Financial Data and Key Metrics Changes - Total investment income for Q4 2021 was $1.2 million, a 17% increase compared to the previous year, driven by higher interest and dividend income from portfolio companies [23] - For the full year, total investment income increased 31% to $4.1 million [25] - Net investment income for Q4 2021 was $320,000 or $0.12 per share, with an adjusted net investment income of $0.16 per share [25] - Net assets at year-end 2021 were $60.7 million, up 32% year-over-year [28] Business Line Data and Key Metrics Changes - The fair value of the portfolio increased 60% to $64.1 million, with a significant shift towards income-producing investments [10] - The portfolio composition included 46% in fixed-rate debt investments, 32% in equity investments, and 22% in dividend-paying publicly traded BDCs and ACV Auctions stock [12] - The company made $19.7 million in investments during 2021, with $17.6 million in eight transactions, averaging about $2.5 million per investment [13] Market Data and Key Metrics Changes - The company exited five equity holdings in private companies, netting $2.7 million, and sold public equities for an additional $3.1 million in gains, totaling $5.8 million in gains for the year [14] - The company still holds 442,934 shares of ACV, valued at $18.81 per share at year-end [18] Company Strategy and Development Direction - The company aims to transition into a dividend-paying business development company with a focus on income-producing instruments [9] - The strategy includes making larger investments into portfolio companies to enhance scaling opportunities [12] - The company plans to continue expanding its portfolio and actively invest in income-producing assets while monitoring its equity portfolio mix for potential capital gains [32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting the successful transformation and positioning for financial flexibility [32] - The company expects actions taken to contribute to increasing net investment income and support growing dividends [32] Other Important Information - The company paid a total of $4.6 million in dividends in 2021, including a 50% increase in the regular quarterly cash dividend to $0.15 per share for Q1 2022 [30] - The company simplified its reporting and regulatory requirements by paying off the $11 million SBA loan and surrendering its SBA license [11] Q&A Session Summary - The Q&A session concluded without specific questions or answers being documented in the provided content [34]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Rand Capital Corporation (Exact name of registrant as specified in its charter) Washington, D.C. 20549 (State or Other Jurisdiction of Incorporation or organization) FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission Fi ...

THIRD QUARTER 2021 | --- | --- | --- | |-------|-------|-----------------------| | | | | | | | F INANCIAL R ESULTS | | | | | | | | November 5, 2021 | | | | Allen F. "Pete" Grum | | | | President & CEO | Daniel P. Penberthy Executive Vice President & CFO © 2021 Rand Capital Corporation Nasdaq: RAND FORWARD LOOKING STATEMENTS This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 193 ...

Rand Capital (NASDAQ:RAND) Q3 2021 Earnings Conference Call November 5, 2021 12:30 PM ET Company Participants Craig Mychajluk - IR Pete Grum - CEO Dan Penberthy - EVP & CFO Conference Call Participants Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a gui ...

[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20%E2%80%93%20FINANCIAL%20INFORMATION) [Financial Statements and Supplementary Data](index=4&type=section&id=Item%201.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Rand Capital Corporation's unaudited consolidated financial statements for Q3 2021 and comparative 2020 data, highlighting increased assets and net assets from investment appreciation [Consolidated Statements of Financial Position](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Position) As of September 30, 2021, total assets increased to $75.9 million from $61.0 million, driven by a $22.1 million rise in investment fair value, leading to total stockholders' equity of $60.2 million and NAV per share of $23.31 Consolidated Balance Sheet Summary (in thousands) | Account | Sep 30, 2021 (Unaudited) | Dec 31, 2020 | | :--- | :--- | :--- | | **Total Investments, at fair value** | $62,102 | $40,049 | | Cash and cash equivalents | $13,300 | $20,365 | | **Total Assets** | **$75,882** | **$60,967** | | Total Liabilities | $15,720 | $14,862 | | **Total Stockholders' Equity (Net Assets)** | **$60,162** | **$46,105** | | NAV per share | $23.31 | $17.86 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For the nine months ended September 30, 2021, net assets from operations increased significantly to $14.9 million, primarily due to a $17.8 million net realized and unrealized gain on investments, despite a $2.9 million net investment loss Operating Results for the Nine Months Ended September 30 (in thousands) | Metric | 2021 (Unaudited) | 2020 (Unaudited) | | :--- | :--- | :--- | | Total Investment Income | $2,840 | $2,047 | | Total Expenses | $5,748 | $1,449 | | Net Investment (Loss) Income | ($2,925) | $1,018 | | Net Realized and Unrealized Gains on Investments | $17,778 | $99 | | **Net Increase in Net Assets from Operations** | **$14,853** | **$1,116** | | Basic and Diluted EPS | $5.75 | $0.52 | - Total expenses for the nine months ended Sep 30, 2021, included a significant **$4.114 million accrual for capital gains incentive fees**, which was not present in the 2020 period[12](index=12&type=chunk) [Consolidated Statements of Changes in Net Assets](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) Net assets grew from $46.1 million at the start of 2021 to $60.2 million by Q3 2021, primarily driven by a $14.9 million net increase from operations, partially offset by dividends and treasury share purchases Changes in Net Assets for the Nine Months Ended Sep 30, 2021 (in thousands) | Description | Amount | | :--- | :--- | | Net Assets at beginning of period | $46,105 | | Net increase in net assets from operations | $14,853 | | Declaration of dividend | ($775) | | Purchase of treasury shares | ($21) | | **Net Assets at end of period** | **$60,162** | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2021, net cash used in operating activities was $2.8 million, primarily due to $15.1 million in new investments, resulting in a $7.1 million net decrease in cash and a period-end balance of $13.3 million Cash Flow Summary for the Nine Months Ended Sep 30 (in thousands) | Activity | 2021 (Unaudited) | 2020 (Unaudited) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($2,836) | ($1,947) | | Net Cash Used in Financing Activities | ($4,230) | ($4,795) | | **Net Decrease in Cash** | **($7,066)** | **($6,741)** | | Cash at Beginning of Period | $20,365 | $25,816 | | **Cash at End of Period** | **$13,300** | **$19,074** | [Consolidated Schedule of Portfolio Investments](index=9&type=section&id=Consolidated%20Schedule%20of%20Portfolio%20Investments) As of September 30, 2021, the investment portfolio's fair value reached $62.1 million, with 55.5% in Non-Control/Non-Affiliate investments and Software as the largest industry concentration at 29.9% Portfolio Composition by Investment Type (Sep 30, 2021) | Investment Type | Fair Value | % of Net Assets | | :--- | :--- | :--- | | Non-Control/Non-Affiliate | $33,414,928 | 55.5% | | Affiliate Investments | $28,084,871 | 46.7% | | Control Investments | $602,570 | 1.0% | | **Total Investments** | **$62,102,369** | **103.2%** | Top 5 Portfolio Company Investments by Fair Value (Sep 30, 2021) | Company | Fair Value | % of Net Assets | | :--- | :--- | :--- | | ACV Auctions, Inc. | $9,795,310 | 16.3% | | Tilson Technology Management, Inc. | $8,925,015 | 14.8% | | Open Exchange, Inc. | $5,570,000 | 9.3% | | ITA Acquisition, LLC | $3,919,103 | 6.5% | | Caitec, Inc. | $3,864,306 | 6.4% | Portfolio Industry Classification (Sep 30, 2021) | Industry | % of Total Investments | | :--- | :--- | | Software | 29.9% | | Professional Services | 21.8% | | Manufacturing | 14.3% | | Consumer Product | 11.3% | | Automotive | 10.9% | [Notes to the Consolidated Financial Statements](index=25&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) These notes detail the company's BDC and RIC status, fair value measurement of Level 3 investments, SBA debentures, related party transactions with RCM, and financial highlights - The company is an externally managed BDC that elected to be treated as a RIC starting January 1, 2020, with investment activities managed by Rand Capital Management, LLC (RCM)[77](index=77&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - As of September 30, 2021, **75% of the investment portfolio's fair value was classified as Level 3 assets**, valued using significant unobservable inputs determined by RCM and approved by the Board[31](index=31&type=chunk)[128](index=128&type=chunk) - The company pays RCM a base management fee of **1.50% of total assets (excluding cash)** and a two-part incentive fee (Income Based and Capital Gains), accruing a **$4,114,000 Capital Gains Incentive Fee** for the nine months ended Sep 30, 2021, based on both realized and unrealized gains[152](index=152&type=chunk)[162](index=162&type=chunk)[165](index=165&type=chunk) - Subsequent to the quarter-end, the company repaid its entire **$11 million of outstanding SBA debentures** and submitted a request to surrender its SBIC license[172](index=172&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=43&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and operations, highlighting the significant increase in net assets driven by strong portfolio performance, particularly unrealized gains, and detailing investment income, expenses, liquidity, and capital resources [Financial Condition](index=46&type=section&id=Financial%20Condition) The company's financial condition significantly strengthened, with net assets increasing by 30.5% to $60.2 million in the first nine months of 2021, fueled by a 55.1% increase in the investment portfolio's fair value to $62.1 million Financial Condition Summary | Metric | Sep 30, 2021 | Dec 31, 2020 | % Increase | | :--- | :--- | :--- | :--- | | Total Assets | $75,881,658 | $60,966,942 | 24.5% | | Total Liabilities | $15,719,533 | $14,862,112 | 5.8% | | **Net Assets** | **$60,162,125** | **$46,104,830** | **30.5%** | - During the first nine months of 2021, the company made **$15.1 million in new investments**, primarily in ITA Acquisition, DSD Operating, and Seybert's Billiards[199](index=199&type=chunk) - The company exited or received repayments from several investments totaling **$6.4 million at cost**, including Science and Medicine Group, Microcision, and Centivo Corporation[199](index=199&type=chunk)[200](index=200&type=chunk) [Results of Operations](index=48&type=section&id=Results%20of%20Operations) For the nine months ended Sep 30, 2021, total investment income grew 38.7% to $2.8 million, but total expenses surged to $5.7 million due to a $4.1 million capital gains incentive fee accrual, resulting in a net investment loss of $2.9 million despite strong portfolio performance Comparison of Nine Months Ended Sep 30 | Metric (in millions) | 2021 | 2020 | | :--- | :--- | :--- | | Total Investment Income | $2.8 | $2.0 | | Total Expenses | $5.7 | $1.4 | | Net Investment (Loss) Income | ($2.9) | $1.0 | | Net Realized Gain | $4.7 | $2.4 | | Net Change in Unrealized Appreciation | $13.0 | ($0.5) | - The increase in unrealized appreciation was primarily driven by valuation increases in **Open Exchange ($4.9M)**, **Tilson ($4.2M)**, and **ACV ($3.3M)**[231](index=231&type=chunk) - Realized gains were primarily from the sale of investments in **Givegab ($1.8M)**, **Centivo ($1.6M)**, and shares of **ACV ($1.0M)**[228](index=228&type=chunk)[229](index=229&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2021, the company had $13.3 million in cash and cash equivalents, which management deems sufficient for the next year, and subsequently repaid its $11 million SBA debentures and terminated its SBIC license - Total liquidity as of September 30, 2021, consisted of **$13.3 million in cash and cash equivalents**[239](index=239&type=chunk) - Subsequent to Q3 2021, the company repaid its **$11 million of outstanding SBA debentures** and terminated its SBIC license, which also terminated the availability of **$3 million in additional SBA leverage**[172](index=172&type=chunk)[239](index=239&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is valuation risk for its private company portfolio, which is valued in good faith due to the absence of a public market, and it holds some marketable securities subject to volatility - The main investment risk is **valuation risk** for the private company securities in the portfolio, as their fair value is determined in good faith in the absence of a ready market[243](index=243&type=chunk) - The company holds some marketable securities which are subject to **market volatility and liquidity risk** in the event of disorderly market conditions[243](index=243&type=chunk) [Controls and Procedures](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the Corporation's **disclosure controls and procedures were effective** as of September 30, 2021[245](index=245&type=chunk) - No material changes to internal control over financial reporting occurred during the third quarter of 2021[246](index=246&type=chunk) [PART II – OTHER INFORMATION](index=56&type=section&id=PART%20II.%20%E2%80%93%20OTHER%20INFORMATION) [Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings - None[248](index=248&type=chunk) [Risk Factors](index=56&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors detailed in the company's Annual Report on Form 10-K for the year ended December 31, 2020 - The report refers readers to the Risk Factors section of the Annual Report on Form 10-K for the year ended December 31, 2020[249](index=249&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2021, the company repurchased 1,148 shares of common stock at an average price of $18.09 under a plan authorizing up to $1.5 million in repurchases, with $1.48 million remaining available Issuer Purchases of Equity Securities (Q3 2021) | Period | Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jul 2021 | 0 | N/A | | Aug 2021 | 911 | $18.18 | | Sep 2021 | 237 | $17.75 | | **Total** | **1,148** | **$18.09** | - A share repurchase plan approved on April 22, 2021, authorizes up to **$1,500,000 in share repurchases** until April 22, 2022, with **$1,479,230 remaining available** as of September 30, 2021[252](index=252&type=chunk) [Defaults upon Senior Securities](index=56&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[253](index=253&type=chunk) [Other Information](index=56&type=section&id=Item%205.%20Other%20Information) The company reported no other information - None[255](index=255&type=chunk) [Exhibits](index=57&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including certificates of incorporation, by-laws, and officer certifications pursuant to the Sarbanes-Oxley Act - Exhibits filed with the report include corporate governance documents and CEO/CFO certifications (31.1, 31.2, 32.1)[258](index=258&type=chunk)

