Alicia Gift - Senior Controller Doug Jamison - Chief Executive Officer Vik Chandra - Chief Executive Officer, Muses Labs Daniel Wolfe - President and Chief Financial Officer

Robert Littlehale - JPMorgan Theodore Kohn - Private Investor

Good day, ladies and gentlemen and welcome to the Harris & Harris Group Second Quarter 2016 Shareholder Update Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Alicia Gift, Senior Controller. You may begin.

Okay. I will be reading the Safe Harbor disclosure. 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 provision 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 these 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 included, 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. In response to investor requests, we have invited executive of one of our portfolio companies, Muses Labs, to provide a brief overview of the company at the conclusion of today’s call. Please note that any opinions or views expressed by the management of Muses Labs are strictly their own and do not necessarily reflect the opinions or views of Harris & Harris Group. Similarly, Muses Labs and its management are solely responsible for the content of their presentation, including any statements that they may make or any statistics or financial information they may provide and Harris & Harris Group expressly disclaims any responsibilities for the contents of such presentation.

Great. Thank you, Alicia. Thank you all to our shareholders and friends for joining the call this morning focused on the second quarter of 2016. In conjunction with this call, we provided a link on the homepage of our website at www.hhvc.com to a short presentation. On the homepage, you can find it under the Resources on the right side of the page titled Q2 2016 Shareholder Update Call Presentation Deck. We will be referencing a couple of the slides from this presentation today. If you look at Slide 3, you can see that we have been busy executing on our primary strategy of Harris & Harris Group, our precision health and medicine focus. As we discussed in detail at our Annual Shareholder Meeting and in previous shareholder letters, “We believe major changes are coming to the American healthcare system over the next decade. The promise of precision medicine will be leading many of these changes. We believe we are in a unique position to build certain of our current and our future portfolio companies, addressing precision health and precision medicine as majority owned subsidiaries or controlled partner companies." Beginning back in 2007 with Metabolon, we started building some of the companies that were introducing technologies that would make precision health, precision medicine a reality in years to come. In addition to Metabolon, companies such as TARA, ORIG3N, OpGen, EchoPixel, NGX Bio, and GenPro are a few examples. More recently, we have focused on software based systems that have the ability to interrogate the different datasets and provide interpretable and medically actionable results to clinicians that are beginning to practice precision health and medicine. This morning, we will hear from a leader in this area, our portfolio company, Muses Labs. Muses Labs has the ability to process multiple different precision medicine datasets to provide information that guides clinicians working with patients with Alzheimer’s disease and cognitive decline. Joining our call today is Vik Chandra, the CEO of our precision health and medicine portfolio company, Muses Labs. As I hand it over to Vik to begin, please see Slide 4 from this presentation. Welcome, Vik.

