Mount Logan Capital Inc (MLCI) 2017 Q1 法說會逐字稿

Good day, and welcome to the 180 Degree Capital Financial Results Call for the First Quarter 2017. (Operator Instructions) We will open up the lines to questions following prepared remarks from Kevin Rendino and myself, Daniel Wolfe. Before beginning the call, I would like to remind all participants that this call is being recorded. Additionally, we will be referring to slides during the presentation that can be found on our Investor Relations website at ir. 180degreecapital.com, under the menu option Calendar of Events.

Please turn to Slide 2. I would also like to remind participants in this call that this presentation may contain statements of a forward-looking nature relating to future events. Statements contained in this presentation that are forward-looking events and statements are intended to be made pursuant to the safe harbor provisions of the private securities litigation reform act of 1995. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. These statements reflect the company's current beliefs, and a number of important factors could cause actual results to differ materially from those expressed herein. Please see the company's filings with the Securities and Exchange Commission for more detailed discussion of the risks and uncertainties associated with the company's business, including, but not limited to, the risks and uncertainties associated with investing and privately held and publicly traded companies and other significant factors that could affect the company's actual results. Except as otherwise required by federal securities laws, 180 Degree Capital Corp. undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties.

I would now like to turn the call over to Kevin Rendino, Chief Executive Officer and Portfolio Manager of 180 Degree Capital Corp.

Thanks, Daniel. Thanks, everyone for joining us for what is our first earnings call for this newly formed 180 Degree Capital. Before turning the call back over to Daniel, who will walk you through the quarter and discuss a couple of our holdings, given this is my first opportunity to speak with you in my new role, I thought I would share some of my early observations as well as discuss our key strategic initiatives.

Let's start on Slide 3, which is the summary of the last 3 months. We're pleased our NAV increased by nearly 4% in the quarter and our share price was up nearly 5% in the quarter. I'm firmly aware this has not been the norm over the last few years, and I'll have more on that in a minute. We completed our restructuring, we are now 180 Degree Capital Corp. under the new symbol T-U-R-N, TURN. I'd like to thank our board for their work in getting us here and of course, our shareholders for your support over the last 4 months. We took a considerable chunk of our expense base out and we'll have some added color on that. And as we start Q2, we are a new business with new leadership and a new strategy focused on investing in deeply undervalued publicly traded companies. Our first step in our new strategy was put in place in early January, when we filed and amended 13D on one of our holding semiconductor company Adesto. Daniel will talk more about that.

Please go to Slide 4 and then Slide 5. First and foremost, the reason for me being here. The reason this company exists is a stock price. I am firmly aware of the direction our stock have had over the last few years, you can see that on Slide 5. Every investment we make, every decision we contemplate, any strategy we pursue, will all start by asking ourselves with the following question. Is this good for shareholders and is this good for TURN's stock price? If it is, we will go forward. If it isn't, we won't. That's it. I've been a public market investor for nearly 30 years. I have expectations for the companies that we own and the management teams that run those businesses. We want higher earnings and a rising stock price. You all have the same expectation for us. We get it. It's the stock price. I've spent my whole career in your shoes. I still sit in those shoes as an investor. We share your expectations of what was required of us. And I view our stock price as a giant voting machine, a giant scoreboard. New York used to have a mayor named Ed Koch. He was a popular figure. He used to greet his constituents on Street corners and greet them with the slogan, how I'm doing? We're not going to have to ask our shareholders how we're doing. We get to see it every day in our stock price and that is what I will use to measure our success. Improving on our share price is why I'm here and that's priorities 1, 2 and 3. So how we're going to improve our stock price? Slide 6 shows the historical trend of our NAV. It has not been a pretty picture. We need to grow our NAV, period, end of story. To do that, we must extract the most value possible for the private market assets that we have, and as quickly as we can. Some of our companies are early stage, but several are mid- to later stage. Over the ensuing months, we hope to be able to share with you the potential for liquidly events for several of our holdings. As far as our future strategy goes, the vast majority of new investments will be made in small public companies, like the one we recently made into Synacor. 180 Degree Capital is an investment management business attempting to hear to the concept of investing 101, buy low and sell higher. It really isn't that complicated. That is how you grow NAV and that is what we plan on doing to grow NAV. We'll have more on our investment approach in a little bit.

