New
York
|
13-3119827
|
(State
or other jurisdiction of
|
(IRS
Employer Identification No.)
|
incorporation
or organization)
|
|
|
|
111
West 57th
Street, New York, New York
|
10019
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Class
|
Outstanding
at May 10, 2007
|
Common
Stock, $0.01 par value per share
|
21,341,029
shares
|
Page
Number
|
||||
PART
I. FINANCIAL INFORMATION
|
||||
Item
1. Consolidated Financial Statements
|
1
|
|||
Consolidated
Statements of Assets and Liabilities
|
2
|
|||
Consolidated
Statements of Operations
|
3
|
|||
Consolidated
Statements of Cash Flows
|
4
|
|||
Consolidated
Statements of Changes in Net Assets
|
5
|
|||
Consolidated
Schedule of Investments
|
6
|
|||
Notes
to Consolidated Financial Statements
|
18
|
|||
Financial
Highlights
|
25
|
|||
Item
2. Management's Discussion and Analysis of Financial Condition and
Results
of Operations
|
26
|
|||
Background
and Overview
|
26
|
|||
Results
of Operations
|
30
|
|||
Financial
Condition
|
31
|
|||
Liquidity
|
33
|
|||
Capital
Resources
|
33
|
|||
Critical
Accounting Policies
|
33
|
|||
Recent
Developments - Portfolio Companies
|
35
|
|||
Forward
Looking Statements
|
35
|
|||
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
36
|
|||
Item
4. Controls and Procedures
|
37
|
|||
PART
II. OTHER INFORMATION
|
||||
Item
1A. Risk Factors
|
38
|
|||
Item
6. Exhibits
|
38
|
|||
Signatures
|
39
|
|||
Exhibit
Index
|
40
|
March
31, 2007
|
December
31, 2006
|
||||||
(Unaudited)
|
|||||||
ASSETS
|
|||||||
Investments,
at value (Cost: $125,055,760 at 3/31/07,
|
|||||||
$121,331,398
at 12/31/06)
|
$ |
112,410,877
|
$ |
112,323,978
|
|||
Cash
and cash equivalents
|
550,452
|
2,071,788
|
|||||
Restricted
funds
|
2,258,665
|
2,149,785
|
|||||
Receivable
from broker
|
0
|
819,905
|
|||||
Interest
receivable
|
563,375
|
625,372
|
|||||
Prepaid
expenses
|
427,580
|
10,945
|
|||||
Other
assets
|
297,754
|
326,817
|
|||||
Total
assets
|
$ |
116,508,703
|
$ |
118,328,590
|
|||
LIABILITIES
& NET ASSETS
|
|||||||
Accounts
payable and accrued liabilities
|
$ |
3,906,008
|
$ |
4,115,300
|
|||
Accrued
profit sharing (Note 5)
|
0
|
261,661
|
|||||
Deferred
rent
|
19,626
|
21,326
|
|||||
Current
taxes payable
|
56,767
|
0
|
|||||
Total
liabilities
|
3,982,401
|
4,398,287
|
|||||
Net
assets
|
$ |
112,526,302
|
$ |
113,930,303
|
|||
Net
assets are comprised of:
|
|||||||
Preferred
stock, $0.10 par value,
|
|||||||
2,000,000
shares authorized; none issued
|
$ |
0
|
$ |
0
|
|||
Common
stock, $0.01 par value, 45,000,000 shares authorized at
|
|||||||
3/31/07
and 12/31/06; 23,169,769 issued at 3/31/07 and
|
|||||||
22,843,757
issued at 12/31/06
|
231,698
|
228,438
|
|||||
Additional
paid-in capital (Note 8)
|
134,784,100
|
129,801,201
|
|||||
Accumulated
net realized loss
|
(6,500,609
|
)
|
(3,747,912
|
)
|
|||
Accumulated
unrealized depreciation of investments
|
(12,644,883
|
)
|
(9,007,420
|
)
|
|||
Unrecognized
net gain on retirement benefit plans
|
61,527
|
61,527
|
|||||
Treasury
stock, at cost (1,828,740 shares at 3/31/07 and
|
|||||||
1,828,740
shares at 12/31/06)
|
(3,405,531
|
)
|
(3,405,531
|
)
|
|||
Net
assets
|
$ |
112,526,302
|
$ |
113,930,303
|
|||
Shares
outstanding
|
21,341,029
|
21,015,017
|
|||||
Net
asset value per outstanding share
|
$ |
5.27
|
$ |
5.42
|
Three
Months Ended
|
|
Three
Months Ended
|
|
||||
|
|
March
31, 2007
|
|
March
31, 2006
|
|||
Investment
income:
|
|||||||
Interest
from:
|
|||||||
Fixed
income securities
|
$
|
652,498
|
$
|
802,362
|
|||
Miscellaneous
income
|
0
|
2,500
|
|||||
Total
investment income
|
652,498
|
804,862
|
|||||
Expenses:
|
|||||||
Salaries,
benefits and stock-based
|
|||||||
Compensation
(Note 4)
|
2,534,766
|
786,361
|
|||||
Administration
and operations
|
380,865
|
322,449
|
|||||
Professional
fees
|
182,195
|
289,887
|
|||||
Rent
|
59,507
|
61,238
|
|||||
Directors'
fees and expenses
|
141,196
|
85,902
|
|||||
Depreciation
|
15,313
|
16,768
|
|||||
Custodian
fees
|
5,774
|
10,000
|
|||||
Total
expenses
|
3,319,616
|
1,572,605
|
|||||
Net