Hey, thank you, Doug and good morning, everybody. We are a company located here in Research Triangle Park of North Carolina. We are about 3 years old, and our entire focus is enabling precision medicine to be practiced in the clinic. If you flip forward to Page 5, you will get a high level view of the core problem that we are solving. Precision medicine has a lot of research behind it at this point in time, but it can be very impractical to practice in the clinic. And some of the drivers for that are the fact that to practice precision medicine, the physician needs to process a very large quantity of data on the patient, everything from looking at a patient’s genome to hundreds of blood tests, the medical history, which resides often in an electronic health record system, and the numerous other blood tests, metabolomics and proteomics tests that are out there and are emerging as well. This is simply too much data on a patient to be processed in the 8 to 12 minutes that a physician spends with their patient. As a result, precision medicine is largely impractical in the clinic today. And on top of that, to practice precision medicine correctly and effectively, the physician has to keep up with an absolutely overwhelming amount of new research that comes out every year. There are 700,000 new research papers released every year and there is no physician out there that could keep up with it. So, there are a variety of drivers why precision medicine is impractical in the clinic today. Our solutions, if you move to Page 6, are designed to help the physician practice clinical – precision medicine in an effective and a practical manner. Our solutions in the middle of this page are designed to process the diverse type of information that exists on a patient and make it actionable for a physician. We do this with a couple of large pieces of technology. The first piece is a precision medicine platform. This is a technology-based platform that runs in a secure HIPAA-compliant environment. It contains the very basic set and important set of capabilities that are necessary to enable precision medicine, capabilities such as collection of data, processing of data, dealing with interactions among medications. But the platform is fundamentally designed to run multiple disease space specific precision medicine protocols. And as Doug indicated, our first protocol is in the age-related cognitive decline and that whole spectrum of Alzheimer’s disease. We have been practicing this first precision medicine protocol with patients since the middle of last year. If you move to Page 7, you will get a high level view of how a precision medicine solution that consists of one or more of these disease-based protocols actually gets applied in the clinic, and how eventually patients benefit from it. Our first solution in the cognitive decline space is targeted to be utilized by physicians as well as applied at senior living facilities with the physicians that they have in residence there. Muses Labs and our technology-based infrastructure operates as a service. It operates as a medical information service serving the needs of clinicians who intend to work with their physicians – with their patients and deliver precision medicine. Our services, they again process the data on the patients and provide the necessary guidance of specific care plans that should be applied to particular patients. The clinic works with the patients and allows us to scale to large number of patients by scaling the number of clinics that we work with and target. Our initial solution in the cognitive decline space targets Alzheimer’s disease and that spectrum. Currently, there are no solutions for Alzheimer’s disease in the marketplace even though this disease was identified well over 100 years ago. Our solution takes a very different approach to the disease and we can do so because we do come at it from a very data driven manner and we can work to address the multiple underlying causes of the disease simultaneously. Our initial solution today helps the physicians correctly identify and treat the more than four dozen drivers of cognitive decline, and I will share some initial results that we presented at an international conference last month. On Page 8, you would begin to get a little bit deeper view of how our solution operates, our solution processes, the various type of information on the patient that you see on the left hand side. Our solution starts by looking at a patient’s genome. And today, we look at the genome at a greater depth than any other company does for any other disease. We look at hundreds of blood tests, medical imaging, MRIs in this case. We are looking at medical history. We look at a patient’s other diseases that they have for comorbidities, in other words, medications that they are taking, allergies, immunizations. We also look at a patient’s lifestyle, everything from sleep to the diet and exercise. As you can understand, we process a very, very large amount of information and the purpose of processing this information is to characterize that patient at a great level of detail so that we can guide the physician to apply the right intervention, the right medical interventions to this patient. Because of the large amount of data, this has to be processed by software and our software then guides the patient – the physician into applying interventions from the right class. Today, we work with interventions that may be lifestyle interventions nutraceuticals, pharmaceuticals and eventually, we will be adding invasive interventions as well. This solution works to address all their underlying issues simultaneously. And this is a very novel approach to treating Alzheimer’s, which has in the past been simply targeted to apply single drugs, addressing single causes of the disease. It turns out there is no single cause. This complex technology has been developed for over 3 years. We have already filed five patents and additional patents are underway. If you moved to Page 9, you will see initial results that we have achieved in patients from applying this technology. These are pilot results. These are not from a structured study. We will be conducting structured studies in the near future. The summary of the results is that for patients who are in the early symptomatic stages. What that means is that they have not declined too far within the Alzheimer’s disease. And if they are in the early stages of the disease or if they are in the pre-symptomatic stages, meaning they have a family history but don’t necessarily have the disease yet, those individuals can be helped significantly by our methodology. We can, in a quantifiable manner improve their memory function and we were the first ones to report the data of this nature of the Alzheimer’s Associations International Conference in July. For patients who are in the later stage, at this point in time, we do not have enough data to know whether we – our methodology can help the patients improve their cognitive function or even slow the rate of their decline, more study needs to be done on that. But even being able to demonstrate improvement in memory of early stage patient is a significant step forward for the Alzheimer’s industry. But we absolutely need to study our methodology in a larger base of patients. It is important to note that this methodology does not depend upon new drugs, so this methodology is available today at a small scale, and we are working to scale our operations so that we can begin to work with thousands of physicians and thousands of patients. Our go-to-market approach, as you can see on Page 10, is to work with healthcare providers and senior living facilities. Just some of the examples of facilities we are working at with today are listed on this page. Everything from George Washington University, their Medical School and the Center for Integrated Medicine and the First Health of Carolinas, this is a hospital network based on the Eastern part of North Carolina and we are continuing to grow that network so that we can begin to scale the number of physicians and patients that benefit from our methodologies. On Page 11, you can see that the marketplace we are targeting is very, very large. Even our initial solution in the cognitive decline space has a patient population of about 8 million people within U.S. who are symptomatic. In addition, there are another 75 million patients in the U.S. who have the genome that puts them at a higher risk for cognitive decline but are in a pre-symptomatic stage. Worldwide, the symptomatic stage population is approximately $96 million. Our estimate for solutions of our nature – of [indiscernible] nature that are clinical for the marketplace is well over $100 billion that targets complex chronic diseases. This is a estimate for the U.S. marketplace where today as a society, we spend about $2.5 trillion on patients that have one or more complex chronic diseases. To capture some of this opportunity that is out there, our execution plans on Page 12, allow us to grow our focus from physicians to senior living facilities, and eventually, directly to consumer offerings. But we also expect to expand our – the disorders that we target. We are starting out with Alzheimer’s, but there are other complex diseases such as depression, diabetes, autoimmune disorders and even Parkinson’s, multiple sclerosis, autism. They are all complex diseases that can be effectively addressed with solutions like Muses Labs and our technologies. Last week, we spent a good bit of time at the Undiagnosed Disease Consortium also run jointly by Harris & Harris Group. We were thrilled to have that opportunity. Clearly, the undiagnosed disease space, there are millions of patients out there with undiagnosed diseases. And even being able to identify the class of a disorder they have and what may be appropriate treatments is a great fit for the type of technologies and methodologies that we have developed at Muses Labs. As that work progresses, we expect to develop protocols related to the undiagnosed disease space as well. We also expect to expand our geographic coverage. We are a service that’s available over the Internet. Our initial focus is the U.S. and we will grow from there. Thank you very much. That’s the material I intended to go through. We appreciate your time.

