Unassociated Document

The chart below compares the values of our venture capital investments in our Cleantech, Healthcare and Electronics portfolios as of June 30, 2011, and as of March 31, 2011.

Note:

Our one investment, Questech, which is classified as "Other" and valued at $436,642 as of March 31, 2011, is included with "Electronics." We sold our investment in Questech in the second quarter of 2011.

We note that the amount in Healthcare does not include our rights to potential future milestone payments from the sale of BioVex Group, Inc., to Amgen, Inc. These rights were valued at $3,316,581 and $3,291,750 as of June 30, 2011, and March 31, 2011, respectively.

We have and may continue to make investments outside these sectors, and we may not maintain these sectors or the weightings within these sectors in future quarters.

Assessment of Our Cleantech Portfolio as of June 30, 2011

We classify companies in our Cleantech portfolio as those that seek to improve performance, productivity or efficiency, and to reduce environmental impact, waste, cost, energy consumption or raw materials using nanotechnology-enabled solutions. Cleantech is a term used commonly to describe products and processes that solve global problems related to resource constraints. We believe macroeconomic and microeconomic trends including ongoing growth in consumption of energy and resources, energy security concerns and volatility of commodity prices create attractive investment opportunities in cleantech. We believe nanotechnology enables innovation in cleantech markets through:

New Approaches to Production: Nanotechnology-enabled methods of production can enable lower energy use at lower cost and operate with better performance than current methods of production.

New Materials: New materials enable the development of new products that overcome inherent limitations of existing technology and processes.

We continue to believe we are positioned well to take advantage of today’s growth markets within cleantech. We have been early investors in many of these markets. Our initial investments in biofuels in 2004 (Solazyme), light-emitting diodes in 2005 (Bridgelux) and batteries in 2007 (Contour Energy), now represent three of our top ten investments by value. These companies achieved record revenue growth in 2010 and continue to make progress in their respective markets.

We also believe we have a pipeline of companies that are developing solutions for growth markets that are emerging today or may develop in future years such as ground-water and other environmental remediation (ABSMaterials), renewable chemicals (Cobalt) and alternative sources for high-intensity light (Laser Light Engines). In the second quarter of 2011, we invested in a new cleantech company, Produced Water Absorbents, Inc. (“PWA”), a spinout from ABSMaterials, Inc. PWA is developing nanoglass materials that are able to remediate contaminated water that is a by-product of drilling for oil and hydraulic fracturing for natural gas. The table below shows the breakdown of our Cleantech portfolio as of June 30, 2011, based on stage of maturity of the investment including the year of our initial investment in each of the companies.

Many of our Cleantech portfolio companies are generating commercial revenues and/or have entered into partnerships and joint development agreements with large corporations. We include some of the commercial developments from these portfolio companies during the second quarter below.

Solazyme

On May 27, 2011, Solazyme completed an IPO by selling 10,975,000 shares of common stock at $18 per share.

On June 20, 2011, Solazyme announced the successful test flight of a MH 60S Seahawk helicopter fueled with a 50:50 blend of algal-derived Solajet HRJ-5® jet fuel.

On June 30, 2011, Solazyme announced it expanded its distribution channels for its Algenist line of cosmetics to include Sephora Canada and The Shopping Channel.

ABSMaterials

In April 2011, field testing by DOE’s National Energy Technology Laboratory confirmed that ABSMaterials’ Osorb material could remove more than 99 percent of oil and grease from water, as well as more than 90 percent of toxic substances such as benzene, toluene, ethylbenzene and xylenes.

In June 2011, ABSMaterials noted the spinout and financing of its subsidiary, Produced Water Absorbents, Inc.

Contour Energy

In June 2011, Contour Energy announced the close of a Series C round of financing led by EDBi, the investment arm of the government of Singapore.

Cobalt

In May 2011, Cobalt announced the close of a Series D round of financing led by the Whittemore Collection Ltd., the investment vehicle of Parsons & Whittemore.

Innovalight

In July 2011, Innovalight announced it had been acquired by DuPont. Details of this transaction are included in the section titled, "Recent and Pending Potential Liquidity Events from Our Portfolio as of June 30, 2011."

We believe the macroeconomic and microeconomic dynamics that supported our thesis for historical investments in cleantech and the potential for nanotechnology to impact cleantech-related markets will continue for the foreseeable future. Some of the market opportunities we are currently investigating for investment opportunities include energy efficiency, energy storage and new methods for production, extraction and purification of high-value materials.

Assessment of Healthcare Portfolio as of June 30, 2011

We classify companies in our Healthcare portfolio as those that use nanotechnology to address problems in healthcare-related industries, including biotechnology, pharmaceuticals and medical devices. We believe macroeconomic and microeconomic trends including an aging population, increasing life expectancy, increasing prosperity that drives efforts to extend life, the increased global reach of disease and the need to address exponential growth of expenses of entitlement programs in some wealthy countries create attractive investment opportunities in healthcare. We believe nanotechnology enables innovation in healthcare markets through:

Engineering of Biological Systems: The ability to study, optimize, and engineer biological systems at the nanoscale enables the use of biological systems for diagnosis and treatment of disease.

Convergence of Multiple Disciplines: Much of the exciting work in nanotechnology is enabled by the convergence of the knowledge from multiple scientific disciplines. This convergence enables advances in healthcare that could not otherwise occur within one discipline.

New Tools: Complex biological processes include and are often the result of nanoscale phenomena. The ability to study and interpret these processes requires new tools. The information produced by these tools may advance the understanding and facilitate the engineering of biological systems.

We continue to believe we are positioned well to take advantage of today’s growth markets within healthcare having been early investors in many of these markets. We believe our initial investments in drug delivery vehicles in 2002 (Mersana), metabolomics in 2006 (Metabolon), synthetic carbohydrates in 2007 (Ancora), oncolytic viruses in 2007 (BioVex) and therapeutic discovery platforms in 2007 (Ensemble), positioned us well to capture the growth of commercial interest in cancer therapeutics, vaccines and molecular diagnostics. Mersana and BioVex are in clinical trials with their respective treatments for cancer, and Metabolon generated record revenue in 2010. Additionally, we believe the acquisition of BioVex Group, Inc., by Amgen, Inc., on March 4, 2011, provided validation of commercial interest in the promise of oncolytic virus technology.

We also believe we have an emerging pipeline of companies that are developing solutions for growth markets that exist today or may develop in future years such as personalized medicine (Enumeral Biomedical). We made a new investment in a personalized medicine company, Champions Oncology (OTC:CSBR) in the second quarter of 2011. The table below shows the breakdown of our Healthcare portfolio as of June 30, 2011, based on stage of maturity of the investment including the year of our initial investment in each of the companies.

Our Healthcare companies demonstrate progress and growth through different mechanisms depending on their respective businesses. Businesses that provide services, such as Metabolon, generate revenues from the commercial sale of these services. Businesses that enter into partnerships for discovery and development of therapeutics, vaccines and diagnostics may generate revenue from upfront fees, milestone payments and royalties on sales of approved products. Businesses that endeavor to advance a therapeutic, diagnostic or vaccine product through clinical trials may not generate revenue until an approved product is on the market, if ever. Progress for these types of companies can be measured by progress through clinical trials. We include some of the developments from these portfolio companies during the second quarter below.

Champions Oncology

In April 2011, Champions Oncology announced a round of financing through private placement led by Battery Ventures.

Enumeral

In June 2011, Enumeral completed its Series A round of financing led by us with participation from high-net-worth individual investors, a corporate investor and a venture capital firm.

Metabolon

In June 2011, Metabolon announced the publication of "Identification of Metabolites in the Normal Ovary and Their Transformation in Primary and Metastatic Ovarian Cancer." The biochemical changes observed provide insight into the biochemical consequences of transformation and provide candidate biomarkers of ovarian oncogenesis.

We believe the macroeconomic and microeconomic dynamics that supported our thesis for historical investments in healthcare and the potential for nanotechnology to impact healthcare-related markets will continue for the foreseeable future. Some of the market opportunities we are currently investigating for investment opportunities include molecular diagnostics, 3D biology, cellular therapy and tissue engineering.

Assessment of Electronics Portfolio as of June 30, 2011

We classify companies in our Electronics portfolio as those that use nanotechnology to address problems in electronics-related industries, including semiconductors, telecommunications and data communications, metrology and test and measurement. We believe macroeconomic and microeconomic trends including global connectivity, demand for increasing bandwidth due to pervasiveness of electronics in daily life, the desire to see not just hear, and need for real-time availability of data and demand for more functionality driven by increasing global prosperity create attractive investment opportunities in electronics. We believe nanotechnology enables innovation in electronics markets through:

New Methods of Production: Nanotechnology enables continuation of Moore’s Law for exponential increases of the number of integrated circuits in semiconductor devices.

New Materials: New materials enable unique capabilities, performance and form-factors in electronic devices.

New Forms of Computation: Nanotechnology enables methods of solving equations and other problems that would be difficult or impossible with standard digital computing techniques.

We continue to believe we are positioned well to take advantage of today’s growth markets within electronics having been early investors in many of these markets. We believe our initial investments in non-volatile memory in 2001 and 2007 (Nantero and Adesto, respectively), transparent conductors in 2004 (Cambrios), image sensors in 2006 (SiOnyx), integrated photonics in 2003 (NeoPhotonics) and metrology in 2006 (Xradia), positioned us well to capture the growth of commercial interest in smartphones and tablet computers with touchscreens, the exponential increase in demand for bandwidth for data and telecommunications and the demand for non-destructive imaging capabilities in a variety of industries.

We also believe we have an emerging pipeline of companies that are developing solutions for growth markets that exist today or may develop in future years such as high-performance computing enabled by quantum mechanics (D-Wave Systems) and radio-frequency identification and near-field communication devices enabled by printed electronics (Kovio). The table below shows the breakdown of our Electronics portfolio as of June 30, 2011, based on stage of maturity of the investment including the year of our initial investment in each of the companies.

