Welcome to 180 Degree Capital Corp.'s Fourth Quarter 2021 Financial Results Update Call. This is Daniel Wolfe, President and Portfolio Manager of 180 Degree Capital. Kevin Rendino, our Chief Executive Officer and Portfolio Manager, and I would like to welcome you to our call this morning. All participants are currently in a listen-only mode. Following our prepared remarks, we will open the line to questions. . I would like to remind participants that this call is being recorded, and that we will be referring to a slide deck that we have posted on our Investor Relations Web site at ir.180degreecapital.com under Financial Results. Please turn to Slide 1 that contains our Safe Harbor statement. This presentation may contain statements of a forward-looking nature relating to future events. Statements contained in this presentation that are forward-looking statements are intended to be made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. These statements reflect the company's current beliefs, and a number of important factors could cause actual results to differ materially from those expressed herein. Please see the company's filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties associated with the company's business that could affect the company's actual results. Except as otherwise required by federal securities laws, 180 Degree Capital Corp. undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties. I would now like to turn the call over to Kevin.

Thank you, Daniel, and good morning, everyone. I'll start with a review of the fourth quarter and turn it over to Daniel for some comments. And then towards the end, I'll talk about the current environment that we're living through in Q1. Let's start with Slide 2. We concluded our fifth full year as 180 Degree Capital by reporting an increase in our NAV for Q4 of 2.8%. In the quarter, our public asset performance was 6.1% or 9%, if you include the carried interest from our SMA, versus a minus 2.7% decline for the Russell Microcap Index, so a very good quarter indeed. For the calendar year, we achieved 34.7% return in our public assets or 38.2%, if you include the SMA, versus a 19.3% return for the Russell Microcap. In the quarter, we did have a $1.6 million decline in the quarter for our private assets and those were led by declines in Nanosys and Seaport. That said, we have had some good news to start the year from our private portfolio and I'd point you to two of our most recent press announcements regarding Petra Pharmaceutical and D-Wave. We hope there is more to come on that front in the ensuing months, and I'll talk about that in my closing remarks. We closed the year out with close to $77 million in cash and public assets, equating to roughly $7.30 per share with an additional $3.38 of book value in our private portfolio. On the next slide, you'll see our historical trend of our NAV. It should come as no coincidence that the direction of this chart changed from years of decay in our book value to five years of growth at the exact time that we've changed our strategy five years ago, centering on value-based public market activism strategy. On Slide 4, we show the trend of our cash and public assets over the course of our history. We presently are in a market that is very difficult for our asset class. What's interesting to me about this chart is despite our success from running our cash and public assets from 20 million to nearly 80 million in five years, we've gone through some very difficult markets along the way. The fourth quarter of 2018 was one where there was a 25% hiccup to our cash and public assets from the prior quarter. And I don't need to remind anybody about the painful market dislocation at the onset of the pandemic. But for us, we saw a 33% decline in our liquid assets from the quarter before. So whatever pain we're living through today, I'm comforted by knowing that at some point it will end if we get the names right to invest in during this period, we can continue along the trajectory that started in the fourth quarter of 2016. We've shown this chart, the next one, for the 20 quarters of 180's history. Obviously, the goal is to narrow the discount to our NAV as best we can. And to do this, our strategy revolves around turning our balance sheet into public assets and building enough scale in our assets that over time, we can contemplate distributions to our shareholders without sacrificing our ability to grow our assets from our public market stock picking. As for the sources of change in our net assets for Q4, please turn to Slide 6. Here we show that we achieved $0.64 of gains from our public stocks, $0.15 of losses from our private portfolio, and $0.20 of expenses which included a bonus accrual for our persistent performance. We end with a $10.66 book value. The following slide shows our calendar year 2021 sources of change in assets, an amplified version of the prior slide. We achieved $2.15 of gains in our public assets while losing $0.20 in our privates. You can see our full operating expense number, which included the bonus pool, which I spoke about that our Board approved given our outperformance for not only the past year but for the three years prior. Slide 7 is all you need to know about whether or not our strategy has created value for our shareholders. Over our five-year period, we've achieved $6.57 of gains in our public portfolio and despite recent headwinds from our private portfolio. Because our starting point encompass the privates being the majority of our assets, we have had to have material outperformance from our public stocks to enable our NAV to grow over 50%. And fortunately, we have had just that, as you will see in one of the future slides in this presentation. Slide 8 is our quarter-to-date performance for each of our public companies. As I said in total, we generated a 6.1% return for the quarter, 9% including