Okay. Vik, thank you very much. We appreciate you taking you out of your schedule to present to our shareholders here, so thank you very much. Daniel, can I now turn the presentation over to you?

Certainly. Thank you, Doug. We would next like to summarize some of the accomplishments and some of the challenges to our business in the second quarter of 2016. Please turn to Slide 14 in the presentation. We increased our investment income by 60% and decreased our net operating loss by 34% during the second quarter of 2016 as compared with the second quarter of 2015. We increased our investment income by 77% and decreased our net operating loss by 39% during the first six months of 2016 as compared with the first six months of 2015. These reductions in net operating loss position us well to achieve the substantial reductions in net loss on an annual basis as discussed in prior calls and at our annual meeting. We launched two co-investment funds offered by H&H Co-Investment Partners LLC, an entity formed to provide shareholders who are accredited investors and other accredited investors, the opportunity to invest alongside us in our portfolio companies on an individual portfolio company basis. The first two co-investment funds will invest in the current rounds of the financing of D-Wave Systems and HZO. These opportunities remain open to interested accredited investors for a limited time. Interome, our precision health and medicine company that integrates science and analytics to provide information about your health now into the future was an organizer of the Undiagnosed Disease Consortium or UnDx Consortium. The Undiagnosed Disease Consortium brings together leading researchers and clinicians to provide insights to a cohort of patients suffering from undiagnosed diseases. We currently own 100% of the outstanding securities of Interome, and Doug will discuss more about Interome later in this call. The acquisition of Bridgelux by a consortium of buyers that was initially announced in July 2015 finally closed on August 1, 2016. While we are pleased that the transaction did close, the investment was ultimately a loss for us. We invested approximately $5 million in Bridgelux beginning with our initial investment in 2005 and we received $1.9 million in cash and approximately 200,000 shares of a new spin-out company called Vineo. These proceeds were materially equal to the value of our securities of Bridgelux on our financial statements since we learned the terms of the transaction in mid-2015. Also during the quarter, we sold our shares of Magic Leap to two undisclosed buyers for aggregate proceeds of approximately $640,000 versus our cost basis of approximately $340,000. While we are excited about the potential future for Magic Leap to build value, we owned a very small amount of the company and received an unsolicited offer to purchase our shares at what we believe is a good price that generated a realized gain. We note that prior to receipt of this offer, we valued our shares – we fair valued our shares of Magic Leap at approximately $350,000. That value was derived using option pricing models. We received our shares of Magic Leap through the sale of one of our former portfolio companies, which itself was a spinout of a portfolio company that was sold. All three of these transactions generated gains on our invested capital. We also faced challenges during the quarter. Please turn to Slide 15. Our net asset value per share decreased from $2.88 as of the end of 2015 to $2.67 as of March 31, 2016 and $2.63 as of June 30, 2016. The price per share of our common stock decreased from $2.20 as of the end of 2015 to $1.61 as of June 30, 2016 and $1.58 as of August 8, 2016. The values of publicly traded equities, particularly those of micro-capitalization companies continue to be highly volatile. The price per share and market capitalization of Adesto Technologies Corporation decreased in value from $5.62 at March 31, 2016 to $3.28 at June 30, 2016 and is currently trading at approximately $2.50 as of today. The decrease in the price per share of Adesto accounted for the vast majority of the decreases in value of our portfolio investments this quarter. Our own stock price has also been under considerable headwinds as mentioned above and other headwinds. Even though the financing of some of our portfolio companies may have occurred at increased – increases in prices per share from prior rounds of financing, such increases may not be reflected in full in our values owing to other rights and preferences afforded to investors in those rounds of financing. This challenge in part limited the positive contribution to our net asset value per share by companies that completed such rounds of financing during the second quarter of 2016. Please turn to Slide 16, as I move to a discussion of our financial statements as of June 30, 2016. As of June 30, 2016, we had total assets of approximately $88.4 million on our balance sheet. Included in our total assets is our investment portfolio, which was valued at approximately $75 million versus its cost basis of $115.7 million. Therefore, our portfolio is in a depreciated state of $40.7 million. We also held $11.8 million in cash and had a $5 million of debt outstanding. At June 30, 2016, our primary and secondary liquidity was approximately $22.6 million. Our net assets were approximately $81.2 million and our net asset value per share, as mentioned previously, was $2.63, which was a decrease from the prior quarter of $2.67 and year end of 2015 at $2.88. Turning to our income statement on Slide 17, for the three months ended June 30, 2016, we had investment income of approximately $460,000 compared to approximately $288,000 in investment income for the same period in 2015. For the six months ended June 30, 2016, we had investment income of approximately $760,000 compared to approximately $430,000 in investment income for the same period in 2015. For the three months ended June 30, 2016, we had operating expenses of approximately $1.5 million compared to approximately $1.9 million for the same period of 2015. For the six months ended June 30, 2016, we had operating expenses of approximately $3 million compared to approximately $4.1 million for the same period in 2015. Our net operating loss was approximately $1 million and $2.2 million for the three and six months ended June 30, 2016 compared with $1.6 million and $3.6 million for the same periods in 2015. I will now turn the call back over to Doug.

