HARRIS
& HARRIS GROUP, INC.®
|
||
(Exact
Name of Registrant as Specified in its Charter)
|
||
New
York
|
13-3119827
|
|
(State
or Other Jurisdiction of
|
(I.R.S.
Employer Identification No.)
|
|
Incorporation
or Organization)
|
||
111
West 57th
Street, New York, New York
|
10019
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Title
of Each Class
|
Name
of Each Exchange on Which Registered
|
|
Common
Stock, $.01 par value
|
Nasdaq
Global Market
|
Large
accelerated filer ¨
|
Accelerated
filer þ
|
Non-accelerated
Filer ¨
|
DOCUMENTS
INCORPORATED BY REFERENCE
|
INCORPORATED
AT
|
|
Harris
& Harris Group, Inc. Proxy Statement for the
|
Part
III, Items 10, 11,
|
|
2007
Annual Meeting of Shareholders
|
12,
13 and 14
|
Page
|
|||
PART
I
|
|||
Item
1.
|
Business
|
1
|
|
Item
1A.
|
Risk
Factors
|
14
|
|
Item
1B.
|
Unresolved
Staff Comments
|
26
|
|
Item
2.
|
Properties
|
27
|
|
Item
3.
|
Legal
Proceedings
|
27
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
27
|
|
PART
II
|
|||
Item
5.
|
Market
For Registrant's Common Equity, Related
|
||
Stockholder
Matters and Issuer Purchase of
|
|||
Equity
Securities
|
28
|
||
Item
6.
|
Selected
Financial Data
|
31
|
|
Item
7.
|
Management's
Discussion and Analysis of Financial
|
||
Condition
and Results of Operations
|
32
|
||
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market
|
||
|
Risk
|
49
|
|
Item
8.
|
Consolidated
Financial Statements
|
||
and
Supplementary Data
|
51
|
||
Item
9.
|
Changes
in and Disagreements with Accountants on
|
||
Accounting
and Financial Disclosure
|
95
|
||
Item
9A.
|
Controls
and Procedures
|
95
|
|
Item
9B.
|
Other
Information
|
95
|
|
PART
III
|
|||
Item
10.
|
Directors
and Executive Officers of the Registrant
|
96
|
|
Item
11.
|
Executive
Compensation
|
96
|
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners
|
||
and
Management and Related Stockholder Matters
|
96
|
||
Item
13.
|
Certain
Relationships and Related Transactions,
|
||
and
Director Independence
|
96
|
||
Item
14.
|
Principal
Accountant Fees and Services
|
97
|
|
PART
IV
|
|||
Item
15.
|
Exhibits
and Financial Statements Schedules
|
98
|
|
Signatures
|
100
|
||
Exhibit
Index
|
102
|
· |
Equity,
equity-related securities (including warrants) and debt with equity
features from either private or public
issuers.
|
· |
Venture
capital investments, whether in corporate, partnership or other
form, including development stage or start-up entities.
|
· |
Intellectual
property or patents or research and development in technology
or product development that may lead to patents or other marketable
technology.
|
· |
Debt
obligations of all types having varying terms with respect to security
or credit support, subordination, purchase price, interest payments
and maturity.
|
· |
Foreign
securities.
|
· |
Miscellaneous
investments.
|
·
|
recruiting
management;
|
·
|
formulating
operating strategies;
|
·
|
formulating
intellectual property strategies;
|
·
|
assisting
in financial planning;
|
·
|
providing
management in the initial start-up stages; and
|
·
|
establishing
corporate goals.
|
·
|
funding
research and development in the development of a technology;
|
·
|
obtaining
licensing rights to intellectual property or patents;
|
·
|
acquiring
intellectual property or patents;
or
|
·
|
forming
and funding companies or joint ventures to commercialize further
intellectual property.
