Greetings! And welcome to the Rand Capital Corporation’s Second Quarter 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Deborah Pawlowski, Investor Relations. Please go ahead.

Thank you, Hector, and good afternoon, everyone. We appreciate your time today for Rand’s second quarter 2019 financial results conference call. On the line I have here Pete Grum, our Chief Executive Officer; and Dan Penberthy, our Executive Vice President and Chief Financial Officer. You should have a copy of the release that crossed the wire this morning as well as the slides that will accompany our conversation today. If not, they are available on our Web site at www.randcapital.com. If you look at the slide deck and turn to Slide 2, let me point out some important information. As you are 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 the Securities and Exchange Commission. You can find the information on our Web site or in sec.gov. So with that, let me now turn it over to Pete who is going to summarize the highlights for the quarter and give a brief update on the status of the transactions with East Asset Management. Then, Dan, will follow with more details regarding the financials. Pete?

Good afternoon, everyone. Thank you for your time today. We are happy to have this opportunity to update you on Rand’s second quarter and included in that is the progress we have made towards completion of the transaction with East Asset Management who I’ll refer to as East going forward. If you all turn to Slide 3, let me touch on some of the key developments during the second quarter. Most significantly, we have been working through the process for completing the $25 million investment in Rand by East. The investment by East consisted of cash and portfolio assets will provide us with additional capital to grow our portfolio and increase the return for all the shareholders. Portfolio assets that will be contributed by East will be immediately accretive to investment income. As I am sure you are aware, we received shareholder approval at the Special Shareholder Meeting in May. We have been working on all the planning, diligence and approvals needed for closing and to be ready to operate with our new assets under our new structure. Last month, importantly, the SEC deemed effective that registration of our new external management company, Rand Capital Management, as a registered investment adviser. This was an important step in this process. Another regulatory approval we have been seeking from U.S. Small Business Administration and we continue to make progress on a daily basis. Subject to this SBA approval, we expect the transaction to close in the second half of this year and anticipate that the greater scale better positions us in the Capital Markets through the increase of shareholders’ equity and total assets. At the end of the second quarter, our net asset value, or NAV, decreased to $4.85 per share, down from the $5.06 per share at the end of March.…

Thanks, Pete, and good afternoon, everyone. If you could please turn to Slide 11, and I’ll start with the net asset value per share, or NAV. As Pete mentioned, we finished the quarter with net asset value at $4.85 per share. As you can see on the chart, NAV decreased $0.21 per share over the trailing quarter. This decrease was impacted by three factors. First, our valuation policy has us review the fair value of our investments each quarter. This sometimes results in unrealized appreciation or depreciation in fair value based on the operating performance trends of the particular portfolio of companies or capital transactions that they may have been involved with. During the quarter, we’ve recognized net reductions in fair value amounting to about $0.19 per share. The next factor pertains to the fact that higher expenses, primarily associated with the East transaction and the related Special Shareholder Meeting, had about $0.03 per share impact. Finally, on the positive side, our total investment income was higher than last year having a favorable impact of about $0.02 per share. On Slide 12 is a summary of our operating performance for the second quarters of 2019 and 2018 and also the first half of both periods. As we’ve previously mentioned, we have been investing in more income-producing instruments over the past couple of years. This has increased our investment income as well as realized some non-recurring income. Our second quarter investment income of $583,000 is up 41% over last year and included $194,000 non-recurring dividend. On a year-to-date basis, investment income is up $526,000 or 68% which also includes $225,000 of non-recurring fee income which was received during the first quarter. Our second quarter expenses of $824,000 are up $350,000 over the same quarter of the prior year. About $329,000 of…

I think we should.

Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Sam Robosky wit SER Asset Management. Please proceed with your questions.

Good afternoon, Dan and Pete. How much more expenses do we have to pay for the transaction? What is the balance? And as far as the dividend, which month do we expect to pay the dividends?

Let me take it in two pieces. As far as expenses, I believe substantially all of the transaction expenses we’ve received and paid. We do have a payment to KBW as disclosed in our proxy that when the transaction goes through that we owe them 300,000. But we paid 200, we have 300 left I believe. So substantially all the expenses that we’re going to incur have gone through that I am aware of. Your second one is when is the dividend going to be declared and paid. A lot of that is time dependent on when we get the deal approved and closed. I would like to see it close at the end of September. The Board can then – and it’s a Board decision, not a management decision. The Board can then look. We have to distribute out the RIC status the amount of retained earnings, in layman’s term. That’s approximately $22 million. Whether that’s the next month, my guess would be it’s fairly soon after the closing but it may go into early next year.

Okay. Thank you. Now as far as the price of the stock and the dividend paid at $1.50, do you expect to reverse split the stock as the dividend should reduce the price of stock? And with the new shareholder being maybe 3.60 or some number like that, do we expect to do a reverse split?

As you know, if we expected it and sort of announced it, we would. We’re not going to announce it, but we certainly know that that is sometimes common in these type of transactions.

But would you – my presumption you wouldn’t want your stock to trade, for example, currently it’s $2.50, $2.60 with a $1.50 dividends that might take it down to $1. Presumably you wouldn’t want the stock to trade at the level. Is that a fair assumption?

I understand the concept, but at this point we’re not at a liberty to discuss that.

Okay. Thank you.

Thanks, Sam. Good talking with you.

Okay.

[Operator Instructions]. Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back to management for closing remarks.

Again, we’re excited about what the next couple of months are going to bring because I do believe the transaction with East, which I think will be great for the company, to narrowing its final phase. We look forward to finishing that and then the new Rand will be up and running and providing dividends and we’re excited about the future. And we appreciate your support during this period and continue to take calls from you if you have any questions or concerns.

Ladies and gentlemen, this concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.