Thank you, Daniel. So, we want to remind you of our execution path. We continue to focus intently on three areas we believe we can create value for our shareholders now and into the future. If you will turn to Slide 18, first, as we have discussed, we are intently focused on opportunities in precision health and medicine. Second, we will continue to cultivate our maturing companies that have potential to generate substantial returns. When these maturing companies exit, we plan to return to shareholders a much greater portion of future realized gains from these investments in the form of dividends and share repurchases than we have historically. As Daniel mentioned, we also began offering limited numbers of accredited investors the opportunity to co-invest with Harris & Harris Group in some of these maturing companies through a newly formed co-investment fund that is managed by Harris & Harris Group. We will also call and monetize portfolio companies when we have the opportunity and we use these proceeds to execute on our precision health strategy. Third, we will continue to reduce our net operating loss to finance our investment income less our expenses. We are on track to see a further reduction in net operating loss of 20% to 30% in 2016 after an 11% reduction over the period of time from 2013 to 2015. I think you just heard some of that in Daniel’s presentation of the financials. We believe this will take us to an expense level we believe is at a minimum to operate a publicly traded business development company in the current regulatory environment. We will also seek to increase substantial short-term income generated from existing and new investments to offset our operating expenses and potentially generate additional cash flows for shareholders of Harris & Harris Group. We would like to return the precision health and medicine for a moment. As we have said historically, we believe the current healthcare market is right for change. According to the Congressional Budget Office, healthcare expenditures have grown at a level of 2% greater than gross domestic product each year since 1975. Each year, healthcare has taken increasingly more of our economic output in the United States. Healthcare has grown from 8% of GDP in 1975 to just under 18% today. Not only is this trend unsustainable, but is escalated while not providing healthcare consumers answers to chronic diseases that are individualized to their illness nor specific answers that can be used to prolong health and wellbeing for extended periods of time. Precision health and precision medicine will be an increasingly important piece of the changing healthcare market over the next decade. As I have said previously, we have been involved with building companies that provide many of the technologies that enable precision health and medicine. As you heard today and at the shareholder meeting in June, we have also been involved building companies such as Muses Labs, Interome and Fleet that are focused on gathering and interrogating information, some of which is provided by our own technology portfolio of companies mentioned above to provide clinically actionable information. We believe that building a bridge between the consumer and the clinical market where large data sets of information can be stored, interrogated and clinically interpreted is an opportunity for Harris & Harris Group to become an impactful leader in the healthcare market. There are three legs to our precision health story; the enabling technologies, the information engines that can interrogate this big data information and getting this new form of medical practice to consumers. ORIG3N and Interome are involved in this third leg of the stool and expect to see us focus more attention on the clinics and the clinicians which will become the early practitioners of precision health and medicine as we continue to execute on this strategy. If you turn to Slide 19, towards this goal of bringing position health and medicine to the consumer and patient, we recently helped organize a landmark event in San Diego called the UnDx Consortium or Undiagnosed Consortium. You heard Daniel mention it. You also heard Vik mention it. This consortium worked with seven patients struggling with undiagnosed diseases. These seven patients are medical refugees as the current healthcare system can’t understand their diseases. They have a medical record that looks like recent acts test in Congress, voluminous. We brought these seven patients together with five precision health technologies. Consortium collected blood and stool samples, tested and analyzed them and met to present this data to a group of 40 leading technologists, clinicians and biostatisticians last week. New hypotheses were generated. Interrogation of different data sets has begun and a bridge to clinicians was initiated. The event was a first of its kind and many of the luminaries from leading research institutions, clinical practices and financing institutions were all present. This consortium is a huge step in making precision medicine a reality for patients. And we are a leader in making it happen. And honestly, in seeing these patients and hearing what they have been through, it is humbling to be able to provide potential help to these wonderful people. There is a wonderful documentary movie being made about five of these patients called Undiagnosed Medical Refugees and the event last week was filmed as part of this documentary. Daniel, will you now provide us an update on the co-investment vehicle as we close?