|
• |
stock
market and capital markets
conditions;
|
• |
internal
developments in our Company with respect to our personnel, financial
condition
and compliance with all applicable
regulations;
|
• |
announcements
regarding any of our portfolio
companies;
|
• |
announcements
regarding developments in the nanotechnology field in
general;
|
• |
environmental
and health concerns regarding nanotechnology, whether real or perceptual;
|
• |
announcements
regarding government funding and initiatives related to the development
of nanotechnology;
|
• |
general
economic conditions and trends;
and/or
|
• |
departures
of key personnel.
|
2006
Quarter Ending
|
Low
|
High
|
|||||
March
31
|
$
|
12.75
|
$
|
16.10
|
|||
June
30
|
$
|
9.57
|
$
|
14.26
|
|||
September
30
|
$
|
9.38
|
$
|
12.99
|
|||
December
31
|
$
|
11.80
|
$
|
15.16
|
|||
2005
Quarter Ending
|
Low
|
High
|
|||||
March
31
|
$
|
11.30
|
$
|
16.80
|
|||
June
30
|
$
|
10.01
|
$
|
13.38
|
|||
September
30
|
$
|
10.70
|
$
|
13.85
|
|||
December
31
|
$
|
10.15
|
$
|
14.95
|
EQUITY
COMPENSATION PLAN INFORMATION
As
of December 31, 2006
|
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
|
|
Weighted
average exercise price of outstanding options, warrants and
rights
|
|
Number
of securities remaining available for future
issuance
|
|||||
Plan
category
|
(a)
|
(b)
|
(c)
|
|||||||
Equity
compensation plans approved by security holders
|
3,699,611
|
$
|
10.11
|
192,986
|
||||||
Equity
compensation plans not approved by security holders
|
||||||||||
TOTAL
|
3,699,611
|
$
|
10.11
|
192,986
|
|
|
12/01
|
12/02
|
12/03
|
12/04
|
12/05
|
12/06
|
Harris
& Harris Group, Inc.
|
100.00
|
135.56
|
635.37
|
902.64
|
765.97
|
666.23
|
|
Nasdaq
Composite
|
100.00
|
69.66
|
99.71
|
113.79
|
114.47
|
124.20
|
|
Nasdaq
Financial
|
100.00
|
98.84
|
130.51
|
148.01
|
156.43
|
181.94
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
2002
|
|||||||
Total
assets
|
$
|
118,328,590
|
$
|
132,938,120
|
$
|
79,361,451
|
$
|
44,115,128
|
$
|
35,951,969
|
||||||
Total
liabilities
|
$
|
4,398,287
|
$
|
14,950,378
|
$
|
4,616,652
|
$
|
3,432,390
|
$
|
8,695,923
|
||||||
Net
assets
|
$
|
113,930,303
|
$
|
117,987,742
|
$
|
74,744,799
|
$
|
40,682,738
|
$
|
27,256,046
|
||||||
Net
asset value per outstanding share
|
$
|
5.42
|
$
|
5.68
|
$
|
4.33
|
$
|
2.95
|
$
|
2.37
|
||||||
Cash
dividends paid
|
$
|
0.00
|
$
|
0.00
|
$
|
0.00
|
$
|
0.00
|
$
|
0.00
|
||||||
Cash
dividends paid per outstanding share
|
$
|
0.00
|
$
|
0.00
|
$
|
0.00
|
$
|
0.00
|
$
|
0.00
|
||||||
Shares
outstanding, end of year
|
21,015,017
|
20,756,345
|
17,248,845
|
13,798,845
|
11,498,845
|
|
2006
|
2005
|