operating loss
|
(2,667,118
|
)
|
(767,743
|
)
|
|||
Net
realized gain (loss) from investments:
|
|||||||
Realized
(loss) gain from investments
|
(674
|
)
|
11,953
|
||||
Income
tax expense (Note 7)
|
84,905
|
9,606
|
|||||
Net
realized (loss) gain from investments
|
(85,579
|
)
|
2,347
|
||||
Net
realized loss
|
(2,752,697
|
)
|
(765,396
|
)
|
|||
Net
increase in unrealized depreciation
|
|||||||
on
investments:
|
|||||||
Change
as a result of investment sales
|
0
|
0
|
|||||
Change
on investments held
|
(3,637,463
|
)
|
(888,594
|
)
|
|||
Change
in unrealized depreciation on investments
|
(3,637,463
|
)
|
(888,594
|
)
|
|||
Net
increase in unrealized depreciation
|
|||||||
on
investments
|
(3,637,463
|
)
|
(888,594
|
)
|
|||
Net
decrease in net assets resulting
|
|||||||
from
operations:
|
|||||||
Total
|
$
|
(6,390,160
|
)
|
$
|
(1,653,990
|
)
|
|
Per
average basic and diluted outstanding share
|
$
|
(0.30
|
)
|
$
|
(0.08
|
)
|
|
Average
outstanding shares
|
21,277,576
|
20,756,345
|
Three
Months Ended
|
|
Three
Months Ended
|
|
||||
|
|
March
31, 2007
|
|
March
31, 2006
|
|||
Cash
flows used in operating activities:
|
|||||||
Net
decrease in net assets resulting from operations
|
$
|
(6,390,160
|
)
|
$
|
(1,653,990
|
)
|
|
Adjustments
to reconcile net decrease in net assets
|
|||||||
resulting
from operations to net cash used in
|
|||||||
operating
activities:
|
|||||||
Net
realized and unrealized loss on investments
|
3,638,137
|
876,641
|
|||||
Depreciation
and amortization
|
(65,730
|
)
|
(295,811
|
)
|
|||
Stock-based
compensation expense
|
1,690,181
|
0
|
|||||
Changes
in assets and liabilities:
|
|||||||
Restricted
funds
|
(108,880
|
)
|
(170,644
|
)
|
|||
Receivable
from portfolio company
|
0
|
75,000
|
|||||
Interest
receivable
|
61,997
|
(316,696
|
)
|
||||
Receivable
from broker
|
819,905
|
0
|
|||||
Prepaid
expenses
|
(416,635
|
)
|
(449,037
|
)
|
|||
Other
assets
|
(10,191
|
)
|
0
|
||||
Accounts
payable and accrued liabilities
|
(209,292
|
)
|
236,796
|
||||
Accrued
profit sharing
|
(261,661
|
)
|
(1,897,072
|
)
|
|||
Deferred
rent
|
(1,700
|
)
|
(1,701
|
)
|
|||
Current
income tax liability
|
80,795
|
(8,282,830
|
)
|
||||
Net
cash used
in operating activities
|
(1,173,234
|
)
|
(11,879,344
|
)
|
|||
Cash
flows from investing activities:
|
|||||||
Purchase
of short-term investments
|
|||||||
and
marketable securities
|
(10,952,109
|
)
|
(67,883,929
|
)
|
|||
Sale
of short-term investments and marketable securities
|
12,165,656
|
92,418,871
|
|||||
Investment
in private placements and loans
|
(4,857,357
|
)
|
(9,412,764
|
)
|
|||
Proceeds
from sale of investments
|
0
|
20,688
|
|||||
Purchase
of fixed assets
|
(270
|
)
|
(5,989
|
)
|
|||
Net
cash (used in) provided by investing activities
|
(3,644,080
|
)
|
15,136,877
|
||||
Cash
flows from financing activities:
|
|||||||
Proceeds
from stock option exercises (Note 4)
|
3,295,978
|
0
|
|||||
Net
cash provided by financing activities
|
3,295,978
|
0
|
|||||
Net
(decrease) increase in cash and cash equivalents:
|
|||||||
Cash
and cash equivalents at beginning of the period
|
2,071,788
|
1,213,289
|
|||||
Cash
and cash equivalents at end of the period
|
550,452
|
4,470,822
|
|||||
Net
(decrease) increase in cash and cash equivalents
|
$
|
(1,521,336
|
)
|
$
|
3,257,533
|
||
Supplemental
disclosures of cash flow information:
|
|||||||
Income
taxes paid
|
$
|
10,252
|
$
|
8,291,973
|
Three
Months Ended
|
|
Year
Ended
|
|
||||
|
|
March
31, 2007
|
|
December
31, 2006
|
|
||
|
|
(Unaudited)
|
|
|
|||
Changes
in net assets from operations:
|
|||||||
Net
operating loss
|
$
|
(2,667,118
|
)
|
$
|
(7,612,935
|
)
|
|
Net
realized (loss) gain on investments
|
(85,579
|
)
|
258,693
|
||||
Net
increase in unrealized depreciation
|
|||||||
on
investments held
|
(3,637,463
|
)
|
(4,418,870
|
)
|
|||
Net
decrease in net assets resulting
|
|||||||
from
operations
|
(6,390,160
|
)
|
(11,773,112
|
)
|
|||
Changes
in net assets from capital
|
|||||||
stock
transactions:
|
|||||||
Issuance
of common stock upon the