Many of our Electronics portfolio companies are generating commercial revenues and/or have entered into partnerships and joint development agreements with large corporations. We include some of the commercial developments from these portfolio companies during the second quarter below.

D-Wave Systems

In May 2011, D-Wave Systems announced Lockheed Martin Corporation entered into an agreement to purchase a quantum computing system from the company.

Cambrios

In April 2011, Synaptics and Cambrios signed a reference design partnership agreement to bring Cambrios’ ClearOhm-based touch technology to the market.

In July 2011, Hitachi Chemical and Cambrios signed a collaboration agreement to produce photosensitive transparent conductive films that can be patterned using simple light exposure rather than expensive patterning techniques.

Kovio

In June 2011, Kovio announced a round of financing led by Tyco Retail Solutions, a unit of Tyco International.

Adesto

In July 2011, Adesto announced the formation of a development and manufacturing partnership that will lead to the delivery of the first Conductive Bridging RAM-based devices in 2011.

We believe the macroeconomic and microeconomic dynamics that supported our thesis for historical investments in electronics and the potential for nanotechnology to impact electronics-related markets will continue for the foreseeable future, albeit with some adjustment. The high capital intensity of traditional semiconductor investments and the reduced values placed on these companies at exit in the current market environment have resulted in these investments becoming less favorable to investors, including ourselves. We are currently investigating opportunities that do not require such substantial capital investment to reach commercial revenues and breakeven cash flow.

Investment Objective

Our principal objective is to achieve long-term capital appreciation by making equity-focused venture capital investments. Therefore, a significant portion of our current venture capital investment portfolio provides little or no income in the form of dividends or interest. Current income is a secondary objective. We are implementing a strategy that we believe will provide greater regularity and shorter time periods between realizations of capital gains on investments. As part of this strategy, we are seeking to increase our current income by providing debt financing to privately held and publicly traded small companies. We seek to reach the point where future growth is financed through reinvestment of our capital gains from our venture capital investments and where current income offsets our annual expenses during periods of time between realizations of capital gains on our investments.

We currently earn interest income from fixed-income securities, including U.S. government and agency securities. The amount of interest income we earn varies with the average balance of our fixed-income portfolio and the average yield on this portfolio. In previous years, we have been able to generate substantial amounts of interest income from our holdings of U.S. Treasury securities. As of June 30, 2011, we held four U.S. Treasury securities with maturity dates of less than six months yielding approximately 0.09 percent. As of June 30, 2011, yields for 3-month, 6-month, and 12-month U.S. Treasury securities were 0.03 percent, 0.10 percent and 0.19 percent, respectively. With yields at this level, we expect to generate less interest income from U.S. government securities than in previous fiscal quarters and years.

Results of Operations

We present the financial results of our operations utilizing GAAP for investment companies. On this basis, the principal measure of our financial performance during any period is the net increase (decrease) in our net assets resulting from our operating activities, which is the sum of the following three elements:

Net Operating Income (Loss) - the difference between our income from interest, dividends, and fees and our operating expenses.

Net Realized Gain (Loss) on Investments - the difference between the net proceeds of sales of portfolio securities and their stated cost, plus income from interests in limited liability companies.

Net Increase (Decrease) in Unrealized Appreciation or Depreciation on Investments - the net unrealized change in the value of our investment portfolio.

Owing to the structure and objectives of our business, we generally expect to experience net operating losses and seek to generate increases in our net assets from operations through the long-term appreciation of our venture capital investments. We have relied, and continue to rely, primarily on proceeds from sales of investments, rather than on investment income, to defray a significant portion of our operating expenses. Because such sales are unpredictable, we attempt to maintain adequate working capital to provide for fiscal periods when there are no such sales. During 2010, we made our first venture debt investment. While the interest income generated from these investments does not currently defray a significant portion of our operating expenses, further investments in venture debt could generate more substantial investment income in future years.

The potential for, or occurrence of, inflation could result in rising interest rates for government-backed debt. This trend would have two effects on our business. First, the spread between the interest rates we can obtain from investing low-risk government debt versus high-risk venture debt will compress, which would result in a reduction of the risk premium associated with investments in venture debt. We may reduce the number and amount invested in venture debt should this risk premium decrease substantially as to not compensate us adequately for the risk associated with such investments. Second, funds drawn from our credit facility will accrue interest at a rate that fluctuates with the London Interbank Offered Rate (LIBOR). LIBOR is expected to increase in times of inflation. Our venture debt investments may include both fixed and floating interest rates. Our interest income would decrease if the spread between the interest rate on funds from our credit facility and our venture debt investments decrease.

Three months ended June 30, 2011, as compared with the three months ended June 30, 2010

In the three months ended June 30, 2011, and June 30, 2010, we had net increases in net assets resulting from operations of $21,222,221 and $2,150,952, respectively.

Investment Income and Expenses:

We had net operating losses of $1,806,393 and $1,953,949 for the three months ended June 30, 2011, and June 30, 2010, respectively. The variation in these results is primarily owing to the changes in investment income and operating expenses, including non-cash expense of $557,806 in 2011 and $661,666 in 2010 associated with the vesting of stock options. During the three months ended June 30, 2011, and 2010, total investment income was $187,826 and $129,208, respectively. During the three months ended June 30, 2011, and 2010, total operating expenses were $1,994,219 and $2,083,157, respectively.

During the three months ended June 30, 2011, as compared with the same period in 2010, investment income increased, reflecting an increase in interest income from bridge notes, non-convertible promissory notes, subordinated and senior secured debt, and the participation agreement, offset by a decrease in our average holdings of U.S. government securities and a decrease in the average yield of these securities. During the three months ended June 30, 2011, our average holdings of such securities were $35,821,905, as compared with $49,244,819 during the three months ended June 30, 2010. The average yield on our U.S. government securities decreased from 0.11 percent for the three months ended June 30, 2010, to 0.06 percent for the three months ended June 30, 2011.

Operating expenses, including non-cash, stock-based compensation expense, were $1,994,219 and $2,083,157 for the three months ended June 30, 2011, and June 30, 2010, respectively. The decrease in operating expenses for the three months ended June 30, 2011, as compared to the three months ended June 30, 2010, was primarily owing to decreases in salaries, benefits and stock-based compensation expense and administration and operations expense, offset by an increase in professional fees. Salaries, benefits and stock-based compensation expense decreased by $120,739, or 8.2 percent, through June 30, 2011, as compared with June 30, 2010, primarily as a result of a decrease in non-cash expense of $103,860 associated with the Harris & Harris Group, Inc. 2006 Equity Incentive Plan (the "Stock Plan") and a decrease in salaries and benefits owing primarily to a decrease in our head count. At June 30, 2011, we had 10 full-time employees, as compared with 11 full-time employees at June 30, 2010. While the non-cash, stock-based compensation expense for the Stock Plan accounted for $557,806 of our operating expenses, this amount was offset by a corresponding increase to our additional paid-in capital, resulting in no net impact to our net asset value. The non-cash, stock-based compensation expense and corresponding increase to our additional paid-in capital may increase in future quarters. Administration and operations expense decreased by $9,003, or 3.9 percent, through June 30, 2011, as compared with June 30, 2010, primarily as a result of a decrease in our directors' and officers' liability insurance expense and decreases in managing directors' travel-related expenses, offset by a one-time leasing commission expense associated with subletting our office space located 420 Florence Street, Suite 200, Palo Alto, CA, commencing on July 1, 2011. Professional fees increased by $31,847, or 18.0 percent, for the three months ended June 30, 2011, as compared with the same period in 2010, primarily as a result of an increase in certain accounting and consulting fees. Our rent expense of $89,500 for the three months ended June 30, 2011, includes $95,599 of rent paid in cash net of $6,099 non-cash rent expense, credits and abatements that we recognize on a straight-line basis over the lease term. For the quarter ended June 30, 2010, we had a loss of $68,038 as a result of abandoning our lease at our former office prior to the end of the lease term that expired in April 2010.

Realized Income and Losses from Investments:

During the three months ended June 30, 2011, and June 30, 2010, we realized net losses on investments of $2,172,269 and $396,769, respectively.

During the three months ended June 30, 2011, we realized net losses of $2,172,269, consisting primarily of realized losses on our investment in PolyRemedy, Inc., of $204,206 and in Questech Corporation of $1,966,591.

During the three months ended June 30, 2010, we realized net losses of $396,769, consisting primarily of realized losses on a portion of our investment in Kovio, Inc., of $257,007 and in Orthovita, Inc., of $167,300, offset by realized gains on our investment in Satcon Technology Corporation of $14,320.

Net Unrealized Appreciation and Depreciation of Portfolio Securities:

During the three months ended June 30, 2011, net unrealized appreciation on total investments increased by $25,200,986, or 3,698.4 percent, from net unrealized appreciation of $681,400 at March 31, 2011, to net unrealized appreciation of $25,882,386 at June 30, 2011. During the three months ended June 30, 2010, net unrealized depreciation on total investments decreased by $4,501,670, or 42.6 percent, from net unrealized depreciation of $10,564,305 at March 31, 2010, to net unrealized depreciation of $6,062,635 at June 30, 2010.

