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

Thank you, operator, and good afternoon, everyone. We certainly appreciate your time today for Rand's third quarter 2017 financial results conference call. 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 www.randcapital.com. The slides that will accompany our discussions today are also posted on the website. So, if you would look at the slide deck, and turn to Slide 2, we will discuss 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 website, or at www.sec.gov. So, with that, let me first turn it over to Pete who is going to summarize the quarter results and then Dan will go into greater detail regarding the financials.

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 along, I'm going to start on Slide 3 which highlights our third quarter. At the end of the current quarter, net asset value or NAV stood at $5.1 per share, a slight increase from the end of last quarter. And Dan will go over all the financial results later in his discussion. This quarter's investment included $100,000 convertible unsecured note funded from our new small business investment company or SBIC fund, under the Small Business Administration pre-licensing the approval protocol. I'll pitch on the status of our relationship with the SBA in a moment. The investor within our company called Centivo which is development phased tech enabled the house pollution company, they're really interesting idea that helps self-insured employers and their employees save money and have a better experience. To do this, they are developing technology and administration services, but they intended to provide the self-insured companies. That in the last quarter and over the last year, we've filed our application through SAB is our SBIC with a small business administration. We're also to receive approval for $15 million of debenture leverage later this year. As previously noted, this will be in addition to the current $8 million of debentures that we currently have with the SBA. We intend to use these funds to further our growth strategy. Also want to note that board recently extended approval of our share repurchase program through October 26, 2018. We have approximately 460,000 shares available for repurchase under the program. This is really dependent on the delivery of excess cash at our corporate level, funds that are within our SBIC are not available for the share repurchase. We…

Thanks Pete, and good afternoon, everyone. If you could please turn to Slide 10 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 $5.01 per share. As you can see NAV increased a penny per share over the trailing quarter as our investment income has been growing and we are nearing operating cash breakeven. Additionally, during the third quarter of 2017, we recorded favorable market value appreciation which I'll discuss in more detail on the next slide. The reduction in NAV since the December 2015 peak is the natural progression as the companies is our portfolio both succeed and struggle in their respective markets. The end of 2015 was the timing of our last exit which was Gemcor. We realized a sizable gain on that exit which helps us monetize our unrealized appreciation and help 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. These investments are helping us to more fully cover our expenses on a quarterly basis overtime. Additionally, exits 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 11. Here I've summarized our operating performance for the third quarter of 2017 and 2016, as well as the comparable year-to-date period. As we've previously mentioned, in the near-term, we've been investing in more financial instruments which increase our interest income and you can see the results. Our third quarter investment income of $397,000 is up 26% over last year and our year-to-date investment income of $1.75 million is up 47%.…

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

Thank you. Now, we'll be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Sam Rebotsky with SER Asset Management. Please go ahead.

Yeah. Good afternoon, Pete and Dan.

Hi, Sam. How are you?

Good, good. So, let me - do we expect to have any exit during the end of the current year besides be authentic?

We can't predict those with any degree of regularity. We have some that are talking with investment bankers. We do intend to liquidate our position in Athenex. And I guess without going into insider information that's where I'll leave it.

Okay. And now you've indicated that before the end of this quarter you expect to get the loan, is that like a 100% that is going - that's happening?

No, let me make sure that I'm clear. What we are trying to get is a commitment that would allow to borrow [Technical Difficulty] people from the SBA, we met with them couple of weeks ago Dan and I at a trade show and the guy who is running it went to great link, they describe how busy they were so the SBA is a big part of the recovery of Puerto Rico and then places they got hit by hurricane. But we've been in that process for some time and I think we kept by the end of the year I will know and answer one way or the other, but we would think hopefully in the next month or so, we will get a positive answer and that's what we put all our effort into. That's big part of our growth strategy.

Okay, okay. Now as far is your portfolio you spoke of the positives there, what about the stocks that you have losses on, for example, what your expectation City Dining Cards, the Teleservices that to you've written down to zero, are there any expectations of realizing any kind of value add of some of these investments or what is your expectation?

As the time and according with the valuation policy, our expected value is zero at that time and that's reflected in all of our valuation. There is some possibility that they may come back but at this point we're not predicting any of them.

Do you work with them to try to find a buyer or to find a way if there is a value to sort of do something with some of these investments?

We do, and we are in contact with them and without that going into specific, our companies that are still working and in robust high paid setters or Teleservices is a fairly large company. We just believe now is the time that where we are in the capital structure. That at this point if there was a liquidation we receive any time. Now that can't change over time as companies grow or not grow and we continue evaluate them every quarter. But at this point, our expected proceeds are if that zero, it's zero.

Okay. One final question right now. With the stock trading at a 40% discount to your stated valuation even though the other things are written down and with a $1 cash. It would appear the market is not giving you sufficient respect and possibly even though you may find a need for cash, it may be a very good investment to buy your own shares with the authorization that you have? What do you think of that?

