8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): August 3, 2005

Safeguard Scientifics, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Pennsylvania

(State or Other Jurisdiction of Incorporation)

1-5620 23-1609753

(Commission File Number) (IRS Employer Identification No.)

800 The Safeguard Building
435 Devon Park Drive
Wayne, PA  
 
19087

(Address of Principal Executive Offices) (Zip Code)

610-293-0600

(Registrant’s Telephone Number, Including Area Code)

Not applicable

(Former Name or Former Address, if Changed Since Last Report)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

     ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	ITEM 2.02. Results of Operations and Financial Condition
	ITEM 9.01. Financial Statements and Exhibits
	Exhibit Index
PRESS RELEASE

ITEM 2.02. Results of Operations and Financial Condition

On August 3, 2005, Safeguard Scientifics, Inc. (“Registrant”) issued a press release setting forth the Registrant’s financial information for the second quarter ended June 30, 2005. A copy of Registrant’s press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference.

This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”) or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

ITEM 9.01. Financial Statements and Exhibits

(c) Exhibits

     99.1      Press Release of Safeguard Scientifics, Inc. dated August 3, 2005

SIGNATURES

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

	Safeguard Scientifics, Inc.
Dated: August 3, 2005	By:	STEVEN J. FEDER
		Steven J. Feder
		Senior Vice President and General Counsel

Exhibit Index

Exhibit
No.	Description
99.1	Press Release of Safeguard Scientifics, Inc. dated August 3, 2005

EX-99.1

EXHIBIT 99.1

CONTACT:	Janine Dusossoit
	Vice President, Investor Relations
	Safeguard Scientifics, Inc.
	610-975-4952

SAFEGUARD ANNOUNCES 20% INCREASE
IN SECOND QUARTER 2005 REVENUES

Significant Progress in Reducing Operating Losses
at Consolidated Companies

Wayne, PA, August 3, 2005 — Safeguard Scientifics, Inc. (NYSE: SFE), a strategic growth partner for information technology and life sciences companies in the Time-to-Volume stage of development, today announced its operating results for the second quarter of 2005.

“We are very pleased with the revenue growth achieved by our companies in the second quarter,” said Anthony L. Craig, President and Chief Executive Officer of Safeguard. “All five consolidated companies made significant progress toward achieving profitability as they continue to scale their businesses.”

For the three months ended June 30, 2005, Safeguard’s consolidated revenues from continuing operations (which included Laureate Pharma) were $48.0 million, up 20% from $39.9 million in the second quarter of 2004. Net loss from continuing operations in the second quarter of 2005 was $7.7 million, or $0.06 per share, compared with net income from continuing operations of $10.2 million, or $0.08 per share in the second quarter of 2004. The 2004 results included $30.0 million of other income primarily associated with sales of companies.

For the six months ended June 30, 2005, Safeguard’s consolidated revenues from continuing operations were $90.9 million, up 15% from $78.8 million in the first six months of 2004. Net loss from continuing operations in the first six months of 2005 was $23.8 million or $0.20 per share compared to net income from continuing operations of $4.4 million or $0.04 per share in the year-ago period. The 2004 results included $40.5 million of other income primarily associated with sales of companies.

“Clarient, Mantas, and Pacific Title all recorded strong increases in revenues in the second quarter of 2005 compared to the year-ago quarter,” said Christopher Davis, Executive Vice President and Chief Administrative and Financial Officer of Safeguard Scientifics. “These companies, along with Alliance Consulting, all reported improved operating results in the second quarter of 2005.”

Revenues at Clarient (NASDAQ: CLRT), a technology and service resource for pathologists, oncologists and the pharmaceutical industry, jumped 118% in the second quarter of 2005 compared to the same period last year. Significant growth at its diagnostic laboratory services business and increased sales of its proprietary ACIS^® systems contributed to the gains.

Laureate Pharma, which provides bioprocessing and drug delivery services to support the development and commercialization of pharmaceutical and biopharmaceutical products, contributed $3.8 million of revenues in the second quarter of 2005, an increase of 43% from the first quarter, its first quarter as a Safeguard company. Safeguard acquired Laureate Pharma in December 2004 and is helping the company scale its business through an expanded marketing and sales effort.

At Mantas, a leading provider of sophisticated analytic applications that address risk management, fraud detection, anti-money laundering and trading compliance, revenues grew 47% over the prior year second quarter as a result of strong growth in services as well as increased product license revenue. At June 30, 2005, backlog was $44 million compared to $37 million at March 31, 2005.

Pacific Title, which provides high technology digital and other specialized post-production services to the Hollywood motion picture and television industry, achieved 15% growth in revenues compared to last year’s second quarter, reflecting an increase in trailer production as well as expanded new digital intermediate services.

