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]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 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 File Number: 814-00235 Rand Capital Corporation (Exact Name of Registrant as specified in its Charter) New York 16-0961359 (State or Other J ...

Rand Capital (NASDAQ:RAND) Q4 2020 Earnings Conference Call March 8, 2021 1:30 PM ET Company Participants Deborah Pawlowski - Investor Relations Pete Grum - Chief Executive Officer Dan Penberthy - Executive Vice President and Chief Financial Officer Operator Greetings, and welcome to Rand Capital Corporation Fourth Quarter 2020 Financial Results. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, t ...

FOURTH QUARTER AND FULL YEAR 2020 FINANCIAL RESULTS March 8, 2020 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 1934, as amended. All statements, other than historical facts, including but not limited to statements ...

Fees and Compensation - The Base Management Fee is calculated at an annual rate of 1.50% of total assets, excluding cash or cash equivalents[44]. - The Incentive Fees consist of an Income Based Fee and a Capital Gains Fee, with the Income Based Fee calculated quarterly based on Pre-Incentive Fee Net Investment Income[45][46]. - The hurdle rate for the Income Based Fee is set at 1.75% per quarter (7% annualized), with no fee payable if this rate is not exceeded[49]. - The Capital Gains Fee is calculated at 20% of the positive difference between cumulative realized capital gains and cumulative realized capital losses at the end of each calendar year[56]. - The Income Based Fee is subject to a "catch-up" provision, allowing for additional fees if certain thresholds are exceeded[61]. - The Adviser has a "catch-up" provision allowing for a 20.00% Income Based Fee on Pre-Incentive Fee Net Investment Income exceeding 1.75% in any calendar quarter[63]. - The Adviser will be reimbursed for costs related to investment advisory services, including management fees and operational expenses[75]. Investment Management and Operations - The Investment Committee, responsible for investment decisions, increased from five to six members as of December 31, 2020, following a change in control[42]. - RCM employed a total of four employees as of December 31, 2020, managing the operations of the company[37]. - The Adviser is authorized to enter into sub-advisory agreements to assist in investment recommendations and structuring[40]. - The company reimburses RCM for overhead and other expenses incurred in managing its operations[37]. - The Administration Agreement, effective December 31, 2020, will remain in effect for two years and can be terminated with 60 days' notice[76]. Regulatory Compliance - The company is regulated as a Business Development Company (BDC) under the 1940 Act, which imposes significant operational limitations[78]. - At December 31, 2020, the company was in compliance with the 70% qualifying assets rule under the 1940 Act[82]. - The Adviser is responsible for maintaining financial records and preparing reports required by the SEC[74]. - Rand SBIC has complied with SBA requirements since its inception, maintaining at least 20% to 25% of total dollars invested in "smaller enterprises" as defined by the SBA[86]. - As of December 31, 2020, Rand SBIC had $11,000,000 in outstanding SBA debenture instruments, with a maximum cash investment of $4.8 million in any one portfolio company[95][91]. - To qualify as a RIC, Rand SBIC must meet source-of-income, asset-diversification, and minimum distribution requirements, which are critical for tax treatment[97]. - As of December 31, 2020, neither Rand nor Rand SBIC had unrealized net built-in gains, which could affect their tax status if realized within five years of qualifying as RICs[104]. - The Corporation is subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless specific distribution requirements are met[99]. Financial Performance - Total assets decreased from $64,791,449 in 2019 to $60,966,942 in 2020, a decline of approximately 6.4%[299]. - Total investment income increased to $3,102,919 in 2020, up 14% from $2,724,696 in 2019[302]. - Net investment income improved to $1,756,128 in 2020, compared to a loss of $85,697 in 2019[302]. - The company reported a net realized loss on investments of $5,983,279 in 2020, compared to a gain of $861,838 in 2019[302]. - Cash and cash equivalents decreased from $25,815,720 in 2019 to $20,365,415 in 2020, a reduction of approximately 21%[299]. - Total liabilities increased from $11,162,933 in 2019 to $14,862,112 in 2020, an increase of about 33%[299]. - The company declared dividends totaling $8,190,723 in 2020, marking a significant distribution to shareholders[304]. - The weighted average shares outstanding rose to 2,268,356 in 2020 from 836,893 in 2019, indicating a substantial increase in share issuance[302]. - The total stockholders' equity decreased from $53,628,516 in 2019 to $46,104,830 in 2020, a decline of approximately 14%[299]. Investment Portfolio - The investment portfolio consists of debt and equity securities in private companies, which are subject to valuation risk due to the lack of public market[295]. - As of December 31, 2020, there were no off-balance sheet arrangements or hedging investments reported[296]. - The maximum term for financing by SBICs is limited, and control over a small business can be exercised for up to seven years from the initial acquisition[89]. - The SBA prohibits SBICs from investing in certain businesses, including those with the majority of employees outside the U.S. or in passive/non-operating businesses[88]. - The total investment in Caitec Acquisition, Inc. amounts to $3,810,702, which is 8.3% of net assets[309]. - The investment in HDI Acquisition LLC is valued at $1,275,140, accounting for 2.8% of net assets[311]. - The investment in Rheonix, Inc. totals $702,732, representing 1.5% of net assets[311]. - The total fair value of investments as of December 31, 2019, was $17,125,591, including both control and affiliate investments[343]. Unrealized Gains and Losses - The net change in unrealized depreciation on investments was $4,970,917 in 2020, compared to a depreciation of $3,065,811 in 2019[302]. - The net unrealized depreciation of total investment securities is approximately $672,000, with $10.6 million of unrealized appreciation and ($11.3) million of unrealized depreciation[319]. - Total Affiliate Investments reached $17,026,091, with gross additions of $5,916,662 and gross reductions of $10,791,318, resulting in a net income of $1,172,010[343]. - The total realized losses for the year included a net loss of $5,983,279, with significant losses from Genicon, Inc. and BeetNpath, LLC[408]. - Unrealized gains for Level 3 investments totaled $6,508,501, primarily driven by gains from Genicon and Centivo Corporation[408]. Tax and Distributions - The Corporation intends to elect to be treated as a RIC for the 2020 tax year, which will exempt it from corporate-level federal income taxes on net ordinary income or capital gains distributed to stockholders[417]. - The tax character of distributions paid during the year ended December 31, 2020, included $24,806,704 in ordinary income and $2,412,046 in long-term capital gains, totaling $27,218,750[421]. - The Corporation's taxable income for 2020 was estimated at $3,512,380, which includes a net increase in net assets resulting from operations of $743,766[421]. - Income taxes refunded during the years ended December 31, 2020, 2019, and 2018 amounted to $121,277, $728,523, and $26,448, respectively[380].

THIRD QUARTER 2020 | --- | --- | --- | --- | |-------|-------|-------|--------------------------------------| | | | | | | | | | FINANCIAL RESULTS | | | | | November 6, 2020 | | | | | | | | | | Allen F. "Pete" Grum President & CEO | Daniel P. Penberthy Executive Vice President & CFO © 2020 Rand Capital Corporation Nasdaq: RAND SAFE HARBOR STATEMENT 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 Securi ...

Rand Capital (NASDAQ:RAND) Q3 2020 Earnings Conference Call November 6, 2020 10:30 AM ET Company Participants Deborah Pawlowski – Investor Relations Pete Grum – Chief Executive Officer Dan Penberthy – Executive Vice President and Chief Financial Officer Conference Call Participants Sam Rebotsky – SER Asset Management Operator Greetings, and welcome to the Rand Capital Corporation Third Quarter 2020 Financial Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. ...