180 Degree Capital Corp (TURN) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Harris & Harris second-quarter 2011 conference call. At this time, all participants are in a listen-only mode. Later, we'll have a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, today's conference is being recorded. I would now like to turn the conference over to your host for today, Ms. Harriet Fried of LHA. Ma'am, you may begin.

Thank you everyone for joining us this morning for the Harris & Harris Group second-quarter 2011 shareholders' conference call. On this morning's call, Doug Jamison, Chairman and CEO; and Daniel Wolfe, President, Chief Operating Officer and Chief Financial Officer, as well as Patty Egan, Chief Accounting Officer, will lead a discussion about the Company's business and its second-quarter results. Today's conference call and webcast are being accompanied by a slide presentation. To access that presentation, please go to the Company's website at www.tinytechvc.com A link to the presentation can be found on the home page.

Before starting the call, I'll read the Safe Harbor statements. This presentation may contain statements of a forward-looking nature relating to future events. Statements contained in this presentation that are forward-looking 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 annual report on Form 10-K as well as subsequent filings filed with the Securities and Exchange Commission for a 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 venture capital investing and other significant factors that could affect the Company's actual results. Except as otherwise required by federal securities law, Harris & Harris Group Inc. undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties. With that introduction, I'd now like to turn the call over to Doug Jamison. Go ahead, please, Doug.

Thank you, Harriet. Good morning everyone.

Welcome to our second call in 2011 and again, reporting on the quarter ending June 30, 2011. As has been our practice, we'll begin the presentation by spending a few minutes discussing our strategy. I'll then ask Patty Egan, our Chief Accounting Officer, to briefly provide the highlights of our June 30 financials. Patty will be referencing our recently-filed quarterly report on Form 10-Q. After Patty, Daniel Wolfe, our President and CFO will walk you through some additional slides articulating a few of our recent disclosures and directions. We'll then open it up to questions. We expect the call to last approximately 45 minutes.

Strategically and operationally, it's been a good start to the year for Harris & Harris Group. Our strategy is beginning to be realized. We recognized an IPO window that was opening. We positioned 2 companies to date to get out into that initial public offering market. We used an open mergers and acquisition window to sell 2 companies, BioVex and Innovalight.

We continued to position the portfolio for the future and we sold 3 companies that wouldn't be material to NAV in the future, due to our positions of ownership in those companies and our dollars at work in those companies. We financed successfully multiple of our potential big impact companies for the future. We made some new exciting Company investments. And we're proud of our team for being opportunistic in this environment.

We are heading into some economic headwinds, and certainly into some uncertainty that we believe has meaningful downside. This will potentially impact our portfolio companies. However, we've done what we should as a Company to position ourselves for the time ahead and we've never felt better about our investment thesis. We believe our nanotechnology thesis has greater credibility now than it ever has been. Just like the shareholder letter, I'd like to just spend a few minutes walking through that thesis and why we continue to believe that focusing on nanotechnology-enabled companies is a way to grow this Company for the future.

By focusing on nanotechnology, we profit from disruptive breakthroughs that enable transformative companies. We invest in innovation enabled by nanotechnology. We focus on nanotechnology because science is reductionist, and historically, disruptive breakthroughs in energy, healthcare and electronics occur through understanding science and technology at smaller and smaller scales. Currently, these disruptive breakthroughs are occurring at the nano- scale and below, and enabling transformative companies.

As this slide depicts, it was really in the late 1970s and 1980s that most of the tools that enable nanotechnology were created or discovered. Over the ensuing period, you had materials that were discovered and over the 20 years these scientific discoveries were made and nanotechnology products began to be envisioned. Beginning after 2000, the first products resulting from the advancements of nanotechnology finally began to come to the market. This introduction has begun to accelerate at the end of the first decade of commercialization, and that decade we believe ended in 2010.

We believe nanotechnology can be classified as a foundational technology. As the current slide depicts, there have been many foundational technologies historically and their development paths demonstrate some similarities.

First, foundational technologies go through a gestational phase. During the gestational phase, the tools, materials, and systems that will enable future growth are discovered and perfected. Again, we thought those were the years from the late 1970s through 2000. In the first generation of commercial development, which we believe began after the turn of 2001, the first products came to market.