Slide 7 shows you the historical relationship between our stock price and NAV. As you can see, we're trading at a historical low percentage of NAV, essentially the lowest ratio in our company's history. We must narrow the discount our stock trades at relative to NAV, and we think we have a strategy for doing so. Our current share price trades at 58% of net asset value. We have 100% of our assets we're trading in cash or liquid public market assets. We would expect our stock to trade at or very close to NAV. Because the considerable portion of our assets are private companies, the lack of liquidity has led to a widespread between our stock and the NAV. We dig a little deeper and if you turn to slide 8, you'll see that the discount is even greater when you look at the sum of the parts analysis. If you strip out our cash and public companies, our private portfolio is actually trading at 43% of NAV, not the 58% that everyone thinks it does. Not only has the Street concluded our private marks are not worth NAV, they are ascribed to 60% discount of that value vis-à-vis our stock. Here's our goal. Over time, we will be converting each and every private market holding to cash in public companies. As that happens, we expect a discount to narrow, materially narrow, I might add. The higher Adesto and Synacor go, the higher our cash goes with a flat NAV in our private holdings, our stock should meaningfully appreciate towards our NAV. With the market actually truly valued our private portfolio assets that are current discount, it will yield the value today of a $1.08, and our cash and liquid securities to $0.65 a share and our stocks should be 20% higher today. That's not taking into consideration the possibilities that many of our portfolio holdings are actually worth NAV, or there I say, more than NAV. We also want to manage third-party capital. This will reduce our burn faster as well as share in the profits our investors will earn and we look forward to putting together an investment deck and going out to the markets and raising third-party capital.

Slide 9 looks at our expenses. NAV needs to grow faster than our expense burn. This has been a problem for our business over the past few years. Despite lowering our operating expenses in prior years, they were still too high, which is one of the primary reasons we recommended our reorganization and the removal of our BDC status. We've dramatically reduced our operating expenses through reduced regulatory costs. And we have lowered our expenses as well through lower headcount, reduced T&E budgets and other expenses. By way of example, our 2016 expenses were $5.5 million, which equates to $0.18 per share or 7.5% of our NAV. That means our portfolio needs to rise 7.5% per year just to breakeven. It's too high a bogey. Our expenses in the first quarter were $1.6 million, which equates to 5.1% per share or an annualized 8% of NAV. As a result of our strategy change to a closed-end fund, we have talked a lot about how we expect our operating expenses to be reduced.

I'm happy to now share with you some specifics. By way of example, we can forecast for Q2 operating expense numbers that are significantly lower than the run rate from last year and the first quarter of this year. We expect our expense numbers to decline to less than $1 million per quarter in Q2, and our cost savings will be 36% quarter-over-quarter. We hope that we will be able to offload more of that expense as we sublet our Broadway, New York office as well as having some of our severance run off in the next 12 months.

Our next quarter's expense are $2.7 per quarter, 1.1% of NAV, or predicted to be 4.4% annualized as a percentage of our NAV. Simply put, it's easier to achieve NAV growth when your expense burn is 4.4% as opposed to 7.5%. More on cost savings later. As to our strategy in investment process, our new strategy centers on investing in undervalued small-cap companies that are orphaned and removed from the ETF passive world that has completely overtaken the current environment. So why are we doing this? We believe having a constructive activist bent in the micro-cap world is a differentiated solution. If done effectively, it should lead to attractive returns in a non-correlated manner. We are headed to a place that isn't as crowded as the index ETF world of large-cap investing.

Slide 10 highlights the 20-year rolling return profile dating back 90 years. As you can see, micro-caps not only outperforms small- and large-caps stocks on average, but they do so over both low- and high-return periods.

Slide 11 shows the orphan nature of the aspect to the group. Companies with market caps of $300 million and less are covered by only 2% of Wall Street analysts. This group is simply not as picked over as other asset classes.

Slide 12 is a little good news, bad news scenario. By definition, we like our companies and management teams to have skin in the game. There was stock does well, we have shareholders do well coinciding with the management and the board doing well. As you can see from this slide, the average insider ownership of sub $300 million market caps is 26.1%, far exceeding higher capitalization companies. We know management teams like to pat their own wallets, so high ownership generally means the interest of a company's management team and investors are aligned. That said, sometimes too much ownership will scare us off. Sometimes the change in business strategy may be necessary to propel a stock higher. If a company doesn't share the vision shareholders have, or is unwilling to alter its strategy, substantial insider ownership can actually work against shareholders, so it's a balance.