2004
|
2003
|
2002
|
|||||||||||
Total
investment income
|
$
|
3,028,761
|
$
|
1,540,862
|
$
|
637,562
|
$
|
167,785
|
$
|
253,461
|
||||||
|
||||||||||||||||
Total
expenses1
|
$
|
10,641,696
|
$
|
7,006,623
|
$
|
4,046,341
|
$
|
2,731,527
|
$
|
2,124,549
|
||||||
Net
operating (loss) income
|
$
|
(7,612,935
|
)
|
$
|
(5,465,761
|
)
|
$
|
(3,408,779
|
)
|
$
|
(2,563,742
|
)
|
$
|
(1,871,088
|
)
|
|
Total
tax (benefit) expense2
|
$
|
(227,355
|
)
|
$
|
8,288,778
|
$
|
650,617
|
$
|
13,761
|
$
|
199,309
|
|||||
Net
realized income (loss) from
|
||||||||||||||||
investments
|
$
|
258,693
|
$
|
14,208,789
|
$
|
858,503
|
$
|
(984,925
|
)
|
$
|
2,390,302
|
|||||
Net
(increase) decrease in unrealized
|
||||||||||||||||
depreciation
on investments
|
$
|
(4,418,870
|
)
|
$
|
(2,026,652
|
)
|
$
|
484,162
|
$
|
343,397
|
$
|
(3,241,408
|
)
|
|||
Net
(decrease) increase in net assets
|
||||||||||||||||
resulting
from operations
|
$
|
(11,773,112
|
)
|
$
|
6,716,376
|
$
|
(2,066,114
|
)
|
$
|
(3,205,270
|
)
|
$
|
(2,722,194
|
)
|
||
(Decrease)
increase in net assets
|
||||||||||||||||
resulting
from operations per
|
||||||||||||||||
average
outstanding share
|
$
|
(0.57
|
)
|
$
|
0.36
|
$
|
(0.13
|
)
|
$
|
(0.28
|
)
|
$
|
(0.27
|
)
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
|
Total
Incremental Investments
|
$489,999
|
$6,240,118
|
$3,812,600
|
$14,837,846
|
$16,251,339
|
$24,408,187
|
No.
of New Investments
|
1
|
7
|
5
|
8
|
4
|
6
|
No.
of Follow-On Investment Rounds
|
0
|
1
|
5
|
21
|
13
|
14
|
No.
of Rounds Led
|
0
|
1
|
0
|
2
|
0
|
7
|
Average
Dollar Amount - Initial
|
$489,999
|
$784,303
|
$437,156
|
$911,625
|
$1,575,000
|
$2,383,424
|
Average
Dollar Amount - Follow-On
|
N/A
|
$750,000
|
$325,364
|
$359,278
|
$765,488
|
$721,974
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
||||||||||||||
Net
Asset Value, Beginning of Year
|
31,833,475
|
24,334,770
|
27,256,046
|
40,682,738
|
74,744,799
|
117,987,742
|
|||||||||||||
Gross
Write-Downs During Year
|
(2,532,730
|
)
|
(5,400,005
|
)
|
(1,256,102
|
)
|
(5,711,229
|
)
|
(3,450,236
|
)
|
(4,211,323
|
)
|
|||||||
Gross
Write-Downs as a Percentage of Net Asset Value
|
-7.96
|
%
|
-22.19
|
%
|
-4.61
|
%
|
-14.04
|
%
|
-4.62
|
%
|
-3.57
|
%
|
31-Dec-00
|
31-Mar-01
|
30-June-01
|
30-Sep-01
|
31-Dec-01
|
||||||||||||
NAV
per Share
|
3.51
|
3.09
|
3.29
|
2.92
|
2.75
|
|||||||||||
$
Change
|
(0.42
|
)
|
0.20
|
(0.37
|
)
|
(0.17
|
)
|
|||||||||
%
Change
|
-11.97
|
%
|
6.47
|
%
|
-11.25
|
%
|
-5.82
|
%
|
||||||||
|
31-Mar-02
|
30-June-02
|
30-Sep-02(1
|
)
|
31-Dec-02
|
|||||||||||
NAV
per Share
|
2.63
|
2.68
|
2.61
|
2.37
|
||||||||||||
$
Change
|