|
|||||||
exercise
of stock options
|
3,260
|
2,587
|
|||||
Additional
paid-in capital on common
|
|||||||
stock
issued
|
3,292,718
|
2,612,603
|
|||||
Stock-based
compensation expense
|
1,690,181
|
5,038,956
|
|||||
Net
increase in net assets resulting from
|
|||||||
capital
stock transactions
|
4,986,159
|
7,654,146
|
|||||
Changes
in net assets from adoption
|
|||||||
of
SFAS No. 158
|
0
|
61,527
|
|||||
Net
decrease in net assets
|
(1,404,001
|
)
|
(4,057,439
|
)
|
|||
Net
assets:
|
|||||||
Beginning
of the period
|
113,930,303
|
117,987,742
|
|||||
End
of the period
|
$
|
112,526,302
|
$
|
113,930,303
|
Method
of
|
|
Shares/
|
|
|
|
|||||
|
|
Valuation
(3)
|
|
Principal
|
|
Value
|
||||
Investments
in Unaffiliated Companies (6)(7) - 15.97% of net
assets
|
||||||||||
Private
Placement Portfolio (Illiquid) - 15.97% of net
assets
|
||||||||||
AlphaSimplex
Group, LLC (2) — Investment
management company
|
||||||||||
headed
by Dr. Andrew W. Lo, holder of the Harris & Harris
Group
|
||||||||||
Chair
at MIT
|
||||||||||
Limited
Liability Company Interest
|
(B
|
)
|
—
|
$
|
11,036
|
|||||
Exponential
Business Development Company (1)(2) —
|
||||||||||
Venture
capital partnership focused on early stage companies
|
||||||||||
Limited
Partnership Interest
|
(B
|
)
|
—
|
0
|
||||||
Molecular
Imprints, Inc. (1)(2) — Manufacturing nanoimprint
|
||||||||||
lithography
capital equipment
|
||||||||||
Series
B Convertible Preferred Stock
|
(A
|
)
|
1,333,333
|
2,000,000
|
||||||
Series
C Convertible Preferred Stock
|
(A
|
)
|
1,250,000
|
2,500,000
|
||||||
Warrants
at $2.00 expiring 12/31/11
|
(B
|
)
|
125,000
|
0
|
||||||
4,500,000
|
||||||||||
Nanosys,
Inc. (1)(2)(5) — Developing zero and one-dimensional
|
||||||||||
inorganic
nanometer-scale materials and devices
|
||||||||||
Series
C Convertible Preferred Stock
|
(C
|
)
|
803,428
|
2,370,113
|
||||||
Series
D Convertible Preferred Stock
|
(C
|
)
|
1,016,950
|
3,000,003
|
||||||
5,370,116
|
||||||||||
Nantero,
Inc. (1)(2)(5) — Developing a high-density, nonvolatile,
|
||||||||||
random
access memory chip, enabled by carbon nanotubes
|
||||||||||
Series
A Convertible Preferred Stock
|
(C
|
)
|
345,070
|
1,046,908
|
||||||
Series
B Convertible Preferred Stock
|
(C
|
)
|
207,051
|
628,172
|
||||||
Series
C Convertible Preferred Stock
|
(C
|
)
|
188,315
|
571,329
|
||||||
2,246,409
|
|
|
Method
of
|
Shares/
|
|||||||
Valuation
(3)
|
Principal
|
Value
|
||||||||
Investments
in Unaffiliated Companies (6)(7) - 15.97% of net assets
(cont.)
|
||||||||||
Private
Placement Portfolio (Illiquid) - 15.97% of net assets
(cont.)
|
||||||||||
NeoPhotonics
Corporation (1)(2) — Developing and manufacturing
|
||||||||||
optical
devices and components
|
||||||||||
Common
Stock
|
(C
|
)
|
716,195
|
$
|
133,141
|
|||||
Series
1 Convertible Preferred Stock
|
(C
|
)
|
1,831,256
|
1,831,256
|
||||||
Series
2 Convertible Preferred Stock
|
(C
|
)
|
741,898
|
741,898
|
||||||
Series
3 Convertible Preferred Stock
|
(C
|
)
|
2,750,000
|
2,750,000
|
||||||
Warrants
at $0.15 expiring 01/26/10
|
(C
|
)
|
16,364
|
164
|
||||||
Warrants
at $0.15 expiring 12/05/10
|
(C
|
)
|
14,063
|
140
|
||||||
5,456,599
|
||||||||||
Polatis,
Inc. (1)(2)(5)(10) — Developing MEMS-based optical
|
||||||||||
networking
components
|
||||||||||
Series
A-1 Convertible Preferred Stock
|
(B
|
)
|
16,775
|
0
|
||||||
Series
A-2 Convertible Preferred Stock
|
(B
|
)
|
71,611
|
320,282
|
||||||
Series
A-4 Convertible Preferred Stock
|
(B
|
)
|
4,774
|
21,353
|
||||||
Series
A-5 Convertible Preferred Stock
|
(B
|
)
|
5,491
|
45,127
|
||||||
386,762
|
||||||||||
Total
Unaffiliated Private Placement Portfolio (cost:
$18,106,450)
|
$
|
17,970,922
|
||||||||
Total
Investments in Unaffiliated Companies (cost:
$18,106,450)
|
$
|
17,970,922
|
Method
of
|
|
Shares/
|
|
|
|
|||||
|
|
Valuation
(3)
|
|
Principal
|
|
Value
|
||||
Investments
in Non-Controlled Affiliated Companies (6)(8) - 30.39% of net
assets
|
||||||||||
Private
Placement Portfolio (Illiquid)
- 30.39% of net assets