Slide 13 should be self-explanatory. Over the last 25 years, nearly 60% of mergers occurred with companies that were sub $300 million market caps.

Slide 14 shows the noncorrelation aspect to our asset class. I view the investing world right now is being one giant ETF, not our space. 0.76 is the actual number. We feel good about tracking in a group of stocks that the world isn't paying attention to.

As far as our own process goes, you can see our investment process highlighted on Slide 15. We are Graham and Dodd value investors focused on investing in companies that traded 2/3 of the market on either price-to-earnings, price-to-cash flow, price-to-sales or half of the market on price-to-book, or have an above average dividend yield, although I must say, you don't find that all -- all that often in this asset class. Once we screen for companies that fit our fundamental profile, we do a deep dive, researching the business, speaking with managements, industry contacts, Wall Street analysts and the rest. There always needs to be a reason for ownership. We want to own cheap stocks, but being cheap as if the price of admission. To become an actual holding of 180 Degree, we need more than just being an inexpensive stock. We want to own companies, where we can identify a catalyst, where by if that catalyst comes to fruition, it will cause the stock to move higher. We assemble our own components for a strategy to improve the financial performance of the target company. There could be a management change, a new product, specific operating model changes. Whatever it is, we need to have a reason to believe. We will attempt to work with management teams and boards to affect change. It is all meant to be collegial and not antagonistic, at least in the beginning.

Turning to Slide 16. You can see the evolution of our form of constructive activism. Phase 1 is identifying quality deep undervalued companies with strong management teams in the process of executing a turnaround. These companies do not require substantial time or involvement, essentially what we have here are companies that have already gone some sort of outside activism in the past, or the board has pursued its own changes without outside pressure. Our new position in Synacor is an example of this. Several years ago, the board made significant changes to its business and its management. The work has already been done, but investors have yet to reap the rewards. Daniel will talk more about this later.

Phase 2 is investing in the same company as Phase 1, except the small changes are necessary to affect change. And it could be enhanced Investor Relation strategies or small focused changes to the operating model, which could lead to improved financial performance. More time is involved in Phase 2, but it's not substantial. Phase 3 are companies that need dramatic change to its board or its management team, proposing drastic fundamental change to a company's business. It could be advocating for a sale of the company in certain instances, sometimes it can mean proxy campaigns and taking seats on the board. Our hope is never to get here, but you have to be willing to do it, our companies won't take you seriously. All in all, we prefer Phases 1 and 2 types of investments. The hard work has already been done by either an activist or the board and the management itself. The stock hasn't moved all that much as the company was undergoing its changes and time has already elapsed. The turnaround is coming sooner rather than later. Essentially, we don't want to be the first one in, but early enough to benefit from a company's turn and yes, that was a pun intended.

With that, let me turn our call over to Daniel for review of the quarter.

Thanks, Kevin. As Kevin mentioned previously, we completed our transition from a business development company to a registered closed-end fund on March 30, 2017. With this change, we are no longer required to file our quarterly financial statements on Form 10-Q, and instead file a schedule of investments on Form N-Q. In this document, we have provided the updated valuation of our portfolio companies as well as a calculation of net assets and net asset value per share. We are pleased to report that the net assets increased by approximately $3.2 million or 4.5% from $72.3 million as of December 31, 2016 to $75.5 million as of March 31, 2017. Net asset value per share increased by $0.09 or 3.8% from $2.34 as of December 31, 2016 to $2.43 as of March 31, 2017. The value of our investment portfolio net of approximately $3.1 million of cash invested during the quarter increased in value by approximately $4.3 million or $0.14 per share. Our expenses investing the restricted stock during the quarter accounted for a decrease in value of approximately $0.05 a share. We no longer have any restricted stock outstanding. Two companies, Adesto and Nanosys accounted for substantially all of the increases in value during the quarter. NGX Bio, Senova Systems and potential milestone payments from the acquisition of Molecular Imprints by Canon accounted for the majority of our decreases in value.

We ended the quarter with approximately $10.6 million in cash and we currently have approximately $8.2 million in cash on hand.