Certainly Doug, please turn to Slide 20. We would like to remind shareholders and interested potential investors who have to meet, they have to be able to participate, you have to meet the definition of an accredited investor that are two announced co-investment opportunities in HZO and D-Wave Systems remain open, but have limited time remaining for indications of interest to be received. You can view information about the offering and the offering materials by clicking on the banners on our homepage are going to www.banq.co. Please feel free to reach out to me at daniel@hhvc.com, if you have any questions on either of the offerings.

Thank you, Daniel. So first of all, we think all of you, shareholders, for joining on this call. We realize it’s the dull days of in summer. At this time, we would like to open the lines up to any questions that we may have. Thank you for listening and being interested.

Thank you. [Operator Instructions] Our first question comes from the line of David Bright of AFD [ph]. Your line is now open.

Hi, what are the minimal investments with these accredited investors, what are the minimal investment amounts?

Yes, great question. So the minimum investment amount for either offering is $25,000.

Okay. And the terms and rewards and so on and so forth are listed on your website?

So you can find all of the information about the current rounds of financing of both companies within the offering materials, and you can find those through – by going through our website, you can get to the bank website where all those offering materials are. The other thing you can do is you can e-mail me at the e-mail address I listed or I could repeat it if it would be helpful. And I am happy to e-mail those to you directly.

So, what’s your e-mail again, sorry.

Sure. It’s daniel@hhvc.com.

Okay. And do you have physicians actively working with you on these different investments to help to analyze it from a physician standpoint?

So we are existing investors in both of these companies. And in D-Wave, we have been an investor in since 2006, HZO since its founding essentially in 2011. So we are – these are the reasons why we are comfortable bringing these opportunities to the market for participation by shareholders and other potential investors, because we really do understand these companies. They are not without risk obviously, but these are companies that we are – that I think could be very interesting for participation given the stage that they are at.

Did you ask physicians?

No I meant physicians in terms of your precision medicine, if you have physicians?

My apologies. I apologize.

So Daniel’s correct on all.

I thought you said physicians.

No, I contemplated it to investment, so I am sorry, that’s my bad.

In the precision health and medicine arena, yes, I mean in our diligence of all our companies, we work with experts in the field as we evaluate them. We often work with experts in the field once we’re investors and we build those companies as well. So nothing is different in the precision health and medicine space. We work with both what I call clinical researchers that are usually on the forefront of the technologies as they are being practiced in clinics and they are wonderful. There is still a big difference between who you would meet if you went to Memorial Sloan-Kettering Cancer Institute or to a bailer or to the Broad Institute than a clinician practicing on the frontline, and [indiscernible] on precision health and medicine, we have involved some of the clinicians on the frontline, both some of the leading concierge clinics that are already starting to practice this, and then generally, hoping [ph] that up to clinicians because understanding what needs to be introduced in their practice and the strength they have is going to be important for the success of that. So if you looked at like even the UnDx Consortium that we put together, it had primary care physicians on the frontline that work directly with these patients. You had clinical researchers there all the way up to a gentleman, Isaac Kohane, who is Director of the NIHs program for undiagnosed disease. So again yes, we are very active in involving physicians in the precision health and medicine. We think that one of the biggest challenge is going to be bridging this technology to practicing clinicians within the existing sort of healthcare practice, but hoping in some respects to transform it as well.

Okay. And my last question on that, I happen to be a physician in the clinical practice, how are you – what’s your game plan on bridging in the precision medicine in addition to getting it involved and getting it into the community of physicians, you’ve got to figure out a way to get it reimbursed by the payers because that can be a majordomo challenge as well?