the SMA versus that 2.7% decline in the Russell Microcap Index. We achieved good performance from most of our companies in the quarter. Some bullet points on the next few slides. Synalloy reported much better results than expected and the new management team there has been the driving force in the big turnaround of both the metals and the chemical businesses. The company did a rights offering in the quarter. We participated at our fair share, including oversubscribing beyond our fair share. Maven is no longer -- TheMaven, it is now called The Arena Group. And finally, you have seen the company have its numbers up to date. And subsequent to the end of the year, the company has long-awaited up list and conducted a $30 million raise to help fund a recent acquisition. We think the opportunities from this starting point valuation today, given the decline is significant as we look out a year or two. Everspin announced better than expected results and the stock went vertical, rising from $6.50 to $13.00 in the quarter, and we use the rise to sell our entire position at nearly $11.00 a share, $10.67 to be exact. The stock added $0.13 to our NAV this quarter. Lantronix also continued to execute and provided Q3 results and guidance that exceeded expectations. We all now understand the pandemic and the effect that it has had on the supply chain for the information technology universe. Some companies have been able to navigate through it better than others. For example, you know we own Quantum and they have failed in the current timeframe and their ability to navigate through it, as you can see from their recent earnings report. Well, Lantronix on the other hand is run by Paul Pickle, and so far they've navigated through it beautifully and the stock has reflected the operational excellence in which he has run the company. Potbelly hurt us in the quarter. Although they did report solid improved results in Q3, the Omicron variant appeared around Thanksgiving, cases spiked here and around the world. And the psychology around owning a restaurant stock turned negative as investors became fearful that this would impact their business in Q4. We haven't seen Q4 yet, so the effects aren't known. I don't think they'll be significant at all. But the stock is sold off in advance. The pullback for us represents a great opportunity. This company is being run so well, is being remade and we think the stock will be materially higher over the next one or two years run by Bob Wright and Steve Cirulis. At $5.00 , we think it represents unbelievable value actually. A quick peek at Slide 12 will show our calendar performance for every stock we have owned; Synalloy, PFSweb, Alta Group, Lantronix, Potbelly, and Parabellum, Synacor were our biggest contributors, Adesto as well. Synchronoss and Sonam hurt. All-in-all, a 34% return or a 38.2% return including the SMA. A lot to comb over here on Slide 13, but that's our performance for every single position we have owned. I mentioned Adesto on the prior slide. It actually is included in this slide. In total, 373.6% return or 405% return, including the SMA. Some notable facts on this page as we look at it and study the first five years of our existence, there are 35 names on this list. We have 26 winners and nine losers, that's a 75% batting average on our winners versus our losers. Out of the 26 winners, seven had total returns of over 100% and 14 had gross IRRs of over 100%. The biggest percentage loser of any of our losers was Sonam at 29%. So this page for us is a nice combination of showing how we've provided our shareholders not only a good batting average, but a terrific slugging percentage. Skipping ahead to Slide 15, what you see depicted here is what we just spoke of. You have more winners than losers, and more winning positions than losing positions. And as for our winning positions, they're up a lot. And while we've been able to contain their percentage losses of our losing positions, most of this we believe starts with something that we say almost every conference call is that our entry price as value investors, we believe the price that you pay for the business you buy is a key component of maximizing return while monitoring risks at the same time. Chart 16 is the same chart. But in this case, it shows the total dollars earned on those investments. Almost half of our investments have had gains of $2.5 million and above, while Sonam is our biggest loser at 1.3 million. Chart 17 sums it up for everyone to see. That is our performance for the quarter, the year, three years and five years. Obviously, it is a pleasing chart to look at and highlights the investment success we've had. Since we started, we feel really fortunate about the last five years. But we're not going to rest on our laurels. The first quarter has been a blunt reminder that you can never sit back or sit still as an investor and point to the scoreboard of years past. This chart is historic looking and says nothing about what the next five years are going to be. I only hope that in five years time, we're able to replicate or come close to replicating what the last five years have looked like. And finally on Slide 16, what you see here is the progress that we've made in remaking our business and our balance sheet. I certainly don't take for granted what we've been able to do in the last five years. And our overall goal is to have this chart come as close to having 100% cash and public assets in it versus where we started than where we are today. And that's going to take some rigorous analysis of public markets, equities and really good stock picking like we've had in the last five years. And we hope in five years time that this chart does in fact represent that our balance sheet will reflect 100% of it in this public market strategy that we set forth when we started this company five years ago. Daniel, why don't I turn it over to you?

