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Harris & Harris Group (TINY)

Q2 2012 Earnings Call

August 14, 2012 10:00 am ET


Patricia N. Egan - Chief Accounting Officer, Vice President and Senior Controller

Douglas W. Jamison - Chairman, Chief Executive Officer, and Managing Director, and Chairman of Executive Committee


Sam Rebotsky



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Good day, ladies and gentlemen, and welcome to the Harris & Harris Second Quarter 2012 Financial Results. [Operator Instructions] As a reminder, this conference call is being recorded. Now, I'll turn the conference over to Patty Egan. Please begin.

Patricia N. Egan

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Thanks. 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 laws, Harris & Harris Group, Inc. undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties.

Douglas W. Jamison

Thank you, Patty. Good morning. This is Doug Jamison, and welcome to our call reporting on the second quarter of 2012. Harris & Harris Group is an early-stage active investor in transformative nanotechnology companies.

I'll begin the call this morning with a few remarks on our business. Patty Egan, our Chief Accounting Officer, will then provide a brief summary of our June 30, 2012 financials. Patty will reference our recently filed quarter report on Form 10-Q. I will then close with additional remarks and open up the lines for questions. We expect the call to last approximately 45 minutes.

Our priorities remain focused for 2012 and beyond. Our 3 priorities include: first, working with our existing portfolio companies to reach positive liquidity events. As we have stated previously, we believe our late stage companies are well positioned for liquidity events between now and 2014. And we believe many of our mid-stage companies could be in a position to complete transactions that create liquidity over this same time period; second, generating predictable and near-term income by increasing our venture debt investments and taking advantage of opportunities provided us by our newly publicly traded positions, such as selling covered calls on our position in Solazyme; and third, increasing our assets under management without issuing common stock.

Of these priorities, the first and third as listed create the potential to fundamentally change the return potential of Harris & Harris Group, as they give us new capital to manage and they provide a spark for movement in NAV per share. The second priority permits us to have more control of our future by offsetting expenses in a predictable manner and it reduces the downward pressure on NAV that comes from the long and unpredictable development of our early-stage venture portfolio. Said another way, priority 2 permits us to survive, while 1 and 3 permit us to thrive. Our goal is to thrive and our time is focused accordingly.

I think Steve Waite, in a recent article for SoundView Research, summarized us well. Harris & Harris Group has 2 core businesses. One, investing in nanotechnology, and two, operating a venture capital firm.

Addressing one, investing in nanotechnology. We will continue to invest in disruptive technologies enabled at the nano scale. Most of the really disruptive technologies we see in the sectors we invest in are enabled at the nano scale now. One doesn't open up an academic journal or popular press without reading about advances in nanotechnology. And now in its second commercial decade, its future is both bright and upon us.

A look at Slide 5 gives a brief indication of the power of the connectedness of nano scale-enabled technologies. Not only do disruptive technologies have become the basis of some of our portfolio companies impact one sector, but many times, these same technologies have an impact over multiple sectors. Therefore, the ecosystem and the learning across our portfolio is networked far more intimately than most other technology areas. This network ecosystem and our leadership will be difficult to replicate.

Additionally, as we look forward, the exciting technology domains that we believe will result in transformative companies of tomorrow are nano-enabled. Looking at Slide 6, these technology domains include areas such as precision chemistry, nanofluidics and fabrication, separations, sensing, merging semiconductors and biological molecular analysis, big data, which has gotten a lot of recent press and 3D biology. In many of these domains, we already have investments that are beginning to mature.

Addressing 2, operating a venture capital company. As any of you that follow us know, we have spent no small amount of time over the past few years discussing the issues surrounding the operation of a venture capital company with all the changes in this industry. These issues have caused us to rethink our model and to make sure we are well positioned for the future, hence, our priorities going forward. In the sectors we invest in, the lengthening time from investment to exit has resulted in venture capital backed companies needing to prove scale and manufacturing and often end market traction prior to liquidity event as Slide 7 depicts.

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