4th Quarter Report
January 18, 2001
Dear Shareholders,
We ended the quarter with our net asset value at $1.46 per share. This represents a 10% increase from our net asset value of $1.33 per share in the fourth quarter of last year. We made two investments during the quarter. We purchased 100 shares of Convertible Series B Preferred stock for $100,000 in INRAD, Inc. INRAD is located in Northvale, New Jersey and develops, manufactures and supplies products for the Photonics industry primarily consisting of Crystals and Crystal Components, Custom Optics, and Systems and Instruments. INRAD is currently trading on the Bulletin Board (OTC: INRD.OB) but recently announced that it has filed for listing on NASDAQ Small Cap.
We also increased our investment in BNKR, Inc. by $200,000 through participation in a Bridge Loan. This was part of a second round of financing led by Seed Capital Partners, which totaled $1.5 million. BNKR, Inc. is currently pursuing marketing partners to broaden its variety of services to include brokerage, loan, credit cards and insurance.
We wrote off our investment in TSS-Transnet, Inc. and revalued our shares in ARIA Wireless to reflect the lower market price. Pathlight Technology, Inc. continues to expand its business and has recently issued press releases regarding their relationships with EMC, McData, Tokyo Electron and Tidalwire.
Thank you for your continued support and interest in Rand.
Allen F. Grum
Portfolio Valuation / December 31, 2000
12/31/00 9/30/00
Per share Per share
Company and Business Type of Investment Date Acquired Cost Value of Rand Value of Rand
=========================== ======================= =============== ================ =================== =========== =================== ===========
=========================== ======================= =============== ================ =================== =========== =================== ===========
American Tactile Convertible 6/23/95 150,000 50,000 0.01 50,000 0.01
Corporation Medina, NY. Debentures at 8% due
Develops equipment and June 2000 and April
systems to produce 2001 with detachable
signage. warrants
www.americantactile.com
........................... ....................... ............... ................ ................... ........... ................... ...........
........................... ....................... ............... ................ ................... ........... ................... ...........
ARIA Wireless Systems, Common Stock - 5/23/97 543,840 129,840 0.02 227,840 0.04
Inc. (OTC:AWSI)* Buffalo, 488,000 shares
NY. Markets wireless $105,840 Demand Notes
radio transmission at 15%
communication equipment.
www.aria-glb.com
........................... ....................... ............... ................ ................... ........... ................... ...........
........................... ....................... ............... ................ ................... ........... ................... ...........
BNKR, Inc. Series A Convertible 5/30/00 400,000 400,000 0.07 200,000 0.03
Bloomington, MN. Provides Preferred Stock -
turn-key solutions 200,000 shares
for on-line community Cumulative Dividend
banking. www.bnkr.com $0.08 per share per
annum
200,000 Note at 12%
due February, 2001
........................... ....................... ............... ................ ................... ........... ................... ...........
........................... ....................... ............... ................ ................... ........... ................... ...........
BioWorks, Inc. Geneva, Series A Convertible 11/6/95 56,000 56,000 0.01 56,000 0.01
NY. Develops and Preferred Stock -
manufactures biological 32,000 shares
alternative to chemical
pesticides.
www.bioworksbiocontrol.com
........................... ....................... ............... ................ ................... ........... ................... ...........
........................... ....................... ............... ................ ................... ........... ................... ...........
Clearview Cable TV, Inc. Common Stock - 400 2/23/96 55,541 55,541 0.01 55,541 0.01
New Providence, NJ. shares
Cable television operator.
........................... ....................... ............... ................ ................... ........... ................... ...........
........................... ....................... ............... ................ ................... ........... ................... ...........
Contract Staffing Series A 8% 11/8/99 100,000 100,000 0.02 100,000 0.02
Buffalo, NY. PEO Cumulative Preferred
providing human resource Stock - 10,000 shares
administration for small
businesses.
www.contract-staffing.com
........................... ....................... ............... ................ ................... ........... ................... ...........
........................... ....................... ............... ................ ................... ........... ................... ..........
DataView, LLC Mt. Kisco, 5.5% Membership 10/1/98 310,357 343,357 0.06 343,357 0.06
NY. Designs, develops and Interest
markets browser based
software for investment
professionals.
www.marketgauge.com
............................ ....................... ............... ................ ................... ........... ................... ..........
