Clarient's case, we have stated several times what we won't do and that is to dribble stock out over a long period of time. That is not the way we would find liquidity with Clarient. I think we would liquidity with Clarient should there A, be an ultimate acquirer of the company; B, a block sale of stock by us to other parties, either strategic or financial.

Great, that's very helpful. And then just moving on to another one of your holdings which is doing very well, I wanted to ask a question about Avid.

As it relates to Avid, at GE's annual meeting last month, they discussed their molecular imaging product and they expect to commercialize it by 2015 with a $500 million opportunity for GE with their product. Could you discuss how that product which looks similar to my untrained eye relates to Avid and Avid's time table for marketing its products and where it stands?

Good question Bob. We were really excited about GE's view of the marketplace that corroborated our own view of the marketplace.

Actually in recent FDA meetings with Avid and GE presence, the FDA sanctioned the Avid approach to the FDA trials very clearly and that puts Avid, I would say, a couple of years ahead of GE just in putting a product to the market commercially. GE is substantially behind them in that whole FDA approval process.

So we are very excited about Avid, the company, the marketplace that it is targeting and all of the indicators are that Avid is in the leading position and it's a very exciting, valuable opportunity for us. And we are happy to see that GE thinks it's a $500 million opportunity.

Great, thank you very much. I'll get back in queue.

Bill Sutherland, Boenning & Scattergood.

The annual expense run rate, Steve, that you have gotten down to; any further progress that you're working on and kind of can you give us a sense of dimension?

There are continued efforts to refine certain expenses within our operating structure and we are very active in a number of initiatives. Too soon to tell the size of the impact, but our goal is to continue to find efficiencies in 2009 and to show a continued reduction, if you will, in those expenses in the aggregate in comparison to prior periods.

Are you focused on all three of those categories that you highlighted?

I think what you will find is that there will be some efficiencies found in certain of the operating activities of our corporate infrastructure that will provide some further cost refinement. There are no plans to further reduce headcount at Safeguard.

There is no plan necessarily to increase headcount. We believe that we have got an optimal amount of resources to pursue the activity. So I think you'll find that the cost reductions that we may enjoy going forward will come from other areas outside of direct payroll costs.

Okay and on the alternative pools of capital initiatives, any update there?

We have begun some preliminary discussions with some trusted advisors and parties external to Safeguard to get some initial reaction to our endeavors. That feedback has been vitally important to us in further crafting our strategy around those initiatives and we have a fair amount of internal resources spending time, energy and effort to ensure that this stays a very active Endeavor for us during 2009 and 2010.

Bill, just a footnote on that. The Oak transaction with Clarient is an example of an alternate pool of capital which augmented both balance sheets and augmented our shareholder value as a result.

That's a good point Peter. The deployments in the quarter of $3.5 million, did I -- maybe I haven't read the release close enough. Which companies did that go to?

We put some money into Cellumen. We modestly increased some funding to -- I apologize. Some was done just recently and some was done in the quarter. Molecular Biometrics is in Q1 and those two were the lion's share of what we --

I think we helped fund an acquisition for Portico as well.

Alright. I saw that. So does -- is the SVB facility completely available still?

Other than for a letter of credit commitment in connection with a lease obligation for one of our former product companies that Safeguard is still responsible for for about $6 million, we have roughly $44 million available to us on that facility.

And then last, I wondered if you could give the comps for the revenue expectations -- I'm sorry -- the revenue that you are expecting for the full year and what you did last year. I assume --

As I mentioned earlier, Bill, our expectation on an aggregate basis for Safeguard's partner companies revenue ranges from 200 to $220 million for the year and that guidance remains unchanged from what we had previously communicate and that is up over $173 million in the aggregate that was achieved last year.

Okay, that I have. I didn't know -- is the breakout in the filing? I haven't looked at it in a while.

It may not be immediately apparent but we will make sure that we provide some further documentation if it's not clear in our information.

Is not by company but it is by sector, healthcare or life science.

Is is? Thanks Peter. That looks like it's it for me.

Peter, I wanted to get your thoughts on given the state of the markets right now in the VC and early-stage world, do you -- what do you think is the approach that Safeguard can take to really take the greatest advantage of this kind of unprecedented low point? Thanks.

