Patricia Egan – CFO and CCO Douglas Jamison – Chairman and CEO Daniel Wolfe – President and COO

Good day, ladies and gentlemen, and welcome to the Harris & Harris Group Shareholder Update Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference Ms. Patty Egan, CFO. Ma’am, you may begin.

Thank you. I'll begin by reading the Safe Harbor Statement. This presentation may contain statements that are forward-looking in 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 that 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. I'll now turn the call over to our CEO, Doug Jamison.

Thank you, Patty. Good morning. This is Doug and welcome to our shareholder call. Harris & Harris Group builds transformative companies from disruptive science. Daniel Wolfe, our President and COO will begin the presentation today. He will be followed by Patty Egan, our CFO and then I will make a few observations before opening up the call to any questions. Daniel?

Thank you, Doug. We made two new investments in the third quarter of 2014: TARA Biosystems, Inc. and Accelerator Corporation. We discussed the uniqueness of Accelerator investment on our last quarterly call and in the second quarter letter to shareholders that can be found on our website. TARA Biosystems is based on research from the Vunjak-Novokovic lab at Columbia University, the Radisic Lab at University of Toronto and Langer Lab at MIT. It aims to capitalize on the need for more effective processes for evaluating the safety and efficacy of new therapies and new drug compounds. TARA Biosystems will initially use its "organ-on-a-chip" platform to provide physiologically-relevant "heart-on-a-chip" human tissue models for both toxicology and drug discovery applications. Today, many promising new therapies for a variety of diseases-most strikingly, cardiovascular disease, which kills more people than all forms of cancer combined-must endure a painstaking, long and expensive process of testing prior to being implemented in human trials. Even then, owing to the complexity of cardiac tissue, therapies that make it through the process continue to pose serious health hazards in patients in early testing. TARA Biosystems has created a unique, advanced, stem cell-derived system based on its proprietary, patent-pending 'biowire' technology. This system enables testing on physiologically-relevant, three dimensional heart tissue to get a more accurate, dependable reading on the safety and efficacy of the therapy under investigation. The 'biowire' technology significantly reduces risk and uncertainty, thus reducing the cost of development and accelerating to market only those therapies with real therapeutic value. In addition to our new investments, we wanted to update shareholders on the public listing of our portfolio company Enumeral Biomedical. As we discussed in detail on the prior quarterly call, in July of 2014, Enumeral successfully raised approximately $21.5 million in financing in conjunction with a reverse merger with a publicly traded shell company. The company's common stock now trades on the OTC market under the symbol ENUM. As of September 30, 2014, Enumeral accounted for $8.9 million of our total amount of secondary liquidity versus our cost basis of approximately 5.6 million. We know that our shares are restricted from being sold until January 31, 2016. Going forward shareholders may see some volatility in the value of our securities of Enumeral resulting from the volatility in the trading price of Enumeral stock as is often the case with small publicly traded companies. Shareholders may also wish to read a blog on Enumeral that was posted on our website on August 4, 2014. We look forward to continuing to build Enumeral in the years to come now as a public company. We ended the third quarter of 2014 with approximately $2.1 million in certain receivables. The vast majority of which relates to the first milestone payment from Amgen’s acquisition of BioVex Group totaling $2.07 million. This milestone payment became due following acceptance by the FDA of a biologics license application filed by Amgen after successful completion of its Phase 3 clinical trials. We are excited to see this potentially important malignant melanoma treatment continue to make progress towards reaching the market in the near future. The most important thing to remember is that if this novel oncolytic virus based therapy, which is a great example of our early involvement in an now exciting area of immunotherapies, reaches the market, cancer patients would have a new opportunity for treatment that they haven’t previously had available to them. For us, this may also result in payments for achievement of additional milestones. I will now pass the presentation to Patty Egan, our CFO, to discuss the financial statements for the quarter ending September 30, 2014.

Thanks, Daniel. At September 30, 2014, we had total assets of approximately $122.5 million on our balance sheet. Included in our total assets is our venture capital portfolio which was valued at approximately $97 million versus its cost basis of $111 million as of September 30. Therefore as of the end of the third quarter, our venture capital portfolio was in a depreciated state of approximately $14 million. We also held $22.5 million in cash and had no debt outstanding as of September 30, 2014. At September 30, our primary and secondary liquidity was $35.7 million. Our net assets at September 30, 2014 were approximately $120.2 million and our net asset value per share was $3.85. This was a decrease from our net asset value per share of $3.87 at June 30, 2014. Turning to our income statement. For the nine months ended September 30, 2014 we had investment income of approximately $374,000. This compares with approximately $510,000 in investment income during the same period in 2013. Our total expenses were approximately $6.3 million for the nine months which is approximately the same level as in 2013. These total expense figures include both cash and non-cash based operating expenses such as stock based compensation. Stock based compensation expense has no impact to NAV. Our total cash based and accrued operating expenses for the nine months ended September 30, 2014 were approximately $5.6 million as compared with $5.4 million during the comparable period in 2013. This yielded in a net operating loss of $5.9 million through September 30, 2014 which was an increase compared to our net operating loss of $5.8 million for the nine months ended September 30, 2013. I will now turn our call back over to Doug Jamison.