I've been able to buy shares back dependent on cash and where we have our cash and cash that is in subsidiary, it is only for SBA fee investment and those tend to be private companies that are allowed. The cash that we have of the parent bank for you are to buy shares back. At this point, we have limited cash available for share repurchase. Conceptually, I agree with you 100% and academically I agree with you 100%. At this point, I would tell you from my perspective, we don't have excess cash to buy shares back. We can get the company to where do have excess cash, its first on our list.

Okay. Then what I would suggest try to in other words hold back on some investments, try to create cash at the subsidiary as long as the stock trades at this level to use some of this cash to buy some shares in the open market that way you could achieve that and improve. And give basically a dividend to shareholders with the 40% discount. That would be my judgment at this point.

I want to make sure I am clear the money that is in the subsidiary is not available to purchase shares back. It's only at the parent.

What do you need in other words you have no money at the parent, what do you need to get money at the parent if you could get a $1 million at the parent, you then could buy some shares. What do you need to get money at the parent?

We can take money from the subsidiary when we have enough some positive network and it's an SBA regulation and protocol that we follow. I understand what you're saying, and I understand that buying shares back and I wish we had cash at the parent do that. But at this point, we don't.

Okay. All right good luck.

Thank you, Sam. We always appreciate your support.

Okay. Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Bill McClain with Circle and Advisors [ph]. Please proceed.

Hey gentlemen, how you doing?

Hi Bill.

Good. There is a parent company have the ability given how low borrowing costs are now to borrow money and repurchase shares?

It maybe I have to go on to the regulation about BDC leverage amount, but I don't think it accounts the SBA. Leverage it as part of thing. We have now looked at that and we have just spent time trying to figure out who would borrow, who would lend those money.

Let's say given I don't know how much FNX would be free to use as collateral and so forth. But it just seems to me with the success you've had investing greatly exceeds today's cost of money and it might be in the shareholders' best interest to borrow money if you could to repurchase shares, I had roughly 40% discount to their net asset value. So, I would just suggest to take a look at that.

Okay. Taking notes right now. For your information there's very few assets that are at the parent level. And the once that are in the subsidiary are assets that with SBA as a first lien on that.

Great. Well I need a little bit you could find it might make some sense I mean if I was trade at a 10% or 15% discount like most let's say closed end funds or your peers which they are only a few that would be one thing by trading at this size of discount, I think extraordinary opportunities should be addressed with extraordinary action. I guess it's a best way to put it. Anyway, just a thought through something listen you guys are smart capital allocators, they are smart investors and you know a lot of smart folks maybe somebody is out there to help with that understand the transaction.

Okay. Thank you.

Sure

Our next question comes from the line of Sam Rebotsky with SER Asset Management. Please proceed.

Just as long as those lines to the extent that these appendix is sold, and it becomes cash does is that automatically go to the SBA?

Yeah, that's an asset of the - of our first SBA fee funds and that's for it, if there is only we have a gas pipeline and few other smaller investments that are at a parent and those were done 12, 14 years ago. But as FNX is owned by SBA B1.

So, the 7.8 million is balanced to the SBA, in other words you have to get it down since zero to be able to use the money. I'm trying to understand, what percentage of your assets have to hold up to against that liability?

Well, they are all owned by the SBIC. Now we have the ability to upstream cash under certain circumstances where as we have enough of positive network and there is some roles that are part of the SBA regulation that dictate that. Our SBIC II was created because we thought jump forum, we took cash out SBIC I up to the parent and then back down to fund the SBIC II. But the ability to money out, is created by having positive investing results exits.

So, I'm trying to understand what dollar amount has to be held decide - the one you've drawn out from the Gemcor for the next one. That's also going to be - you're not going to have flexibility on this money to buy any stock, when you didn't buy stock before you had flexibility, or I don't understand?

And I wish that there was a very clear answer, but we had money at a parent that had come from various things. When we do have an ability to take money out of parent we tend to do that, and it is not just one formula, but it primarily we have cash proceeds from a cash flow exit, we can look at taking those out of the subsidiary into the parents.

Well I would think you also you want to work with the SBIC and try to figure out and carve some money out for this, a limited amount and I think you have plenty of coverage with all your assets and with the stocks selling it at the discount, it would be helpful. And I think the objectivity of these stock traded higher, you have more flexibility in raising more funds. So, it defeats the purpose you're in essence of bank without any abilities. And anyhow that's my thought at this point relative that utilization of your cash. Hope you could work it out. Thank you.

Thank you. We have no further question in queue at this time. I would like to hand the floor back over to management for closing remarks.

Thank you. We enjoyed talking with you today and talking about this quarter. For those of you feel free to call us between quarters at any time but we look forward to talking to you next quarter.

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