|
||||||||||
Adesto
Technologies Corporation (1)(2)(4)(5) — Developing
|
||||||||||
semiconductor-related
products enabled at the nanoscale
|
||||||||||
Series
A Convertible Preferred Stock
|
(A
|
)
|
3,416,149
|
$
|
1,147,826
|
|||||
BridgeLux,
Inc. (1)(2)(11) — Manufacturing high-power light
|
||||||||||
emitting
diodes
|
||||||||||
Series
B Convertible Preferred Stock
|
(A
|
)
|
1,861,504
|
1,000,000
|
||||||
Secured
Convertible Bridge Note (including interest)
|
(A
|
)
|
$
|
350,877
|
355,398
|
|||||
1,355,398
|
||||||||||
Cambrios
Technologies Corporation (1)(2)(5) — Developing
|
||||||||||
nanowire-enabled
electronic materials for the display industry
|
||||||||||
Series
B Convertible Preferred Stock
|
(C
|
)
|
1,294,025
|
1,294,025
|
||||||
Series
C Convertible Preferred Stock
|
(C
|
)
|
1,300,000
|
1,300,000
|
||||||
2,594,025
|
||||||||||
Chlorogen,
Inc. (1)(2)(5) — Developing patented chloroplast
|
||||||||||
technology
to produce plant-made proteins
|
||||||||||
Series
A Convertible Preferred Stock
|
(B
|
)
|
4,478,038
|
0
|
||||||
Series
B Convertible Preferred Stock
|
(B
|
)
|
2,077,930
|
0
|
||||||
Secured
Convertible Bridge Note (including interest)
|
(B
|
)
|
$
|
221,438
|
0
|
|||||
0
|
||||||||||
Crystal
IS, Inc. (1)(2)(5) — Developing single-crystal
|
||||||||||
aluminum
nitride substrates for optoelectronic devices
|
||||||||||
Series
A Convertible Preferred Stock
|
(C
|
)
|
391,571
|
305,425
|
||||||
Series
A-1 Convertible Preferred Stock
|
(C
|
)
|
1,300,376
|
1,014,294
|
||||||
Warrants
at $0.78 expiring 05/05/2013
|
(B
|
)
|
15,231
|
0
|
||||||
Warrants
at $0.78 expiring 05/12/2013
|
(B
|
)
|
2,350
|
0
|
||||||
Warrants
at $0.78 expiring 08/08/2013
|
(B
|
)
|
4,396
|
0
|
||||||
1,319,719
|
||||||||||
CSwitch,
Inc. (1)(2)(5) — Developing next-generation, system-on-
|
||||||||||
a-chip
solutions for communications-based platforms
|
||||||||||
Series
A-1 Convertible Preferred Stock
|
(C
|
)
|
6,700,000
|
3,350,000
|
Method
of
|
|
Shares/
|
|
|
|
|||||
|
|
Valuation
(3)
|
|
Principal
|
|
Value
|
||||
Investments
in Non-Controlled Affiliated Companies (6)(8) - 30.39% of net assets
(cont.)
|
||||||||||
Private
Placement Portfolio (Illiquid)
- 30.39% of net assets (cont.)
|
||||||||||
D-Wave
Systems, Inc. (1)(2)(5)(13) — Developing high-
|
||||||||||
performance
quantum computing systems
|
||||||||||
Series
B Convertible Preferred Stock
|
(A
|
)
|
2,000,000
|
$
|
1,734,600
|
|||||
Warrants
at $0.85 expiring 10/19/07
|
(B
|
)
|
1,800,000
|
0
|
||||||
1,734,600
|
||||||||||
Innovalight,
Inc. (1)(2)(5) - Developing renewable energy
|
||||||||||
products
enabled by silicon-based nanomaterials
|
||||||||||
Series
B Convertible Preferred Stock
|
(A
|
)
|
16,666,666
|
2,500,000
|
||||||
Kereos,
Inc. (1)(2)(5) — Developing emulsion-based imaging
|
||||||||||
agents
and targeted therapeutics to image and treat cancer
|
||||||||||
and
cardiovascular disease
|
||||||||||
Series
B Convertible Preferred Stock
|
(A
|
)
|
545,456
|
1,500,000
|
||||||
Kovio,
Inc. (1)(2)(5) — Developing semiconductor products
|
||||||||||
using
printed electronics and thin-film technologies
|
||||||||||
Series
C Convertible Preferred Stock
|
(A
|
)
|
2,500,000
|
3,000,000
|
||||||
Mersana
Therapeutics, Inc. (1)(2)(5)(12) — Developing advanced
|
||||||||||
polymers
for drug delivery
|
||||||||||
Series
A Convertible Preferred Stock
|
(C
|
)
|
68,452
|
136,904
|
||||||
Series
B Convertible Preferred Stock
|
(C
|
)
|
616,500
|
1,233,000
|
||||||
Warrants
at $2.00 expiring 10/21/10
|
(B
|
)
|
91,625
|
0
|
||||||
1,369,904
|
||||||||||
Metabolon,
Inc. (1)(2)(5) - Discovering biomarkers through
|
||||||||||
the
use of metabolomics
|
||||||||||
Series
B Convertible Preferred Stock
|
(A
|
)
|
2,173,913
|
2,500,000
|
Method
of
|
|
Shares/
|
|
|
|
|||||
|
|
Valuation
(3)
|
|
Principal
|
|
Value
|
||||
Investments
in Non-Controlled Affiliated Companies (6)(8) - 30.39% of net assets
(cont.)
|
||||||||||
Private
Placement Portfolio (Illiquid)
- 30.39% of net assets (cont.)