During the three months ended June 30, 2011, net unrealized appreciation on our venture capital investments increased by $25,199,484, from net unrealized appreciation of $681,639 at March 31, 2011, to net unrealized appreciation of $25,881,123 at June 30, 2011, owing primarily to increases in the valuations of the following investments held:

Investment	Amount of Write-Up

Solazyme, Inc.	$	21,106,005
Adesto Technologies Corporation		4,130,000
Metabolon, Inc.		2,103,440
Cambrios Technologies Corporation		1,554,890
ABSMaterials, Inc.		937,500
Innovalight, Inc.		923,130
Bridgelux, Inc.		623,882
Molecular Imprints, Inc.		310,325
GEO Semiconductor, Inc.		36,410

The write-ups for the three months ended June 30, 2011, were offset by decreases in the valuations of the following investments held:

Investment	Amount of Write-Down

SiOnyx, Inc.	$	1,627,821
NeoPhotonics Corporation		1,507,438
Xradia, Inc.		1,316,792
D-Wave Systems, Inc.		1,129,575
Nanosys, Inc.		725,246
Ensemble Therapeutics Corporation		599,640
Mersana Therapeutics, Inc.		467,475
Laser Light Engines, Inc.		421,945
Ancora Pharmaceuticals Inc.		318,477
Cobalt Technologies, Inc.		250,587
Nextreme Thermal Solutions, Inc.		137,665
Champions Oncology, Inc.		53,333
Contour Energy Systems, Inc.		19,919
Kovio, Inc.		2,335
NanoTerra, Inc.		1,781

We had an increase in unrealized appreciation for PolyRemedy, Inc., of $312,313 and for Questech Corporation of $1,693,813 owing to the sale of these securities.

We had an increase in unrealized appreciation of $24,831 on the rights to milestone payments from Amgen, Inc., from its acquisition of BioVex Group, Inc., in the first quarter of 2011.

We had an increase in unrealized appreciation owing to foreign currency translation of $22,974 on our investment in D-Wave Systems, Inc.

During the three months ended June 30, 2010, net unrealized depreciation on our venture capital investments decreased by $4,516,186, from net unrealized depreciation of $10,561,039 at March 31, 2010, to net unrealized depreciation of $6,044,853 at June 30, 2010, owing primarily to increases in the valuations of the following investments held:

Investment	Amount of Write-Up

Solazyme, Inc.	$	8,149,698
SiOnyx, Inc.		2,002,611
D-Wave Systems, Inc.		855,025
Xradia, Inc.		730,022
Laser Light Engines, Inc.		500,000
BioVex Group, Inc.		423,421

The write-ups for the three months ended June 30, 2010, were partially offset by decreases in the valuations of the following investments held:

Investment	Amount of Write-Down

Nextreme Thermal Solutions, Inc.	$	2,202,629
Molecular Imprints, Inc.		2,014,874
Bridgelux, Inc.		1,663,728
NeoPhotonics Corporation		1,548,863
Kovio, Inc.		335,675
Nanosys, Inc.		280,649
Questech Corporation		69,479
TetraVitae Bioscience, Inc.		62,500
PolyRemedy, Inc.		53,893
Mersana Therapeutics, Inc.		14,109
Metabolon, Inc.		6,527

We had an increase in unrealized depreciation for Satcon Technology Corporation of $5,797 owing to the sale of its securities.

We had a decrease in unrealized depreciation for Kovio, Inc., of $227,469 owing to the termination of a warrant. The warrant was terminated pursuant to the terms of the Series A' financing which closed during the second quarter of 2010.

We had a decrease in unrealized depreciation for Orthovita, Inc., of $648 owing to the sale of its securities.

We had an increase in unrealized depreciation owing to foreign currency translation of $113,985 on our investment in D-Wave Systems, Inc.

Unrealized depreciation on our U.S. government securities portfolio increased from $3,266 at March 31, 2010, to $17,782 at June 30, 2010.

Six months ended June 30, 2011, as compared with the six months ended June 30, 2010

In the six months ended June 30, 2011, and June 30, 2010, we had net increases in net assets resulting from operations of $20,096,062 and $3,838,683, respectively.

Investment Income and Expenses:

We had net operating losses of $3,641,696 and $4,066,627 for the six months ended June 30, 2011, and June 30, 2010, respectively. During the six months ended June 30, 2011, and 2010, total investment income was $324,650 and $208,281, respectively. During the six months ended June 30, 2011, and 2010, total operating expenses were $3,966,346 and $4,274,908, respectively, including non-cash expense of $985,120 in 2011 and $1,214,938 in 2010 associated with the vesting of stock options.

During the six months ended June 30, 2011, as compared with the same period in 2010, investment income increased, reflecting an increase in interest income from bridge notes, non-convertible promissory notes, subordinated and senior secured debt, and the participation agreement, offset by a decrease in our average holdings of U.S. government securities. During the six months ended June 30, 2011, our average holdings of such securities were $36,364,398, as compared with $51,492,274 during the six months ended June 30, 2010. The average yield on our U.S. government securities for the six months ended June 30, 2011, and 2010, was 0.09 percent.

Operating expenses, including non-cash, stock-based compensation expense, were $3,966,346 and $4,274,908 for the six months ended June 30, 2011, and June 30, 2010, respectively. The decrease in operating expenses for the six months ended June 30, 2011, as compared to the six months ended June 30, 2010, was primarily owing to decreases in salaries, benefits and stock-based compensation expense and administration and operations expense, offset by an increase in professional fees and rent expense. Salaries, benefits and stock-based compensation expense decreased by $270,918, or 9.5 percent, through June 30, 2011, as compared with June 30, 2010, primarily as a result of a decrease in non-cash expense of $229,818 associated with the Stock Plan and a decrease in salaries and benefits owing primarily to a decrease in our head count. At June 30, 2011, we had 10 full-time employees, as compared with 11 full-time employees at June 30, 2010. While the non-cash, stock-based compensation expense for the Stock Plan increased our operating expenses by $985,120, this increase was offset by a corresponding increase to our additional paid-in capital, resulting in no net impact to our net asset value. The non-cash, stock-based compensation expense and corresponding increase to our additional paid-in capital may increase in future quarters. Administration and operations expense decreased by $34,967, or 6.8 percent, through June 30, 2011, as compared with June 30, 2010, primarily as a result of a decrease in our directors' and officers' liability insurance expense, decreases in the cost of non-employee-related insurance and decreases in managing directors' travel-related expenses, offset by a one-time leasing commission expense associated with subletting our office space located 420 Florence Street, Suite 200, Palo Alto, CA, commencing on July 1, 2011. Professional fees increased by $36,326, or 8.6 percent, for the six months ended June 30, 2011, as compared with the same period in 2010, primarily as a result of an increase in certain accounting and consulting fees, offset by a reduction in certain legal fees. Rent expense increased by $12,640, or 7.6 percent, for the period ended June 30, 2011, as compared with the six months ended June 30, 2010. Our rent expense of $179,000 for the six months ended June 30, 2011, includes $190,497 of rent paid in cash net of $11,497 non-cash rent expense, credits and abatements that we recognize on a straight-line basis over the lease term. For the six months ended June 30, 2010, we had a loss of $68,038 as a result of abandoning our lease at our former office prior to the end of the lease term which expired in April 2010.

Realized Income and Losses from Investments:

During the six months ended June 30, 2011, we realized net gains on investments of $5,362,071, as compared with realized net losses on investments of $408,292 during the six months ended June 30, 2010.

During the six months ended June 30, 2011, we realized net gains of $5,362,071, consisting primarily of realized gains on our investments in BioVex Group, Inc., of $7,509,340 and in Siluria Technologies, Inc., of $25,000, offset by realized losses on our investments in PolyRemedy, Inc., of $204,206 and in Questech Corporation of $1,966,591.

During the six months ended June 30, 2010, we realized net losses of $408,292, consisting primarily of realized losses on a portion of our investment in Kovio, Inc., of $257,007, in Orthovita, Inc., of $167,300, and realized losses on the disposal of fixed assets, offset by realized gains on our investment in Satcon Technology Corporation of $14,320 and realized gains on the sale of U.S. government securities.

Net Unrealized Appreciation and Depreciation of Portfolio Securities:

During the six months ended June 30, 2011, net unrealized appreciation on total investments increased by $18,378,080, or 244.9 percent, from net unrealized appreciation of $7,504,306 at December 31, 2010, to net unrealized appreciation of $25,882,386 at June 30, 2011. During the six months ended June 30, 2010, net unrealized depreciation on total investments decreased by $8,316,234, or 57.8 percent, from net unrealized depreciation of $14,378,869 at December 31, 2009, to net unrealized depreciation of $6,062,635 at June 30, 2010.

During the six months ended June 30, 2011, net unrealized appreciation on our venture capital investments increased by $18,378,085, from net unrealized appreciation of $7,503,038 at December 31, 2010, to net unrealized appreciation of $25,881,123 at June 30, 2011, owing primarily to increases in the valuations of the following investments held:

Investment	Amount of Write-Up

Solazyme, Inc.	$	21,129,046
Adesto Technologies Corporation		4,130,000
BridgeLux, Inc.		2,260,618
Metabolon, Inc.		2,098,023
CambriosTechnologies Corporation		1,554,890
ABSMaterials, Inc.		937,500
Innovalight, Inc.		844,348
Kovio, Inc.		620,397
Molecular Imprints, Inc.		299,200
Cobalt Technologies, Inc.		254,693
Enumeral Biomedical Corp.		83,333
GEO Semiconductor, Inc.		49,733
NanoTerra, Inc.		795

The write-ups for the six months ended June 30, 2011, were offset by decreases in the valuations of the following investments held:

Investment	Amount of Write-Down

Xradia, Inc.	$	2,065,542
NeoPhotonics Corporation		1,859,210
SiOnyx, Inc.		1,629,058
D-Wave Systems, Inc.		1,129,575
Ancora Pharmaceuticals Inc.		955,432
Nanosys, Inc.		725,246
Ensemble Therapeutics Corporation		599,640
Mersana Therapeutics, Inc.		467,475
Laser Light Engines, Inc.		421,945
Nextreme Thermal Solutions, Inc.		412,993
Contour Energy Systems, Inc.		206,118
Champions Oncology, Inc.		53,333

We had an increase in unrealized appreciation for PolyRemedy, Inc., of $312,313 and for Questech Corporation of $1,632,310, owing to realized losses on the sale of these securities.

We had an increase in unrealized appreciation of $24,831 on the rights to milestone payments from Amgen, Inc., from its acquisition of BioVex Group, Inc., in the first quarter of 2011.

We had a decrease in unrealized appreciation for BioVex Group, Inc., of $7,467,615, which resulted from a realized gain on the sale of its securities.

