Andrew Racz
Director of Research
300 East 54 Street, Suite 26C
New York, NY 10022
Phone: (212) 319-6949
Fax: (212) 753-1944

Harris & Harris

October 13, 2009




2009 Price Range:

$7 - $3


(As of September 30, 2005) 

Authorized to issue 45,000,000 shares of Common Stock, par value $0.01 per share, and 2,000,000 shares of preferred stock, par value $0.10 per share. Each share within a particular class or series thereof has equal voting, dividend, distribution and liquidation rights.

Title of Class


Number held by
company for
its own account


Common stock



25,966,758 (1)

Preferred stock


- 0 -


(1)  The number of shares of our Common Stock outstanding excludes:

  • Option to purchase approximately 1,345,836 shares of Common Stock at an exercise price of $10.11 outstanding as of October 5, 2009;

  • Option to purchase approximately 1,302,409 shares of Common Stock



December 31,

December 31,

December 31,

Financial Position




Total Assets

$ 111,627,601

$ 142,893,332

$ 118,328,590

Total Liabilities

$ 2,096,488

$ 4,529,988

$ 4,398,287

Net Assets

$ 109,531,113

$ 138,363,344

$ 113,930,303

Net Asset Value per
outstanding share

$ 4.24

$ 5.93

$ 5.42

Shares outstanding








Classes of Assets


% of


% of


% of


$ 692,309


$ 330,009


$ 2,071,788


U.S. Government obligations

$ 52,983,940


$ 60,193,593


$ 58,656,147



$ 56


$ 647,861


$ 1,445,277


Private Placements

$ 56,965,153


$ 78,110,384


$ 53,667,831


Other Assets

$ 986,143


$ 3,611,485


$ 2,487,547


Total Assets








Andrew G. Racz
Beral, Inc.

DOUG JAMISON (A):   Good morning, this is Doug Jamison from Harris and Harris Group.

ANDREW RACZ (Q):   Hi, how are you?

A:   I'm doing well, how are you?

Q:    Mr. Jamison, let me come to the pont. Ten years of fifteen ago, everybody talked about Silicon Valley or hi-tech investments. Since then, venture capital technically disappeared except part of Prime Equities like Fortress Investment Group (FIG) and Blackstone (BX). Now, does Harris and Harris represent the post-Obama world? Where would you put Harris & Harris in the big picture?

A:   We hope that President Obama in 2009, like President Clinton in 1992, will visit Palo Alto. I think Harris & Harris Group is a small venture capital firm, so it's between $100 and $200 million in assets. So we are small by venture capital standards. We're early stage, so we tend to spin companies and ideas out of research institutions so we get them at their earliest stages. We're focused on, as you know, an area of science and that scale, we at least believe is an exciting area of science that is really created some of the breakthroughs.

Q:   Let me know whom you consider independent companies and your competitors in the marketplace.

A:   Well, in the public realm, there is nobody because there is not another publicly-traded venture capital company.

The following tables summarize the values of our portfolios of venture capital investments and U.S. government obligations, as compared with their cost, at June 30, 2009, and December 31, 2008:


June 30, 2009

Dec. 31, 2008

Venture capital investments at cost

$ 92,989,567

$ 91,090,001

Net unrealized depreciation

$ 29,029,756

$ 34,124,848

Venture capital investments, at value

$ 63,959,811

$ 56,965,153

At December 31, 2008, our total assets and net assets were $111,627,601 and $109,531,113 respectively. Our net asset value per share at that date was $4.24 and our shares outstanding increased to 25,859,573 at December 31, 2008.

Q:   Let us go back into the past. There have been very successful public companies, mainly in Silicon Valley, that made not even a million or hundreds of millions -- some people even made billions. Now that ten years have past, the financial world has changed and I hope you don't mind, but the totally unknown company, Harris & Harris, comes along and says, well, this is a good concept. And over and above, let's say we are a well-regarded companies. We know how to raise money, and we are very conservative with our efforts. Correct?

A:   That is correct. I mean, we haven't "come along". We've been around since 1984, so we've been through multiple venture capital cycles before.

Q:   But at the moment, let's say in the public arena, you are unique.

A:   We are as unique as a venture capital firm, yes.

Q:   No, you have, if I'm correct from just reading stated assets, about $110 million.

A:   Correct.

Q:   Now, it's between cash, between advanced companies and non-advanced companies. How would you break it down?

A:   Of the $100 million in net assets, $64 million is the value of the venture capital portfolio, $47 million is the case as of June 30th. Of that $64 million in value that's in the venture capital portfolio, 70% of it is in the top 10 holdings of that venture capital portfolio.

Q:   More advanced, you would say?

A:   Some of our 34 companies are advanced. Our venture capital portfoli we put in three baskets. You know our early-stage companies that are long on promise but they have both technology risk and market risk and there's probably 12 companies in that basket. We then have a basket for the companies that have overcome their technology risk but they have market risk, so they're just putting their products on the market. We have 11 companies in that basket. And then we have the companies that have shown their ability to get to revenue. And that revenue would vary -- call it between $10 million plus -- but there are six companies in that basket, and those are what we call the execution risk basket. Neophotonics does over $100 million a year in revenue. Molecular Imprints does over $20 million in revenue.

