Greetings and welcome to the Rand Capital Second Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. And a question-and-answer session will follow formal presentation. [Operator Instructions]. As a reminder, this conference in being recorded. I’ll now turn the conference over to your host Mr. Pawlowski, Investor Relations for Rand Capital. Thank you, you may begin.

Thank you, operator and good afternoon, everyone. We certainly appreciate your time today for our inaugural quarterly earnings conference call. We will be addressing our second quarter 2017 financial results and our progress and we’re excited about having this new forum with which to discuss this with you. On the line with me today are Pete Grum, our Chief Executive Officer and Dan Penberthy our Executive Vice President and Chief Financial Officer. Pete and Dan will be reviewing the results that were published in the press release distributed this morning. If you don’t have that release, it is available on our website at randcapital.com. The slides that will accompany our discussions today are also posted on the website. Looking at the slide deck, if you turn to Slide 2, we show our Safe Harbor Statement. As you're likely aware we may make some forward-looking statements during this presentation and also during the question-and-answer session. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ from where we are today. These risks and uncertainties and other factors are provided in the earnings release as well as in other documents filed by the company with Securities and Exchange Commission. These documents can be found on our Web Site, or at www.sec.gov. So, first let me turn it over to Pete who'll summarize the quarter results and Dan will on go onto comment in detail regarding the financials. With that it's my pleasure to turn the call over to Pete to begin. Pete?

Thanks, Deb, good afternoon everyone. We're happy to have this opportunity to tell you what's been going on with Rand. For those of who you are following online I'm starting on Slide 3 which highlights our second quarter. We've spent a lot of the quarter, a lot of hard work, commenting on filing our applications to establish our second Small Business Investment Company or SBIC fund with the U.S. Small Business Administration. While the SBA is undergoing their normal review process we got the fund going by contributing 7.5 million of our cash into this new entity. In accordance with the way that the SBA structures these funds we require some debenture commitment and an amount equal to twice our cash contribution into the new fund. We're hopeful to receive approval for $15 million of the debenture leverage later this year. That will be an addition to the 8 million that we currently have outstanding with the SBA and we intend to use these new funds to further our growth strategy. In the mean time in the last quarter we began investing from the new fund under the SBA's pre-licensing approval protocol. We had somewhat of a pent-up demand situation with the low-level investing in the first quarter this year as we're preparing our application for the new fund. As a result, we closed high level investments in the second quarter; 3.35 million. Of that 3 million was from the new fund, and 350,000 was from our previously existing SBIC fund. All of this quarter's investments were following on and the company has already included in our portfolio. As you may know on average we make about three separate investments into each of our portfolio companies during our holding period as they grow and mature. This quarter's investment simply forms…

Thanks Pete and good afternoon everyone. If you could please turn to slide 11 and I’ll start with net asset value per share or NAV. As Pete mentioned, we did finish the quarter with a net asset value at $5 per share. NAV reached the peak of 535 at December 31st 2015. The reduction since that time is a natural progression of the Rand portfolio as these companies in our portfolio both to exceed and struggle in their respective markets. As these market dynamics play out at the portfolio company level, we will adjust our carrying values accordingly. Note that net asset value per share is up over 25% from where it was just 4.5 years ago at December 31st 2012. The end of 2015 was the timing of our last exit which was Gemcor. We did realize a sizeable gain on that exit which helped us monetize our unrealized appreciation and helped drive net asset value. Gemcor was also a strong cash flow provider for us and since then we have been focused on rebuilding our portfolio to include more cash flow generating assets. We believe that these investments will help to more fully cover our expenses on a quarterly basis overtime. Additionally, exit such as this do result in Rand realizing in investments full potential. But we do know from experience that we can’t crush exits nor predict their timing. Please turn to slide 12, here I’ve summarized our operating performance for the second quarter of 2017 and 2016 as well as the comparable year-to-date periods. As we’ve mentioned a couple of times here this afternoon, in the near-term we’ve been investing in more financial instruments which increase our interest income and you can see the results. Our second quarter investment income of $349,000 is up 58% over…

Thanks, Dan. In closing hopefully, you can see that there's a lot of excitement going on with Rand and its portfolio of companies. We as management are working hard to take the company to the next level by driving our growth strategy. We hope soon to have this additional SBA capital to put to work and we certainly have a wide variety of opportunities in our pipeline to invest in. So, with that let me open up the line for any questions.