|
||||||||||
NanoGram
Corporation (1)(2)(5) — Developing a broad suite of
intellectual property
utilizing nanoscale materials
|
||||||||||
Series
I Convertible Preferred Stock
|
(C
|
)
|
63,210
|
$
|
64,259
|
|||||
Series
II Convertible Preferred Stock
|
(C
|
)
|
1,250,904
|
1,271,670
|
||||||
Series
III Convertible Preferred Stock
|
(C
|
)
|
1,242,144
|
1,262,764
|
||||||
2,598,693
|
||||||||||
Nanomix,
Inc. (1)(2)(5) — Producing nanoelectronic sensors that
|
||||||||||
integrate
carbon nanotube electronics with silicon microstructures
|
||||||||||
Series
C Convertible Preferred Stock
|
(B
|
)
|
9,779,181
|
330,228
|
||||||
NanoOpto
Corporation (1)(2)(5) — Manufacturing discrete and integrated optical
communications sub-components on a chip by utilizing nano manufacturing
and nano coating technology
|
||||||||||
Series
A-1 Convertible Preferred Stock
|
(B
|
)
|
267,857
|
0
|
||||||
Series
B Convertible Preferred Stock
|
(B
|
)
|
3,819,935
|
0
|
||||||
Series
C Convertible Preferred Stock
|
(B
|
)
|
1,932,789
|
0
|
||||||
Series
D Convertible Preferred Stock
|
(B
|
)
|
1,397,218
|
49,121
|
||||||
Secured
Convertible Bridge Note (including interest)
|
(B
|
)
|
268,654
|
537,308
|
||||||
Warrants
at $0.4359 expiring 03/15/10
|
(B
|
)
|
193,279
|
0
|
||||||
586,429
|
||||||||||
Nextreme
Thermal Solutions, Inc. (1)(2)(5) — Developing thin-film
|
||||||||||
thermoelectric
devices for cooling and energy conversion
|
||||||||||
Series
A Convertible Preferred Stock
|
(C
|
)
|
1,750,000
|
1,750,000
|
||||||
Questech
Corporation (1)(2) — Manufacturing and marketing
|
||||||||||
proprietary
metal and stone decorative tiles
|
||||||||||
Common
Stock
|
(B
|
)
|
655,454
|
905,050
|
||||||
Warrants
at $1.50 expiring 11/21/07
|
(B
|
)
|
3,750
|
0
|
||||||
Warrants
at $1.50 expiring 11/19/08
|
(B
|
)
|
5,000
|
0
|
||||||
Warrants
at $1.50 expiring 11/19/09
|
(B
|
)
|
5,000
|
0
|
||||||
905,050
|
Method
of
|
|
Shares/
|
|
|
|
|||||
|
|
Valuation
(3)
|
|
Principal
|
|
Value
|
||||
Investments
in Non-Controlled Affiliated Companies (6)(8) - 30.39% of net assets
(cont.)
|
||||||||||
Private
Placement Portfolio (Illiquid)
- 30.39% of net assets (cont.)
|
||||||||||
Solazyme,
Inc. (1)(2)(5) — Developing energy-harvesting
|
||||||||||
machinery
of photosynthetic microbes to produce industrial
|
||||||||||
and
pharmaceutical molecules
|
||||||||||
Series
A Convertible Preferred Stock
|
(C
|
)
|
988,204
|
$
|
385,400
|
|||||
Series
B Convertible Preferred Stock
|
(C
|
)
|
495,246
|
500,000
|
||||||
885,400
|
||||||||||
Starfire
Systems, Inc. (1)(2)(5) — Producing ceramic-forming polymers
|
||||||||||
Common
Stock
|
(A
|
)
|
375,000
|
150,000
|
||||||
Series
A-1 Convertible Preferred Stock
|
(C
|
)
|
600,000
|
600,000
|
||||||
750,000
|
||||||||||
Xradia,
Inc. (1)(2) - Designing, manufacturing and selling ultra
high
|
||||||||||
resolution
3D x-ray microscopes and fluorescence imaging systems.
|
||||||||||
Series
D Convertible Preferred Stock
|
(A
|
)
|
3,121,099
|
4,000,000
|
||||||
Zia
Laser, Inc. (1)(2)(5) — Developing quantum dot semiconductor
lasers
|
||||||||||
Series
C Convertible Preferred Stock
|
(B
|
)
|
1,500,000
|
15,000
|
||||||
Total
Non-Controlled Private Placement Portfolio (cost:
$44,432,534)
|
$
|
34,192,272
|
||||||||
Total
Investments in Non-Controlled Affiliated Companies (cost:
$44,432,534)
|
$
|
34,192,272
|
Method
of
|
|
Shares/
|
|
|
|
|||||
|
|
Valuation
(3)
|
|
Principal
|
|
Value
|
||||
Investments
in Controlled Affiliated Companies (6)(9) - 2.25% of net
assets
|
||||||||||
Private
Placement Portfolio (Illiquid)
- 2.25% of net assets
|
||||||||||
Evolved
Nanomaterial Sciences, Inc. (1)(2)(5) -- Developing
|
||||||||||
nanoscale-enhanced
approaches for the resolution of
|
||||||||||
chiral
molecules
|
||||||||||
Series
A Convertible Preferred Stock
|
(B
|
)
|
5,870,021
|
$
|
1,571,719
|
|||||
SiOnyx,
Inc. (1)(2)(5) -- Developing silicon-based
|
||||||||||
optoelectronic
products enabled by its proprietary "Black Silicon"
|
||||||||||
Series
A Convertible Preferred Stock
|
(C
|
)
|
233,499
|
70,050
|
||||||
Series
A-1 Convertible Preferred Stock
|
(C
|
)
|
2,966,667
|
890,000
|
||||||
960,050
|
||||||||||
Total
Controlled Private Placement Portfolio (cost:
$4,440,000)
|
$
|
2,531,769
|
||||||||
Total
Investments in Controlled Affiliated Companies (cost:
$4,440,000)
|
$
|
2,531,769
|
||||||||
U.S.