New Investments


Cobalt Technologies, Inc.

$ 240,000

Laser Light Engines, Inc.

$ 2,000,000

PolyRemedy, Inc.

$ 244,500

Tetra Vitae Biosciences, Inc.

$ 250,000

Follow-on Investments

$ 17,779,462

The following tables summarize the value of our portfolios of venture capital investments and U.S. government obligations as compared with their costs, at December 31, 2008, and December 31, 2007:


  2008                     2007

Venture capital investments, at cost

$ 91,090,001

$ 82,677,528

Net unrealized depreciation

$ 31,124,848

$ 4,567,144

Venture capital investments, at value

$ 56,965,153

$ 8,110,384

Q:   You have about $45-47 million cash.

A:   At June 30th, we did.

Q:   And do you roughly intend to keep 30-40% of your money in liquid assets? At all times?

Q:   Yes. I think that's a good thing. We always have follow-on investments, so we always have to have liquid assets reserved for those follow-on investments. However, on October 5, 2009, we have raised about $20M new equity.

Q:   Now then, you have a whole variety of early-stage companies which require cash, development and marketing. Let's say you get a telephone call from Fortress Investment Group, which is a $30 billion private equity company, and said, look, we come across with such-and-such a company, too small for us. Would you like to take an equity interest? This is the way you accumulate new ideas?

A:   Yes. I mean we also get calls from research institutions.

Q:   Anybody calls you and then . . .

A:   But other companies as well.

Q:   Then you develop some companies and then let's go to the very end, six, eleven, or I don't know how many companies, which are producing decent revenues and have an increased valuation other than the price you paid when you acquired them. Correct?

A:   Correct.

Q:   Now, some of these companies you are trying to bring public. You have already brought the one solar company public, if I'm correct.

A:   Yes. Actually, all the companies in our portfolio now are private. We brought them forward. We sold any public positions we have and they are all private currently. And yes, we would be looking to either bring them public or sell them in an M&A transaction.

Q:   Now I would like to select one at random, this solar company. You have a company called JA Solar?

A:   We have a company in Novalight that has partnered with JA Solar. JA Solar is a public company. We are not invested in them. We are invested in Novalight. They recently announced the partnership.

Q:   Briefly, what is Novalight? How much did it cost you? What's the value?

A:   Novalight is a Silicon Valley-based silicon nano particle or silicon ink photovoltaic company. We have invested multiple times in it. I believe our cost is approximately $3 to $4 million. It's currently valued at $5 million.

Q:   And if they make this transaction with the solar company, the solar company is already public and Novalight's value may increase substantially.

A:   I can't speak to that directly.

Q:   It could, because it is associated with the high-flying company.


JA Solar Holdings Co. Ltd. is working to commercialize a new generation of high-performance solar products using silicon ink technology from Innovalight Inc. JA Solar is currently developing silicon ink-based high-efficiency solar cells at its R&D pilot line in Yangzhou, China with plans for initial commercialization in 2010.

"Innovalight's silicon ink, in conjunction with JA Solar's leadership in high-volume solar cell manufacturing with demonstrated yield, conversion efficiency, and how production costs, provides a very promising solution to enhance the conversion efficiency of solar cells utilizing our existing solar cell manufacturing lines," said Qingtang Jiang, JA Solar's chief technology office. "JA Solar will continue to invest in new technologies to stay at the forefront of the solar sector.

A:   It is also selling products. So I would think that Novalight's value could potentially increase because their revenue increases dramatically from this partnership, and they will also associate themselves with other firms.

Q:   Just for the sake of argument, let's say your market value of Novalight could be $10, more than double what you paid for it.

A:   Well, from the way we make money as a venture capital firm, that is correct thinking. I mean, what we do is we like to get more than 2x return. We're looking for 5x to 10x returns in our best companies. But yes, the idea is we invest at wholesale, but private market transactions, and then when we sell them, we like to sell them at multiples of what our cost is.


Information contained herein is based on data obtained from recognized statistical services, issuers reports or communications or other sources believed to be reliable. However, such information has not been verified by us and we do not make any representation to its accuracy or completeness. Any statement non-factual in nature constitutes only current opinions which are subject to change. BERAL INC. or their officers, directors, analysts or employees may have positions in the securities or commodities referred to herein, and may as principal or agent buy and sell such securities or commodities. An employee, analyst, officer or a director of BERAL INC. may serve as a director for companies mentioned in this report. Neither the information nor any comment expressed shall constitute an offer to sell or a solicitation of an offer to buy any securities or commodities mentioned herein. There may be instances when fundamental, technical and competitive opinions may not be in concert. This firm may from time to time perform investment banking or other services for or which investment banking or other businesses from any company mentioned in this report.



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Andrew Racz. 300 East 54 Street, Suite 26C, New York, NY 10022
Phone: (212) 319-6949 Fax: (212) 753-1944. E-mail:

Copyright © 2011 Andrew Racz. All Rights Reserved.