Secondly, foundational technologies often take decades to fully diffuse to their respective sectors. The Internet has taken close to 2 decades to reach over 80% of US households, and is now emerging as a potent force of economic development. Nanotechnology is just beginning to become impactful and the decades of its diffusion and growth lie ahead of it. We believe the coming decades will be the time of potential wealth creation for nanotechnology.

This slide you've seen in previous presentations and in our Form 10-Qs and Form 10-Ks. We believe the metrics continue to support the growth of nanotechnology. In our own portfolio, the aggregate portfolio revenue has been growing most recently over 40% between 2009 and 2010, where it increased from $268 million to $380 million. Clearly, we're beginning to see nanotechnology commercialization bloom.

Over the past few years, we've seen tremendous growth in nanotechnology-enabled products being introduced onto the market. The semiconductor industry continues to manufacture significantly below 100-nanometer line widths. The introduction of sporting equipment such as rackets, golf clubs, and specialty fabrics, which is what we talked about 4, 5, 6 years ago, that's now been followed by the introduction of automobile functionality, touch screen displays as you see on your iPads and iPhones, LED lighting, batteries and newly-approved therapeutics.

Beginning, we think, in around 2004, the world's leading companies began to develop well-articulated strategies for nanotechnology. In the areas of energy, healthcare and electronics, most of the leading companies in the world have realized that nanotechnology will impact their competitive advantage over the coming decades. A good demonstration of this realization is that over two-thirds of the companies in our own portfolio have paid commercial partnerships or investments from leading companies. These companies include Chevron, [Bungi], Schlumberger, Unilever, Dow, BP, Pfizer, Bristol-Meyers Squibb, Novartis, Bosch, Intel, Samsung, Panasonic, Tyco, Lockheed Martin to name a few. These aren't unknown companies, these are the world's leading companies that are heavily involved in nanotechnology. Additionally, Amgen purchased BioVex and DuPont purchased Innovalight, both in our portfolio, both very well-known companies.

So where are we now as we head into what we term the second decade of nanotechnology commercialization. We believe we're certainly at the end of the gestation period. We believe we're entering the second decade of nanotechnology commercialization. We believe the science has matured enough that after 2000, the first successful companies and products could begin to gain traction in the marketplace and we believe that if past technology cycles provide any guide, we believe the second decade of commercialization will be the decade of rapid commercialization and outside investment returns.

We believe we are very well positioned. We believe we're a leader investing in this space. We believe we have an ecosystem and the deal flow to really accelerate during this second generation. Thank you. Patty, can I turn it over to you?

Thank you, Doug. At June 30, 2011 we had total assets of $173.4 million on our balance sheet. Included in our total assets is our venture capital portfolio, which was valued at $131.9 million, versus its cost basis of $106 million. Therefore, at June 30, 2011, our venture capital portfolio was in an appreciated state of $25.9 million. We also held $40.1 million in cash, restricted cash and US Treasuries as of June 30 and we have debt outstanding of $2.6 million. Our net assets at June 30 were approximately $168.4 million, and our net asset value per share was $5.43. This is an increase from $4.76 per share at December 31, 2010.

Turning to our income statement, for the 6 months ended June 30, 2011, we had an investment income of approximately $325,000, which compares with approximately $208,000 in investment income during the same period in 2010. Increase in our investment income plus an increase in our interest earned on our venture debt investments as well as an increase in bridge note interest. Interest income generated from of our US government security holdings continues to be lower as compared to prior periods due to the decrease in yields. Our total expenses were approximately $4 million during the first 6 months of 2011, compared with approximately $4.3 million during the same period in 2010. These total expense figures include both cash and non-cash based operating expenses, such as stock-based compensation. Our non-cash, stock-based compensation expense was approximately $985,000 during the 6 months ended June 30, 2011, as compared with $1.2 million during the same period in 2010.

Our total cash base and accrued operating expenses for the 6 months ended June 30, 2011 were approximately $2.86 million, as compared with $2.84 million for the same period in 2010. This yielded a net operating loss of $3.6 million through June 30, 2011 as compared to a net operating loss of $4.1 million through the first 6 months of 2010. During the 6 months ended June 30, 2011, we realized net gains of $5.4 million on the disposable investments. This amount includes the gains realized from the acquisition of BioVex and sale of Siluria, offset by our realized losses on the disposals of Questech and PolyRemedy. This compares to approximately $408,000 of realized losses in the first half of 2010.

