REDONDO BEACH, Calif., April 7, 2005 (PRIMEZONE) -- CorpHQ, Inc. (Pink Sheets:COHQ) today reported that it had entered into a Share Purchase Agreement with Safeguard Shareholders (UK) LLP ("SSUL"), under which it divested a large portion of its ownership interest in its portfolio company, Safeguard Technology International, Inc. ("Safeguard").
The agreement, which was effective as of March 31, 2005, provides for the sale of 22,285,628 shares, representing 38% of all outstanding Safeguard shares, for a net price per share of $0.0535. The total proceeds of the sale is $1,192,775 which is to be paid directly to CorpHQ by the individual members of SSUL. Since the closing, CorpHQ has received $239,792 in individual confirmations from SSUL members and expects to receive the entire proceeds of the sale by July 1, 2005.
It is anticipated that this extraordinary divestiture will cause CorpHQ to experience a net loss for the quarter ended March 31, 2005, as Safeguard's shares were previously valued at $0.08 by CorpHQ.
CorpHQ has continually and profitably reduced its ownership position in Safeguard in negotiated transactions at prices ranging from $0.15 to $0.20 since mid 2004, with sales of $128,254 during 2005. CorpHQ may continue to divest its position in Safeguard up to an additional 7,750,000 shares as part of its overall incubation strategy. CorpHQ believes that the current fair market value of the shares of Safeguard is $0.20 per share.
CorpHQ has also agreed to loan up to $250,000 to Safeguard for professional fees and related costs to allow it to apply for public trading with the SEC, and listing in the OTC stock market in the United States during 2005.
SSUL is an aggregation of existing, non-U.S. Safeguard shareholders which purchased Safeguard shares during 2001 and 2002 from Livingstone Asset Management and related parties ("LAM"). LAM had originally acquired shares of Safeguard at startup for $0.1493 per share as a foreign distributor under Regulation S promulgated under the Securities Act of 1933. While the transaction in which the company sold its shares to LAM under Regulation S was lawfully completed, subsequent to the closing of that share purchase Safeguard began to hear reports of LAM's abusive selling activities.
Safeguard's Board of Directors immediately terminated the offering at that time, and engaged counsel to make an investigation into the matter. Safeguard then created an elaborate communications system to contact each Safeguard shareholder it could obtain information on, and has maintained extensive contact since that time to ensure that every shareholder had reliable information about the company and its prospects, and did not rely on the information previously disseminated by LAM.
Since that time, Safeguard and CorpHQ have also taken steps to align the interests of the minority shareholders with CorpHQ's shareholders and to engender the establishment of a minority shareholders' advisory committee to advise the Safeguard board on its development strategy. The divestiture of a large block of the shares owned by CorpHQ for less than their fair market value is the last in a series of actions designed to help make Safeguard's foreign shareholders as close to whole as possible.
Steve Crane, Chief Executive Officer of CorpHQ said, "While we had no knowledge of LAM's abusive activities at the time, nor any legal requirement to make this contribution, this was the right thing to do for many reasons. We are committed to Safeguard's success and also to the success of their later round investors. While value to our own shareholders is always our primary goal, we believe that a suitable balance has been achieved which allows CorpHQ to achieve a substantial amount of liquidity on its investment in Safeguard, while aligning the minority shareholders' average cost basis in Safeguard with our own."
Crane continued, "Secondly, we estimate that the SSUL members transferred approximately $20 million to LAM , of which approximately $1.3 million was received by Safeguard. If we are able to reduce the aggregate cost average to the point where SSUL can achieve a return on their investment, we believe that SSUL may invest with CorpHQ in a subsequent portfolio company."
"Finally, while most companies espouse strong corporate values and ethics, few actually take the high road when money is on the table. I am proud that our Board allowed us to do the right thing in this instance. We have made a big difference to an awful lot of people that invested their hard-earned money in Safeguard. We will continue to work tirelessly for Safeguard and all of its shareholders until the company's value can be realized for all of its investors," added Crane.
About CorpHQ, Inc.
CorpHQ Inc. operates as a holding company and business incubator; we organize, invest in, and provide comprehensive management support and a variety of resources to high-potential companies. CorpHQ also acquires interests in and provides consultation to selected companies that are synergistic with its portfolio companies.
Forward-Looking Statements
"Any statements made in this press release which are not historical facts contain certain forward-looking statements, as such term is defined in the Private Litigation Reform Act of 1995, concerning potential developments affecting the business, prospects, financial condition and other aspects of the company to which this release pertains. These forward looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results of the specific items described in this release, and the company's operations generally, to differ materially from what is projected in such forward-looking statements. Although such statements are based upon the best judgments of management of the company as of the date of this release, significant deviations in magnitude, timing and other factors may result from business risks and uncertainties including, without limitation, the company's dependence on third parties, general market and economic conditions, technical factors, the availability of outside capital, receipt of revenues and other factors, many of which are beyond the control of the company. Although we believe that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements, and we disclaim any obligation to update information contained in any forward-looking statement."
This press release is available at www.corphq.com and http://www.pinksheets.com/quote/quote.jsp?symbol=COHQ.