Financial Data and Key Metrics Changes - Total investment income for Q2 2021 increased by 20% to $811,000 compared to the previous year [6][18] - Net asset value (NAV) per share rose to $22.51, reflecting a 7% increase from the previous quarter and a 26% increase from year-end [6] - GAAP net investment loss was reported at $0.31 per share, while adjusted net investment income was $0.10 per share, up from $0.08 per share in the prior year [9][21] Business Line Data and Key Metrics Changes - The portfolio transitioned from equity investments to income-producing investments, with 55% in equity, 36% in fixed-rate debt, and 9% in dividend-paying publicly traded BDCs [10] - The fair value of investments increased by $7.5 million, with Open Exchange's fair value rising to $5.6 million, an increase of $4.9 million during the year [10] Market Data and Key Metrics Changes - 23 portfolio companies generated income in the quarter, compared to 13 in the prior year [18] - Dividend income increased by 45% to approximately $137,000, primarily from the BDC investment portfolio [18] Company Strategy and Development Direction - The company is focusing on evolving its portfolio to drive investment income and higher cash distributions [6] - The strategy includes transforming equity investments into debt to enhance ongoing dividends [63] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to execute the strategy to grow the portfolio and support a growing dividend, backed by a strong liquidity position of approximately $16 million [24][26] - The company will continue to monitor and adjust its dividend based on actual year-to-date GAAP and estimated tax results [24][46] Other Important Information - The company accrued $1.1 million in noncash expenses related to capital gains incentive fees, primarily due to realized gains from the sale of GiveGab [8][19] - The company has a share repurchase program authorized for up to $1.5 million, which expires in April 2022 [25] Q&A Session Summary Question: What was the value of ACVA on June 30? - The Class A at June 30 was $24.85 and the Class B was $23.61 [30] Question: How much of the accrued capital gains is attributable to ACVA? - The response indicated that the specific amount could not be provided immediately but would be followed up [32][34] Question: Is there an exit strategy for ACV? - The company aims to liquefy equity investments like ACV over time, converting cash into interest-paying debentures or loans [61][63] Question: How will adjustments to dividends be handled? - Adjustments will be made based on projected results, with capital gains potentially resulting in one-time dividends [45][49] Question: What precipitated the sale of the GiveGab position? - The company sold its proportional investment as part of a total acquisition of GiveGab, which was influenced by market conditions [69]

SECOND QUARTER 2021 | --- | --- | --- | --- | |-------|-------|-------|-----------------------| | | | | | | | | | | | | | | F INANCIAL R ESULTS | | | | | August 9, 2021 | | | | | | | | | | Allen F. "Pete" Grum | | | | | President & CEO | Daniel P. Penberthy Executive Vice President & CFO © 2021 Rand Capital Corporation Nasdaq: RAND FORWARD LOOKING STATEMENTS This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements and Supplementary Data](index=3&type=section&id=Item%201.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Rand Capital Corporation's unaudited consolidated financial statements and notes for H1 2021 and FY 2020 [Consolidated Statements of Financial Position](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Position) This statement details the company's assets, liabilities, and equity at specific points in time Consolidated Statements of Financial Position Summary | ASSETS | | :--- | :--- | | **June 30, 2021** | **December 31, 2020** | | Investments at fair value | $59,807,395 | $40,048,501 | | Cash and cash equivalents | $12,944,885 | $20,365,415 | | Total assets | $73,438,428 | $60,966,942 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | Total liabilities | $15,318,607 | $14,862,112 | | Total stockholders' equity (net assets) | $58,119,821 | $46,104,830 | | Total liabilities and stockholders' equity (net assets) | $73,438,428 | $60,966,942 | - Total assets increased by **20.5%** to **$73.4 million** at June 30, 2021, from **$61.0 million** at December 31, 2020, primarily driven by a significant increase in investments at fair value[11](index=11&type=chunk)[206](index=206&type=chunk) - Investments at fair value surged by **49.3%** to **$59.8 million** at June 30, 2021, from **$40.0 million** at December 31, 2020[11](index=11&type=chunk)[209](index=209&type=chunk) - Cash and cash equivalents decreased by **36.4%** to **$12.9 million** at June 30, 2021, from **$20.4 million** at December 31, 2020[11](index=11&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) This statement outlines the company's revenues, expenses, and net income/loss over specific periods Consolidated Statements of Operations Summary | Metric | | :--- | :--- | | **Three Months Ended June 30, 2021** | | Total investment income (USD) | $811,037 | | Total expenses (USD) | $1,619,958 | | Net investment (loss) income (USD) | ($810,887) | | Net realized gain on sales and dispositions of investments (USD) | $1,817,350 | | Net change in unrealized appreciation/depreciation on investments (USD) | $3,494,371 | | Net increase in net assets from operations (USD) | $4,500,834 | | Basic and diluted net increase in net assets from operations per share (USD) | $1.74 | | **Three Months Ended June 30, 2020** | | Total investment income (USD) | $674,545 | | Total expenses (USD) | $475,806 | | Net investment income (USD) | $198,739 | | Net realized gain on sales and dispositions of investments (USD) | $18,595 | | Net change in unrealized appreciation/depreciation on investments (USD) | $206,237 | | Net increase in net assets from operations (USD) | $423,571 | | Basic and diluted net increase in net assets from operations per share (USD) | $0.20 | | **Six Months Ended June 30, 2021** | | Total investment income (USD) | $1,827,429 | | Total expenses (USD) | $4,785,621 | | Net investment (loss) income (USD) | ($2,977,915) | | Net realized gain on sales and dispositions of investments (USD) | $2,128,105 | | Net change in unrealized appreciation/depreciation on investments (USD) | $13,381,403 | | Net increase in net assets from operations (USD) | $12,531,593 | | Basic and diluted net increase in net assets from operations per share (USD) | $4.85 | | **Six Months Ended June 30, 2020** | | Total investment income (USD) | $1,310,371 | | Total expenses (USD) | $992,312 | | Net investment income (USD) | $737,160 | | Net realized gain on sales and dispositions of investments (USD) | $2,412,046 | | Net change in unrealized appreciation/depreciation on investments (USD) | ($2,295,498) | | Net increase in net assets from operations (USD) | $853,708 | | Basic and diluted net increase in net assets from operations per share (USD) | $0.44 | - Net increase in net assets from operations significantly rose to **$12.5 million** for the six months ended June 30, 2021, compared to **$0.85 million** for the same period in 2020, primarily due to a substantial increase in net change in unrealized appreciation on investments[14](index=14&type=chunk) - Net investment income shifted from a gain of **$737,160** in H1 2020 to a loss of **($2,977,915)** in H1 2021, largely driven by a significant increase in expenses, particularly capital gains incentive fees[13](index=13&type=chunk) [Consolidated Statements of Changes in Net Assets](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) This statement tracks changes in the company's net assets due to operations, dividends, and other transactions Consolidated Statements of Changes in Net Assets Summary | Metric | | :--- | :--- | | **Six Months Ended June 30, 2021** | | Net assets at beginning of period (USD) | $46,104,830 | | Net increase in net assets from operations (USD) | $12,531,593 | | Declaration of dividend (USD) | ($516,602) | | Net assets at end of period (USD) | $58,119,821 | | **Six Months Ended June 30, 2020** | | Net assets at beginning of period (USD) | $53,628,516 | | Net increase in net assets from operations (USD) | $853,708 | | Purchase of treasury shares (USD) | ($14,304) | | Declaration of dividend (USD) | ($4,756,606) | | Net assets at end of period (USD) | $49,711,314 | - Net assets increased by **$12.0 million** to **$58.1 million** at June 30, 2021, from **$46.1 million** at December 31, 2020, primarily due to the net increase in net assets from operations[16](index=16&type=chunk)[206](index=206&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows Summary | Cash Flow Activity | | :--- | :--- | | **Six Months Ended June 30, 2021** | | Net cash (used in) operating activities (USD) | ($3,469,812) | | Net cash used in financing activities (USD) | ($3,950,718) | | Net decrease in cash and cash equivalents (USD) | ($7,420,530) | | Cash and cash equivalents, end of period (USD) | $12,944,885 | | **Six Months Ended June 30, 2020** | | Net cash provided by operating activities (USD) | $1,012,654 | | Net cash used in financing activities (USD) | ($4,770,910) | | Net decrease in cash and cash equivalents (USD) | ($3,758,256) | | Cash and cash equivalents, end of period (USD) | $22,057,464 | - Net cash used in operating activities was **($3.47) million** for the six months ended June 30, 2021, a decrease from **$1.01 million** provided by operating activities in the prior year, mainly due to increased investments in portfolio companies and changes in unrealized appreciation[18](index=18&type=chunk) - Net cash used in financing activities decreased to **($3.95) million** in H1 2021 from **($4.77) million** in H1 2020, primarily due to lower dividend payments[18](index=18&type=chunk) [Consolidated Schedule of Portfolio Investments (June 30, 2021)](index=9&type=section&id=Consolidated%20Schedule%20of%20Portfolio%20Investments%20as%20of%20June%2030%2C%202021) This schedule details the company's investment portfolio composition and fair values as of June 30, 2021 Portfolio Investments by Type (June 30, 2021) | Investment Type | Fair Value (June 30, 2021) (USD) | Percent of Net Assets (%) | | :--- | :--- | :--- | | Non-Control/Non-Affiliate Investments | $38,331,679 | 66.0% | | Affiliate Investments | $20,873,147 | 35.9% | | Control Investments | $602,569 | 1.0% | | Total Investments | $59,807,395 | 102.9% | Portfolio Investments by Industry (June 30, 2021) | Industry Classification | Percentage of Total Investments (at fair value) as of June 30, 2021 (%) | | :--- | :--- | | Software | 39.2% | | Professional Services | 14.8% | | Manufacturing | 14.8% | | Consumer Product | 11.7% | | BDC Investment Fund | 9.2% | | Automotive | 4.9% | | Healthcare | 4.6% | | Oil and Gas | 0.8% | | Total Investments | 100% | - Restricted securities represented **85%** of the fair value of the investment portfolio at June 30, 2021, including **$10.5 million** (**18%** of portfolio) of restricted ACV Auctions, Inc. shares[30](index=30&type=chunk) - The top five portfolio company concentrations at June 30, 2021, were ACV Auctions, Inc. (**24%**), Open Exchange, Inc. (**9%**), Tilson Technology Management, Inc. (**8%**), ITA Acquisition, LLC (**7%**), and Caitec, Inc. (**6%**)[129](index=129&type=chunk) [Consolidated Schedule of Portfolio Investments (December 31, 2020)](index=17&type=section&id=Consolidated%20Schedule%20of%20Portfolio%20Investments%20as%20of%20December%2031%2C%202020) This schedule details the company's investment portfolio composition and fair values as of December 31, 2020 Portfolio Investments by Type (December 31, 2020) | Investment Type | Fair Value (December 31, 2020) (USD) | Percent of Net Assets (%) | | :--- | :--- | :--- | | Non-Control/Non-Affiliate Investments | $26,157,302 | 56.8% | | Affiliate Investments | $13,891,199 | 30.1% | | Total Investments | $40,048,501 | 86.9% | Portfolio Investments by Industry (December 31, 2020) | Industry Classification | Percentage of Total Investments (at fair value) as of December 31, 2020 (%) | | :--- | :--- | | Software | 29.3% | | Manufacturing | 16.2% | | Professional Services | 14.6% | | Healthcare | 11.6% | | Consumer Product | 10.3% | | BDC Investment Funds | 8.2% | | Automotive | 7.3% | | Oil and Gas | 1.2% | | Contact Center | 1.2% | | Marketing | 0.1% | | Total Investments | 100% | - Restricted securities constituted **92%** of the fair value of the investment portfolio at December 31, 2020[61](index=61&type=chunk) - The top five portfolio company concentrations at December 31, 2020, were ACV Auctions, Inc. (**16%**), Tilson Technology Management, Inc. (**12%**), Caitec, Inc. (**10%**), Filterworks Acquisition USA, LLC (**7%**), and Science and Medicine Group, Inc. (**5%**)[129](index=129&type=chunk) [Notes to the Consolidated Financial Statements](index=25&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the company's accounting policies, investments, and other financial information [Note 1. ORGANIZATION](index=25&type=section&id=Note%201.