During the 6 months ended June 30, 2011, there was an $18.4 million change in the value of our investment portfolio. Of this $18.4 million increase, $23.9 million relates to the increase in value of our investments that were still held on our balance sheet as of June 30, 2011. This is offset by reversals of $5.5 million related to previously-recorded net unrealized gains on investments that were disposed of during the year.

Thank you, Patty. Daniel, can you take us through the remaining slides?

Absolutely. Thank you, Doug. As Doug mentioned earlier, we believe we and our portfolio companies, took advantage of windows of opportunity during the first half of the year to position the themselves for future growth. Solazyme and NeoPhotonics raised substantial amounts of capital that will allow each to execute on their respective businesses. Four of our privately held companies raised publicly-announced rounds of financing that included new investors. We were able to add to our available cash through the sale of BioVex to Amgen and Innovalight to DuPont.

While valuations and social networking and mobile application development are reaching high levels, the valuations of nanotechnology-enabled companies in which we invest, remain at attractive levels. We have taken advantage of these opportunities by investing 2 new companies during the second quarter of 2011, Champions Oncology, Inc. and Produced Water Absorbents Inc. Champions Oncology is using its Tumorgraft platform to develop personalized therapies and new drugs for treating cancer. Produced Water Absorbents is a spin-out of our portfolio company, ABSMaterials, but is focused on using its proprietary glass materials to clean up contaminated water generated from drilling of oil and extraction of natural gas. We believe these 2 companies strengthen our pipeline of other emerging equity-focused portfolio companies from which future gains may be generated for long-term growth of Harris & Harris Group.

We discussed the importance of considering our primary and secondary liquidity when assessing the overall strength of our balance sheet. At the annual shareholder meeting, and on page 51 in the Management's Discussion and Analysis section of our quarterly report as of June 30, 2011, filed on Form 10-Q. Primary liquidity is comprised mostly of cash and US Treasury securities. Secondary liquidity is comprised of publicly-traded companies. Our primary and secondary liquidity increased by $26 million to $86.7 million as of June 30, 2011, from $50.7 million as of March 31, 2011, primarily due to the IPO of Solazyme. This IPO transitioned the value of our shares of Solazyme from our privately-held illiquid portfolio to secondary liquidity.

Although our secondary liquidity has increased substantially since the prior quarter, and is the largest amount we have had on our balance sheet historically, the amount we will actually realize from the sale of our positions in these publicly-traded companies may be materially different from the value of these positions as of June 30, 2011. This potential difference is owing to the relatively high volatility of the stock prices of both Solazyme and NeoPhotonics and small capitalization stocks in general. Solazyme priced its initial public offering at $18 per share. The stock has traded in a range of approximately $28 down to $13, with the low end of the range occurring during the recent volatility in the public markets.

NeoPhotonics priced its initial public offering at $11 per share, and the stock has traded in a range of approximately $21 down to $5.50. These stocks, as well as our own stock, are not immune to the high volatility and uncertainty that currently affects the public markets. Solazyme and NeoPhotonics accounted for approximately 28% of our net assets as of June 30, 2011. The price per share of these companies in the public markets is a key input used to determine the value of our positions at each Company at the end of each quarter. As such, significant fluctuations in the price per share of these companies will significantly affect our net asset value per share and our secondary liquidity. Such fluctuation does not, however, affect our day-to-day operations.

We continue to actively manage our expenses in an effort to reduce our overall net loss on a quarterly and yearly basis. Our expenses for the second quarter and the first half of the year were lower than those of similar time frames during the past 2 years. We were successful subleasing our office space in Palo Alto, following a reduction in our presence in that location. We were small beneficiaries of the hype and rapid expansion of the social media craze by securing tenants at a slightly higher rate than our cost. We have 10 full-time employees. We believe this number of employees is the minimal amount of staff required to operate at the high standards our shareholders demand of us. We have not granted stock options since May of 2010, and the compensation committee of our Board of Directors recently agreed to not grant additional options to management during the remainder of 2011. We also continue our efforts to seek near-term cash flow from our venture debt investments. I'll now turn it back over to Doug.

Thank you, Daniel. I think what we'd like to do at this time is open up to questions before my final concluding remarks.