Thank you, Kevin. Please turn to Slide 19. For the quarter, our private portfolio decreased in value by 1.6 million or approximately $0.15 a share. The largest decreases, as Kevin mentioned, in value occurred in Nanosys, Seaport and EchoPixel. The largest increases occurred in our rights to future payments from the acquisition of Petra Pharma and in D-Wave Systems. In almost every shareholder letter and almost every presentation and shareholder update call that we do, we state that while we desire to shepherd our existing private portfolio to exits or explore opportunities to sell our positions in those companies, we have the luxury of being able to sell our private holdings or monetize them when we believe it makes sense for shareholders rather than being forced to do so to survive. As Kevin mentioned, we are pleased to report two events that we believe increase the likelihood we have the opportunity to realize cash payments from our rights to future milestone payments from the acquisition of Petra by Eli Lilly & Company, and to monetize our position in D-Wave systems. Let me talk a little bit more about both of those. In a presentation to investors in December 2021, Lilly noted for the first time that it actually was the entity that acquired Petra Pharma, and that is expected to start human studies of the mutant selective PI3K alpha inhibitor developed by Petra in the first half of '22. Although 180 cannot assure our investors when such an event may occur, if at all, such an event would trigger a contractual payment to Petra's former shareholders, including 180. The $6.8 million payment to 180, if received, would increase cash per share by approximately $0.66. Lilly also noted that a further development milestone could occur in '23, contingent on achieving clinical proof of concept. 180 would receive an additional approximately 5.5 million of this milestone is achieved or $0.53 a share. As such, the cumulative proceeds from these two milestones, if they occur, could be 12.3 million or $1.19 per share versus our current carrying value of 7.6 million or $0.73 per share. Next, on the D-Wave Systems, it announced its intent to become a publicly traded company through a merger with DPCM Capital, which trades under the symbol XPOA, a special purpose acquisition company, or SPAC. D-Wave and XPOA stated the transaction value of an equity value of approximately $1.2 billion. For perspective, our valuation of 180 shares of D-Wave as at the end of '21 of 5.7 million equates to an equity value of the company of approximately 750 million. If the transaction is completed, as is currently agreed to by each party, 180 would hold approximately 900,000 shares of common stock of the merged company. As you can see from Slide 19, we only have a handful of private portfolio companies left that had material value. As Kevin mentioned earlier and we'll discuss in a bit, we are currently optimistic that there will be other opportunities to monetize some of these remaining private portfolio companies in '22. Please turn to Slide 20. As we have noted in previous letters, we have dramatically reduced our cost structure under our new strategy. In 2016, before our funds changed investment focus and management team, our operating expenses, excluding stock-based compensation and interest on outstanding debt, averaged approximately 1.3 million per quarter. For Q4 '21, our regular operating expenses, excluding a little bit of severance costs, equaled approximately 750,000. The large material difference in our personnel-related expenses shown on this slide on a year-over-year basis relates to a one-time reversal last year in our medical benefit and retirement benefit accrual for certain prior employees. We will maintain a lean cost structure outside of fixed expenses for being a public company, focusing our expenses on activities solely designed to enhance our investment performance or to increase our revenues for managing outside capital. With the conclusion of 180 Degree's first five years in existence, we believe it is the time to be more proactive about telling our story and to getting 180 in front of new investors. This effort includes the launch of a new Web site that went live after the close yesterday that includes new content, such as white papers that discuss our perspectives on the market and where we believe opportunities exist to generate favorable risk adjusted returns. We have also engaged firm peak strategies to help us expand our public relations and thought leadership efforts. We are proud of what we have accomplished since 2017, and look forward to more actively getting in front of new shareholders and potential clients. Please turn to slides 21 and 22. We continue to anticipate the reductions in our operating expenses as a percentage of net assets will be based on growth in our net assets, rather than further reductions in our expenses. You can see this reduction come through in '21 with the increase in our net assets of approximately 14.3 million driving the reduction in our day-to-day expense ratio from 3.6% in '20 to 3.0% in '21. It is also important to note that the carried interest generated in our SMA covered a significant portion of our total operating expenses, including annual bonuses. We remain committed to treating every dollar of shareholder money with the utmost care and consideration. It is much easier for us to grow NAV when expense hurdle rate is where it is today. Please turn to the next slide. Here we present our annual scorecard based on certain metrics. We are proud of this performance and our ability to continue to grow value for our shareholders across all of these metrics. Please turn to Slide 24. Finally, as of the end of Q4 '21, if you give full credit to the aspect of cash, public traded securities and other net of assets and liabilities and including the carried interest from our SMA, you would look at and say that that was about $7.28 per share. We turn traded about 69% of NAV with our stock price being at $7.35. If we received 100% credit, the market is ascribing value of approximately $0.07 per share or $700,000 to our private portfolio. Given our private assets are valued at approximately 35 million, the market is discounting the value of our private portfolio assets by approximately 98% under this scenario as of Q4 '21. As a reminder, as I mentioned earlier, if achieved, the first milestone payment from the acquisition of Petra to turn is approximately 6.8 million or $0.66 per share. The combination of the first two payments is 12.3 million or $1.19 per share. I'll now turn the call back over to Kevin.