During the second quarter of 2005, Alliance Consulting, which provides custom software solutions and IT consulting services to Fortune 2000 clients, achieved improved operating results and reached break-even despite a modest decline in revenues compared to the year-ago quarter. At that time, Alliance was engaged in a significant post-merger integration project for its largest customer. Alliance continues to successfully deploy its new, higher-margin Global Delivery and Master Data Management services.

“At the Parent Company level, Safeguard’s balance sheet is strong,” said Mr. Davis, “and we ended the second quarter with $151 million in cash and marketable securities available to support the funding of our companies and for making acquisitions.”

“Safeguard’s strategy is to create long-term value for our shareholders by acquiring companies and helping them to develop by applying operational and management expertise,” said Mr. Craig. “We work closely with our companies to help them define their growth strategies and achieve their goals. We also recognize that young companies must invest to build growth. While these investments affect their profitability as well as Safeguard’s consolidated results, we believe that the investments will enhance the long-term values of our companies. As their enhanced values become apparent in growing revenues and profitability, we expect to have opportunities to realize the increased values through liquidity events.”

Web Cast
Safeguard will host a conference call and Web cast on August 4, 2005 at 9:00 a.m. (ET) to discuss second quarter 2005 results. Interested parties may access the live Web cast through the Safeguard Web site at www.safeguard.com. Web participants are encouraged to go to the site at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. A replay of the Web cast will be archived and available at the Web site shortly after the call.

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About Safeguard
Safeguard Scientifics, Inc. (NYSE: SFE) is a strategic growth partner for companies in the Time-to-Volume stage of development. Time-to-Volume companies are those that are generating revenues from a commercially viable product or service, and are facing new challenges as they scale their businesses to meet market opportunities. Focused primarily on the information technology and life sciences sectors, Safeguard generally acquires majority ownership interests in companies at this stage of growth. In addition to expansion capital, Safeguard provides its companies a wide range of operating and managerial expertise to drive their successful growth to become market leaders. For more information about Safeguard and its strategy, visit www.safeguard.com.

Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained herein, statements contained in this release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward-looking statements are subject to risks and uncertainties. These forward-looking statements that could cause actual results to differ materially, include, among others, managing rapidly changing technologies, limited access to capital, competition, the ability to attract and retain qualified employees, the ability to execute our strategy, the uncertainty of the future performance of our companies, acquisitions and dispositions of companies, the inability to manage growth, compliance with government regulations and legal liabilities, additional financing requirements, labor disputes, the effect of economic conditions in the business sectors in which our companies operate, and other uncertainties described in the Company’s filings with the Securities and Exchange Commission. Many of these factors are beyond our ability to predict or control. In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. The Company does not assume any obligation to update any forward-looking statements or other information contained in this press release.

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Safeguard Scientifics, Inc.
Condensed Consolidated Balance Sheets
(in thousands)

	June 30,		December 31,
	2005		2004
	(unaudited)
Assets
Current Assets
Cash and cash equivalents, restricted cash and marketable securities — Parent	$	151,252	$	162,378
— Subsidiaries		10,644		19,170
Restricted marketable securities		3,822		3,771
Accounts receivable, net		39,059		37,677
Prepaid expenses and other current assets		4,482		8,974
Total current assets		209,259		231,970
Property and equipment, net		44,606		45,135
Ownership interests in and advances to companies		33,723		35,311
Long-term marketable securities		4,891		11,964
Long-term restricted marketable securities		11,251		13,045
Intangible assets, net		8,871		10,855
Goodwill		93,204		93,049
Other		10,672		12,483
Total Assets	$	416,477	$	453,812
Liabilities and Shareholders’ Equity
Lines of credit	$	18,710	$	11,636
Current maturities of long-term debt		3,652		3,820
Other current liabilities		42,452		47,026
Total current liabilities		64,814		62,482
Long-term debt		5,427		11,210
Minority interest		7,302		11,652
Other long-term liabilities		13,207		12,665
Convertible senior debentures		150,000		150,000
Total shareholders’ equity		175,727		205,803
Total Liabilities and Shareholders’ Equity	$	416,477	$	453,812

Certain prior year amounts have been reclassified to conform to the current year presentation.