(0.12
|
)
|
0.05
|
(0.07
|
)
|
(0.24
|
)
|
|||||||||
%
Change
|
-4.36
|
%
|
1.90
|
%
|
-2.61
|
%
|
-9.20
|
%
|
||||||||
|
31-Mar-03
|
30-June-03
|
30-Sep-03
|
31-Dec-03(1
|
)
|
|||||||||||
NAV
per Share
|
2.26
|
2.22
|
2.11
|
2.95
|
||||||||||||
$
Change
|
(0.11
|
)
|
(0.04
|
)
|
(0.11
|
)
|
0.84
|
|||||||||
%
Change
|
-4.64
|
%
|
-1.77
|
%
|
-4.95
|
%
|
39.81
|
%
|
||||||||
|
31-Mar-04
|
30-June-04
|
30-Sep-04(1
|
)
|
31-Dec-04
|
|||||||||||
NAV
per Share
|
3.01
|
2.85
|
4.44
|
4.33
|
||||||||||||
$
Change
|
0.06
|
(0.16
|
)
|
1.59
|
(0.11
|
)
|
||||||||||
%
Change
|
2.03
|
%
|
-5.32
|
%
|
55.79
|
%
|
-2.48
|
%
|
||||||||
|
31-Mar-05
|
30-June-05
|
30-Sep-05(1
|
)
|
31-Dec-05
|
|||||||||||
NAV
per Share
|
4.20
|
4.61
|
5.94
|
5.68
|
||||||||||||
$
Change
|
(0.13
|
)
|
0.41
|
1.33
|
(0.26
|
)
|
||||||||||
%
Change
|
-3.00
|
%
|
9.76
|
%
|
28.85
|
%
|
-4.38
|
%
|
||||||||
|
31-Mar-06
|
30-June-06
|
30-Sep-06
|
31-Dec-06
|
||||||||||||
NAV
per Share
|
5.6
|
5.54
|
5.54
|
5.42
|
||||||||||||
$
Change
|
(0.08
|
)
|
(0.06
|
)
|
0.00
|
(0.12
|
)
|
|||||||||
%
Change
|
-1.41
|
%
|
-1.07
|
%
|
0.00
|
%
|
-2.17
|
%
|
New
Investments
|
Amount
|
|||
D-Wave
Systems, Inc.
|
$
|
1,750,547
|
||
Evolved
Nanomaterial Sciences, Inc.
|
2,800,000
|
|||
Innovalight,
Inc.
|
2,500,000
|
|||
Metabolon,
Inc.
|
2,500,000
|
|||
SiOnyx,
Inc.
|
750,000
|
|||
Xradia,
Inc.
|
4,000,000
|
|||
Follow-on
Investments
|
||||
Chlorogen,
Inc.
|
$
|
221,438
|
||
Crystal
IS, Inc.
|
1,098,240
|
|||
CSwitch
Corporation
|
2,850,000
|
|||
NanoGram
Corporation
|
1,262,764
|
|||
NanoOpto
Corporation
|
433,138
|
|||
NeoPhotonics
Corporation
|
2,750,000
|
|||
Nextreme
|
500,000
|
|||
Polatis,
Inc.
|
89,310
|
|||
Questech
Corporation
|
12,750
|
|||
SiOnyx,
Inc.
|
890,000
|
|||
Total
|
$
|
24,408,187
|
December
31,
|
|
||||||
|
|
2006
|
|
2005
|
|||
Venture
capital investments,
|
|||||||
at
cost
|
$
|
62,118,800
|
$
|
37,706,342
|
|||
Net
unrealized depreciation
|
8,450,969
|
4,519,009
|
|||||
Venture
capital investments,
|
|||||||
at
fair value
|
$
|
53,667,831
|
$
|
33,187,333
|
|||
|
December
31,
|
||||||
2006
|
2005
|
||||||
U.S.
government and agency
|
|||||||
securities,
at cost
|
$
|
59,212,598
|
$
|
96,320,405
|
|||
Net
unrealized depreciation
|
556,451
|
69,541
|
|||||
U.S.
government and agency
|
|||||||
securities,
at fair value
|
$
|
58,656,147
|
$
|
96,250,864
|
December
31,
|
|||||||
Category
|
2006
|
2005
|
|||||
Tiny
Technology
|
99.9
|
%
|
99.9
|
%
|
|||
Other
Venture Capital Investments
|
0.1
|
%
|
0.1
|
%
|
|||
Total
Venture Capital Investments
|
100.0
|
%
|
100.0
|
%
|
New
Investment
|
Amount
|
|||
eLite
Optoelectronics, Inc.