I would like to speak about the largest increase in value in our portfolio during the quarter, Adesto Technologies Corporation. Please refer to Slide 17. As many of you already know, Adesto is a publicly traded company that trades under the symbol IOTS. Adesto completed its IPO in October 2015 at a price per share of $5. The stock subsequently rose to a high of $8.50 before decreasing substantially throughout the year to a low of $1.50. We own approximately 1.8 million shares of Adesto. While Kevin did not formally join as CEO until March 30, 2017, we changed our passive approach of managing this investment to an active approach, as discussed in our 13D filing on January 9, 2017. Since this point, in our early January, we have been actively engaged with management of Adesto to convey our thoughts and ideas regarding primarily messaging and spending on R&D. Many of our proposals were reflected in our updated presentation materials and investor communications. We were also pleased to see its spend on R&D decreased from prior quarters and their commitment to be continue to decrease these levels as a percentage of overall revenue. Adesto stock was trading at $1.90 on January 9, 2017. It was trading at $4.15 as of March 31, 2017, and it closed at $5.35 yesterday. We are obviously pleased with this trends. The largest decrease in value in our portfolio during the quarter was NGX Bio, due to risks associated with its ongoing financing requirements. Additionally, we did not receive a potential milestone payment associated with the acquisition of Molecular Imprints by Canon, and we decreased the probabilities associated with the receipt of milestone payments associated with the sale of the assets of Senova to an undisclosed corporation. That said, a number of our most mature privately held companies continue to make progress building their respective businesses.

Please refer to Slide 18. D-Wave Systems announced the sale of its new 2000-Qubit System to Temporal Data Systems. A 2000-Qubit upgrade system will also be installed at the Quantum Artificial Intelligence Lab run by Google, NASA and the Universities Space Research Association. Additionally, Volkswagen announced a collaboration with D-Wave on a traffic flow optimization project. AgBiome received EPA approval for its first product of biological fungicide product marketed as HZO for use in turf and ornamental applications. HZO continues to penetrate the tablet, automotive, audio and verbal markets with its differentiated waterproofing solutions. Nanosys announced they're partnered with a Chinese film manufacturer Exciton to bring its Quantum Dot Enhancement Films to market alongside existing partners, 3M and Hitachi. Mersana presented data at the recent American Association for Cancer Research Annual Meeting that supported the efficacy and tolerability of its clinical stage antibody drug conjugate therapeutic for cancer. I note that these 5 companies have a collective valuation of approximately $32.1 million or more than the $24 million in value that our stock price currently reflects on our private portfolio as a whole, if cash in public securities are valued as full value. As Kevin mentioned, we also have a number of early-stage companies that comprise the remaining $25 million of our portfolio assets. While 180 Degree Capital technically began as a company on March 24, 2017, as Kevin mentioned, he and I have been actively in diligence on number of potential investment opportunities since announcing this transition in December 2016.

In February 2017, we were introduced to a company called Synacor that trades under the symbol SYNC. Please refer to Slide 19. Synacor is a technology development multi-platform services and revenue provider for video, Internet and communication providers, device manufacturers and enterprises. Through its managed portals and advertising solutions, the company enables its customers to earn revenue by monetizing media across their customers. The company's reoccurring in fee-based revenue solutions include end-to-end advanced video services, e-mail and collaboration services, cloud-based authentication and paid content in premium services. When we begun our -- we began our diligence on the company, it was trading at $3.15 per share. During the period between our introduction and our investment, we became increasingly convinced that this company was a deeply undervalued and it could be a very interesting investment opportunity, owing to factors including Synacor has a high-quality management team that joined in 2014 and is executing on a plan to reach $300 million in revenue and $30 million in EBITDA in 2019. The company won AT&T's portal business from Yahoo! in May 2016, which, we believe, was a potential transformative event. This business has projected to generate $100 million in annual revenue starting in second half of 2017. The company successfully integrated acquisitions of Zimbra, Technorati and NimbleTV. When combined with its cloud ID authentication technology, we believe this suite of products provides a platform for growth of high margin, reoccurring revenue streams alongside its portal and advertising businesses. Synacor has a strong balance sheet. When combined with its strengthening income statement and overall business execution, we believe these factors support a substantially higher valuation that is currently ascribed to the company. The company stock ran up to a high of $4.20 following the announcement in March 2017 that it was on schedule to launch the AT&T portal in the second half this year. We remained patient during this time, looking for the right opportunity to purchase a meaningful position in the company, the secondary offering presented such an opportunity. We believe we received a meaningful allocation in the oversubscribed financing owing to our early, active and constructive engagement with Synacor's management.