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] And our first question is from Brett Reece from Janney Montgomery Scott. Please go ahead.

Pete or Dan do you have any plans in the near future to pay a cash dividend or buyback stock to try to narrow the discount between the net asset value and the market price of the stock?

We're certainly looking at that and that's tied into our current cash flow and the ability if we're going to have a dividend to have it be a consistent dividend, we don't believe a one-time dividend would do much good and buying back of stock which we’ve done historically in the past is also in there. When we get our license which I believe should be from PSP and get some of these companies monetized we'll will certainly look at it closer. And we continue to be in the list of things that we’ve talked about in every board meeting.

Right, right. I appreciate that and if I could just leave you with just some empirical data. I bought the stock personally in for clients back in the fall of 2013 and I’m happy with all of the progress you guys have made. But at that time, the NAV was around 440 and we’re going on pushing four years this coming fall and the NAV are five and the stock price is 280. So, the extent you can pull out the tool chest to try to narrow that in the foreseeable future, I would appreciate that.

Thank you. And I appreciate that, we internally feel that is personally management and the board have been the big buyers of the stock, at the end of the year we made substantial purchases personally and the board members, but I think your feedback is more warranted.

Our next question is from [Indiscernible] Advisors. Please go ahead.

I got a question, I think it’s a two-part question. The first is how do you determine when you make an investment, where you want to be in the capital structure of the company investing in. And number two, how much is that influenced by your need for income to support the operation of the business. And then I guess the third which is once you get this new funding is that going to change any so that you're maybe be looking at a higher risk, higher reward tranches in the capital structure of these companies that you may take a look at.

Let me kind of backward to your question. With the new funds, certainly in the beginning and as you’ve seen with our recent investments, we will probably be more on the debt side or the comfortable debt or mezzanine debt with these companies. As when we started our other SBIC, we need to get it up and running and covering those expenses and our first couple of investments out of that new fund have been debt type instruments which are probably less risk and less reward. To your original question about what we do on the capital structure when we go in, as you know we always invest with other institutional investors, with that said we never really buy common stock public shares. But we also want to make sure that with the people that we invest in, we’ve got enough money around the table to bring the company to fruition. We tend to be a little more patient than most people I think in general we’re end about five years and we’ll continue to look at that, but in the beginning of this fund, we’re going to do more debt type investments. I don’t know if that answered all your questions.

Pretty much, I’m trying to figure out what you can do as an entity to get into the -- if you feel it's appropriate to get into a higher risk, higher reward situation that may inspire investors in the company and then number two, that whole thought, is that any influenced by the fact that unlike a lot of venture capital firms that have kind of termination dates, this is kind of a business in perpetuity?

Well it is and it's my goal as a company to be in being perpetuity and as we has been around for 40 something years and I think we'll continue. Really our portfolio that we've invested in the last 10 years has been fairly high risk, high returns. I was looking the other day our IRR of companies that we've exited of the 50 that came into the SBIC we've invested and we've exited about half and they've been I think three times our money and IRR in the mid-20s which we're happy about. We're as frustrated as I think any anyone that has not translated into a growth in the stock price, part of the reason we're having these calls and we've engaged key advisors is take a more professional approach to investor relationship. The management of the board is very disappointed with what's happened to the stock price, there no way to really get around that.

And this is Dan Penberthy in regards to kind of how we invest in the capital structure, much like when we first started with our first SBIC found in 2002, some of the first several investments which we did lead were subject with warrant structures and those warrants, those were companies like Sinacore, Liaison, RAMSCO although the original warrant instruments ended up being where we drove most of our investments value with final realization so the subject was warrant structures something a structure with I think RAND can make money and return the higher equity returns that both management and our investors are looking for while maintaining some of the creditworthiness of a subject portfolio.

Great. And I think -- just to make the comment that your batting average is pretty darn good and when the swinging the bat has been productive, I'm just trying to [indiscernible] with you and chow out some thoughts to how do raised interest in what you're doing in a period where no one wants to own anything other than an S&P 500 ETF. So, it's kind of an uphill battle at the moment and if you guys can figure this out, my hat's off to you and I agree I think, this call is both appropriate and well done by both you folks and [indiscernible]. So, my hats off to you.