We had an increase in unrealized appreciation owing to foreign currency translation of $139,237 on our investment in D-Wave Systems, Inc.

During the six months ended June 30, 2010, net unrealized depreciation on our venture capital investments decreased by $8,321,573, from net unrealized depreciation of $14,366,426 at December 31, 2009, to net unrealized depreciation of $6,044,853 at June 30, 2010, owing primarily to increases in the valuations of the following investments held:

Investment	Amount of Write-Up

Solazyme, Inc.	$	8,149,698
SiOnyx, Inc.		3,078,765
Xradia, Inc.		1,330,469
Mersana Therapeutics, Inc.		961,704
D-Wave Systems, Inc.		855,025
Ensemble Therapeutics Corporation		500,000
Laser Light Engines, Inc.		500,000
BioVex Group, Inc.		421,422
Metabolon, Inc.		69,635

The write-ups for the six months ended June 30, 2010, were partially offset by decreases in the valuations of the following investments held:

Investment	Amount of Write-Down

Nextreme Thermal Solutions, Inc.	$	3,303,943
Molecular Imprints, Inc.		2,023,124
Kovio, Inc.		1,750,165
Nanosys, Inc.		280,649
Bridgelux, Inc.		220,253
PolyRemedy, Inc.		107,786
TetraVitae Bioscience, Inc.		62,500
Questech Corporation		62,269
NeoPhotonics Corporation		5,111

We had a decrease in unrealized depreciation for Orthovita, Inc., of $72,432 owing to the sale of its securities.

We had an increase in unrealized depreciation owing to foreign currency translation of $29,246 on our investment in D-Wave Systems, Inc.

Unrealized depreciation on our U.S. government securities portfolio increased from $12,443 at December 31, 2009, to $17,782 at June 30, 2010.

Financial Condition

June 30, 2011

At June 30, 2011, our total assets and net assets were $173,384,222 and $168,426,152, respectively. At December 31, 2010, they were $149,289,168 and $146,853,912, respectively.

At June 30, 2011, our net asset value per share was $5.43, as compared with $4.76 at December 31, 2010. At June 30, 2011, our shares outstanding increased to 31,000,601 from 30,878,164 at December 31, 2010. Our shares outstanding increased due to the exercise of 122,437 options. These option exercises provided $491,058 of cash to the Company.

Significant developments in the six months ended June 30, 2011, included an increase in the holdings of our venture capital investments of $25,736,860 and decreases in our holdings of U.S. government obligations and cash of $4,531,354. The increase in the value of our venture capital investments from $106,150,422 at December 31, 2010, to $131,887,282 at June 30, 2011, resulted primarily from an increase in the net value of our venture capital investments of $23,901,077, owing primarily to the increase in value of Solazyme, Inc., following completion of its IPO, and by three new and 17 follow-on investments of $10,657,586, offset by the sale of our securities in BioVex Group, Inc., PolyRemedy, Inc., Questech Corporation and Siluria Technologies, Inc. The decrease in the value of our U.S. government obligations and cash from $42,031,536 at December 31, 2010, to $37,500,182 at June 30, 2011, is primarily owing to the payment of cash for operating expenses of $2,860,329 and to new and follow-on venture capital investments totaling $10,657,586, offset by cash received from the sale of our securities in BioVex Group, Inc., PolyRemedy, Inc., Questech Corporation and Siluria Technologies, Inc.

The following table is a summary of additions to our portfolio of venture capital investments made during the six months ended June 30, 2011:

New Investments	Amount of Investment

Champions Oncology, Inc.	$	2,000,000
NanoTerra, Inc.		750,000
Produced Water Absorbents, Inc.		1,000,000

Follow-On Investments	Amount of Investment

Adesto Technologies Corporation	$	445,659
Ancora Pharmaceuticals Inc.		200,000
Ancora Pharmaceuticals Inc.		100,000
Bridgelux, Inc.		813,805
Cobalt Technologies, Inc.		121,560
Contour Energy Systems, Inc.		720,000
Enumeral Biomedical Corp.		650,000
Enumeral Biomedical Corp.		99,999
NeoPhotonics Corporation		550,000
GEO Semiconductor, Inc.		150,000
Innovalight, Inc.		272,369
Innovalight, Inc.		181,579
Kovio, Inc.		892,315
Mersana Therapeutics, Inc.		298,900
Molecular Imprints, Inc.		866,668
Molecular Imprints, Inc.		481,482
Ultora, Inc.		63,250

Total	$	10,657,586

The following tables summarize the values of our portfolios of venture capital investments and U.S. government obligations, as compared with their cost, at June 30, 2011, and December 31, 2010:

	June 30, 2011		December 31, 2010

Venture capital investments, at cost	$	106,006,159	$	98,647,384
Net unrealized appreciation(1)		25,881,123		7,503,038
Venture capital investments, at value	$	131,887,282	$	106,150,422

	June 30, 2011		December 31, 2010

U.S. government obligations, at cost	$	32,197,584	$	38,273,349
Net unrealized appreciation(1)		1,263		1,268
U.S. government obligations, at value	$	32,198,847	$	38,274,617

(1)At June 30, 2011, and December 31, 2010, the net accumulated unrealized appreciation on investments was $25,882,386 and $7,504,306, respectively.

Liquidity

Our liquidity and capital resources are generated and are generally available through our cash holdings, interest earned on our investments on U.S. government securities, cash flows from the sales of U.S. government securities and payments received on our venture debt investments, proceeds from periodic follow-on equity offerings and realized capital gains retained for reinvestment.

We fund our day-to-day operations using interest earned and proceeds from our cash holdings, the sales of our investments in U.S. government securities and interest earned from our venture debt securities. We believe the increase or decrease in the value of our venture capital investments does not materially affect the day-to-day operations of the Company or our daily liquidity. At June 30, 2011, and December 31, 2010, we had no investments in money market mutual funds.

We have a $10 million three-year revolving credit facility with TD Bank, N.A. This credit facility is used to fund our venture debt investments and not for the payment of day-to-day operating expenses. As of June 30, 2011, we had debt outstanding of $2,550,000, which is less than two percent of our net assets. This debt is collateralized with cash held in a restricted account on a one-for-one basis with the amount of debt outstanding from the credit facility. Therefore, repayment of the outstanding debt as of June 30, 2011, would not have a significant impact on our daily liquidity. We have not issued any debt securities, and, therefore, are not subject to credit agency downgrades.

As a venture capital company, it is critical that we have capital available to support our best companies until we have an opportunity for liquidity in our investments. As such, we will continue to maintain a substantial amount of liquid capital on our balance sheet. However, to complement our equity-focused portfolio investing, we seek to invest some of this capital in venture debt where we will have more defined investment return timelines than we currently have in our existing portfolio. In addition, we may from time to time opt to borrow money to make investments, specifically in debt securities that generate cash flow and have a known timeframe for return on investment.

At June 30, 2011, and December 31, 2010, our total net primary liquidity was $37,560,664 and $42,079,934, respectively. Our primary liquidity is comprised of our cash, U.S. government securities, receivables from unsettled trades, receivables from portfolio companies, taxes receivables and interest receivables. The decrease in our primary liquidity from December 31, 2010, to June 30, 2011, is primarily owing to the use of funds for investments and payment of net operating expenses offset by the sale of investments.

At June 30, 2011, and December 31, 2010, our secondary liquidity was $49,241,940 and $0, respectively. Our secondary liquidity consists of our publicly traded securities. Although these companies are publicly traded, their stock may not trade at high volumes and prices can be volatile, which may restrict our ability to sell our positions at any given time. We may also be restricted for a period of time in selling our positions in these companies due to lock-up provisions or due to our shares being unregistered.

We believe that the difficult venture capital environment may continue to adversely affect the valuation of investment portfolios, tighter lending standards and reduced access to capital. These conditions may lead to a further decline in net asset value and/or decline in valuations of our portfolio companies. Although we cannot predict future market conditions, we continue to believe that our current cash and U.S. government security holdings and our ability to adjust our investment pace will provide us with adequate liquidity to execute our current business strategy.

Except for a rights offering, we are also generally not able to issue and sell our common stock at a price below our net asset value per share, exclusive of any distributing commission or discount, without shareholder approval. As of June 30, 2011, our net asset value per share was $5.43 per share and our closing market price was $5.13 per share. We do not currently have shareholder approval to issue or sell shares below our net asset value per share.

Borrowings

On February 24, 2011, we established a new $10 million three-year revolving credit facility with TD Bank, N.A., to be used in conjunction with our venture debt investments.

The credit facility, among other things, matures on February 24, 2014, and generally bears interest, at the Company’s option, based on (i) LIBOR plus 1.25 percent or (2) the higher of the federal funds rate plus fifty basis points (0.50 percent) or the U.S. prime rate as published in the Wall Street Journal. The credit facility generally requires payment of interest on a monthly basis and requires the payment of a non-use fee of 0.15 percent annually. All outstanding principal is due upon maturity. The credit facility is secured by cash collateral to be held in a non-interest bearing account at TD Bank. The credit facility contains affirmative and restrictive covenants, including: (a) periodic financial reporting requirements, (b) maintaining our status as a BDC (c) maintaining unencumbered, liquid assets of not less than $7,500,000, (d) limitations on the incurrence of additional indebtedness, (e) limitations on liens, and (f) limitations on mergers and dissolutions. The credit facility is used to supplement our capital to make additional venture debt investments.

The Company’s outstanding debt balance was $2,550,000 and $0, at June 30, 2011, and December 31, 2010, respectively. The annual weighted average interest cost for the six months ended June 30, 2011, was 1.5269 percent, exclusive of closing fees and for other prepaid expenses related to establishing the credit facility. The remaining capacity under the credit facility was $7,450,000 at June 30, 2011. At June 30, 2011, the Company was in compliance with all financial covenants required by the credit facility.