Government and Agency Securities - 51.29% of net
assets
|
||||||||||
U.S.
Treasury Bill -- due date 4/12/07
|
(J
|
)
|
1,000,000
|
998,620
|
||||||
U.S.
Treasury Notes -- due date 11/30/07, coupon 4.25%
|
(H
|
)
|
6,500,000
|
6,468,540
|
||||||
U.S.
Treasury Notes -- due date 02/15/08, coupon 3.375%
|
(H
|
)
|
9,000,000
|
8,880,120
|
||||||
U.S.
Treasury Notes -- due date 05/15/08, coupon 3.75%
|
(H
|
)
|
9,000,000
|
8,892,810
|
||||||
U.S.
Treasury Notes -- due date 09/15/08, coupon 3.125%
|
(H
|
)
|
5,000,000
|
4,886,500
|
||||||
U.S.
Treasury Notes -- due date 01/15/09, coupon 3.25%
|
(H
|
)
|
3,000,000
|
2,927,940
|
||||||
U.S.
Treasury Notes -- due date 02/15/09, coupon 4.50%
|
(H
|
)
|
5,100,000
|
5,086,434
|
||||||
U.S.
Treasury Notes -- due date 04/15/09, coupon 3.125%
|
(H
|
)
|
3,000,000
|
2,914,350
|
||||||
U.S.
Treasury Notes -- due date 07/15/09, coupon 3.625%
|
(H
|
)
|
3,000,000
|
2,938,470
|
||||||
U.S.
Treasury Notes -- due date 10/15/09, coupon 3.375%
|
(H
|
)
|
3,000,000
|
2,915,400
|
||||||
U.S.
Treasury Notes -- due date 01/15/10, coupon 3.625%
|
(H
|
)
|
3,000,000
|
2,927,940
|
||||||
U.S.
Treasury Notes -- due date 04/15/10, coupon 4.00%
|
(H
|
)
|
3,000,000
|
2,954,070
|
||||||
U.S.
Treasury Notes -- due date 07/15/10, coupon 3.875%
|
(H
|
)
|
3,000,000
|
2,942,460
|
||||||
U.S.
Treasury Notes -- due date 10/15/10, coupon 4.25%
|
(H
|
)
|
2,000,000
|
1,982,260
|
||||||
Total
Investments in U.S. Government and Agency Securities (cost:
$58,076,776)
|
$
|
57,715,914
|
||||||||
Total
Investments (cost: $125,055,760)
|
$
|
112,410,877
|
(1)
|
Represents
a non-income producing security. Equity investments that have not
paid
dividends within the last 12 months are considered to be non-income
producing.
|
(2)
|
Legal
restrictions on sale of investment.
|
(3)
|
See
Footnote to Schedule of Investments for a description of the Valuation
Procedures.
|
(4)
|
Initial
investment was made during 2007.
|
(5)
|
These
investments are development stage companies. A development stage
company
is defined as a company that is devoting substantially all of its
efforts
to establishing a new business, and either it has not yet commenced
its
planned principal operations, or it has commenced such operations
but has
not realized significant revenue from
them.
|
(6)
|
Investments
in unaffiliated companies consist of investments in which we own
less than
five percent of the voting shares of the portfolio company. Investments
in
non-controlled affiliated companies consist of investments in which
we own
five percent or more, but less than 25 percent, of the voting shares
of
the portfolio company or where we hold one or more seats on the portfolio
company’s Board of Directors. Investments in controlled affiliated
companies consist of investments in which we own 25 percent or more
of the
voting shares of the portfolio
company.
|
(7)
|
The
aggregate cost for federal income tax purposes of investments in
unaffiliated companies is $18,106,450. The gross unrealized appreciation
based on the tax cost for these securities is $1,732,194. The gross
unrealized depreciation based on the tax cost for these securities
is
$1,867,722.
|
(8)
|
The
aggregate cost for federal income tax purposes of investments in
non-controlled affiliated companies is $44,432,534. The gross unrealized
appreciation based on the tax cost for these securities is $333,269.
The
gross unrealized depreciation based on the tax cost for these securities
is $10,573,531.
|
(9)
|
The
aggregate cost for federal income tax purposes of investments in
controlled affiliated companies is $4,440,000. The gross unrealized
appreciation based on the tax cost for these securities is $0. The
gross
unrealized depreciation based on the tax cost for these securities
is
$1,908,231.
|
(10)
|
Continuum
Photonics, Inc., merged with Polatis, Ltd., to form Polatis,
Inc.
|
(11)
|
BridgeLux,
Inc., was previously named eLite Optoelectronics,
Inc.
|
(12)
|
Mersana
Therapeutics, Inc., was previously named Nanopharma
Corp.
|
(13)
|
D-Wave
Systems, Inc., is located and is doing business primarily in Canada.
We
invested in D-Wave Systems, Inc., through D-Wave USA, a Delaware
company.