(Operator Instructions). And our first question comes from the line of Michael Lew from Needham. Your line is open.

Thank you and good morning, Doug, Daniel and Patty.

Good morning.

Good morning.

I may have missed this but what was the commercial revenue or revenue growth for the private companies during the quarter or for the first 6 months of the year?

We didn't report it. Historically, sometimes we have reported it for the first half of the year but we didn't report it to this point in time. The issue as I think everyone knows historically is that, we don't report individual company's revenue unless they report it. Some of our companies, especially if they've grown, have been more vocal about their revenue, but we have not done it for the first half of the year. We may do it, report it at the end of the third quarter when we have better clarity into what it is for the first half of the year.

The problem is, we are a public Company. We file our financials very quickly after the end of the quarter but that information is still coming in. So we may report it for the first half of the year at the end of the third quarter, so people can see where it is going. But we'll certainly, as we have historically report it in aggregate, when our companies provide it publicly, we try to get it out to you publicly as well, so you can understand how they're doing.

Okay. Based on the amount of activity in the portfolio and it seems to have picked up a lot, and if the markets do stabilize, what level of NAV could you be at by year-end? Do you think you can reach a record level if there is no significant downturn in the environment?

To be frankly honest, it's very difficult to predict that NAV and probably can't provide and won't provide any guidance to it. But, look, we're going to be volatile for the next period of time as Daniel said, because of our publicly-traded companies. Solazyme's a big position in that. When the markets got volatile, Solazyme went down from trading in the mid-20s to trading in the 14s. We don't know where Solazyme will be trading, especially in this market, come the end of September 30th and certainly the end of the year. And that will impact our NAV and it's really outside of our control.

In our own portfolio of companies, I guess what I would note is that -- and what you should have seen reflected is the value is now being driven by more liquid companies, so it's going to fluctuate, but it's visible to you as a shareholder, you can see that. Two, we had a lot of financing in the second quarter, and they were quality financings that increased value, but you'll also see that we increased the nonperformance risk discount.

Yes.

In some more companies. And 1, we think that just as early stage investors, that's a wise thing to do, but 2, I think that tells you that there is clearly some uncertainty that we see in the macro environment going forward, and what we're saying is we don't know what that will look like, but we would rather be prepared for it and proactive than responding to it as well. So look, it's impossible to guess where NAV per share is. We're glad to see it go up.

We believe that there's a lot of potential in the portfolio. I think you saw that in the financing events this quarter. But in the near term, our NAV is going to be impacted by the volatility of the public companies and certainly will be impacted as well by what happens. I mean, if the bottoms drop out of the market and the bottom drops out of the economy, it is going to be a tougher environment for every Company and ours won't be immune from that.

Okay. That's fair. Also, with regards to the number of proposals that are coming across the desk, in which segment of clean tech are you seeing the most activity? Is there any area that stands out or is there any area that's significantly lower than anticipated?

I'll take a stab at that, maybe hand it over to Daniel as well. First of all, as we've said for the last couple quarters, it's interesting, it's probably healthcare areas that we've seen a lot of interesting work being done at valuations we consider very affordable valuations, and we think there are some opportunities in that space going forward, and we're certainly seeing as our own companies pick up in that area. So we're seeing more than we were probably seeing even a couple years ago.

Electronics, you haven't seen us do as much of and you actually see -- you see I think it's now zero early stage companies in our electronics portfolio and one of the reasons for that is the electronics side has been a bit of a laggard. That may change over time.

There's a venture capital J curve. That may change over time. A lot of those companies are maturing well but it's been a very difficult sector to finance and a sector in the venture world that's been in disarray. Although, I think our companies have outperformed a lot of what we've seen there. In the clean tech space, which we remain interested in, and again, PWA, one of our investments in that space this quarter, augmenting a healthcare investment also this quarter.

It's interesting. We're doing more and more looking in the water. I think you're going to see us looking in certain AG areas going into the future there that we see exciting. I mean, we're being inundated with biofuel deals. So it's interesting. We're inundated with oncolytic virus deals after we sell BioVex to Amgen, and we're inundated with biofuel deals because of the success of Solazyme. Our thinking is slightly different on that, which is, look, we were in the first successful oncolytic virus company. We've been there. We've done that. We were 3 to 7 years ahead of that. We timed it very nicely for the market, when the market started to get interest in malignant melanoma and now oncolytic viruses. We have something to sell to that market. I don't think you'll see us do any more oncolytic virus companies for malignant melanoma.