I'll now turn the call back over to Kevin for closing remarks, before we open the line to questions.

Thanks, Daniel. I've talked to a number of you over the past 4 months and I plan on talking to all of you in the ensuing months. By now, you should know the reasons for me being here. We want to get the stock price higher and that is going to be how we measure our success. To do so, we have to narrow the discount to NAV vis-à-vis our share price. We need to increase our NAV share through investment appreciation and we need to decrease and eliminate the drag on the NAV from noninvestment activities to minimizing day-to-day operating expenses as much as possible as well as generating income for managing third-party capital rather sources. We are 100% aligned with shareholders. We must increase the price of our stock to truly be successful. We think we're on our way to doing so. And we look forward to reporting to you on our ensuing quarters. Thanks, Daniel.

And now we'll take some questions.

(Operator Instructions) Our first question comes from the line of [Michael Morielli].

Yes. In this restructuring, what is the effect of -- what is the -- is there a reduction or an increase in executive compensation? And if so, what are the percentages in terms of higher or lower?

Thanks, [Mike], for your question. As we said in our earlier comments, expenses were roughly 8% or 7.5% of our NAV in year 2016. And we expect to get that number down to 4.4% for the balance of this year and potentially even lower for next year. We're not going to break out each line item of our expense base. But our expenses are materially lower with the new reorganization.

I was concerned that all the executives coming and more and more people getting paid that the executive part was going to jump.

Well we actually have less people now than we had before, by a factor of 50%. You'll see executive compensation, vis-à-vis our proxy, which will go out -- which is out. The proxy is out, so you can look at our compensation for last year and then of course, this year's compensation will be reflected in our proxy in 2018. But expenses are going down, we have less people. And so all the things that you want from us, we're delivering on.

And you'll see in the proxy materials actually that the -- talks about who is with the firm going forward and who is not with the firm going forward. And you can see that, as Kevin mentioned, we have dramatically reduced the headcount and are really focused on building value for shareholders.

Our next question comes from the line of [Tom Bonvissuto].

Just a few clarifying questions, if I may. As I observed the -- and I want to make sure I get my data right here. So the Synacor purchase, if I did my numbers right, is it about a 2% position that you have in Synacor -- of Synacor?

Yes, it's about right.

Okay. And then...

$2.25 million divided by the assets, you're talking about of almost a 3% position.

Okay, so somewhere in that range. And then Adesto, if I've done my numbers, it's about 11% of Adesto. Is that correct?

That's correct.

Okay. So if we were to compare those two companies, and we think about what your strategy is going forward, do you feel there is a certain percentage that you need to achieve in order to have the influence you want to have to make the changes you want to make?

So it depends. Obviously, the more ownership you have, by definition, the more influence you'll have. A lot depends upon the boards though. You can own 10% of the business, but if you've got an entrenched board and a management team with a significantly higher percentage of ownership than you have, it becomes a little more difficult. You can have a couple of board. If you're going to another position that kind of hasn't worked in stock prices, sort of, done nothing for long period of time and you may have a couple of board members that are really uneasy, they don't know how to go about actually affecting change, even with the position of 2% or 3%, you can affect some change. So it truly does depend, [Tom], on the individual company. Obviously, the more you own, the more influence you should have. Generally speaking, that's true. It doesn't practically work that way all the time. We're not going to take a position in a company that's less than 2% to 3% to 4% though. Any new positions, we'll have significant ownership in.

Okay. And then along those lines, on Slide 15, it refers to in your process here that you've outlined, low inside ownership, maybe you can give me a similar answer, but as it depends. But is there a kind of a level of inside ownership that you say well have the inside ownership, and I assume that's executive management and the board is less on a certain this level that's a good screening. Because we're doing the screening, typically it's somewhat quantitative, but some of the things you have there are more qualitative?