Safeguard Scientifics, Inc.
Condensed Consolidated Statements of Operations
(in thousands except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
	(unaudited)						(unaudited)
Revenue
Product sales	$	3,475		$	1,838		$	5,506		$	4,079
Service sales		44,535			38,013			85,348			74,769
Total revenue		48,010			39,851			90,854			78,848
Operating Expenses
Cost of sales — product		984			1,087			1,723			2,265
Cost of sales — service		31,410			24,098			61,573			48,157
Selling, general and administrative		20,228			25,590			41,630			48,030
Research and development		2,603			3,090			5,492			6,743
Amortization of intangibles		894			790			1,832			1,909
Total operating expenses		56,119			54,655			112,250			107,104
Operating loss		(8,109	)		(14,804	)		(21,396	)		(28,256	)
Other income, net		1,259			29,998			1,250			40,477
Impairment — related party		(102	)		—			(260	)		—
Interest Income		1,148			522			2,279			974
Interest expense		(1,564	)		(2,500	)		(3,100	)		(5,678	)
Equity loss		(1,376	)		(3,927	)		(5,407	)		(6,301	)
Minority interest		1,215			971			2,851			3,342
Net income (loss) from continuing operations before income taxes		(7,529	)		10,260			(23,783	)		4,558
Income tax (expense) benefit		(150	)		(89	)		11			(129	)
Net income (loss) from continuing operations		(7,679	)		10,171			(23,772	)		4,429
Discontinued operations, net of income taxes		—			(22,632	)		—			(21,524	)
Net Loss	$	(7,679	)	$	(12,461	)	$	(23,772	)	$	(17,095	)
Basic income (loss) per share from continuing operations	$	(0.06	)	$	0.08		$	(0.20	)	$	0.04
Basic loss per share from discontinued operations		—			(0.18	)		—			(0.18	)
Basic net loss per share	$	(0.06	)	$	(0.10	)	$	(0.20	)	$	(0.14	)
Diluted income (loss) per share from continuing operations	$	(0.06	)	$	0.08		$	(0.20	)	$	0.04
Diluted loss per share from discontinued operations		—			(0.18	)		—			(0.18	)
Diluted net loss per share (a)	$	(0.06	)	$	(0.10	)	$	(0.20	)	$	(0.14	)
Weighted average shares outstanding from continuing operations
Basic		120,779			119,854			120,714			119,735
Diluted		120,779			121,088			120,714			121,642
Weighted average shares outstanding from discontinued operations
Basic and Diluted		120,779			119,854			120,714			119,735

Certain prior year amounts have been reclassified to conform to the current year presentation.
As a result of the sale of CompuCom, in October 2004, the results of CompuCom are shown as a discontinued operation for all periods presented.

(a) If a consolidated or equity method company has dilutive options or securities outstanding, dilutive net loss
per share is computed first by deducting from net loss the income attributable to the potential exercise of the
dilutive options or securities of the company.

Safeguard Scientifics, Inc.
Results of Segment Operations from Continuing Operations
(in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2005		2004		2005		2004
	(unaudited)				(unaudited)
Revenues
Alliance	$	21,473	$	23,779	$	43,256	$	47,259
Clarient		5,209		2,391		9,216		4,322
Laureate Pharma		3,792		—		6,437		—
Mantas		8,088		5,495		15,173		11,128
Pacific Title		9,448		8,186		16,772		14,861
Other Companies		—		—		—		1,278
Total Segment Results	$	48,010	$	39,851	$	90,854	$	78,848

Operating Income (Loss) (a)
Alliance	$	48		$	(1,989	)	$	(512	)	$	(2,242	)
Clarient		(3,246	)		(5,473	)		(7,442	)		(9,196	)
Laureate Pharma		(2,708	)		—			(5,900	)		—
Mantas		(776	)		(4,309	)		(2,421	)		(8,515	)
Pacific Title		2,190			1,606			3,112			2,258
Other Companies		—			—			—			(1,396	)
Total Segment Results		(4,492	)		(10,165	)		(13,163	)		(19,091	)
Other Items		(3,617	)		(4,639	)		(8,233	)		(9,165	)
	$	(8,109	)	$	(14,804	)	$	(21,396	)	$	(28,256	)

Safeguard Share of Net Income (Loss) from Continuing Operations (b)
Alliance	$	(163	)	$	(2,064	)	$	(863	)	$	(2,375	)
Clarient		(1,994	)		(3,349	)		(4,532	)		(5,846	)
Laureate Pharma		(2,788	)		—			(6,043	)		—
Mantas		(775	)		(5,246	)		(2,428	)		(8,839	)
Pacific Title		2,485			1,346			3,345			1,968
Other Companies (c)		(1,484	)		27,021			(5,506	)		35,571
Total Segment Results		(4,719	)		17,708			(16,027	)		20,479
Other Items (d)		(2,960	)		(7,537	)		(7,745	)		(16,050	)
Net Income (Loss) from Continuing Operations	$	(7,679	)	$	10,171		$	(23,772	)	$	4,429

(a) Operating Income (Loss) represents the revenues less operating expenses of each
segment, and excludes any allocation to minority interest.

(b) Safeguard Share of Net Income (Loss) from Continuing Operations includes the net
results of each segment, including interest, adjusted for any amount allocated to minority
interest.

(c) Other Companies includes those companies in which Safeguard has less than a
majority interest, as well as our ownership in funds. Our share of Other Companies
consists primarily of equity income (loss) and gains (loss) on companies, both of which are
reported below the operating income (loss) line.

(d) Other Items includes corporate expenses and income taxes.