Contractual Obligations

A summary of our significant contractual payment obligations is as follows:

Payments Due by Period

	Total		Less than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Revolving credit facility(1)	$	2,550,000	$	—	$	2,550,000	$	—	$	—

Operating leases	$	2,540,736	$	326,475	$	888,828	$	570,716	$	754,717

(1) As of June 30, 2011, we had $7,450,000 of unused borrowing capacity under our credit facility.

Capital Resources

On October 9, 2009, we completed the sale of 4,887,500 shares of our common stock at a price of $4.75 per share to the public for total gross proceeds of $23,215,625; net proceeds of this offering, after deducting underwriting discounts and offering costs of $2,000,413, were $21,215,212. Through June 30, 2011, we used all of the net proceeds from this offering to make new investments, as well as for follow-on investments in our existing venture capital investments and for working capital.

Critical Accounting Policies

The Company's significant accounting policies are described in Note 3 to the Consolidated Financial Statements and in the Footnote to the Consolidated Schedule of Investments. Critical accounting policies are those that are both important to the presentation of our financial condition and results of operations and those that require management’s most difficult, complex or subjective judgments. The Company considers the following accounting policies and related estimates to be critical:

Valuation of Portfolio Investments

The most significant estimate inherent in the preparation of our consolidated financial statements is the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. As a BDC, we invest in primarily illiquid securities that generally have no established trading market.

Investments are stated at "value" as defined in the 1940 Act and in the applicable regulations of the SEC and GAAP. Value, as defined in Section 2(a)(41) of the 1940 Act, is (i) the market price for those securities for which a market quotation is readily available and (ii) the fair value as determined in good faith by, or under the direction of, the Board of Directors for all other assets. (See "Valuation Procedures" in the "Footnote to Consolidated Schedule of Investments.") As of June 30, 2011, our financial statements include venture capital investments valued at $131,887,282, the fair values of which were determined in good faith by, or under the direction of, the Board of Directors. As of June 30, 2011, approximately 78.3 percent of our net assets represent investments in portfolio companies at fair value by the Board of Directors.

Determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment, although our valuation policy is intended to provide a consistent basis for determining fair value of the portfolio investments. Factors that may be considered include, but are not limited to, the cost of the Company’s investment; transactions in the portfolio company’s securities or unconditional firm offers by responsible parties; the financial condition and operating results of the company; the long-term potential of the business and technology of the company; the values of similar securities issued by companies in similar businesses; multiples to revenues, net income or EBITDA that similar securities issued by companies in similar businesses receive; the proportion of the company’s securities we own and the nature of any rights to require the company to register restricted securities under the applicable securities laws; the achievement of milestones; discounts for restrictions on transfers of publicly traded securities; and the rights and preferences of the class of securities we own as compared with other classes of securities the portfolio has issued.

Historically, difficult venture capital environments have resulted in companies not receiving financing and being subsequently closed down with a loss of investment to venture investors, and other companies receiving financing but at significantly lower valuations than the preceding rounds, leading to very deep dilution for those who do not participate in the new rounds of investment. Our best estimate of this non-performance risk has been quantified and included in the valuation of our portfolio companies as of June 30, 2011.

All investments recorded at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels related to the amount of subjectivity associated with the inputs to fair valuation of these assets, are as follows:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: Quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

Level 3: Unobservable inputs for the asset or liability.

As of June 30, 2011, all of our portfolio company investments were classified as Level 3 in the hierarchy, indicating a high level of judgment required in their valuation.

The values assigned to our assets are based on available information and do not necessarily represent amounts that might ultimately be realized, as these amounts depend on future circumstances and cannot be reasonably determined until the individual investments are actually liquidated or become readily marketable. Upon sale of investments, the values that are ultimately realized may be different from what is presently estimated. This difference could be material.

Stock-Based Compensation

Determining the appropriate fair-value model and calculating the fair value of share-based awards on the date of grant requires judgment. Historically, we have used the Black-Scholes-Merton option pricing model to estimate the fair value of employee stock options.

Management uses the Black-Scholes-Merton option pricing model in instances where we lack historical data necessary for more complex models and when the share award terms can be valued within the model. Other models may yield fair values that are significantly different from those calculated by the Black-Scholes-Merton option pricing model.

Management uses a binomial lattice option pricing model in instances where it is necessary to include a broader array of assumptions. We used the binomial lattice model for the 10-year NQSOs granted on March 18, 2009. These awards included accelerated vesting provisions that were based on market conditions. At the date of the grant, management’s analysis concluded that triggering of the market condition acceleration clause was probable.

Option pricing models require the use of subjective input assumptions, including expected volatility, expected life, expected dividend rate, and expected risk-free rate of return. Variations in the expected volatility or expected term assumptions have a significant impact on fair value. As the volatility or expected term assumptions increase, the fair value of the stock option increases. The expected dividend rate and expected risk-free rate of return are not as significant to the calculation of fair value. A higher assumed dividend rate yields a lower fair value, whereas higher assumed interest rates yield higher fair values for stock options.

In the Black-Scholes-Merton model, we use the simplified calculation of expected term as described in the SEC’s Staff Accounting Bulletin 107 because of the lack of historical information about option exercise patterns. In the binomial lattice model, we use an expected term that assumes the options will be exercised at two-times the strike price because of the lack of option exercise patterns. Future exercise behavior could be materially different than that which is assumed by the model.

Expected volatility is based on the historical fluctuations in the Company's stock. The Company's stock has historically been volatile, which increases the fair value of the underlying share-based awards.

GAAP requires us to develop an estimate of the number of share-based awards that will be forfeited owing to employee turnover. Quarterly changes in the estimated forfeiture rate can have a significant effect on reported share-based compensation, as the effect of adjusting the rate for all expense amortization after the grant date is recognized in the period the forfeiture estimate is changed. If the actual forfeiture rate proves to be higher than the estimated forfeiture rate, then an adjustment will be made to increase the estimated forfeiture rate, which would result in a decrease to the expense recognized in the financial statements. If the actual forfeiture rate proves to be lower than the estimated forfeiture rate, then an adjustment will be made to decrease the estimated forfeiture rate, which would result in an increase to the expense recognized in the financial statements. Such adjustments would affect our operating expenses and additional paid-in capital, but would have no effect on our net asset value.

Pension and Post-Retirement Benefit Plan Assumptions

The Company provides a Retiree Medical Benefit Plan for employees who meet certain eligibility requirements. Until it was terminated on May 5, 2011, the Company also provided an Executive Mandatory Retirement Benefit Plan for certain individuals employed by us in a bona fide executive or high policy-making position. Our former President accrued benefits under this plan prior to his retirement, and the termination has no impact on his accrued benefits. Several statistical and other factors that attempt to anticipate future events are used in calculating the expense and liability values related to our post-retirement benefit plans. These factors include assumptions we make about the discount rate, the rate of increase in healthcare costs, and mortality, among others.

The discount rate reflects the current rate at which the post-retirement medical benefit and pension liabilities could be effectively settled considering the timing of expected payments for plan participants. In estimating this rate, we consider the Citigroup Pension Liability Index in the determination of the appropriate discount rate assumptions. The weighted average rate we utilized to measure our post retirement medical benefit obligation as of December 31, 2010, and to calculate our 2011 expense was 5.68 percent. We used a discount rate of 5.75 percent to calculate our pension obligation for the Executive Mandatory Retirement Benefit Plan.

Recent Developments - Portfolio Companies

On July 6, 2011, the Company made a $1,032,058 follow-on investment in a privately held, equity-focused portfolio company.

On July 21, 2011, Innovalight, Inc., was sold to E. I. du Pont de Nemours and Company ("DuPont"). On July 21, 2011, we received repayment of our outstanding bridge notes of Innovalight plus accrued but unpaid interest of $458,569. On August 5, we received our payment of $4,088,820 for our shares of Innovalight, which did not include $948,894 held in escrow.

On July 27, 2011, the Company made a $500,000 follow-on investment in a privately held, equity-focused portfolio company.

As of June 30, 2011, we owned an aggregate of 2,304,149 shares of Solazyme. This position was valued at $44,354,868 as of June 30, 2011. The key inputs to our valuation of Solazyme were the share price as of the close of trading on June 30, 2011, which was $22.97, less a liquidity discount owing to the lock-up restrictions placed on the shares through an agreement with the underwriters of the IPO. As of August 5, 2011, Solazyme’s closing price was $17.61 per share.

Forward-Looking Statements

The information contained herein may contain "forward-looking statements" based on our current expectations, assumptions and estimates about us and our industry. These forward-looking statements involve risks and uncertainties. Words such as "believe," "anticipate," "estimate," "expect," "intend," "plan," "will," "may," "might," "could," "continue" and other similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of several factors more fully described in "Risk Factors" and elsewhere in this Form 10-Q, and in our Form 10-K for the year ended December 31, 2010. The forward-looking statements made in this Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Our business activities contain elements of risk. We consider the principal types of market risk to be valuation risk, interest rate risk and foreign currency risk. Although we are risk-seeking rather than risk-averse in our investments, we consider the management of risk to be essential to our business.

Valuation Risk

Value, as defined in Section 2(a)(41) of the 1940 Act, is (i) the market price for those securities for which market quotations are readily available and (ii) fair value as determined in good faith by, or under the direction of, the Board of Directors for all other assets. (See the "Valuation Procedures" in the "Footnote to Consolidated Schedule of Investments" contained in "Item 1. Consolidated Financial Statements.")