Thanks, Daniel. Okay, that's what was. Let's talk about what is the current environment, which has been a brutal and there's no hiding from that. To start the year, investors are focused and fixated on the inflationary and disrupted supply chain environment that is likely to lead to higher interest rates. COVID-19 never seems to go away. And now we have a Russian invasion of Ukraine, which is causing panic and concerns for risk assets. Put simply, it's a market filled with fear. The inflationary supply chain issues are real and are providing a serious headwind for the market and the economy. I think, as you know, I love reading about some of the world's best investors and I stuck this in our shareholder letter. Warren Buffett once said that, “Over time, people get smarter but not wiser. They don't get emotionally stable. All the conditions for extreme overvaluation and undervaluation absolutely exist, the way they did 50 years ago. You can teach people all you want, you can tell them to read Graham's book, you can send them to graduate school, but when they're scared, they're really scared.” Well, the markets are presently experiencing extreme volatility, vicious selling and are truly scared. While our investment results for the history of 180 have shown great outperformance, we are not immune from the sell-off that has occurred to start the year. And we have had our fair share of disappointing stocks. Now some are down for good reason, like Quantum, but most are down. And the companies haven't even reported their earnings yet. So I don't really know what to make of that. We've had a number of large sell-offs in our five-year history. And yet through all of it, our public and related asset growth, as I mentioned earlier, the total return is 373%. So I mentioned the two timeframes. 2018 fourth quarter, market down 25%; pandemic 2020, market down 33% and this is another one. Since November, the Russell Microcap is down 25%. So it's not as though the market hasn't, to some extent, discounted a lot of bad news. And while it's never fun to live through these sell-offs, in the big picture, you need washouts like you're currently -- we're experiencing to find the stocks that offer the most or enormous upside. And these are also the type of cycles that show the importance of having permanent capital. In those other two crashes that I spoke of, and this one, we're not forced to liquidate and we don't have redemptions to meet. Of course, at some point, you need to get to the other side and you need to pick the right stocks when the other side happens. And when you're going through it, you don't know where the bottom is. But having permanent capital is a very big advantage for us because nobody is tapping us on the shoulder and telling us to exit the arena. Finally, and remember, we do have a private portfolio. And while the news over the last five years has not been great, the news in recent months has been very good. You've seen our two announcements, and Daniel alluded to the fact that we may have others. Our public market strategy has bailed out our private holdings whose total value has struggled to keep up with breakeven throughout the last five years. But as I said, you've seen two significant announcements on our privates. And we do think there's potential for more. And while it's early in the quarter, and this is not a promise, but it is possible that by the end of this quarter, the private holdings will provide a significant buffer and offset to some of the declines that we're seeing in our public assets. And that would be a welcome present, given it's been the complete opposite for the last five years. That's sort of a statement of fact. We know more than you do. We can't talk about a lot of it. And it's not a promise. It's, I guess, call it a forecast. But knowing what we know today, it would be a pleasant welcome to have some sort of cushion offsetting the public markets, selling that we've seen at least in the first two months of the quarter. Of course, March could be completely different from February. So again, just to reiterate, not a promise. But you also know we're fairly careful about the words that we choose. So all-in-all, Q4 '21 was good relative to the indices. It was a very good year. It's been a great five years. And we always think it's better to judge us on the totality of the five years relative to even judging us on one quarter, even though Q4 was a real good one. So those are my thoughts. We're happy to entertain any questions you might have. So Daniel, you may want to open it up for questions and fire away.