|
$
|
1,000,000
|
||
Kereos,
Inc.
|
800,000
|
|||
Kovio,
Inc.
|
3,000,000
|
|||
Zia
Laser, Inc.
|
1,500,000
|
|||
Follow-on
Investments
|
||||
Cambrios
Technologies Corporation
|
$
|
511,006
|
||
Chlorogen,
Inc.
|
364,261
|
|||
Kereos,
Inc.
|
160,000
|
|||
Molecular
Imprints, Inc.
|
2,500,000
|
|||
Nanomix,
Inc.
|
250,000
|
|||
NanoOpto
Corporation
|
411,741
|
|||
Mersana
Therapeutics, Inc.
|
683,000
|
|||
Nanosys,
Inc.
|
3,000,003
|
|||
Nantero,
Inc.
|
571,329
|
|||
NeoPhotonics
Corporation
|
999,999
|
|||
Starfire
Systems, Inc.
|
500,000
|
|||
Total
|
$
|
16,251,339
|
Documents |
Page
|
|
Management's
Report on Internal Control Over
|
||
Financial
Reporting
|
52
|
|
Report
of Independent Registered Public Accounting Firm
|
53
|
|
Consolidated Financial Statements | ||
Consolidated
Statements of Assets and Liabilities
|
||
as of December 31, 2006, and 2005
|
55
|
|
|
||
Consolidated
Statements of Operations for the
|
||
years ended December 31, 2006, 2005, 2004
|
56
|
|
Consolidated
Statements of Cash Flows for the
|
||
years
ended December 31, 2006, 2005, and 2004
|
57
|
|
Consolidated
Statements of Changes in Net Assets for the
|
||
years
ended December 31, 2006, 2005, and 2004
|
58
|
|
Consolidated
Schedule of Investments as of December 31, 2006
|
59-66
|
|
Consolidated
Schedule of Investments as of December 31, 2005
|
67-72
|
|
Footnote
to Consolidated Schedule of Investments
|
73-76
|
|
Notes
to Consolidated Financial Statements
|
77-93
|
|
Financial
Highlights for the years ended December 31, 2006,
|
||
2005 and 2004
|
94
|
•
|
pertain
to the maintenance of records that in reasonable detail accurately
and
fairly reflect the transactions and dispositions of the assets of
the
Company;
|
•
|
provide
reasonable assurance that transactions are recorded as necessary
to permit
preparation of financial statements in accordance with generally
accepted
accounting principles, and that receipts and expenditures of the
company
are being made only in accordance with authorizations of management
and
directors of the Company; and
|
•
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company's assets
that
could have a material effect on the financial
statements.
|
HARRIS
& HARRIS GROUP, INC.
CONSOLIDATED
STATEMENTS OF ASSETS AND
LIABILITIES
|
ASSETS
|
|||||||
December
31, 2006
|
|
December
31, 2005
|
|||||
Investments,
at value (Cost: $121,331,398 at 12/31/06,
|
|||||||
$134,026,747
at 12/31/05
|
$
|
112,323,978
|
$
|
129,438,197
|
|||
Cash
and cash equivalents
|
2,071,788
|
1,213,289
|
|||||
Restricted
funds (Note 6)
|
2,149,785
|
1,730,434
|
|||||
Receivable
from portfolio company
|
0
|
75,000
|
|||||
Receivable
from broker (Note 3)
|
819,905
|
0
|
|||||
Interest
receivable
|
625,372
|
248,563
|
|||||
Prepaid
expenses
|
10,945
|
2,993
|
|||||
Other
assets
|
326,817
|
229,644
|
|||||
Total
assets
|
$
|
118,328,590
|
$
|
132,938,120
|
|||
LIABILITIES
& NET ASSETS
|
|||||||
Accounts
payable and accrued liabilities (Note 6)
|
$
|
4,115,300
|
$
|
3,174,183
|
|||
Accrued
profit sharing (Note 4)
|
261,661
|
2,107,858
|
|||||
Deferred
rent
|
21,326
|
31,003
|
|||||
Current
taxes payable
|
0
|
1,514,967
|
|||||
Taxes
payable on behalf of shareholders (Note 7)
|
0
|
8,122,367
|
|||||