............................ ....................... ............... ................ ................... ........... ................... ..........
Fertility Acoustics, Inc. Common Stock - 10/1/97 87,440 1,167,012 0.20 1,167,012 0.20
Buffalo, NY. Developer of 848,736 Shares
proprietary methods to
diagnose onset of
ovulation.
............................ ....................... ............... ................ ................... ........... ................... ..........
............................ ....................... ............... ................ ................... ........... ................... ..........
G-TEC Natural Gas Systems 41.67% Class A 8/31/99 300,000 300,000 0.05 300,000 0.05
Buffalo, NY. Manufactures Membership Interest
and distributes systems 8% Cumulative Dividend
that allow natural gas to
be used as an alternative
fuel to gases.
www.gas-tec.com.
............................ ....................... ............... ................ ................... ........... ................... ..........
............................ ....................... ............... ................ ................... ........... ................... ..........
Hammertime Kitchen & Bath Company has ceased 10/1/98 175,000 0.03
Works, Inc. Clarence, NY. operations
Exclusive Sears licensed
installer of kitchens and
baths.
............................ ....................... ............... ................ ................... ........... ................... ..........
............................ ....................... ............... ................ ................... ........... ................... ..........
HCI Systems Kennebunk, ME. Series B Preferred 12/15/99 100,500 100,500 0.02 100,500 0.02
Facilities management Stock - 67,000 Shares
software solution. 5% Cumulative Dividend
www.hcisystems.com
............................ ....................... ............... ................ ................... ........... ................... ..........
............................ ....................... ............... ................ ................... ........... ................... ..........
INRAD, Inc. (OTC: INRD.OB) Convertible Series B 10/31/00 100,000 100,000 .02 - -
Northvale, NJ. Develops Preferred Stock - 100
and manufactures products Shares
for laser photonics 10% Dividend
industry. www.inrad.com
............................ ....................... ............... ................ ................... ........... ................... ..........
............................ ....................... ............... ................ ................... ........... ................... ..........
MemberWare Technologies, Promissory Note at 9/16/99 100,000 150,000 0.03 150,000 0.03
Inc. Pittsford, NY. Prime Rate + 4.5% due
Internet company engaged September 2004.
in web related consulting Common Stock - 40,000
services. Shares 34,000
www.memberware.com warrants for shares
of stock
............................ ....................... ............... ................ ................... ........... ................... ..........
............................ ....................... ............... ................ ................... ........... ................... ..........
MINRAD, Inc. Buffalo, NY. 595,506 Common 8/4/97 874,030 1,111,000 0.19 1,111,000 0.19
Developer of laser guided Shares. 53,628
surgical devices. Merged Preferred Shares
with BioVector, Inc.
December 1999.
............................ ....................... ............... ................ ................... ........... ................... ..........
Pathlight Technology, Inc. Class A Series 10/7/97 1,174,998 2,012,922 0.35 2,012,922 0.35
Ithaca, NY. Develops SAN Convertible Preferred
technology for computer Stock - 200,000
industry. www.pathlight.com shares with 6%
cumulative dividend.
Preferred Class B -
117,187 shares
Class C Preferred
Stock - 214,285
Shares
67,578 warrants for
shares of stock
............................ ....................... ............... ................ ................... ........... ................... ..........
............................ ....................... ............... ................ ................... ........... ................... ..........
Platform Technology Two units with option 9/24/97 8,045 60,000 0.01 60,000 0.01
Holdings, LLC for two additional
Charlottesville, VA. units
Provides sales support and
management for unique
medical businesses.
............................ ....................... ............... ................ ................... ........... ................... ..........
............................ ....................... ............... ................ ................... ........... ................... ..........
TSS-Transnet Milton, Company filed for 6/1/00 316,401 - - 250,000 0.04
Ontario. Canadian and U.S. bankruptcy - October
trucking and logistics 2000
company.
............................ ....................... ............... ................ ................... ........... ................... ..........
............................ ....................... ............... ................ ................... ........... ................... ..........