%20ORGANIZATION) This note describes Rand Capital Corporation's structure, BDC status, management, and tax election - Rand Capital Corporation operates as a Business Development Company (BDC) under the 1940 Act and has a wholly-owned Small Business Investment Company (SBIC) subsidiary, Rand SBIC, Inc[81](index=81&type=chunk)[82](index=82&type=chunk) - In November 2019, Rand completed a stock sale transaction with East Asset Management, leading to external management by Rand Capital Management, LLC (RCM) as its investment adviser and administrator[83](index=83&type=chunk) - Rand intends to elect U.S. Federal tax treatment as a Regulated Investment Company (RIC) as of January 1, 2020, and paid a special dividend of **$23.7 million** (**$1.62 per share**) in May 2020 to distribute accumulated earnings and profits[85](index=85&type=chunk) - A **1-for-9** reverse stock split was effected in May 2020, reducing outstanding shares from approximately **23.8 million** to **2.6 million**[88](index=88&type=chunk)[119](index=119&type=chunk) - The SEC granted exemptive relief in October 2020 and a new order in March 2021, allowing Rand to co-invest with affiliated funds managed by RCM and Callodine Group, LLC[89](index=89&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk) [Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=27&type=section&id=Note%202.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the company's key accounting principles, including investment classification and valuation - Investments are classified into Control, Affiliate, and Non-Control/Non-Affiliate categories based on voting security ownership (Control: **>25%** or **>50%** board; Affiliate: **5-25%**; Non-Control/Non-Affiliate: neither)[97](index=97&type=chunk) - Investments are valued at fair value, determined in good faith by RCM and approved by the Board of Directors, with unrestricted publicly traded securities valued at the average closing price for the last three trading days of the reporting period[98](index=98&type=chunk)[99](index=99&type=chunk) - Interest income is recognized on an accrual basis, except for investments in default or doubtful collection, where it's recognized upon receipt. PIK interest is added to the principal balance[101](index=101&type=chunk)[104](index=104&type=chunk) - Dividend income is recognized on an accrual basis when reasonably estimable, including cumulative dividends on preferred equity[105](index=105&type=chunk)[106](index=106&type=chunk) - The Corporation intends to elect RIC status for tax purposes, which generally relieves it from corporate-level federal income taxes if at least **90%** of taxable income is distributed[121](index=121&type=chunk) Top 5 Portfolio Company Concentrations | Top 5 Portfolio Company Concentrations | | :--- | :--- | | **June 30, 2021** | | ACV Auctions, Inc. (ACV) | 24% | | Open Exchange, Inc. (Open Exchange) | 9% | | Tilson Technology Management, Inc. (Tilson) | 8% | | ITA Acquisition, LLC (ITA) | 7% | | Caitec, Inc. (Caitec) | 6% | | **December 31, 2020** | | ACV Auctions, Inc. (ACV) | 16% | | Tilson Technology Management, Inc. (Tilson) | 12% | | Caitec, Inc. (Caitec) | 10% | | Filterworks Acquisition USA, LLC (Filterworks) | 7% | | Science and Medicine Group, Inc. (SMG Group) | 5% | [Note 3. INVESTMENTS](index=31&type=section&id=Note%203.%20INVESTMENTS) This note details investment valuation methodologies, fair value measurements, and changes in Level 3 assets - The Corporation uses asset, market, and income approaches to determine fair value, with significant unobservable inputs for Level 3 investments including EBITDA and revenue multiples, liquidation seniority, and transaction pricing[132](index=132&type=chunk)[141](index=141&type=chunk)[145](index=145&type=chunk) Fair Value Measurement Levels | Fair Value Measurement Level | | :--- | :--- | | **June 30, 2021** | | Level 1 (Quoted prices in active markets) | 15% | | Level 2 (Observable inputs other than quoted prices) | 18% | | Level 3 (Significant unobservable inputs) | 67% | | **December 31, 2020** | | Level 1 | 8% | | Level 3 | 92% | | Level 2 | 0% | Level 3 Investments by Valuation Approach (June 30, 2021) | Investment Type | EBITDA Multiple (X) | Liquidation Seniority | Revenue Multiple (X) | Transaction Pricing | Totals | | :--- | :--- | :--- | :--- | :--- | :--- | | Non-Control/Non-Affiliate Equity | $— | $500,000 | $1,026,219 | $7,638,112 | $9,164,331 | | Non-Control/Non-Affiliate Loan and Debt | $3,588,901 | $2,385,913 | $— | $3,586,152 | $9,560,966 | | Affiliate Equity | $2,062,500 | $22,841 | $1,274,015 | $5,888,348 | $9,247,704 | | Affiliate Loan and Debt | $2,373,519 | $— | $— | $9,251,924 | $11,625,443 | | Control Equity | $— | $— | $— | $157,654 | $157,654 | | Control Debt | $— | $— | $— | $444,915 | $444,915 | | **Total Level 3 Investments** | **$8,024,920** | **$2,908,754** | **$2,300,234** | **$26,967,105** | **$40,201,013** | | **Range** | 5-6X | | 1X | 2X-4X | Not Applicable | | **Weighted Average** | 5.5X | | 1X | 2.9X | Not Applicable | - For the six months ended June 30, 2021, Level 3 assets saw a net increase of **$3,448,849**, with significant unrealized gains from Open Exchange, Inc. and ACV Auctions, Inc., and substantial new investments in ITA Acquisition, LLC and Seybert's Billiards Corporation[149](index=149&type=chunk) [Note 4. OTHER ASSETS](index=36&type=section&id=Note%204.%20OTHER%20ASSETS) This note provides a breakdown and changes in other assets, including receivables and prepaid expenses Other Assets Summary | Other Assets | | :--- | :--- | | **June 30, 2021** | **December 31, 2020** | | Dividend receivable (USD) | $96,060 | $65,700 | | Prepaid expenses (USD) | $50,737 | $8,400 | | Escrow receivable (USD) | $35,766 | $— | | Total other assets (USD) | $182,563 | $74,100 | - Total other assets increased by **146.4%** to **$182,563** at June 30, 2021, from **$74,100** at December 31, 2020, primarily due to increases in dividend receivable, prepaid expenses, and the addition of an escrow receivable[152](index=152&type=chunk) [Note 5. COMMITMENTS AND CONTINGENCIES](index=36&type=section&id=Note%205.%20COMMITMENTS%20AND%20CONTINGENCIES) This note confirms the absence of significant commitments or contingencies for the reporting periods - The Corporation had no commitments or contingencies at June 30, 2021, or December 31, 2020[153](index=153&type=chunk) [Note 6. SBA DEBENTURES](index=36&type=section&id=Note%206.%20SBA%20DEBENTURES) This note details the company's outstanding SBA debentures, interest rates, maturities, and available leverage SBA Debentures Summary | SBA Debentures | | :--- | :--- | | **June 30, 2021** | **December 31, 2020** | | Debentures guaranteed by the SBA (USD) | $11,000,000 | $11,000,000 | | Less unamortized issue costs (USD) | ($156,575) | ($175,413) | | Debentures guaranteed by the SBA, net (USD) | $10,843,425 | $10,824,587 | - Outstanding SBA debentures remained at **$11.0 million** at June 30, 2021, with a weighted average interest rate of **3.45%** (including SBA annual fee)[112](index=112&type=chunk)[156](index=156&type=chunk) - The debentures mature between **2022** and **2029**, with **$3.0 million** maturing in **2022** and **$3.0 million** in **2029**[158](index=158&type=chunk) - The Corporation had **$3.0 million** in additional leverage available from the SBA at June 30, 2021[157](index=157&type=chunk) [Note 7. CHANGES IN STOCKHOLDERS' EQUITY (NET ASSETS)](index=37&type=section&id=Note%207.