Total
liabilities
|
4,398,287
|
14,950,378
|
|||||
Net
assets
|
$
|
113,930,303
|
$
|
117,987,742
|
|||
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
|
|||||||
12/31/06
and 30,000,000 at 12/31/05; 22,843,757 issued at
|
|||||||
12/31/06
and 22,585,085 issued at 12/31/05
|
228,438
|
225,851
|
|||||
Additional
paid in capital (Note 9)
|
129,801,201
|
122,149,642
|
|||||
Accumulated
net realized income (loss)
|
(3,747,912
|
)
|
3,781,905
|
||||
Accumulated
unrealized depreciation of investments
|
(9,007,420
|
)
|
(4,764,125
|
)
|
|||
Unrecognized
net gain on retirement benefit plans (Note 6)
|
61,527
|
||||||
Treasury
stock, at cost (1,828,740 shares at 12/31/06 and
|
|||||||
12/31/05)
|
(3,405,531
|
)
|
(3,405,531
|
)
|
|||
Net
assets
|
$
|
113,930,303
|
$
|
117,987,742
|
|||
Shares
outstanding
|
21,015,017
|
20,756,345
|
|||||
Net
asset value per outstanding share
|
$
|
5.42
|
$
|
5.68
|
HARRIS
& HARRIS GROUP, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
Year
Ended
|
|
Year
Ended
|
|
Year
Ended
|
|
||||
|
|
December
31, 2006
|
|
December
31, 2005
|
|
December
31, 2004
|
||||
Investment
income:
|
||||||||||
Interest
from:
|
||||||||||
Fixed-income
securities
|
$
|
2,991,261
|
$
|
1,409,273
|
$
|
614,728
|
||||
Portfolio
companies
|
0
|
65,620
|
22,834
|
|||||||
Miscellaneous
income
|
37,500
|
65,969
|
0
|
|||||||
Total
investment income
|
3,028,761
|
1,540,862
|
637,562
|
|||||||
Expenses:
|
||||||||||
Salaries,
benefits and stock-based
|
||||||||||
compensation
(Note 3)
|
7,933,276
|
2,459,033
|
1,928,088
|
|||||||
Administration
and operations
|
1,250,080
|
1,319,354
|
718,530
|
|||||||
Profit-sharing
provision (Note 4)
|
50,875
|
1,796,264
|
311,594
|
|||||||
Professional
fees
|
737,828
|
830,062
|
667,311
|
|||||||
Rent
|
239,846
|
211,582
|
151,434
|
|||||||
Directors'
fees and expenses
|
340,750
|
308,874
|
209,210
|
|||||||
Depreciation
|
64,916
|
64,713
|
43,151
|
|||||||
Custodian
fees
|
24,125
|
16,741
|
17,023
|
|||||||
Total
expenses
|
10,641,696
|
7,006,623
|
4,046,341
|
|||||||
Net
operating loss
|
(7,612,935
|
)
|
(5,465,761
|
)
|
(3,408,779
|
)
|
||||
Net
realized gain from investments:
|
||||||||||
Realized
gain from investments
|
31,338
|
23,862,037
|
813,994
|
|||||||
Income
tax (benefit) expense (Note 7)
|
(227,355
|
)
|
9,653,248
|
(44,509
|
)
|
|||||
Net
realized gain from investments
|
258,693
|
14,208,789
|
858,503
|
|||||||
Net
(increase) decrease in unrealized
|
||||||||||
depreciation
on investments:
|
||||||||||
Change
as a result of investment sales
|
0
|
|
(23,181,420
|
)
|
915,118
|
|||||
Change
on investments held
|
(4,418,870
|
)
|
19,790,298
|
264,170
|
||||||
Change
in unrealized depreciation
|
||||||||||
on
investments
|
(4,418,870
|
)
|
(3,391,122
|
)
|
1,179,288
|
|||||
Income
tax (benefit) expense (Note 7)
|
0
|
(1,364,470
|
)
|
695,126
|
||||||
Net
decrease (increase) in unrealized
|
||||||||||
depreciation
on investments
|
(4,418,870
|
)
|
(2,026,652
|
)
|
484,162
|
|||||
Net
(decrease) increase in net assets
|
||||||||||
resulting
from operations:
|
||||||||||
Total
|
$
|
(11,773,112
|
)
|
$
|
6,716,376
|
$
|
(2,066,114
|
)
|
||
Per
average basic and diluted outstanding share
|
$
|
(0.57
|
)
|
$
|
0.36
|
$
|
(0.