Because there is typically no public market for our interests in the small privately held companies in which we invest, the valuation of the securities in that portion of our portfolio is determined in good faith by our Board of Directors with the assistance of our Valuation Committee, comprised of the independent members of our Board of Directors, in accordance with our Valuation Procedures. In the absence of a readily ascertainable market value, the determined value of our portfolio of securities may differ significantly from the values that would be placed on the portfolio if a ready market for such securities existed. Determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment, although our valuation policy is intended to provide a consistent basis for determining fair value of the portfolio investments. Factors that may be considered include, but are not limited to, readily available public market quotations; the cost of the Company’s investment; transactions in the portfolio company’s securities or unconditional firm offers by responsible parties; the financial condition and operating results of the company; the long-term potential of the business and technology of the company; the values of similar securities issued by companies in similar businesses; multiples to revenues, net income or EBITDA that similar securities issued by companies in similar businesses receive; the proportion of the company’s securities we own and the nature of any rights to require the company to register restricted securities under the applicable securities laws; the achievement of milestones; discounts for restrictions on transfers of publicly traded securities; and the rights and preferences of the class of securities we own as compared with other classes of securities the portfolio company has issued.

In addition, with respect to our debt investments for which no readily available market quotations are available, we will generally consider the financial condition and current and expected future cash flows of the portfolio company; the creditworthiness of the portfolio company and its ability to meet its current debt obligations; the relative seniority of our debt investment within the portfolio company’s capital structure; the availability and value of any available collateral; and changes in market interest rates and credit spreads for similar debt investments. Any changes in valuation are recorded in our Consolidated Statements of Operations as "Net increase (decrease) in unrealized appreciation on investments." Changes in valuation of any of our investments in privately held companies from one period to another may be volatile.

Investments in privately held, immature companies are inherently more volatile than investments in more mature businesses. Such immature businesses are inherently fragile and easily affected by both internal and external forces. Our investee companies can lose much or all of their value suddenly in response to an internal or external adverse event. Conversely, these immature businesses can gain suddenly in value in response to an internal or external positive development.

Interest Rate Risk

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. As of June 30, 2011, our venture debt investments were at fixed rates. A change in interest rates would, therefore, not have a material effect on our gross investment income. In the future, some of our venture debt investments may be at variable rates. Because we intend to fund a portion of our venture debt investments with borrowings, our net investment income will be affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income in future quarters. As of June 30, 2011, we had $2,550,000 of debt outstanding on our $10 million credit facility that was used to fund our venture debt investments.

We generally also invest in both short and long-term U.S. government and agency securities. To the extent that we invest in short- and long-term U.S. government and agency securities, changes in interest rates result in changes in the value of these obligations that result in an increase or decrease of our net asset value. The level of interest rate risk exposure at any given point in time depends on the market environment, the expectations of future price and market movements, and the quantity and duration of long-term U.S. government and agency securities held by the Company, and it will vary from period to period. If the average interest rate on U.S. government securities at June 30, 2011, were to increase by 25, 75 and 150 basis points, the average value of these securities held by us at June 30, 2011, would decrease by approximately $80,497, $241,491 and $482,983, respectively, and the portion of our net asset value attributable to such securities would decrease correspondingly.

In addition, market interest rates for high-yield corporate debt are an input in determining value of our investments in debt securities of privately held and publicly traded companies. Significant changes in these market rates could affect the value of our debt securities as of the date of measurement of value.

Foreign Currency Risk

Most of our investments are denominated in U.S. dollars. We currently have one investment denominated in Canadian dollars. We are exposed to foreign currency risk related to potential changes in foreign currency exchange rates. The potential loss in fair value on this investment resulting from a 10 percent adverse change in quoted foreign currency exchange rates is $400,489 at June 30, 2011.

Item 4. Controls and Procedures

(a) Disclosure Controls and Procedures. As of the end of the period covered by this report, the Company’s management, under the supervision and with the participation of our chief executive officer and chief financial officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as required by Rules 13a-15 of the 1934 Act). Disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the issuer's management, as appropriate, to allow timely decisions regarding required disclosures. As of June 30, 2011, based upon this evaluation of our disclosure controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective.

(b) Changes in Internal Control Over Financial Reporting. There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the 1934 Act) during the second quarter of 2011 to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. Risk Factors

Investing in our common stock involves significant risks relating to our business and investment objective. You should carefully consider the risks and uncertainties described in our Annual Report on Form 10-K for the year ended December 31, 2010, before you purchase any of our common stock.

The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Unknown additional risks and uncertainties, or ones that we currently consider immaterial, may also impair our business. If any of these risks or uncertainties materialize, our business, financial condition or results of operations could be materially adversely affected. In this event, the trading price of our common stock could decline, and you could lose all or part of your investment.

Approximately 34.9 percent of the net asset value attributable to our equity-focused venture capital investment portfolio, or 26.3 percent of our net asset value, as of June 30, 2011, is concentrated in one company, Solazyme, Inc.

At June 30, 2011, we valued our investment in Solazyme, Inc., which had a historical cost to us of $5,444,197, at $44,354,868, or 34.9 percent of the net asset value attributable to our equity-focused venture capital investment portfolio, excluding our rights to potential future milestone payments from the sale of BioVex Group, Inc., to Amgen, Inc., or 26.3 percent of our net asset value. Solazyme is now publicly traded on the Nasdaq Global Select Market. As of June 30, 2011, we owned an aggregate of 2,304,149 shares of Solazyme. The key inputs to our valuation of Solazyme as of June 30, 2011, were the share price as of the close of trading on June 30, 2011, which was $22.97, less a liquidity discount owing to the lock-up restrictions placed on the shares through an agreement with the underwriters of the IPO. Any downturn in the business outlook of Solazyme, any failure of the products of Solazyme to receive widespread acceptance in the marketplace, any broad decrease in value of the public markets or negative events in the biofuel or algae-derived oil industry sectors could have a significant effect on our specific investment in Solazyme, and the overall value of our portfolio, and could have a significant adverse effect on the value of our common stock. As of August 5, 2011, Solazyme's closing price was $17.61 per share.

The downgrade in the U.S. credit rating could materially adversely affect our business, financial conditions and results of operations.

On August 5, 2011, Standard & Poor's downgraded the U.S. credit rating to AA+ from its top rank of AAA. The current U.S. debt ceiling and budget deficit concerns have increased the possibility of other credit-rating agency downgrades and an economic slowdown. The downgrade of the U.S. credit rating could have a material adverse effect on the financial markets and economic conditions in the United States and throughout the world. Additionally, austerity measures necessary to reduce the deficit could accelerate an already slowing economy in the near term.

Downgrading of the U.S. credit rating could negatively impact the trading market for U.S. government securities and would likely impact the credit risk associated with our investments in U.S. Treasury securities. This could reduce the value of the U.S. Treasury securities in our portfolio. In addition, adverse market and economic conditions that could occur due to a downgrade of the U.S. credit rating on the United States' debt could result in rapidly rising interest rates, a falling dollar, shakier financial markets and slowing or negative economic growth in the near term. These events could adversely affect our business in many ways, including, but not limited to, adversely impacting our portfolio companies’ ability to obtain financing, or obtaining financing but at significantly lower valuations than the preceding financing rounds. Market disturbances could also affect the value of our publicly traded portfolio companies, which as of June 30, 2011, accounted for 38.7 percent of the equity-focused venture capital portfolio. If any of these events were to occur, it could materially adversely affect our business, financial condition and results of operations.

Item 6.	Exhibits

10.1	Amendment No. 1 to the Revolving Loan Agreement, dated as of June 21, 2011, by and between Harris & Harris Group, Inc. and TD Bank, N.A., incorporated by reference as Exhibit 10.1 to the Company's Form 8-K (File No. 814-00176) filed on June 21, 2011.

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*	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.

*filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Harris & Harris Group, Inc.

	/s/	Daniel B. Wolfe
	By:	Daniel B. Wolfe
		Chief Financial Officer

	/s/	Patricia N. Egan
	By:	Patricia N. Egan
		Chief Accounting Officer
		and Vice President

Date: August 8, 2011

EXHIBIT INDEX

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		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.

New York	13-3119827
(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
Incorporation or Organization)

1450 Broadway, New York, New York	10018
(Address of Principal Executive Offices)	(Zip Code)

	Large accelerated filer ¨	Accelerated filer x
	Non-accelerated filer ¨	Smaller reporting company ¨
(Do not check if a smaller reporting company)

Class		Outstanding at August 8, 2011
Common Stock, $0.01 par value per share		31,000,601 shares

	June 30, 2011			December 31, 2010
	(Unaudited)
ASSETS
Investments in portfolio securities, at value:
Unaffiliated privately held companies (cost: $27,131,646 and $37,480,266, respectively)	$	25,069,912		$	56,315,330
Unaffiliated rights to milestone payments (adjusted cost basis: $3,291,750 and $0, respectively)		3,316,581			0
Unaffiliated publicly traded securities (cost: $12,743,787 and $0, respectively)		47,295,273			0
Non-controlled affiliated privately held companies (cost: $50,748,092 and $51,451,965, respectively)		48,200,820			42,775,415
Non-controlled affiliated publicly traded companies (cost: $2,000,000 and $0, respectively)		1,946,667			0
Controlled affiliated privately held companies (cost: $10,090,884 and $9,715,153, respectively)		6,058,029			7,059,677
Total investments in private portfolio companies, rights to milestone payments and public securities, at value (cost: $106,006,159 and $98,647,384, respectively)	$	131,887,282		$	106,150,422
Investments in U.S. Treasury obligations, at value (cost: $32,197,584 and $38,273,349, respectively)		32,198,847			38,274,617
Cash		5,301,335			3,756,919
Restricted funds (Note 3)		2,564,774			2,751
Funds held in escrow from sale of investment, at value (Note 3)		476,178			0
Receivable from portfolio company		15,879			10,000
Interest receivable		22,682			5,924
Prepaid expenses		238,776			379,705
Other assets		678,469			708,830
Total assets	$	173,384,222		$	149,289,168

LIABILITIES & NET ASSETS

Post retirement plan liabilities	$	1,566,477		$	1,506,906
Revolving loan (Note 5)		2,550,000			0
Accounts payable and accrued liabilities		511,034			589,592
Deferred rent		327,262			338,758
Debt interest and other payable		3,297			0
Total liabilities		4,958,070			2,435,256