On the biofuels space, again, we think that there are, there have been some successful companies out there. We think there are a tremendous amount of companies that have been well-financed out there. We think it will be more difficult going forward for an early stage Company to really rise and take the helm from some of the other well-financed, maturing companies in that space and so we've really moved away from that a little bit as early stage investors. So again, a lot in the water area that we're seeing. We still look in power, power generation, energy conversion. We think that's an interesting space going forward in clean tech and we continue to look at healthcare as well.

Okay. And last question, is there anything you can highlight at Ultora? I know it's early stage, but the end-market opportunity for that company just seems to be rapidly evolving, just given the global emissions focus.

I know. I'm sure you're probably chomping at the bit to do that Ultora is still in stealth mode. The only thing we've said publicly is the 2 investors in there are [Cosla] and us. So we think we're with a great partner in that deal. It's very, very early stages, you can tell there's very little money in it to date. So we look forward to giving additional information on to it on to the future and certainly Michael you will be one of the first to know because we know you know that space very, very well. But at this point in time, we just can't say any more about it.

I'll wait for the information to flow out. But thank you.

Thank you, Mike.

Thank you. Our next question comes from the line of [Daniel Jove], a private investor. Your line is open.

Good morning. On June 23rd you released your 8-K or filed an 8-K indicating that a Russian nano tech investment entity had signed a term sheet. I was wondering if you have any updates or comments that you can make on that.

Unfortunately, I'm not going to be able to say that much on that. Let me -- I'll give you a little background to try to be as transparent as I can be. We did not release a press release. We released an 8-K in response to a release that RusNano, the Russian government released on that. I think that the 8-K was clear as to what that all meant.

What I would will say is this. We put a statement in our shareholder letter related to the fact that we continue to look for ways to invest more dollars than we have been able to invest historically in deals. We think a stronger position for Harris & Harris Group would be to have $10 million to $15 million to invest in deals rather than the $5 million to $7 million we've had historically. And so we're looking ways to do that. We're looking for ways to do that are non-dilutive to our existing shareholders. We think that in anything we do, it's probably a 6 to 18 month time frame that we're looking at, so investors shouldn't look to be a quick cure-all on that or anything like that.

And also, just to give you a little idea of what we're looking at, one of the difficulties we've had is we are one of the few publicly traded venture capital firms. I would argue that some of our institutional shareholders and many, many of our retail shareholders have taken a long-term perspective. But as you've noticed as we've raised capital historically, you don't even see many of those shareholders 3 months, 6 months after they invest and the reason is many of the micro cap funds that invest in stocks like ours, they turn their portfolios probably every 90 days. In today's environment, they may turn it every day, but certainly 9 months. And one of the things we're trying to do, we think is best for our shareholders is, can we match the maturity of some of the institutions that want to be invested in Harris & Harris Group, with our time frames as a venture capital firm which are 5 to 10 years.

So we are certainly looking for non-dilutive ways to get to ideal investment ratios to invest in what we think is a wonderful growing ecosystem of nanotechnology companies, again, RusNano, not just in the US but potentially in other areas as well, in a way where the investment time horizons match our investment time horizons. That's probably what I can say at this point in time.

Perhaps there's one point in the 8-K that you could clarify for me. It mentions I think it was a $250 million fund and RusNano would contribute up to one half of that. Would you be raising the other half from outside investors? Would you investing along side them in the fund or would you solely be operating as the fund manager.

I probably can't address that at this point in time. You saw that RusNano had committed basically to be up to half of a fund and we are not committed at this point in time to necessarily go forward on that.

Okay. And then -- but is it fair the to say that transaction was still a potential transaction?

It's fair to say that we are pursuing multiple opportunities to be able to manage money.

You're very good. Then another question, separate issue. One of your --

My Chief Compliance Officer is sitting right to my right and my hand gets squeezed very, very hard. So -- and I've learned to fear her more than everyone else.