So you got to look at the Page 1 shareholders. But anything that approaches sort of 20% is an outlier. Meaning, we really need to feel good about the business and the strategy of the business for us to get involved. If we look at something, and we think the business strategy is completely flawed, and we think there are a number of changes that need to be made, and the insider ownership is 20%, we're probably not going to get involved. If you look at a company like U.S. Cellular for instance -- and by the way, it doesn't necessarily only come from ownership, it also comes from some dual class stock. In other words, you get involved in a lot of these companies to have Class A and Class B stock. So management, they own 1%, but if there are some, The Red Stone, they only entire voting rights of the companies. We're not going to get involved in any of that. U.S. Cellular, by example, of a larger name is one of that. No matter what we think of U.S. Cellular, not that that's a position from 1 AVM, just using it as a reference point. Until that family decides to actually do the right thing, their stock's going to be $39 for life. If they decide to do the right thing, it will be $100 in a heartbeat. But you can't. We don't want to bang our heads against the wall fighting management, when we know at the end of the day we're going to lose. So anything nearing 20% is a flag for sure. Actually, anything sort of at the 15% is a flag.

Okay. And then you talked a lot about investing in micro-cap, where you can really have an influence yet on Pages 10 through 14, it actually, in your title, all references small-cap. I was thrown off by that a little bit. Can you speak to that?

Sorry. It's -- those slides that I referenced are -- it's really micro-cap. Now it depends how you define it. But we are focused on micro-caps, but we are also focused on small-caps. So sort of the 250 and below, you have to define micro-cap as what -- how you want to define it. We are focused on the smalls to small right now, given our own asset base. And so that's why you should take a look at the blue charts or the blue bar, as opposed to the orange bar or the black bars at Slide 10.

All right. Next comes from Scoggin Capital.

Congrats on the quarter. I just noticed cash seem to have decreased from the end of the year till May about $6 million. I think, you mentioned the investment in Synacor and then maybe some G&As probably $4-ish million, where's the other $2 million? And then stock buyback, I know you guys had a program in place, just curious to know your thoughts, given the discount NAV?

Yes. So during the quarter, there were other investments that were made as well. So you had $2 million that went into HALE. You have $625,000 that went into TARA Biosystems. And then you have operating expenses during the quarter in terms of cash burn during the quarter.

In future quarters, we're going to actually use cash plus liquid securities and you should look at that as one bucket as opposed to just cash or as opposed to just liquid securities. We want to build the buckets for both of those as the percentage of our assets. I mean, it's the goal here over the next 3 years. In terms of share repurchase, I'm firmly aware of where the stock trades relative to NAV. To me, it's not the right price. The market has decided it is the right price today. We will, as a board and the management team, assess asset allocation decisions, vis-à-vis the cash that we have. It's not like we're sitting in a tremendous amount of cash right now. We'll use some of it to initiate our new strategy. But rest assured, we think about share repurchase in the manner that you want us to think about it. And on top of that, as you can see from prior reporting of periods, insiders have actually been buying stock as well. So if we can figure out a way to do it and then continue to still run our strategy then share repurchase is going to make a lot of sense for us.

All right. Next question from the line of [Palogic].

The last caller asked the question I was going to ask. But could you may be further give us a little more details on ways to how you think about share repurchases, and if and when it would make sense? I mean -- so from a third party -- looking at your private portfolio, we don't have the information you've got as it relates to the ability to judge the value of that, and kind of your confidence level that [8 of] largest positions, your most mature private portfolio companies are valued kind of at where you say they are versus the downside and kind of the upside that may exist there, et cetera. So you're in a better position to judge that and maybe the market. And so how do you make that determination? Or how do you think about that?

So I've -- we've asked the same questions of the companies that we own, I expect you to ask that question of us. And we ask ourselves that question every day. It's really an asset allocation decision. Just because the market thinks our stock price is $1.43, is what the current true value of the business is, we don't necessarily agree with that. Our NAV is the NAV for a reason. It's audited marks on private businesses by Pricewaterhouse and Duff & Phelps. We don't make these numbers up. They are what they are. Many of our companies are marked because of rounds of finance that they've done, and market caps of those rounds when the rounds were done. So we see what other investors have been willing to pay for businesses in the private world. We take share repurchase very seriously. We want to make sure that we balance that against actually making investment decisions on behalf of our shareholders, vis-à-vis our public companies. If I had more money, I do both today, because we are, I would say, we can argue cash starved. The challenges are greater than if we had twice the amount of cash sitting on our balance sheet. That's not to suggest that we're not going to go in and buy stock. That's not to suggest at all that we're -- that share repurchases is not on the table, because it is. We just want to make smart asset allocation decisions based on the cash that we have. We take share repurchase very seriously. And I don't think that $1.43 is the right price. And my way of reflecting that to you is if you go back and look in the 1 week that I haven't been restricted this year, I was in the open market buying stock in my personal account. So that shares with you, the confidence that I have not only in our business strategy, but in our portfolio of assets that we currently have.