Net assets	$	168,426,152		$	146,853,912

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 06/30/11 and 12/31/10; 32,829,341 issued at 06/30/11 and 32,706,904 issued at 12/31/10		328,294			327,070
Additional paid in capital		209,560,689			208,085,735
Accumulated net operating and realized loss		(63,939,686	)		(65,657,668	)
Accumulated unrealized appreciation of investments		25,882,386			7,504,306
Treasury stock, at cost (1,828,740 shares at 06/30/11 and 12/31/10)		(3,405,531	)		(3,405,531	)

Net assets	$	168,426,152		$	146,853,912
Shares outstanding		31,000,601			30,878,164
Net asset value per outstanding share	$	5.43		$	4.76

	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	34

Financial Highlights	46

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	47

Background	47

Overview	47

Investment Strategy	48

Involvement with Portfolio Companies	49

Historical Investments and Current Investment Pace	49

Importance of Availability of Liquid Capital	50

Our Sources of Liquid Capital	51

Recent and Pending Potential Liquidity Events from our Portfolio as of June 30, 2011	51

Maturity of Current Equity-Focused Venture Capital Portfolio	52

Current Business Environment	54

Valuation of Investments	56

Assessment of Venture Capital Investment Portfolio as of June 30, 2011	58

Investment Objective	65

Results of Operations	65

Financial Condition	73

Liquidity	75

Borrowings	76

Contractual Obligations	77

Capital Resources	77

Critical Accounting Policies	77

Recent Developments – Portfolio Companies	80

Forward-Looking Statements	81

Item 3. Quantitative and Qualitative Disclosures About Market Risk	81

Item 4. Controls and Procedures	83

PART II. OTHER INFORMATION

Item 1A. Risk Factors	84

Item 6. Exhibits	85

Signatures	86

Exhibit Index	87

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Investment income:
Interest from:
Fixed-income securities and bridge notes (Note 3)	$	173,667		$	123,208		$	295,444		$	196,281
Miscellaneous income		14,159			6,000			29,206			12,000
Total investment income		187,826			129,208			324,650			208,281

Expenses:
Salaries, benefits and stock-based compensation (Note 7)		1,344,781			1,465,520			2,583,879			2,854,797
Administration and operations		219,243			228,246			475,801			510,768
Professional fees		208,713			176,866			456,561			420,235
Rent (Note 3)		89,500			89,145			179,000			166,360
Directors’ fees and expenses		85,391			85,560			184,172			180,921
Custody fees		24,000			24,000			48,000			48,000
Depreciation		12,602			13,820			25,166			25,789
Interest and other debt expenses		9,989			0			13,767			0
Lease termination costs		0			0			0			68,038
Total expenses		1,994,219			2,083,157			3,966,346			4,274,908

Net operating loss		(1,806,393	)		(1,953,949	)		(3,641,696	)		(4,066,627	)

Net realized (loss) gain:
Realized (loss) gain from investments:
Unaffiliated companies		(205,597	)		13,218			7,328,743			13,218
Non-Controlled affiliated companies		(1,966,590	)		(257,007	)		(1,966,590	)		(257,007	)
Publicly traded companies		0			(152,980	)		0			(152,980	)
U.S. Treasury obligations/other		(82	)		0			(82	)		(11,523	)
Realized (loss) gain from investments		(2,172,269	)		(396,769	)		5,362,071			(408,292	)

Income tax expense (Note 8)		103			0			2,393			2,632
Net realized (loss) gain from investments		(2,172,372	)		(396,769	)		5,359,678			(410,924	)

Net increase (decrease) in unrealized appreciation on investments:
Change as a result of investment sales		2,006,126			222,319			(5,522,992	)		222,319
Change on investments held		23,194,860			4,279,351			23,901,072			8,093,915
Net increase (decrease) in unrealized appreciation on investments		25,200,986			4,501,670			18,378,080			8,316,234

Net increase in net assets resulting from operations:

Total	$	21,222,221		$	2,150,952		$	20,096,062		$	3,838,683

Per average basic and diluted outstanding share	$	0.68		$	0.07		$	0.65		$	0.12

Average outstanding shares		30,999,579			30,864,491			30,959,503			30,862,202

	Six Months Ended			Six Months Ended
	June 30, 2011			June 30, 2010
Cash flows used in operating activities:
Net increase in net assets resulting from operations	$	20,096,062		$	3,838,683
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
Net realized gain and unrealized appreciation on investments		(23,740,151	)		(7,907,942	)
Depreciation of fixed assets, amortization of premium or discount on U.S. government securities, and bridge note interest		(158,484	)		(142,420	)
Stock-based compensation expense		985,120			1,214,938

Changes in assets and liabilities:
Restricted funds		(2,562,023	)		0
Receivable from portfolio company		(5,879	)		28,247
Interest receivable		4,459			26,234
Prepaid expenses		140,929			(147,356	)
Other assets		8,698			(264,374	)
Post retirement plan liabilities		59,571			67,570
Accounts payable and accrued liabilities		(75,261	)		(90,618	)
Deferred rent		(11,496	)		348,793

Net cash used in operating activities		(5,258,455	)		(3,028,245	)

Cash flows from investing activities:
Purchase of U.S. government securities		(84,283,377	)		(58,644,919	)
Sale of U.S. government securities		90,337,925			68,646,697
Investments in affiliated portfolio companies		(6,860,821	)		(5,469,691	)
Investments in unaffiliated portfolio companies		(3,795,265	)		(857,473	)
Proceeds from conversion of bridge note		0			1,356
Principal payments received on debt investments		109,763			0
Proceeds from sale of investments		8,257,334			407,543
Purchase of fixed assets		(3,746	)		(84,212	)

Net cash provided by investing activities		3,761,813			3,999,301

Cash flows from financing activities:
Proceeds from stock option exercises		491,058			19,897
Payment of offering costs		0			(48,928	)
Proceeds from drawdown of credit facility		2,550,000			0

Net cash provided by (used in) financing activities		3,041,058			(29,031	)

Net increase in cash:
Cash at beginning of the period		3,756,919			1,611,465
Cash at end of the period.		5,301,335			2,553,490

Net increase in cash	$	1,544,416		$	942,025

Supplemental disclosures of cash flow information:
Income taxes paid	$	2,393		$	2,632

	Six Months Ended			Year Ended
	June 30, 2011			December 31, 2010
	(Unaudited)

Changes in net assets from operations:

Net operating loss	$	(3,641,696	)	$	(7,555,807	)
Net realized gain (loss) on investments		5,359,678			(3,740,518	)
Net (decrease) increase in unrealized appreciation on investments as a result of sales		(5,522,992	)		3,608,205
Net increase in unrealized appreciation on investments held		23,901,072			18,274,970

Net increase in net assets resulting from operations		20,096,062			10,586,850

Changes in net assets from capital stock transactions:

Issuance of common stock upon the exercise of stock options		1,224			186
Additional paid-in capital on common stock issued net of offering expenses		489,834			20,527
Stock-based compensation expense		985,120			2,088,091

Net increase in net assets resulting from capital stock transactions		1,476,178			2,108,804

Net increase in net assets		21,572,240			12,695,654

Net assets:

Beginning of the period		146,853,912			134,158,258

End of the period	$	168,426,152		$	146,853,912

	Method of				Shares/
	Valuation (1)	Industry (2)	Cost		Principal		Value

Investments in Unaffiliated Companies (3)(4)(5)(6) – 44.9% of net assets at value

Private Placement Portfolio (Illiquid) – 14.9% of net assets at value

Bridgelux, Inc. (7)(8)		Cleantech
Manufacturing high-power light emitting diodes (LEDs) and arrays
Series B Convertible Preferred Stock	(M)		$	1,000,000		1,861,504	$	2,622,766
Series C Convertible Preferred Stock	(M)			1,352,196		2,130,699		3,002,048
Series D Convertible Preferred Stock	(M)			1,371,622		999,999		1,408,948
Series E Convertible Preferred Stock	(M)			730,369		440,334		620,409
Warrants for Series C Convertible Preferred Stock expiring 12/31/14	( I )			168,270		163,900		139,970
Warrants for Series D Convertible Preferred Stock expiring 8/26/14	( I )			128,543		166,665		91,499
Warrants for Series E Convertible Preferred Stock expiring 12/31/17	( I )			108,867		170,823		77,212
				4,859,867				7,962,852

Cambrios Technologies Corporation (7)(9)		Electronics
Developing nanowire-enabled electronic materials for the display industry
Series B Convertible Preferred Stock	(M)			1,294,025		1,294,025		1,204,270
Series C Convertible Preferred Stock	(M)			1,300,000		1,300,000		1,209,832
Series D Convertible Preferred Stock	(M)			608,156		608,156		788,079
				3,202,181				3,202,181

Cobalt Technologies, Inc. (7)(9)(10)		Cleantech
Developing processes for making bio-butanol through biomass fermentation
Series C-1 Convertible Preferred Stock	(M)			749,998		352,112		660,211
Series D-1 Convertible Preferred Stock	(M)			122,070		48,828		91,553
				872,068				751,764

Ensemble Therapeutics Corporation (7)(9)(11)		Healthcare
Developing DNA- Programmed ChemistryTM for the discovery of new classes of therapeutics
Series B Convertible Preferred Stock	(M)			2,000,000		1,449,275		1,038,986
Secured Convertible Bridge Notes (including interest)	(M)			361,374	$	299,169		722,748
				2,361,374				1,761,734

			Fair Value Measurement at Reporting Date Using:
Description	June 30, 2011		Unadjusted Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

U.S. Government Securities	$	32,198,847	$	32,198,847	$	0	$	0

Privately Held Portfolio Companies:
Preferred Stock	$	67,766,920	$	0	$	0	$	67,766,920
Bridge Notes	$	5,208,640	$	0	$	0	$	5,208,640
Warrants	$	737,400	$	0	$	0	$	737,400
Common Stock	$	0	$	0	$	0	$	0
Rights to Milestone Payments	$	3,316,581	$	0	$	0	$	3,316,581
Senior Secured Debt	$	597,310	$	0	$	0	$	597,310
Participation Agreement	$	519,853	$	0	$	0	$	519,853
Subordinated Secured Debt	$	117,150	$	0	$	0	$	117,150
Non-Convertible Promissory Note	$	4,381,488	$	0	$	0	$	4,381,488