Very good. Very good. On a totally separate issue, then, one of the portfolio companies, Adesto, I noticed in the last 6 months you've doubled the value that you're carrying it at and it's now the second largest holding in your portfolio, I believe. That's not something that I've really had on my radar. I was wondering if you have any comments you can make on what's driven that increase in that value and so I'll let you --

Certainly. Maybe just make a statement and then Daniel, can I turn it over to you to talk a little bit about what Adesto does. We haven't been that public on it. One of the nice things about our portfolio, certain investors and certain different investors get excited about certain companies and some companies are more vocal. They grow. But what we like about -- what we like about uncertainty is that there are plenty of companies in our portfolio and some of those come up and they're off the radar for a while and they go on to be really strong down the road and Adesto is one of those, we've been a little bit more silent about. It's actually in the semiconductor space which has been a very difficult space but they have been very, very successful with their strategy. Dan, will you spend a few minutes maybe introducing Adesto and what they do? And maybe give a little background of why that valuation is increasing.

Absolutely. So Adesto actually came out of stealth about 2, 2 and-a-half years ago, and they have technology that was originally developed out of Arizona State University for making high dense -- making nonvolatile memory in a way that is easily manufacturable, can withstand the operating environments that you need to have, and the operating conditions that you need to have for particularly embedded memory, which embedded memory is in all of your devices, all of your electronic devices, you have on-chip and for example, in micro controllers, and in CPUs, in hard drives, you have a small amount of memory that is positioned very close to the other electronic components, and is integrated in such a way that you can move data back and forth very, very quickly. And their technology allows them to make this very high-speed embedded memory in a unique way.

And they use something called conductive bridging technology to be able to do it. Their website has a really good demonstration of what the basis for that technology is. The Company recently announced a partnership with a fabrication facility to bring this technology to market called Alta Semiconductor and the valuation increase that you see in our financial statements, one of the primary inputs to that was a round of financing that occurred during the second quarter.

So again, what I touched on earlier, there are a lot of things in today's environment we don't control. What we think we need to do as management is control what we can. When I talked earlier about companies that we believe are big impact companies for the future, heading into an uncertain environment the first thing you want to do is make sure they're financed. Right. It's going to make their life much easier and we're really glad to have Adesto financed for the future. Not only that, it happened to be at a very nice step-up in valuation as well which of course preserves our ownership better and speaks to the success of the Company.

Okay. Finally, I was wondering if you could discuss some of the factors that you may take into consideration when deciding to exit your publicly-traded position, not specifically Solazyme and NeoPhotonics, but just in general if you have a price target you're looking at or a time frame or purely just as things go.

So I'll start broadly and try to work down. It's a question that's asked of us and actually often. There's a tremendous amount of opinions as to what we should do. So first of all, the strength of Harris & Harris Group is our strength in making early stage venture capital investments in nanotechnology-enabled companies, oftentimes before the world has realized that. So we're often the first institutional investors. We were the first institutional investors in Solazyme. And by doing that, that's really our strength, building and putting those companies together. As we've said a lot of times, our strength is not -- we're not going to be a Company that is trading publicly traded companies.

That being said, when we look at our publicly-traded companies, almost always when technology companies IPO, they're not at the summit of their growth. They're moving up that steep growth part of the curve. As such, they're volatile. As such, they're risky, as people know, but we believe that the IPO market is more of a financing environment than an exit environment. Now, and the way we look at it, and we've looked at it historically, is that if we think that one of our companies publicly has great growth potential ahead of it and more growth potential than other opportunities we may see to put our cash to work, we will try to realize that growth potential of the Company. If we think there is greater potential to put those dollars to work in a smaller early stage Company, then we will do that.

I think in looking specifically at both NeoPhotonics and Solazyme at this point in time, the growth is ahead of them. So one of the things we look on more of a micro scale is the management, what we know. We've lived with Solazyme, we've lived with NeoPhotonics for a long, long time. What do we know. We know their managements have executed flawlessly. They are both examples of excellent execution by their management. That Tim Jenks, the CEO of NeoPhotonics was a submarine captain. Since 2004, he's grown that company, he grew it through the worst recession we've faced since the Great Depression, and as long as we believe that management is going to continue to execute, clearly as they're valued today, we believe there's growth ahead of it.

Solazyme, when you look at what they're doing, right, the promise of what they're doing is not captured in their cosmetics. It's captured in the functional foods, the chemicals, the potential fuels. I don't see them being an $800 million Company. I don't see them being a $1 billion Company. We see the potential for them to be a $2 billion Company, a $4 billion Company, a $5 billion Company.