[Operator Instructions]. And we've another question from Brett Reece from Janney Montgomery Scott. Please go ahead.

Thanks for taking an additional one. What do you seen interest rate on the term note with the eHealth? I don’t think I heard it or saw it on the slide.

We disclosed in our consolidated schedules of portfolio investments, the full detailed type of investment that we make by instrument as well as the cost and fair value of those. In that disclosure, we have the e-health note at 10% with the maturity of 2019.

Our next question is from [indiscernible], SCR Asset Management. Please go ahead.

Yeah, good afternoon Pete and Dan. You really have done a wonderful job with your investments and as I’ve indicated all along, I’m a very long-time shareholder but the market is not willing to recognize it and I think the inability of people to buy stocks that are not paying a dividend would produce a large portion of additional investors who can invoice the stock. I appreciate that you’re going to consider this. And when do we expect to get the money you said later this year from the 15 million, is that could happen in the fourth quarter or is it possible to be in this third quarter?

Well I want to make sure I answer this correctly. The way we would get that is probably been asked by the SBA to apply. We’ve done the application, well they’ve give us some feedback and we’re working on that. The next step would be for us to be granted a license and I fully think that will be the third quarter. With that happening, we will be granted the ability to borrow if everything goes right up to $15 million. We have already taken 7.5 million of cash and put it into the subsidiary. We would invest that first and draw down the leverage afterwards. So, there is two parts to getting the money. They are getting the approval for it and then actually using it. And we invest about 5 or $6 million a year to give you some perspective and we also have in our portfolio companies that I believe will exit over the near-term timeline. I don’t know which ones and I can’t really predict but that will provide money for us also to pay down the outstanding debt and then also to put into to new investment.

And this is Dan Penberthy, to continue on that what the SBA will do is when we’re licensed we will pay an upfront fee of 1% to the SBA and that will guarantee the $15 million of excess to SBA leverage for between a 4.5 to 5-year period depending on the final date in which we’re licensed. And then the money is available to be drawn as needed when we identify transactions. So, we’re not required to take down the full 15 million and bear the interest burden on that, we can draw it down as needed on an individual transaction basis.

Okay. So, your expectation, even though you may get approval you won’t need the money based until you’re fully invested and it will be gradually to pull down the money.

Correct.

With the one thing with the book value being $5 and the stock trading at 275, that’s more than a 40% discount. So along with the dividend you've authorization for 458,000 shares, to the extent that you can buy some shares, even though this would reduce your ability to lend, the return on equity would be pretty significant because your book value would go up and that sort of my light the fire of other investors that they see how you're putting your money to use, what do you think of that?

I think all things equal and having a lot of money, I would do it immediately but we're really a lot of cognizant on competing cash flows until we get this next license put together and we can look at excess and figure out how that goes, but you're correct in your conclusion and I wish we had a lot of extra money on the balance sheet.

So, in final conclusion you guys have done a good job increasing the value of your asset for all shareholders but unfortunately the public shareholders are not getting the benefit because they -- as your large shareholders keep selling he needs to -- he's selling at a discount, so to the extent that you can figure out how to move the stock up and get other people involved, this would be a strong reason, the dividend clearly say a nickel, a quarter, $0.20 that would be a phenomenal dividend relative to what's going on and that should maybe produce the stock maybe move up to 350 or someplace higher, so that's my suggestion for you, good luck and hopefully you achieve the better results for the shareholders.

Thanks, and that's great feedback and I will point out that this 15 million -- both the $7.5 million and the $15 million of SBA leverage commitment will be held at a subsidiary level that is available only for investments. So, we cannot move that money up stream, it's up to the parents to pay dividends or buy back stock.

This does conclude the question-and-answer session. I'd like to turn the floor back over to Mr. Grum for any closing comments.

Thank you everyone and this is our inaugural call and I appreciate all the answers and questions. We appreciate all your time today and look forward to updating you again with our third quarter results in November. Feel free to call us individually, we're always there, and I appreciate the feedback and have a great day.

This concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time.