Sounds great. . Hi, Whitney . Please go ahead. Can you hear us, Whitney? Sorry, Whitney, we can't hear you. I'll move on to the next one. And then if you can try getting back in the queue, we'll see if we can get that working. Hi, Adam. Go ahead. I wonder if there is technical --

Sorry. Can you guys hear me now?

Yes.

Hi, Adam.

Sorry about that. I'm in an airport and anyway, cell reception, I apologize. Two topics I'm hoping we can explore, one on the private side marks and one on the third party capital side. Starting with the private asset portfolio marks, obviously you gave some incremental information on the call. So it looks like the D-Wave deal, if it would be consummated on the current terms and that the current share price of the publicly traded spec would give you a markup of about $0.35 a share before any tax implications and the Petra milestone payments about another $0.66. So we're talking about $1 a share. Is that all going to flow through? Can the NOLs cover any tax obligations?

We're not paying any taxes, Daniel, right?

Yes. So we had a lot of both operating loss carryforwards as well as capital loss carryforwards that we can use to offset gains. Our operating loss carryforwards are approximately 80 million. Our capital loss carryforwards are approximately 18 million. And as some of these private portfolio companies also fall off, you see numbers that are on our books that are valued at zero or pretty close to that. Those haven't been realized. And part of the reason is, is because either we haven't been forced to because they haven't formally liquidated or also we have the ability to use other historical losses to offset gains. So for the foreseeable future, we don't anticipate to be in a position where we'd be paying any taxes at the corporate level.

Okay, great. And then, obviously, you all talked about was a forecast, not a certainty, but there could be other material developments here over the first quarter or early second quarter. For the private portfolio, obviously the big dog remaining there is AgBiome. Is there anything more you can care to say? Are we talking about something with AgBiome or can you not comment?

Well, I wouldn't be able to comment specifically on what we're talking about. But as it relates to AgBiome, it's our biggest holding in the private portfolio. We actually sat and listened to their Board meeting yesterday. Business is doing really well. Interestingly enough, in an environment where we import a lot of grains from Russia, and from that part of the world, so whether it's wheat or cotton or corn, whatever have you, we do think there's a full market potential for farming in this country. And the necessity for the products that AgBiome provides could be more prevalent in the next five years than they have in the last five years. So they did a big race. And we'll see how that one plays out over time. We do think it's an exciting opportunity. And given some of the facts that we've seen in recent months that we didn't understand the valuations, AgBiome is big idea. And if it can become a big idea, while at the same time showing significant growth, hopefully, it will be an appealing stock for the public markets. So, I can't really comment on anything related to the activity that we're seeing within our private portfolio. But that's just a couple of snippets on AgBiome in general.

Yes, fair enough. Thank you. And then finally, on the third party capital side, obviously you had the FLX platform announcement in mid-November, terrific five-year track record on which to be raising third party capital obviously. So any additional updates or progress metrics you can report on the third party capital side at this time? And what does the pipeline look like? Thank you.