The guidance we've given to our partner company is first of all to protect their cash; secondly, to be very aggressive and predatory in their sales, marketing and competitive approach; and thirdly be opportunistic from an M&A perspective should they find a strategic combination that could give them greater critical mass, one; larger customer set, two; alternate channels of distribution, three; ancillary products that are strategic add-ons, four. We see a number of our companies as being acquisition candidates on the top end of that program.

And there is a liquidity issue with a number of the venture capital players that have a portfolio with no place to go. So we think it's a wonderful opportunity for private-to-private cashless transactions. We know how to do that. We have done that and we're taking advantage of that.

I'll add something as well, Bill, and that is in this environment; really only the very best companies are going to get financing and they will come at very attractive price points. So we have a high bar but a very active pipeline and we are looking for some real compelling opportunities.

Thanks again.

Sam Rebotsky, SER Asset Management.

It gives me great pleasure to congratulate you for this long-time-coming -- for the successful investment of Oak into Clarient because it didn't happen overnight and this is really what you have been working towards. So I want to congratulate you and your team on that achievement.

Now when we look at the balance sheet, we see the increase of the equity from 104 to 125 and we have a loss of $10 million. Could you sort of indicate what valuations did you increase to get to those numbers?

Sam, that was principally the result of the refinement of the accounting for our interest in Clarient and most specifically in connection with the greater amount of minority interest that now exists. But there was a new pronouncement recently that requires companies to modify the way that they account for what was referred to before as minority interest and now is referred to as non-controlling interest in a subsidiary.

And the application of that pronouncement or those principles gave rise to about a $15 million increase in equity because those interests, that minority interest now today, again referred to as non-controlling interest, is now presented as a component to equity. So if you wanted to look at -- if you tried -- and you can see that on our balance sheet very specifically with a line that's now called non-controlling interest in subsidiary of $14.8 million.

Great, great. Now as far as your commitments to invest funds at this current year, could you talk about the amount that you are required to invest and the kind of opportunities in the pipeline and what you see going forward as you contracted Oak, whether Oak would be interested in other of your investments or other people like Oak that may want to come in at this point to invest with other people similar to Oak?

The formal commitments we have are very modest. We don't actually disclose those commitments but I can tell you that they are very modest in their nature.

We do have a particular emphasis this year on ensuring that our existing partner companies have the capital that they need in order to successfully execute against their business plans and to take advantage of the opportunities that Peter spoke to. So though there isn't a specific number that we've committed to, we do provide internally for a number of different assessments and alternatives as to where capital may be deployed and that's as you can appreciate, updated quite frequently.

And finally as it relates to Oak, Oak we believe is just another example of where we have had some great partners in connection with some of the opportunities we have with our partner companies. We would anticipate the opportunity to work with Oak in the future but we also have some other great investment partners, if you will, in a number of our other companies that continue to provide opportunities for us in some unique ways as we continue to build these companies.

(Operator Instructions) Kate (inaudible) MFT Investors.

My question very specifically is for Peter and we've been following Safeguard for quite a bit of time and I know you joined in August of 2005 when the stock was trading at about $1.50. It's reached as high as $3.19 and since April 2007 when it was $3.19, it has gradually gone down. And we are just wondering, how well of a job you think you have done relative to how the stock has been trading over the past three or so years.

It was about $1.20 when I walked in the door and I was happy to see it climb to that $3.20 range up until this credit crunch hit us in the middle of I guess it was (inaudible) and I think in spite of the success of our companies, our balance sheet has been front-runner in what the marketplace climate has been as a result of the cash crunch and this flight to safety and the concern about liquidity. So we are addressing the balance sheet as well as addressing the performance of our companies and I believe that as we continue to succeed in addressing the balance sheet in this climate, we will continue to get rewarded from a shareholder value standpoint.

Okay, great. I have one more question and I apologize if it just completely missed it. But with Rubicor, what is the progress with that currently?

Rubicor has been searching for a CEO. It made progress in that regard. And in concert with the search for CEO, we have been searching for additional investment partners to come into Rubicor along with the rest.

Okay, now when do you think the new CEO will be in place?

We continue to make progress on that, but that's not something that I can forecast at this particular point in time.

This concludes the question-and-answer session for today. I would like to turn the call back to management for any concluding remarks.

Okay, thanks Ryan. Thanks very much for your continued interest and support of Safeguard. We look forward to keeping you up-to-date as we continue to make progress.

Ladies and gentlemen, this concludes today's teleconference. Thank you for your participation.