%20CHANGES%20IN%20STOCKHOLDERS%27%20EQUITY%20%28NET%20ASSETS%29) This note explains the changes in stockholders' equity, including operations, dividends, and treasury share transactions Stockholders' Equity (Net Assets) Summary | Stockholders' Equity (Net Assets) | | :--- | :--- | | **Six Months Ended June 30, 2021** | | Net assets at beginning of period (USD) | $46,104,830 | | Net increase in net assets from operations (USD) | $12,531,593 | | Payment of Dividend (USD) | ($516,602) | | Net assets at end of period (USD) | $58,119,821 | | **Six Months Ended June 30, 2020** | | Net assets at beginning of period (USD) | $53,628,516 | | Net increase in net assets from operations (USD) | $853,708 | | Payment of Dividend (USD) | ($4,756,606) | | Purchase of treasury shares (USD) | ($14,304) | | Net assets at end of period (USD) | $49,711,314 | - Total distributable earnings increased significantly from a deficit of **($4.62) million** at January 1, 2021, to a positive **$7.40 million** at June 30, 2021, driven by the net increase in net assets from operations[159](index=159&type=chunk) [Note 8. RELATED PARTY TRANSACTIONS](index=38&type=section&id=Note%208.%20RELATED%20PARTY%20TRANSACTIONS) This note describes compensation arrangements with Rand Capital Management, including base and incentive fees - Rand pays RCM a Base Management Fee of **1.50%** annually of total assets (excluding cash/cash equivalents) and an Incentive Fee with two parts: Income Based Fee and Capital Gains Fee[162](index=162&type=chunk)[164](index=164&type=chunk) Base Management Fee Details | Base Management Fee | | :--- | :--- | | **Period** | **Amount (USD)** | | Three months ended June 30, 2021 | $212,907 | | Six months ended June 30, 2021 | $388,516 | | Three months ended June 30, 2020 | $141,386 | | Six months ended June 30, 2020 | $281,763 | - The Income Based Fee is calculated quarterly based on Pre-Incentive Fee Net Investment Income, subject to a **1.75%** hurdle rate and an Incentive Fee Cap based on Cumulative Net Return[165](index=165&type=chunk)[166](index=166&type=chunk) - The Capital Gains Fee is determined annually, calculated as **20.0%** of cumulative aggregate realized capital gains less cumulative aggregate realized capital losses and aggregate unrealized capital depreciation[172](index=172&type=chunk) - As of June 30, 2021, a GAAP-required capital gains incentive fee accrual of **$3,660,000** was recorded, reflecting net portfolio appreciation, though actual payment is contingent on realized gains[175](index=175&type=chunk)[176](index=176&type=chunk) - A new Investment Management Agreement and Administration Agreement were approved by shareholders and entered into on December 31, 2020, following a change of control in RCM[177](index=177&type=chunk)[179](index=179&type=chunk) [Note 9. FINANCIAL HIGHLIGHTS](index=41&type=section&id=Note%209.%20FINANCIAL%20HIGHLIGHTS) This note presents key financial performance metrics, including NAV, total return, and expense ratios Financial Highlights Summary | Financial Highlight | | :--- | :--- | | **Six Months Ended June 30, 2021** | | Net asset value, end of period (USD) | $22.51 | | Basic and diluted net increase in net assets from operations per share (USD) | $4.85 | | Total return based on market price (%) | (4.83%) | | Total shareholder return (includes dividends paid) (%) | 3.86% | | Total return based on net asset value (%) | 26.06% | | Ratio of operating expenses before income taxes to average net assets (%) | 9.18% | | Debt/Equity ratio (%) | 18.7% | | Portfolio turnover (%) | 22.6% | | Net assets, end of period (USD) | $58,119,821 | | **Six Months Ended June 30, 2020** | | Net asset value, end of period (USD) | $25.49 | | Basic and diluted net increase in net assets from operations per share (USD) | $0.44 | | Total return based on market price (%) | (54.5%) | | Total shareholder return (includes dividends paid) (%) | (45.4%) | | Total return based on net asset value (%) | (7.3%) | | Ratio of operating expenses before income taxes to average net assets (%) | 1.92% | | Debt/Equity ratio (%) | 21.7% | | Portfolio turnover (%) | 10.7% | | Net assets, end of period (USD) | $49,711,314 | - Net asset value per share increased to **$22.51** at June 30, 2021, from **$17.86** at December 31, 2020[206](index=206&type=chunk) - Total return based on net asset value was **26.06%** for the six months ended June 30, 2021, a significant improvement from **(7.3%)** in the prior year[184](index=184&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Rand Capital Corporation's financial condition, operational results, and investment strategy for H1 2021 [Overview](index=43&type=section&id=Overview) This section outlines Rand Capital Corporation's investment strategy, BDC status, and COVID-19 response - Rand Capital Corporation is an externally managed investment company focused on lending to and investing in lower middle market companies, aiming for current income and capital appreciation[189](index=189&type=chunk) - The company operates as a BDC and primarily invests through its SBIC subsidiary, Rand SBIC, Inc., and now also directly through the parent company following a **$25 million** investment by East Asset Management in November 2019[190](index=190&type=chunk)[191](index=191&type=chunk) - Rand intends to elect RIC tax treatment as of January 1, 2020, requiring distribution of at least **90%** of taxable income to shareholders, leading to regular quarterly cash dividends[194](index=194&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) - The company received SEC exemptive relief to co-invest with affiliated funds managed by RCM and Callodine Group, LLC, aiming for additional investment opportunities and diversification[200](index=200&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk) - RCM actively monitors portfolio companies for liquidity and operational status in response to the COVID-19 pandemic[203](index=203&type=chunk) [Financial Condition](index=47&type=section&id=Financial%20Condition) This section analyzes Rand Capital Corporation's assets, liabilities, net assets, and NAV per share Financial Condition Summary | Metric | June 30, 2021 | December 31, 2020 | Increase (USD) | % Increase (%) | | :--- | :--- | :--- | :--- | :--- | | Total assets (USD) | $73,438,428 | $60,966,942 | $12,471,486 | 20.5% | | Total liabilities (USD) | $15,318,607 | $14,862,112 | $456,495 | 3.1% | | Net assets (USD) | $58,119,821 | $46,104,830 | $12,014,991 | 26.1% | - Net asset value per share increased to **$22.51** at June 30, 2021, from **$17.86** at December 31, 2020[206](index=206&type=chunk) - Cash and cash equivalents represented approximately **22%** of net assets at June 30, 2021, down from **44%** at December 31, 2020[207](index=207&type=chunk) [Composition of Our Investment Portfolio](index=47&type=section&id=Composition%20of%20Our%20Investment%20Portfolio) This section details the changes in the investment portfolio's fair value, cost, and unrealized appreciation