Thanks, Adam. Here's what I'll say about that. We have a series of meetings starting next week actually. So we showed you what our five-year numbers are. I would like to think, to some extent, my prior history at Merrill and BlackRock coupled with what we've been able to do with TURN, and the current environment which has not been a pleasant experience to live through by any stretch of the imagination, would be a really good opportunity and time to invest in us. I always say, at the end of the day that the price you pay for the business you buy is going to define your investment success, or at least be one of the key components to it. Well, I'd much rather buy this portfolio today than I would have December 31. Now you can argue, well, maybe it's better to buy it in June. Maybe it is better to buy it in June. I don't know what June is going to look like. I don't know if President Xi convinced Putin to lay his arms down and go try and negotiate with the Ukrainian President. Next week, the market’s up 10%. Or whether or not when our companies start reporting next week, there's no reason why Synchronoss has gone from $2.60 to $1.60, or if Quantum can get its debt facility, the stock can't go from $2.50 to $5.00 or Potbelly, when they report their numbers and talk about the next three to five years, the stock's not going to go back to $9.00. So I only know what we own. It's been frustrating as all heck to see what's happened to many of our equities, despite them performing pretty well from a fundamental perspective. And if somebody that's interested in spending some time with us and doing the work on us and wanting to become an LP, I told Rob Bigelow who runs our fund marketing yesterday in advance of our meeting on Monday that honestly, we can't get them to give us money on Monday. I don't want it, because we'll never be able to convince them. So raising capital is never easy as you know. I feel like every time we go try and do it, something happens. A pandemic starts, the market freaks out about 7 rating from the Fed and inflation and Russia invades Ukraine and there's always an excuse and a reason for an investor not to want to own something that they haven't invested in the past that's not necessarily familiar to them. So we'll keep at it, Adam. As you know, we have an SMA that basically returned over $2 million of capital back to us and our normal operating expenses of 3 million, so we basically offset -- that's before bonuses. So we offset the burn by having that SMA and we'll go out and try and do more. That's all I can say about that. And if somebody wants to invest with us, that's awesome. We'd be thrilled to have people that believe in us. And if they don't, well, then they don't. And we'll -- look, the best use is to make sure that we have as much permanent capital at 180, because nobody can ever take that from us. And that's the pool of money that one day we can start paying dividends when we get to a better scale than we have today. So that's longwinded, Adam, but that's the answer.

Thank you. Sorry, go ahead.

The only thing I would add to that is, look, having that capital, managing outside capital is great, but it has to be done also under terms that benefit shareholders. And so we're not going to just take on capital to take on capital. It has to be from groups that believe and understand what we're trying to do. And it has to be at attractive enough terms for it to really benefit our shareholders at the end of the day, because we are investing that capital alongside our permanent capital. And so at times where we have -- we have a lot of cash on the balance sheet at 180. If we're banning all the external managed capital we're managing that you have to allocate between all those pools of capital. And so we have to make sure that there's the real opportunity for 180 to make enough off of that capital if we perform for it to make sense.

Yes, most of it is no management fee. It's not a mutual fund model. I don't want 50 bps or 33 bps or 75 bps to pay -- to help spread the costs of 180. It's about the carry and the carry has to make sense. Anything else, Adam?

No, that's it, gents. Thanks. Keep your chins up. Spring is just around the corner.

Thank you. Is it? It's an ice storm here in New Jersey today. I slid down the driveway and almost ended up in the middle of the street.

Same in Chicago, but we're headed to California. So maybe that's my optimism. Thanks.

There you go. Well, a safe flight, Adam, and we'll speak to you soon.

Thanks, Adam. . I'm not seeing any other questions in the queue.

Okay. Whitney, you know you can always pick up the phone and call us. I've known you since 1990 probably. So you know where we live. And for all investors, we wish you nothing but success for 2022. We hope, as Adam said, that spring is around the corner and hopefully there'll be some optimism as we leave the winter months, leave most of the pandemic behind. Hopefully, Russia gets straightened out. And for anyone that wants to chat further about the current environment, Q4, our strategy or specific holdings, feel free to reach out and call, and we'll schedule time with you at your convenience. So thanks very much, everyone, and have a good day.

Thanks, everyone. You can now disconnect.