Ultra-Scan Corporation Common Shares - 49,290 12/11/92 302,586 369,675 0.06 369,675 0.06
Amherst, NY. Ultrasonic
finger print technology.
www.ultra-scan.com
............................ ....................... ............... ................ ................... ........... ................... ..........
............................ ....................... ............... ................ ................... ........... ................... ..........
UStec, Inc. Victor, NY. Promissory Note at 12/17/98 100,500 150,000 0.03 150,000 0.03
Manufacturers and markets 12% due January 2003
digital wiring systems for 50,000 common shares
residential new home 2,500 warrants for
construction. www.ustecnet. common shares
com
............................ ....................... ............... ................ ................... ........... ................... ..........
............................ ....................... ............... ................ ................... ........... ................... ..........
Vanguard Modular Building Preferred Units - 12/16/99 270,000 270,000 0.05 270,000 0.05
Systems Philadelphia, PA. 2,673 Units with
Leases and sells high-end Warrants
modular space solutions. 14% Interest Rate
www.vanguardmodular.com
............................ ....................... ............... ................ ................... ........... ................... ..........
Preferred Stock Portfolio* Motorola - 4,000 7/15/99 214,606 207,844 0.04 879,303 0.15
^ Motorola shares; Texaco -
(MOT-A), Texaco (TXC-A) 5,000 shares
............................ ....................... ............... ................ ................... ........... ................... ..........
............................ ....................... ............... ................ ................... ........... ................... ..........
Other investments Other 594,486 235 - 236 0.04
---------------- ------------------- ----------- ------------------- ----------
Total portfolio 6,159,330 7,133,926 1.24 8,028,396 1.40
=========
investments
Cash and Cash 304,066 0.05 80,041 0.01
equivalents
Net 286,914 0.05 124,389 0.02
receivables(payables)
------------------- ----------- ------------------- ----------
------------------- ----------- ------------------- ----------
Net Assets before 7,724,906 1.34 8,232,826 1.43
Taxes
Tax provision (660,790) 0.12 (471,880) (0.08)
(benefit)
----------------- -------------------
Net Assets 8,385,696 8,704,706
========= =========
Net Asset Value per 1.46 1.51
Share (5,748,034
shares outstanding at
September 30, 2000
and at December 31,
2000)
* Publicly owned company ^ Unrestricted securities
Note: Restricted securities, including securities of publicly-owned companies which are subject to restrictions on resale, are valued at fair value as determined by the Board of Directors. Fair value is considered to be the amount which the Corporation may reasonably expect to receive for portfolio securities if such securities were sold on the valuation date. Valuations as of any particular date, however, are not necessarily indicative of amounts which may ultimately be realized as a result of future sales or other dispositions of securities. Among the factors considered by the Board of Directors in determining the fair value of restricted securities are the financial condition and operating results, projected operations, and other analytical data relating to the investment. Also considered are the market prices for unrestricted securities of the same class (if applicable) and other matters which may have an impact on the value of the portfolio company.
Results from Annual Shareholders Meeting held April 13, 2000
(1) Board of Directors Elections
Reginald B. Newman II Chairman of the Board
Allen F. Grum
| a, c | Luiz F. Kahl |
| g | Erland E. Kailbourne |
| c, g | Ross B. Kenzie |
| a | Willis S. McLeese |
| a, c, g | Jayne K. Rand |
| a - Member of audit committee | c - Member of compensation committee |
| g - Member of governance committee |
| Officers | Title | |
| Allen F. Grum | President/CEO | pgrum@randcap.com |
| Daniel P. Penberthy | Chief Financial Officer | dpenberthy@randcap.com |
| Corporate Data Stock Listing | NASDAQ SmallCap Market-symbol RAND |
| Transfer Agent and Registrar | Continental Stock Transfer & Trust Company / www.continentalstock.com |
| General Counsel | Hodgson Russ LLP |
| Independent Accountants | Deloitte & Touche LLP |
| Number of Shareholders | 823 (as of March 6, 2000) |
Rand is actively seeking business opportunities for investment consideration. If you are aware of those businesses that may need Rand's support and assistance, please feel free to contact us.
Rand Capital Corporation
2200 Rand Building
Buffalo, NY 14203
Tel: 716-853-0802
Fax: 716-854-8480
www.randcapital.com