Both companies have the capital to execute now. They had successful IPOs. They raised a tremendous amount of capital. We think the growth is ahead of them. So as we said publicly for both cases, currently, we have no intentions to sell. We're actually restricted as well, so luckily we don't have to make that decision in today's environment. But in general, we know where our expertise is, but we're looking for growth. And if we think that Solazyme has the potential over the next couple years to grow to a multi-billion dollar Company, we think that's good use of our capital.

I agree. Thank you very much.

Thank you.

Thank you. Our next question comes from the line of Ronald Lazar from the Maxim Group. Your line is open.

Hi, Doug.

Hey, Rob.

My question was on RusNano. You already addressed that on the status. So I thank you for that. That was my inquiry.

Thank you. Again, as we can, we will get -- we will try to be as transparent with information as we can over time.

Okay. Great. Thank you.

Thank you. (Operator Instructions). I show no further questions in the queue. I'd like to turn the conference back to Mr. Doug Jamison for closing remarks.

Good. Thank you very much. 3 things. First of all, probably for a different reason but we're as frustrated by the macro economy and what it's done to the volatility, especially in micro cap stocks as I'm sure most of our shareholders are. For us, the reason is, we're starting to see the maturity in our portfolio. I think we were well positioned when windows were opened to get to some liquidity events. We think that puts our portfolio and our cash position in a very strong cash position.

But as most of you know, there are more companies out there. We're chomping at the bit. We think that the end of 2011 and through 2012 are going to be an interesting opportunity to see more liquidity events and we're going to have to wait to see how that environment shapes up. What I do want to leave you with is, we are excited about our portfolio. I say this a bit tongue in cheek, but I actually mean it. One of the best ways to support Harris & Harris Group is to take a look at some of the products our portfolio of companies have put out there. It's great diligence on your part.

If you don't believe in those products I think you have to take a look at the companies at the same time that the companies are putting out great products, you've got to look at their potential for growth. Most of our companies focused in nanotechnology deal directly with businesses. You're not going to buy one of Xradia's x-ray machines. You're probably not going to buy Solazyme's oil and start stockpiling oil but some of the companies do. You know you can get Solazyme's product, Algenist at Sephora through QVC. We've heard from a lot of shareholders that they really like it. It's a quality product. Certainly if you listen to Solazyme's call, I think it has been growing faster than they had expected.

On the battery side of things, if you have 3D televisions, and you use glasses for those, those glasses, the batteries burn out in them very rapidly. Contour sells those batteries. You can get them through Amazon.com, and they really expand the lifetime with the Contour chemistry. Some of us here, we're bikers, and so we monitor our cadence and miles per hour and things like that on our bike with wireless monitors. I used to change that battery on the wireless 2 to 3 times a summer. I use a Contour battery now and it goes literally the whole year. So you do see the improvement. It's something you can reach out and see.

You can go to Home Depot and buy one of BridgeLux, in cooperation with Cooper Lighting, you can buy their LED lighting and it literally can screw right into your incandescent bulb, but give you all of the efficiency of an LED bulb. So you can actually see and get these products, you can go -- Metro PCS sells a Huawei phone that has Cambrios' film in it now, their transparent conductive film for their touch screens, and you can go out and actually purchase that. All of that helps the revenue growth of our portfolio companies. You can see and feel the products of nanotechnology and certainly the last 9, 10 years of development of it.

Finally, when we look out as an investment house, there's a lot of uncertainty out there. We don't mind that uncertainty. We think that in the current uncertainty that exists out there, probably one of the best strategies, rather than trying to figure out slow growth economic policy, slow growth companies is to invest in companies that have disruptive technology that can become transformative companies for the future. We think out of these environments, great companies emerge, whether it was Kellogg in the 1930s or whether it was Apple in the 1970s. So we really like the space we're in. It's going to create very nice valuations for us to invest at and we like being in this space, especially when we look at all the uncertainty ahead of us, so with that I will conclude.

Thank you very much. And as always if you have questions on what we're doing, as much as we can, we try to be transparent with the shareholders. I hope you all understand there are certain things that we're just not able to speak about at any point in time. So thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may all disconnect at this time.