Our investment is denominated in Canadian dollars and is subject
to
foreign currency translation. Refer to Note 3 "Significant Accounting
Policies."
|
Weighted
|
||||||||||||||||
Weighted
|
Weighted
|
Average
|
||||||||||||||
Average
|
Average
|
Remaining
|
Aggregate
|
|||||||||||||
Exercise
|
Grant
Date
|
Contractual
|
Intrinsic
|
|||||||||||||
Shares
|
Price
|
Fair
Value
|
Term
(Yrs)
|
Value
|
||||||||||||
Options
Outstanding at January 1, 2007
|
3,699,611
|
$
|
10.11
|
$
|
4.43
|
|||||||||||
Granted
|
-
|
-
|
-
|
|||||||||||||
Exercised
|
326,012
|
$
|
10.11
|
$
|
1.74
|
$
|
916,094
|
|||||||||
Forfeited
or Expired
|
-
.
|
|||||||||||||||
Options
Outstanding at March 31, 2007
|
3,373,599
|
$
|
10.11
|
$
|
4.68
|
4.76
|
$
|
9,479,813
|
||||||||
Options
Exercisable at March 31, 2007
|
741,017
|
$
|
10.11
|
$
|
3.71
|
3.84
|
$
|
2,082,258
|
||||||||
Options
Exercisable and Expected to be Exercisable
at March 31, 2007
|
3,007,610
|
$
|
10.11
|
$
|
4.63
|
4.71
|
$
|
8,451,384
|
Three
Months Ended March 31
|
|
||||||
|
|
2007
|
|
2006
|
|||
Per
Share Operating Performance
|
|||||||
Net
asset value per share, beginning of period
|
$
|
5.42
|
$
|
5.68
|
|||
Net
operating loss*
|
(0.13
|
)
|
(0.04
|
)
|
|||
Net
realized income (loss) on investments*
|
0
|
0
|
|||||
Net
increase in unrealized depreciation
|
|||||||
as
a result of sales*
|
0
|
0
|
|||||
Net
increase in unrealized depreciation
|
|||||||
on
investments held*
|
(0.17
|
)
|
(0.04
|
)
|
|||
Total
from investment operations*
|
(.30
|
)
|
(0.08
|
)
|
|||
Net
increase as a result of stock-based compensation
|
0.08
|
0
|
|||||
Net
increase as a result of proceeds from exercise
|
|||||||
of
options
|
0.07
|
0
|
|||||
Total
increase from capital stock transactions
|
0.15
|
0
|
|||||
Net
asset value per share, end of period
|
$
|
5.27
|
$
|
5.60
|
|||
Stock
price per share, end of period
|
$
|
12.92
|
$
|
13.95
|
|||
Total
return based on stock price (1)
|
6.87
|
%
|
0.36
|
%
|
|||
Supplemental
Data:
|
|||||||
Net
assets, end of period
|
$
|
112,526,302
|
$
|
116,333,752
|
|||
Ratio
of expenses to average net assets (1)
|
2.9
|
%
|
1.3
|
%
|
|||
Ratio
of net operating loss to average net assets (1)
|
(2.4
|
)%
|
(0.7
|
%)
|
|||
Cash
dividends paid per share
|
$
|
0
|
$
|
0
|
|||
Deemed
dividend per share
|
$
|
0
|
$
|
0
|
|||
Number
of shares outstanding, end of period
|
21,341,029
|
20,756,345
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
2007
|
||||||||||||||||
Total
Incremental Investments
|
$
|
489,999
|
$
|
6,240,118
|
$
|
3,812,600
|
$
|
14,837,846
|
$
|
16,251,339
|
$
|
24,408,187
|
$
|
4,857,357
|
||||||||
No.
of New Investments
|
1
|
7
|
5
|
8
|
4
|
6
|
1
|
|||||||||||||||
No.
of Follow-On Investment Rounds
|
0
|
1
|
5
|
21
|
13
|
14
|
6
|
|||||||||||||||
No.
of Rounds Led
|
0
|
1
|
0
|
2
|
0
|
7
|
1
|
|||||||||||||||
Average
Dollar Amount - Initial
|
$
|
489,999
|
$
|
784,303
|
$
|
437,156
|
$
|
911,625
|
$
|
1,575,000
|
$
|
2,383,424
|
$
|
1,147,826
|
||||||||
Average
Dollar Amount - Follow-On
|
N/A
|
$
|
750,000
|
$
|
325,364
|
$
|
359,278
|
$
|
765,488
|
$
|
721,974
|
$
|
618,255
|
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
YTD
2007
|
|||||||||||||||
Net
Asset Value, Beginning of Year
|
$
|
31,833,475
|
$
|
24,334,770
|
$
|
27,256,046
|
$
|
40,682,738
|
$
|
74,744,799
|
$
|
117,987,742
|
$
|
113,930,303
|
||||||||
Gross
Write-Downs During Year
|
$
|
(2,532,730
|
)
|
$
|
(5,400,005
|
)
|
$
|
(1,256,102
|
)
|
$
|
(5,711,229
|
)
|
$
|
(3,450,236
|
)
|
$
|
(4,211,323
|
)
|
$
|
(4,043,077
|
)
|
|
Gross
Write-Downs as a Percentage of Net Asset Value
|
-7.96
|
%
|
-22.19
|
%
|
-4.61
|
%
|
-14.04
|
%
|
-4.62
|
%
|
-3.57
|
%
|
-3.55
|
%
|
31-Dec-00