13
|
)
|
||
Average
outstanding shares
|
20,759,547
|
18,471,770
|
15,476,714
|
HARRIS
& HARRIS GROUP, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
Year
Ended
|
|
Year
Ended
|
|
Year
Ended
|
|
|||||
|
|
December
31, 2006
|
|
December
31, 2005
|
|
December
31, 2004
|
||||
Cash
flows used in operating activities:
|
||||||||||
Net
(decrease) increase in net assets
|
||||||||||
resulting
from operations
|
$
|
(11,773,112
|
)
|
$
|
6,716,376
|
$
|
(2,066,114
|
)
|
||
Adjustments
to reconcile net increase (decrease) in net assets
|
||||||||||
resulting
from operations to net cash used in operating activities:
|
||||||||||
Net
realized and unrealized loss (gain) on investments
|
4,420,619
|
(20,470,915
|
)
|
(1,993,282
|
)
|
|||||
Deferred
income taxes
|
0
|
(1,364,470
|
)
|
695,126
|
||||||
Depreciation
and amortization
|
(426,168
|
)
|
346,019
|
43,151
|
||||||
Taxes
payable on behalf of shareholders on deemed dividend
|
0
|
8,122,367
|
0
|
|||||||
Stock-based
compensation expense
|
5,038,956
|
0
|
0
|
|||||||
Changes
in assets and liabilities:
|
||||||||||
Restricted
funds
|
(419,351
|
)
|
(138,463
|
)
|
(379,893
|
)
|
||||
Receivable
from portfolio company
|
75,000
|
(65,000
|
)
|
(10,000
|
)
|
|||||
Interest
receivable
|
(376,808
|
)
|
(189,603
|
)
|
(58,510
|
)
|
||||
Income
tax receivable
|
0
|
(7,023
|
)
|
14,895
|
||||||
Prepaid
expenses
|
(7,951
|
)
|
539,496
|
(535,648
|
)
|
|||||
Other
receivables
|
(819,905
|
)
|
0
|
0
|
||||||
Other
assets
|
(176,325
|
)
|
11,599
|
(8,666
|
)
|
|||||
Accounts
payable and accrued liabilities
|
1,002,643
|
268,525
|
182,260
|
|||||||
Accrued
profit sharing
|
(1,846,197
|
)
|
1,796,264
|
311,594
|
||||||
Deferred
rent
|
(9,677
|
)
|
(3,927
|
)
|
(4,718
|
)
|
||||
Current
income tax liability
|
(9,637,026
|
)
|
1,524,470
|
0
|
||||||
|
||||||||||
Net
cash used
in operating
activities
|
(14,955,302
|
)
|
(2,914,285
|
)
|
(3,809,805
|
)
|
||||
Cash
flows from investing activities:
|
||||||||||
Net
(purchase) sale of short-term investments
|
||||||||||
and
marketable securities
|
37,593,589
|
(52,144,482
|
)
|
(17,823,606
|
)
|
|||||
Investment
in private placements and loans
|
(24,408,187
|
)
|
(16,251,339
|
)
|
(16,731,216
|
)
|
||||
Proceeds
from sale of investments
|
28,295
|
35,392,200
|
2,530,483
|
|||||||
Purchase
of fixed assets
|
(15,086
|
)
|
(45,704
|
)
|
(69,273
|
)
|
||||