Okay. And then would you guys consider margin borrowings? Or are you out of the borrowing game?

I'm not -- well -- so DBD is seeing these, we can use less leverage today than we could before. I'm not really a leverage guy. I mean, money is cheap, we know that. The last thing I'm going to do is lever up this balance sheet. It just not -- it's not part of my investment process in my past. Might we use some leverage at some point perhaps, it's certainly not something that we think about doing or something that we are going to be doing in the next 6 months.

(Operator Instructions) Our next question comes from an anonymous caller.

It's Sam Rebotsky. Yes, Kevin and Dan, it's been a -- this is a good start. Now tell me, the cash at the $8.1 million as of May, what was the cash as of March 31? And what are expectations of creating cash for the June quarter?

So cash as of the end of the quarter was $10.6 million. You know the bulk of the transition of cash from the $10.6 million to the $8.2 million, obviously, was the investment in Synacor and then some operating expenses. We don't give guidance as to the expectations for conversion of cash -- securities to cash. I think, we believe there are meaningful opportunities to see liquidity events in the portfolio. But I think this is also why we're going to be speaking about cash plus liquid securities going forward, because the portfolio will be dynamic and we have the more flexibility do so with the liquid position. Kevin, I ask you want to add anything to that?

Yes. Sam, this is a business that historically, when I joined the board in April, was in runoff. Harris & Harris actually wasn't even in business. They had a portfolio of private businesses with too high a burn. And we're not really making any new investments. They were trying to make follow-on investments, but the only way they were able to do that, because the burn was so high, was to sell other positions. And it was self-defeating and Harris & Harris was getting itself into forced liquidations. We've gotten ourselves in a position, where at the end of the year, we've sold Metabolon, where our cash position was pretty strong. Adesto has risen, as Daniel said in his earlier comments, from a $1.90 to $5.20. You can look at -- we view that as cash. Maybe it's not 100% the cash, you've got to sell it. There could be some discount there if you have to sell it. But we look at that as cash. So we are going to convert these private market holdings -- these private market -- private equity holdings. And we are going to convert them. When they become liquid, we are going to take that cash, then we're either going to put it on the balance sheet. We're going to invest it in the public markets. We're going to use it for share repurchase or we're just going to hand it back to shareholders. And so you just need to simply look at the combination of cash and the liquid securities, just don't look at cash.

Okay, that's good. Now...

Cash could be $4 million...

Cash could be $4 million next quarter but that's because we found a $4 million investment in something, a public company. So look at it by combining the 2.

Kevin, how many situations would you say you are presently looking at? And what stages would you say they would be, if you had the appropriate cash with deposit trigger to invest in or are investing in?

So there's one that if the quarter ended today, we would have a new position. We haven't reflected that yet on our balance sheet or in our statements. It's not a large position. It's a small starter position. We are looking to get bigger in that name. There is a number of factors that it'll be easier to get bigger. If something happens, then it'll be impossible to get bigger if something doesn't happen. So we're in the middle of one right now. And we're looking at, I would say, 2 or 3 others. But there's one that sort of, and I would call it, hot on the press. The same amount of investment -- if I can put the same amount of investment in that one, as we did Synacor, we would do it.

Okay. Sounds good. And I think the approach is good, Kevin. And I think time will show that you're probably going to be right, because this approach has worked over the past. It just takes time. And it's a change and people have to know you're changing. Okay. Good luck.

So we are not showing any additional questions in the queue.

With that, thank you very much for taking the time today. You can find myself or Daniel, vis-à-vis e-mail, or call us if you have any further questions. We look forward to chatting with you down the road or seeing you if your travels take you to New York. And we look forward to reporting on our future strategy next quarter and sharing with you our progress in the ensuing months. Thank you very much for your time today, and have a good one.

The call's now over. Everyone can disconnect from the call. Thank you.