Yes, so fully agree. I think our strategy to begin with, has been to work with concierge physicians where people, mainly wealthy are paying out of pocket. I think the reason is it’s a place where it can be introduced, they tend to be on the forefront and the reimbursement issue is not as big an issue. It’s surprisingly not as small a market as everyone says. I think there are 6 million people in the United States practicing some form of concierge medicine. However, it’s only a start in doing it. You will need to be get reimbursed. Many of our technology companies, so when you look at something like Metabolomics, they have the technology themselves are moving towards from CLIA labs to FDA test kits and everything like that and working on that reimbursement. One of the things we do is basically bring these datasets together and similar to Muses, provide interpretable information. So, as the field progresses, we believe that some of the tests that are done, as part of precision medicine, will be reimbursable and then hopefully as well, the interpretable information that can help guide a clinician, right, data next to the clinician’s knowledge of both the patient and many years of practice would also be in reimbursement, but that’s a step and so we are concentrating to begin with on the concierge market and then moving into general practice.

You mean like the Qliance or MDVIP those sorts of guidance?

Yes, I will think MDVIP to be, I mean, to get in the wheeze is probably that’s a little bit difficult the way it’s setup. But in the major cities, you have New York City and San Francisco you have both concierge clinics that are out-of-pocket, you also in places like San Francisco and New York City and Seattle, you also have physicians that are in network use but recommend to their patients some advanced tests that they believe could be helpful that are out-of-pocket and they pay. So, I think that, that’s the entrée point. But again, the goal is to be able to take these technologies in a short visit with a physician to be able to provide the type of information where a dialogue can happen between you as a physician and your patient that gets to either what they should be doing for their health or in the case of undiagnosed disease, get it hypotheses that can be tested and followed up to ultimately diagnose it or at least provide some sort of steps forward that ease the issue of the disease.

Okay. And one last question, would I be able to get your phone number, if I had some ideas to discuss with you about maybe an area that might be auspicious for what you are talking about in terms of the Big Data, that sort of a thing?

So, certainly and I would enjoy reaching out to you and touching your base to, but yes, one of the things we are going to do is try to bring more and more clinicians together as we look at this and figure out the best opportunity. My number to be reached at is 212-582-0900 at Harris & Harris Group, and I am Doug Jamison.

Okay. 582, last 4 digits?

0900.

Okay, thank you so much.

Thank you.

And David, you can also reach me at the Daniel for the co-investment vehicles at the same number. I also have your phone number that you put into the dial in, so we can definitely connect on that.

Yes, we will chat later. Thank you so much.

Great, thank you.

Thank you. And our next question comes from the line of Robert Littlehale of JPMorgan. Your line is now open.

Good morning.

Hi, Bob.

How are you? Can you just review for us the terms of the $5 million debt interest rate, is there any term to that facility?

Absolutely. So, the interest rate is about 10% per year. It is 10% per year. And the current maturity date is September 30, 2017.

‘17, okay. And Daniel, based on where you stand today on these two co-investment opportunities, would you deem them an initial success and how soon do you think you may follow up with the couple of other opportunities?

Yes, it’s a great question. I think – I would characterize them currently as a success in that – in a couple of ways. And some are not as expected, but very welcome. One, they have been an incredible Investor Relations tool. I have spoken with more shareholders over the past couple of months that we didn’t know that they were shareholders and they reached out to us, because they were interested in the vehicles. I have had multiple shareholders or multiple other individuals actually say after reviewing the materials they decided to purchase more shares of Harris & Harris Group. And so I think the overwhelming response has been very positive. I think we have a good amount of interest in both opportunities and the level of interest, particularly D-Wave, which has been out there for longer and we continue to have more and more people getting in touch with us to potentially participate, which is part of the reason why we have kept it open is because we just continue to see more interest coming in. If you compare the level of interest that we have had to other types of, I will call them crowdsourced or looking at accredited investor platforms for investing in privately held companies. I think we are doing very well in terms of attracting interest to these opportunities, particularly D-Wave given that it’s been out there for longer and we continued to get interest. So in general, I think we are very positive on them. We continue to look at opportunities for potentially bringing other companies out. And I think our target right now is to bring at least another one out before the end of this year. I mean, we are still figuring out exactly which company that maybe.