Thank you. So I’d like to make some general observations if I could. First, we’re not where we want to be. Our NAV has not begun to move upward. It needs to move upward if we’re going to be a growth company but it’s proven more difficult to move in a meaningful way. We believe liquidity events are coming but they’ve taken longer than we would like. We've not been able to get to the scale we need to be at organically to this point. Because of this, there is little demand for our stock or our business model in the current market, which we’ll admit is robust to market by every standard. We are working tirelessly to change these factors. Our business model is classic venture capital. We invest in very early stage company where the odds of success in any one deal are probably worse than putting all our cash on red in a roulette game at a casino. But where the odds of having a great return in a portfolio lift the chance of success to such a level that venture capital over the long-term has the highest rate of return of any asset class. I often say this is that we don't live in a world of normal distributions but in a world of asymmetries and tail distributions. It is critical for our shareholders to understand this. Over the past few years, we've had success with our venture capital portfolio. We have realized returns where many of the investors have not realized returns due to our permanent structure and active decisions we've made over the lifetime of certain deals. We have been in many of the right areas such as in BioVex and we believe we are building better companies than we have ever built historically. We have learned a lot from our realized losses and we've used our returns to fund Harris & Harris Group over the past five years. But we've not yet had a home run in this current portfolio. The home run is the asymmetrical event that flips our portfolio from being flat on the overall return function to having the type of return the shareholders expect from a venture capital company. We need one or more home runs often defined as 8x to 10x returns that Harris & Harris Group play out in a meaningful way for our shareholders. What does this mean for shareholders? It means that over the coming 12 to 36 months, one or more of our maturing companies need to be a home run. If you look at our portfolio, you don't believe any of the companies we speak about as mid to late stage can be home runs for us. I believe it is worth asking yourself why you continue to hold the stock. However, our board and we think that our existing portfolio has the opportunity to have multiple home runs over the coming couple of years. That is why we’ve continued to run the company and to be excited about the potential for the business. If we are right, over some short period of time we could see NAV grow rapidly and our scale grow rapidly. I understand that this is a difficult proposition for many shareholders to accept but it is the math of early-stage venture capital, the result of the asymmetrical return distribution of our asset class. That said, the potential future outcomes and timing of such outcomes are not without risks and may not play out as we believe is currently possible. We’ve continued to make new investments in exciting emerging market opportunities so that after these more mature companies exit, we will have our proverbial shelves stocked providing us multiple opportunities to potentially hit follow-on home runs. This is our business model. Additionally, in the second half of the third quarter letter to shareholders available on our website, we discuss our role in building transformative companies from hard sciences. As you can see from the letter, we at Harris & Harris Group believe that although it has been difficult, there's a real opportunity to claim leadership in building companies focused on commercializing big ideas in these hard sciences. We also believe there is a real opportunity to aggregate capital in a public vehicle to lead the return of hard science company building. We believe the economy is providing an ideal environment to invest in entrepreneurial companies for high-quality returns over the coming two decades and we believe the company that does this effectively will become the leader in generating high-quality job growth and help return American innovation to a leadership position. We are passionate about what we do at Harris & Harris Group. We believe the companies we work with will provide a better world for you, your children and your children's children. And the reason the doors are open is because we believe the value from this portfolio will be realized within the coming years. I want to finish by saying that the most important thing to us and to our model as an early-stage venture capital firm is that we believe we are investing in the right companies in the right market opportunities. Our view of innovation is not incremental. We are involved in the science that has the capability to truly transform and improve human lives into the future. Areas we are involved in include: the Internet of Things – Adesto and HCO are both involved in that area; quantum computing with D-Wave; the microbiome with AgBiome and ProMuc; immuno-oncology with Enumeral and historically with BioVex; machine learning and healthcare information technology with EchoPixel; 3-D biology and stem cells with TARA Biosystems; and personalized medicine with Metabolon. We believe that as these companies continue to execute on their businesses, our shareholders will benefit from our early investment in these emerging areas. We believe the opportunity exists for us to hit home runs. We will now open up the lines for any questions.

[Operator Instructions] And sir, at this time I am showing no questions.

Okay. Very good. So then I will go ahead and close it. I want to continue to remind our shareholders of the blog post and the previous shareholder letters on our website. We try to – as early stage investors, we try to put some of our ideas, our thoughts, our directions of where technology are on paper for our shareholders to read, to better understand what we are trying to do at Harris & Harris Group. They are well worth taking a look at. The blog post highlights some of our thoughts on areas of interest and the business currently and into the future. We’ve also published a series of blogs under the concept of H&H at the cutting edge and these can also be found on our website. We would like to thank you for your support of Harris & Harris Group. We believe the Harris & Harris Group of the future is going to look different than it has from the past decade. Some of these changes have been put in place over the past couple of years but more are coming. Enjoy the upcoming holiday season. Good bye.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all now disconnect. Everyone have a great day.