|
|
31-Mar-01
|
|
30-June-01
|
|
30-Sep-01
|
|
31-Dec-01
|
||||||||
NAV
per Share
|
$
|
3.51
|
$
|
3.09
|
$
|
3.29
|
$
|
2.92
|
$
|
2.75
|
||||||
$
Change
|
(0.42
|
)
|
0.20
|
(0.37
|
)
|
(0.17
|
)
|
|||||||||
%
Change
|
-11.97
|
%
|
6.47
|
%
|
-11.25
|
%
|
-5.82
|
%
|
31-Mar-02
|
|
|
30-June-02
|
|
|
30-Sep-02(1)
|
|
|
31-Dec-02
|
|||||||
NAV
per Share
|
$
|
2.63
|
$
|
2.68
|
$
|
2.61
|
$
|
2.37
|
||||||||
$
Change
|
(0.12
|
)
|
0.05
|
(0.07
|
)
|
(0.24
|
)
|
|||||||||
%
Change
|
-4.36
|
%
|
1.90
|
%
|
-2.61
|
%
|
-9.20
|
%
|
31-Mar-03
|
|
|
30-June-03
|
|
|
30-Sep-03
|
|
|
31-Dec-03(1)
|
|
||||||
NAV
per Share
|
$
|
2.26
|
$
|
2.22
|
$
|
2.11
|
$
|
2.95
|
||||||||
$
Change
|
(0.11
|
)
|
(0.04
|
)
|
(0.11
|
)
|
0.84
|
|||||||||
%
Change
|
-4.64
|
%
|
-1.77
|
%
|
-4.95
|
%
|
39.81
|
%
|
31-Mar-04
|
30-June-04
|
|
|
30-Sep-04(1)
|
|
|
31-Dec-04
|
|||||||||
NAV
per Share
|
$
|
3.01
|
$
|
2.85
|
$
|
4.44
|
$
|
4.33
|
||||||||
$
Change
|
0.06
|
(0.16
|
)
|
1.59
|
(0.11
|
)
|
||||||||||
%
Change
|
2.03
|
%
|
-5.32
|
%
|
55.79
|
%
|
-2.48
|
%
|
31-Mar-05
|
30-June-05
|
|
|
30-Sep-05(1)
|
|
|
31-Dec-05
|
|||||||||
NAV
per Share
|
$
|
4.20
|
$
|
4.61
|
$
|
5.94
|
$
|
5.68
|
||||||||
$
Change
|
(0.13
|
)
|
0.41
|
1.33
|
(0.26
|
)
|
||||||||||
%
Change
|
-3.00
|
%
|
9.76
|
%
|
28.85
|
%
|
-4.38
|
%
|
|
31-Mar-06
|
30-June-06
|
30-Sep-06
|
31-Dec-06
|
|||||||||
NAV
per Share
|
$5.60
|
$5.54
|
$5.54
|
$5.42
|
|||||||||
$
Change
|
(0.08)
|
(0.06)
|
0.00
|
(0.12)
|
|||||||||
%
Change
|
-1.41%
|
-1.07%
|
0.00%
|
-2.17%
|
|||||||||
31-Mar-07
|
|||||||||||||
NAV
per Share
|
5.27
|
||||||||||||
$
Change
|
(0.15
|
) | |||||||||||
%
Change
|
-2.77
|
New
Investment
|
Amount
|
|||
Adesto
Technologies Corporation
|
$
|
1,147,826
|
||
Follow-on
Investment
|
||||
BridgeLux,
Inc.
|
$
|
350,877
|
||
Cambrios
Technologies Corporation
|
$
|
1,300,000
|
||
Kereos,
Inc.
|
$
|
540,000
|
||
NanoOpto
Corporation
|
$
|
268,654
|
||
Nextreme
Thermal Solutions, Inc.
|
$
|
750,000
|
||
Solazyme,
Inc.
|
$
|
500,000
|
||
Total
|
$
|
4,857,357
|
March
31, 2007
|
December
31, 2006
|
||||||
Venture
capital investments,
|
|||||||
at
cost
|
$
|
66,978,984
|
$
|
62,118,800
|
|||
Net
unrealized depreciation (1)
|
12,284,021
|
8,450,969
|
|||||
Venture
capital investments,
|
|||||||
at
fair value
|
$
|
54,694,963
|
$
|
53,667,831
|
March
31, 2007
|
December
31, 2006
|
||||||
U.S.
government and agency
|
|||||||
obligations,
at cost
|
$
|
58,076,776
|
$
|
59,212,598
|
|||
Net
unrealized depreciation(1)
|
360,862
|
556,451
|
|||||
U.S.
government and agency
|
|||||||
obligations,
at fair value
|
$
|
57,715,914
|
$
|
58,656,147
|
March
31, 2007
|
December
31, 2006
|
||||||
Category
|
|||||||
Tiny
Technology
|
99.9
|
%
|
99.9
|
%
|
|||
Other
Venture Capital Investments
|
0.1
|
%
|
0.1
|
%
|
|||
Total
Venture Capital Investments
|
100.0
|
%
|
100.0
|
%
|
31.01* |
Certification
of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
31.02* |
Certification
of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
32.01* |
Certification
of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to
Section 906 of the Sarbanes-Oxley Act of
2002.
|
Harris
& Harris Group, Inc.
|
||
|
|
|
By: | /s/ Douglas W. Jamison | |
Douglas W. Jamison, President |
||
and
Chief Financial Officer
|
By: |
/s/ Patricia
N. Egan
|
|
Patricia N. Egan |
||
Chief Accounting Officer | ||
and
Vice President
|
||
Date:
May 10, 2007
|
Exhibit
No.
|
Description
|
|
31.01
|
Certification
of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
31.02
|
Certification
of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
32.01
|
Certification
of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of
2002.
|