I think, Daniel, is it fair to say just digging in a little bit more that I think these vehicles, to raise multiple hundreds of millions of dollars – multiple hundreds of thousands of dollars in the low millions are good. They are not vehicles that seem to be able to raise $5 million, $6 million, $7 million. So, that gives you an idea. Two, they are primarily retail, so, our institutional investors doesn’t fit sort of their models so they are primarily retail. And it’s interesting, because again we are taking companies public where shareholders have participated as well. There they get a liquid stock, so there is an interest and they participate in these one of the things we hear from some of our retail investors is they actually, like I mean, I will compare D-Wave to an HZO, right? D-Wave could really change the whole phase of computing, right? It’s a big vision, big idea that is more interesting to them even then HZO where it’s moving in the market quickly. It’s growing rapidly. But you are not going to wake up 1 day and tell your grandchildren that the world changed, because it’s waterproof even though it will change how we think of electronics going forward. So, it’s funny because we don’t hear that. What we hear a lot from the Street is they would rather see profit sooner and returns sooner and everything like that. So, it’s funny to watch these different vehicles and the different type of investors that come to Harris & Harris Group, they clearly all don’t match up in what they are ultimately looking for. But again, I reiterate, Daniel, it’s been a wonderful and it continues to be a wonderful exercise and a great reason to talk to and reach out to shareholders. And it’s funny, people come and get excited about something, but as they look at the price of Harris & Harris Group, we are surprised, because when they do the analysis, they come back and say maybe I should buy shares of Harris & Harris Group. And that is we started this because it meet the portfolio days, the off-the-cuff response coming out of that was, wow, we really wanted to invest in this company directly. And we would say why don’t you invest in Harris & Harris Group? That’s why we put on these events. And then when they actually look into and dig into that and they come to us. They are very interested. The amount of incoming attraction to these vehicles is as high as they dig into it. They come back to Harris & Harris Group at its current state. So, like everything, it’s a cycle. I think it’s been very, very good for Harris & Harris Group. Our companies love it. Our companies love it. They get calls from investors sometimes saying, how can I participate in this and now they have a vehicle in place to direct them as well? But again, I mean, we are not going to raise at this point in time, 5s and 10s of millions of dollars for these companies through this type of vehicle, but for hundreds of thousands to million, I think it’s a very nice vehicle.

And that’s the expectation that we said with the companies. I mean, there is always the outside possibility of raising a lot more into it, but Doug is completely correct. It’s mostly going to be in the hundreds of thousands to million type of opportunities

Great. Thank you both.

Thank you.

No problem.

Thank you. [Operator Instructions] Our next question comes from the line of Theodore Kohn, a Private Investor. Your line is now open.

Gentlemen, good morning. I have been a long time investor and unfortunately, I did not hear the beginning of your call. Can you give me some idea as to what of the potential exit strategy we can anticipate within the next 12 months as far as I would say a liquidity event?

Yes. So no, I mean we can’t, because we either – I mean either we don’t know or something is actively going on. We are not permitted to disclose it. Maybe I can give you some context. So I apologize for that, but that’s the way the SEC rolls. What I can say is this. We started the year, we had the backlog of Bridgelux, we disclose that today, it was – the deal had been closed. It took a while to finally close. We received approximately $1.9 million from that, which was not materially different from how we have been valuing it over the last couple of quarters. We also sold our shares of Magic Leap, again not a real material amount and just little over $600,000. But again, that was the result of a sale, which led to another company, which was then sold and then finally we sold those shares, all of which were realized gains. As we look forward, I think there is a couple of companies in our portfolio currently that are looking at potential IPOs. I can’t name them. None of them are what I would call the big, when I talk about the meaningful and the material impact of companies to the future of Harris & Harris Group, I would not put them in that basket. But they are both good companies. One is in the healthcare sector. One is in the electronic sector. They are having good years and they are looking at potential IPO opportunities. So as we turn the corner into 2017, we think that that’s potential. As we often do, we have multiple companies that are in conversations or have been approached for potential sales. And our history is some of those will transact and some of those will not, either the price won’t the right or the investors will say, we think we can do better by building these for the future. And so there are certainly some of those in the portfolio. But as I look out, I don’t think there is probably not much in our portfolio in 2016 that we will monetize other than perhaps some public company positions, depending on what happens in the market in the latter half of this year. As we look to 2017 and really into 2018, we think we are in a period of time where some of our more mature companies and some of the really impactful meaningful ones may begin to exit. And again just to try to provide you more information rather than last I probably won’t get all of them, but the ones we have talked about is meaningful in past disclosures. So this is all publicly and fully disclosed are clearly D-Wave. We have talked about AgBiome. We have talked about Metabolon, talked about HZO in that as well as some of these potential ones that can be meaningful to us. But our strategy just to be very clear is we will continue to monetize positions. Some of these will be monetizing positions I call – calling ones that we don’t expect to be great returns, but turning that into cash so we can reinvest it usefully. We are in no rush to monetize quickly some of the companies that we think can be material and meaningful for our shareholders.