Investment Portfolio Composition Summary | Investment Metric | June 30, 2021 | December 31, 2020 | Increase (USD) | % Increase (%) | | :--- | :--- | :--- | :--- | :--- | | Investments, at cost (USD) | $47,096,853 | $40,720,313 | $6,376,540 | 15.7% | | Unrealized appreciation (depreciation), net (USD) | $12,710,542 | ($671,812) | $13,382,354 | NA | | Investments, at fair value (USD) | $59,807,395 | $40,048,501 | $19,758,894 | 49.3% | - Total investments at fair value increased by **49.3%** to **$59.8 million** at June 30, 2021, representing **103%** of net assets, up from **87%** at December 31, 2020[209](index=209&type=chunk) - The investment strategy has shifted towards higher yielding debt investments and public equity in other BDCs, aiming to generate current income and capital appreciation[210](index=210&type=chunk) Changes in Investments at Cost (H1 2021) | Change in Investments, at Cost (Six Months Ended June 30, 2021) | | :--- | :--- | | New investments (USD) | $11,273,836 | | Other changes to investments (OID amortization, interest conversion) (USD) | $216,089 | | Investments repaid, sold, liquidated or converted (USD) | ($5,113,385) | | Net change in investments, at cost (USD) | $6,376,540 | [Results of Operations](index=48&type=section&id=Results%20of%20Operations) This section compares Rand Capital Corporation's investment income, expenses, and gains for Q2 and H1 2021 vs 2020 [Comparison of Q2 2021 to Q2 2020](index=48&type=section&id=Comparison%20of%20the%20three%20months%20ended%20June%2030%2C%202021%20to%20the%20three%20months%20ended%20June%2030%2C%202020) This section compares Rand Capital Corporation's Q2 2021 and Q2 2020 financial results, including income and expenses Investment Income Comparison (Q2 2021 vs Q2 2020) | Investment Income (Q2 YoY) | | :--- | :--- | | **Metric** | **Q2 2021** | **Q2 2020** | **Change (USD)** | **% Change (%)** | | Interest from portfolio companies (USD) | $642,206 | $570,686 | $71,520 | 12.5% | | Interest from other investments (USD) | $243 | $2,754 | ($2,511) | (91.2%) | | Dividend and other investment income (USD) | $137,047 | $94,438 | $42,609 | 45.1% | | Fee income (USD) | $31,541 | $6,667 | $24,874 | 373.1% | | **Total investment income (USD)** | **$811,037** | **$674,545** | **$136,492** | **20.2%** | - Total investment income increased by **20.2%** to **$811,037** in Q2 2021, driven by higher interest from portfolio companies (up **12.5%**) due to new debt investments and a significant increase in fee income (up **373.1%**)[213](index=213&type=chunk)[215](index=215&type=chunk)[217](index=217&type=chunk) Expenses Comparison (Q2 2021 vs Q2 2020) | Expenses (Q2 YoY) | | :--- | :--- | | **Metric** | **Q2 2021** | **Q2 2020** | **Change (USD)** | **% Change (%)** | | Total expenses (USD) | $1,619,958 | $475,806 | $1,144,152 | 240.5% | - Total expenses increased by **240.5%** to **$1,619,958** in Q2 2021, primarily due to a **$1,060,000** increase in the GAAP-required capital gains incentive fee accrual and a **$72,000** increase in the base management fee[219](index=219&type=chunk) - Net investment income shifted to a loss of **($810,887)** in Q2 2021 from a gain of **$198,739** in Q2 2020[222](index=222&type=chunk) Realized Gain on Investments Comparison (Q2 2021 vs Q2 2020) | Realized Gain on Investments (Q2 YoY) | | :--- | :--- | | **Metric** | **Q2 2021** | **Q2 2020** | **Change (USD)** | | Realized gain on investments before income taxes (USD) | $1,817,350 | $18,595 | $1,798,755 | - A significant realized gain of **$1,817,350** was recognized in Q2 2021 from the sale of the investment in Givegab[223](index=223&type=chunk) Change in Unrealized Appreciation/Depreciation Comparison (Q2 2021 vs Q2 2020) | Change in Unrealized Appreciation/Depreciation (Q2 YoY) | | :--- | :--- | | **Metric** | **Q2 2021** | **Q2 2020** | **Change (USD)** | | Change in unrealized appreciation/depreciation before income taxes (USD) | $3,495,322 | $206,237 | $3,289,085 | - Unrealized appreciation increased significantly in Q2 2021, primarily due to a **$4.9 million** increase in Open Exchange's valuation and a **$1.7 million** decrease in ACV Auctions' valuation (post-IPO, due to restricted Class B stock discount)[225](index=225&type=chunk)[226](index=226&type=chunk)[228](index=228&type=chunk) [Comparison of H1 2021 to H1 2020](index=52&type=section&id=Comparison%20of%20the%20six%20months%20ended%20June%2030%2C%202021%20to%20the%20six%20months%20ended%20June%2030%2C%202020) This section compares Rand Capital Corporation's H1 2021 and H1 2020 financial results, including income and expenses Investment Income Comparison (H1 2021 vs H1 2020) | Investment Income (H1 YoY) | | :--- | :--- | | **Metric** | **H1 2021** | **H1 2020** | **Change (USD)** | **% Change (%)** | | Interest from portfolio companies (USD) | $1,352,968 | $1,106,387 | $246,581 | 22.3% | | Interest from other investments (USD) | $12,870 | $86,004 | ($73,134) | (85.0%) | | Dividend and other investment income (USD) | $383,716 | $107,563 | $276,153 | 256.7% | | Fee income (USD) | $77,875 | $10,417 | $67,458 | 647.6% | | **Total investment income (USD)** | **$1,827,429** | **$1,310,371** | **$517,058** | **39.5%** | - Total investment income increased by **39.5%** to **$1,827,429** in H1 2021, driven by a **22.3%** increase in interest from portfolio companies due to new debt investments and a **256.7%** increase in dividend income[232](index=232&type=chunk)[234](index=234&type=chunk)[236](index=236&type=chunk) Expenses Comparison (H1 2021 vs H1 2020) | Expenses (H1 YoY) | | :--- | :--- | | **Metric** | **H1 2021** | **H1 2020** | **Change (USD)** | **% Change (%)** | | Total expenses (USD) | $4,785,621 | $992,312 | $3,793,309 | 382.3% | - Total expenses increased by **382.3%** to **$4,785,621** in H1 2021, primarily due to a **$3,660,000** increase in the GAAP-required capital gains incentive fee accrual and a **$107,000** increase in the base management fee[238](index=238&type=chunk) - Net investment income shifted to a loss of **($2,977,915)** in H1 2021 from a gain of **$737,160** in H1 2020[240](index=240&type=chunk) Realized Gain on Investments Comparison (H1 2021 vs H1 2020) | Realized Gain on Investments (H1 YoY) | | :--- | :--- | | **Metric** | **H1 2021** | **H1 2020** | **Change (USD)** | | Realized gain on investments before income taxes (USD) | $2,128,105 | $2,412,046 | ($283,941) | - Realized gains decreased slightly in H1 2021 to **$2,128,105**, including gains from the sale of Givegab (**$1.8M**), Apollo Investment Corporation (**$175K**), and ClearView Social, Inc. (**$135K**)[241](index=241&type=chunk) Change in Unrealized Appreciation/Depreciation Comparison (H1 2021 vs H1 2020) | Change in Unrealized Appreciation/Depreciation (H1 YoY) | | :--- | :--- | | **Metric** | **H1 2021** | **H1 2020** | **Change (USD)** | | Change in unrealized appreciation/depreciation before income taxes (USD) | $13,382,354 | ($522,086) | $13,904,440 | - Unrealized appreciation significantly increased to **$13,382,354** in H1 2021, primarily driven by substantial appreciation in ACV Auctions (**$7.6M**) and Open Exchange (**$4.9M**)[244](index=244&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk) [Liquidity and Capital Resources](index=56&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses Rand Capital Corporation's cash position, available leverage, and future funding needs - At June 30, 2021, total liquidity included **$12.9 million** in cash and cash equivalents and an undrawn SBA leverage commitment of **$3.0 million**[251](index=251&type=chunk) - The company anticipates sufficient liquidity for the next year from current cash, SBA leverage, and scheduled interest payments, with a strategy to shift towards income-producing investments[253](index=253&type=chunk) - SBA debt obligations begin to mature in **2022**, requiring identification of future funding sources if investment liquidations are insufficient[252](index=252&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=57&type=section&id=Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section addresses market risk, investment valuation, and the absence of off-balance sheet arrangements - The investment portfolio, primarily consisting of equity and debt securities in private companies, is subject to significant valuation risk due to the absence of public markets[255](index=255&type=chunk) - Valuations are determined in good faith by RCM and approved by the Board, with changes recorded as 'Net change in unrealized depreciation on investments'[255](index=255&type=chunk) - The company did not have any off-balance sheet arrangements or hedging/derivative financial instrument investments as of June 30, 2021[256](index=256&type=chunk) [Controls and Procedures](index=57&type=section&id=Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the Corporation's disclosure controls and procedures were effective as of June 30, 2021[257](index=257&type=chunk) - There have been no material changes in internal control over financial reporting during the most recent fiscal quarter[258](index=258&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=58&type=section&id=Item%201.%20Legal%20Proceedings) This section states that there are no legal proceedings to report for the period - There are no legal proceedings to report[260](index=260&type=chunk) [Item 1A. Risk Factors](index=58&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the 'Risk Factors' section in the company's Annual Report on Form 10-K - Refer to the 'Risk Factors' section in the Annual Report on Form 10-K for the year ended December 31, 2020, for detailed risk information[261](index=261&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=58&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details share repurchase activities and authorization, noting no repurchases in Q2 2021 Share Repurchase Program Activity | Period | Total number of shares purchased | Average price paid per share (USD) | Maximum dollar amount of shares that may yet be purchased (USD) | | :--- | :--- | :--- | :--- | | 4/1/2021 – 4/30/2021 | — | — | $1,500,000 | | 5/1/2021 – 5/31/2021 | — | — | $1,500,000 | | 6/1/2021 – 6/30/2021 | — | — | $1,500,000 | | Total | — | — | | - No shares of common stock were repurchased in open market transactions during the second quarter of 2021[263](index=263&type=chunk) - A new share repurchase plan was approved on April 22, 2021, authorizing the repurchase of up to **$1,500,000** of common stock at prices no greater than the current net asset value, valid until April 22, 2022[265](index=265&type=chunk) [Item 3. Defaults upon Senior Securities](index=58&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) This section confirms that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[266](index=266&type=chunk) [Item 4. Mine Safety Disclosures](index=58&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Rand Capital Corporation - This item is not applicable[266](index=266&type=chunk) [Item 5. Other Information](index=58&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report - There is no other information to report[267](index=267&type=chunk) [Item 6. Exhibits](index=59&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including organizational documents and certifications - Exhibits include the Certificate of Incorporation, By-laws, Specimen certificate of common stock, and Certifications of Principal Executive and Financial Officers[269](index=269&type=chunk)

FIRST QUARTER 2021 | --- | --- | --- | --- | --- | --- | |-------|-------|-------|-------|------------|----------------------| | | | | | F INANCIAL | R ESULTS | | | | | | | May 10, 2021 | | | | | | | | | | | | | | Allen F. "Pete" Grum | | | | | | | President & CEO | Daniel P. Penberthy Executive Vice President & CFO © 2021 Rand Capital Corporation Nasdaq: RAND FORWARD LOOKING STATEMENTS This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, a ...

Financial Data and Key Metrics Changes - Total investment income for Q1 2021 increased approximately 60% year-over-year to $1 million, equating to $0.39 per share [6][16] - Net asset value rose 16.9% to $20.87 per share, primarily due to the increase in fair value of the investment in ACV Auctions [7] - GAAP net investment loss was reported at $0.84 per share, attributed to $2.6 million in non-cash expenses related to capital gains incentive fees [7][19] - Adjusted net investment income was $0.16 per share when excluding the accrued capital gains incentive fees [19] Business Line Data and Key Metrics Changes - The number of companies contributing to investment income nearly doubled compared to the prior year [6] - The portfolio composition at quarter-end consisted of approximately 56% equity investments, 34% fixed-rate debt investments, and 10% in dividend-paying publicly traded BDCs [9] Market Data and Key Metrics Changes - The fair value of investments in publicly traded BDCs totaled approximately $5.1 million at quarter-end [12] - The largest investment during the quarter was a $2.8 million term loan with warrants from Seybert's Billiards Supply [10] Company Strategy and Development Direction - The company is transitioning its portfolio from equity investments to income-producing investments, with a focus on dividend-paying assets [6][25] - The company plans to continue adjusting its portfolio mix to drive returns and support a growing dividend [25] Management's Comments on Operating Environment and Future Outlook - Management highlighted the strong liquidity position with approximately $18 million available for new investments, which includes $14.9 million in cash and an undrawn SBA commitment of $3 million [22] - The company aims to distribute a significant portion of its income to shareholders in the form of cash dividends, maintaining an annualized dividend rate of $0.40 based on conservative estimates [23][24] Other Important Information - The company announced its first regular quarterly dividend of $0.10 per share during Q1 2021, with a second quarter dividend also set at $0.10 per share [8][23] - A share repurchase program was renewed, authorizing the purchase of up to $1.5 million of stock [24] Q&A Session Summary - There were no questions during the Q&A session, and the call concluded with closing remarks from management [27][28]