Publicly Traded Portfolio Companies:
Common Stock(a)	$	49,241,940	$	0	$	0	$	49,241,940

Total	$	164,086,129	$	32,198,847	$	0	$	131,887,282

	Beginning Balance 4/1/2011		Total Realized Losses Included in Changes in Net Assets			Transfers Between Asset Classes			Total Unrealized Gains (Losses) Included in Changes in Net Assets			Investments in Portfolio Companies, Interest on Bridge Notes, and Amortization of Loan Fees, Net			Disposals			Ending Balance 6/30/2011		Amount of Total Gains for the Period Included in Changes in Net Assets Attributable to the Change in Unrealized Gains or Losses Relating to Assets Still Held at the Reporting Date

Preferred Stock	$	86,112,915	$	(204,206	)	$	(25,294,647	)	$	597,547		$	3,425,561		$	3,129,750		$	67,766,920	$	285,234

Bridge Notes		4,815,775		0			(1,331,792	)		278,041			1,446,616			0			5,208,640		278,041

Common Stock		436,642		(1,966,591	)		0			1,693,813			0			(163,864	)		0		0

Warrants		655,692		0			108,867			(34,138	)		6,979			0			737,400		(34,138	)

Rights to Milestone Payments		0		0			3,291,750			24,831			0			0			3,316,581		24,831

Participation Agreement		483,100		0			0			35,547			1,206			0			519,853		35,547

Subordinated Secured Debt		144,490		0			0			3,565			(30,905	)		0			117,150		3,565

Senior Secured Debt		662,532		0			0			(1,335	)		(63,887	)		0			597,310		(1,335	)

Non-Convertible Promissory Note		0		0			0			3,033,338			1,348,150			0			4,381,488		3,033,338

Publicly Traded Common Stock		4,447,843		0			23,225,822			19,568,275			2,000,000			0			49,241,940		19,568,275

Total	$	97,758,989	$	(2,170,797	)	$	0		$	25,199,484		$	8,133,720		$	2,965,886		$	131,887,282	$	23,193,358

	Beginning Balance 1/1/2011		Total Realized Gains (Losses) Included in Changes in Net Assets			Transfers Between Asset Classes			Total Unrealized Gains (Losses) Included in Changes in Net Assets			Investments in Portfolio Companies, Interest on Bridge Notes, and Amortization of Loan Fees, Net		Disposals			Ending Balance 6/30/2011		Amount of Total Gains for the Period Included in Changes in Net Assets Attributable to the Change in Unrealized Gains or Losses Relating to Assets Still Held at the Reporting Date

Preferred Stock	$	100,451,746	$	7,159,677		$	(29,064,993	)	$	(5,835,233	)	$	3,425,561	$	(8,369,838	)	$	67,766,920	$	1,191,337

Bridge Notes		3,565,062		0			(1,331,792	)		397,208			2,578,162		0			5,208,640		397,208

Common Stock		977,414		(1,966,591	)		(479,269	)		1,632,310			0		(163,864	)		0		0

Warrants		684,780		128,732			108,867			(146,927	)		121,422		(159,474	)		737,400		(18,195	)

Rights to Milestone Payments		0		0			3,291,750			24,831			0		0			3,316,581		24,831

Participation Agreement		471,420		0			0			44,134			4,299		0			519,853		44,134

Subordinated Secured Debt		0		0			0			10,680			106,470		0			117,150		10,680

Senior Secured Debt		0		0			0			1,241			596,069		0			597,310		1,241

Non-Convertible Promissory Note		0		0			0			3,033,338			1,348,150		0			4,381,488		3,033,338

Publicly Traded Common Stock		0		0			27,475,437			19,216,503			2,550,000		0			49,241,940		19,216,503

Total	$	106,150,422	$	5,321,818		$	0		$	18,378,085		$	10,730,133	$	(8,693,176	)	$	131,887,282	$	23,901,077

	Beginning Balance 4/1/2010		Total Realized Gains (Losses) Included in Changes in Net Assets			Total Unrealized Gains (Losses) Included in Changes in Net Assets			Investments in Private Placements and Interest on Bridge Notes		Disposals		Ending Balance 6/30/2010		Amount of Total Gains for the Period Included in Changes in Net Assets Attributable to the Change in Unrealized Gains or Losses Relating to Assets Still Held at the Reporting Date

Preferred Stock	$	77,237,407	$	0		$	4,674,671		$	3,805,608	$	0	$	85,717,686	$	4,674,671

Bridge Notes		3,703,674		0			0			955,117		0		4,658,791		0

Common Stock		1,463,561		0			(340,784	)		0		0		1,122,777		(340,784	)

Warrants		610,304		(257,007	)		187,446			0		0		540,743		187,446

Total	$	83,014,946	$	(257,007	)	$	4,521,333		$	4,760,725	$	0	$	92,039,997	$	4,521,333

	Beginning Balance 1/1/2010		Total Realized Gains (Losses) Included in Changes in Net Assets			Total Unrealized Gains (Losses) Included in Changes in Net Assets			Investments in Private Placements and Interest on Bridge Notes		Disposals		Ending Balance 6/30/2010		Amount of Total Gains for the Period Included in Changes in Net Assets Attributable to the Change in Unrealized Gains or Losses Relating to Assets Still Held at the Reporting Date

Preferred Stock	$	73,134,661	$	0		$	8,317,389		$	4,265,636	$	0	$	85,717,686	$	8,317,389

Bridge Notes		2,718,225		0			0			1,940,566		0		4,658,791		0

Common Stock		1,164,599		0			(50,700	)		8,878		0		1,122,777		(50,700	)

Warrants		779,601		(257,007	)		(17,550	)		35,699		0		540,743		(17,550	)

Total	$	77,797,086	$	(257,007	)	$	8,249,139		$	6,250,779	$	0	$	92,039,997	$	8,249,139

								Weighted Average
				Weighted		Weighted Average		Remaining	Aggregate
				Average		Grant Date		Contractual	Intrinsic
	Shares			Exercise Price		Fair Value		Term (Yrs)	Value

Options Outstanding at January 1, 2011		3,860,748		$	7.81	$	4.76	5.60	$	125,208

Granted		0		$	0	$	0	0

Exercised		(122,437	)	$	4.01	$	1.67	0

Forfeited or Expired		(349,194	)	$	5.98	$	3.12	0

Options Outstanding at June 30, 2011		3,389,117		$	8.13	$	5.04	5.47	$	301,017

Options Exercisable at June 30, 2011		2,381,657		$	8.67	$	5.45	5.53	$	148,215

Options Exercisable and Expected to be Exercisable at June 30, 2011		3,367,743		$	8.12	$	5.02	5.47	$	301,017

	For the Three Months Ended June 30				For the Six Months Ended June 30
	2011		2010		2011		2010

Numerator for increase in net assets per share	$	21,222,221	$	2,150,952	$	20,096,062	$	3,838,683

Denominator for basic weighted average shares		30,999,579		30,864,491		30,959,503		30,862,202

Basic net increase in net assets per share resulting from operations	$	0.68	$	0.07	$	0.65	$	0.12

Denominator for diluted weighted average shares		31,017,329		30,903,625		30,977,558		30,901,438

Diluted net increase in net assets per share resulting from operations	$	0.68	$	0.07	$	0.65	$	0.12

	Three Months Ended June 30						Six Months Ended June 30
	2011			2010			2011			2010

Per Share Operating Performance

Net asset value per share, beginning of period	$	4.73		$	4.42		$	4.76		$	4.35

Net operating loss*		(0.06	)		(0.06	)		(0.12	)		(0.13	)
Net realized (loss) gain on investments*		(0.07	)		(0.02	)		0.17			(0.02	)
Net increase (decrease) in unrealized appreciation as a result of sales*		0.06			0.01			(0.18	)		0.01
Net increase in unrealized appreciation on investments held*(1)		0.75			0.14			0.77			0.26
Total from investment operations*		0.68			0.07			0.64			0.12

Net increase as a result of stock-based compensation expense*		0.02			0.02			0.03			0.04
Net increase as a result of proceeds from exercise of options		0.00			0.00			0.00			0.00
Total increase from capital stock transactions		0.02			0.02			0.03			0.04

Net asset value per share, end of period	$	5.43		$	4.51		$	5.43		$	4.51
Stock price per share, end of period	$	5.13		$	4.09		$	5.13		$	4.09
Total return based on stock price		(4.65	)%		(11.28	)%		17.12	%		(10.50	)%

Supplemental Data:

Net assets, end of period	$	168,426,152		$	139,182,848		$	168,426,152		$	139,182,848

Ratio of expenses to average net assets		1.3	%		1.5	%		2.6	%		3.1	%

Ratio of net operating (loss) to average net assets		(1.1	)%		(1.4	)%		(2.4	)%		(3.0	)%

Average debt outstanding	$	1,278,571		$	0.00		$	863,812		$	0.00

Average debt per share	$	0.04		$	0.00		$	0.03		$	0.00

Number of shares outstanding, end of period		31,000,601			30,864,899			31,000,601			30,864,899

	2007		2008		2009		2010		Six Months Ended June 30, 2011

Total Incremental Investments	$	20,595,161	$	17,779,462	$	12,334,051	$	9,560,721	$	9,757,586

No. of New Investments		7		4		2		3		2

No. of Follow-On Investment Rounds		20		25		29		27		16

No. of Rounds Led		3		4		5		5		2

Average Dollar Amount – Initial	$	1,086,441	$	683,625	$	174,812	$	117,069	$	1,500,000

Average Dollar Amount – Follow-On	$	649,504	$	601,799	$	413,256	$	341,093	$	422,349