Thank you. The other side of the question is nothing negative, to what extent are any of the portfolio companies likely not to make it or where your evaluation is greater and what you might anticipate the value of the companies to be?

Yes. So again, my formal response is that we have evaluation when it goes to the values, the values we report at June 30 are the values we believe are appropriate for those companies. Again I mean, the Harris & Harris Group is an early stage venture capital firm. We put a bunch of horses in the race, but only a couple of them not only win, but complete the race. And I think you will continue to see that. What we have tried to share with shareholders is our most mature companies are fairly mature companies. We don’t expect – we expect them to grow and to provide potential returns for Harris & Harris Group as we look forward. And different than like 2002 to 2004 where so many of the companies were young in our portfolio. A vast majority of the companies are more mature at this point in time. The companies that one may expect not to succeed, there is clearly some in the precision health and medicine because some of the investments we made more recently there in our MD&A, we still present the companies with the different maturities early stage, mid-stage and late stage. I would be looking at the early stage and you will see a lot of our new investments there. But again, a lot of these are $200,000, $250,000 investments. I don’t expect to see D-Wave at this point in time. They have had access to capital. They are executing on their business the same as Metabolon. Having said all of that, one of the things that has happened since the accounting world has really put a strong adherence on OPM is one of the tools, option pricing models, is one of the tools. It makes our valuations much more opaque. By that I mean it’s really difficult when companies raise money even at increased rounds of capital. You sometimes see those valuations decrease. This is all accounting the ups and downs, ultimately realize cash and you ideally have realized returns. But it’s made it much more opaque to understand that the company finance had a good price, the company doing well or is it struggling. And I think you are going to continue to see that in our valuations. I would say we have as the companies gotten more mature, we have been able to use other tools DCF, comparables and that helps with that understanding of the valuations. But again, I mean my personal view is I thought fair value accounting was a fantastic and it impact our evaluations much I think, historically like over 20 years. We were right all at fair value accounting. The attention put an option pricing modeling now by the accounting profession, especially in private companies where option pricing wasn’t even the assumption is don’t even hold true and on non-normal distributions, I think is a real insult to the industry that’s turned fair value accounting into a black box. And you have seen it in our valuations. I don’t know if it will change in the future. We believe it’s a very good tool. We believe in our valuations. But again, the best measure is ultimately can we turn realized cash into real life gains at the end of the day. In the case of like Bridgelux, we were unable to do that even though we were able to rescue some cash out of it. In the case of Magic Leap, we were and that has to be our goal going forward.

And just to expand very quickly two points. One is Doug’s point on the valuations and making it more difficult for shareholders to know does a decrease in value actually indicate an impairment in the expectation of return from that company or an issue with that company. So in our MD&A, in our financials, we generally try to provide as much as we are permitted of information that can provide some clarity to that. So for example, if a company’s value goes down, but the round of financing was actually done at a higher price per share, we will note that. And it goes does just because of option pricing modeling parameters. The other thing that I will note and you may have missed this during the call, but it was a subtle example of where the differences between option pricing model and what the values that those provide and what might ultimately maybe realized can be different. Magic Leap, when we – before we had an unsolicited offer on the table, we didn’t have any other tool to derive value than option pricing models. And it valued our shares at a little bit less than – yes, little bit less than half of what we ultimately sold those for. And so it just points to the valuations – the realized value at the end of the day can be materially different from the value that we currently hold on our books.

And again, fair value accounting is not – fair value accounting, we provide a value on our books, that is the best value we have at that point in time. To be very clear, fair value accounting’s goal clearly is not to ascertain whether that investment will be more or less valuable into the future. But clearly, we have realized you as shareholders, want to understand that. And again, have hats off to Daniel. We over the last years, we have been facing this 1.5 years have really tried to increase the disclosure on our MD&A to help you as a shareholder, if you want to understand that. And again, we are happy to take calls coming out of that information as well. So thank you for that question.

Thank you for the information gentlemen.

Thank you.

Take care.

Thank you. And at this time, I am showing no further questions. I would hand the call back over to Doug Jamison for any closing remarks.

Great. So I will be brief. Thank you, again, for joining us and is call. Clearly, if you have any questions, always feel free to reach out to Daniel or I. And we look forward to speaking to you again in November after we report our September 30 financials. Thank you very much. Have a good week.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Have a good day everyone.