January 20, 2000
Dear Shareholders:
The fourth quarter was a busy one for Rand and for our portfolio companies.
We made three new investments and increased our investment in one additional
company. Specifically, we made the following new investments:
1. $270,000 in Vanguard Modular Building Systems, located in Philadelphia,
Pennsylvania. Vanguard leases and sells high-end modular space solutions, such
as classrooms to school districts and modular complexes to the healthcare,
commercial and government industries. The investment was in a preferred stock
with warrants.
2. $100,000 in Contract Staffing, Inc., located in Buffalo, New York.
Contract Staffing provides total human resource solutions for small businesses.
Specifically, they assume the legal risk and responsibility for payroll, tax
reporting, benefit administration, workers' compensation and other human
resource functions, allowing small business owners the time to run their
businesses. We purchased preferred stock with a warrant for 10% of the company.
3. $100,500 in HCI Systems, Inc., located in Wells, Maine. They are a
leader in facilities management software solutions. HCI's IMP System provides
total control over every aspect of assets and property operations. We purchased
67,000 shares of preferred stock.
4. $100,000 in DataView, LLC, located in Mt. Kisco, New York. DataView
designs and develops graphically rich browser based products, which provide
advanced data-visualization tools for instant analysis of financial information.
This was our third investment in DataView and we purchased a convertible note.
Our portfolio companies were also active raising money. Due to the sale of
new equity, we increased our valuations of MemberWare Technologies, Inc. and
DataView, LLC. During the fourth quarter, MINRAD, Inc. merged with BioVector,
Inc. and we received MINRAD stock as consideration for our BioVector preferred
stock.
We have also revalued our position in ARIA Wireless Systems, Inc.to reflect
an increase in the price of their stock. Finally, we sold our remaining shares
of Lightbridge, Inc. and Ellicottville Energy Corporation repaid our Note.
It was a great quarter for us, and I look forward to another successful
year. Almost all of our investments have strengthened their outlook. We are
finally beginning to see the long term success that we anticipated when we made
these investments.
We end the quarter with our Net Asset Value unchanged at $1.33.
Thank you for your support.
Allen F. Grum
President
Portfolio Valuation / December 31, 1999
December 31, 1999 September 30, 1999
Per Per
Company and Business Type of Investment Date Acquired share share
- -------------------- ------------------ ------------- Cost Value of Rand Value of Rand
---- ------- -------- ------ -------
American Tactile Corporation Convertible 6/23/95 150,000 50,000 0.01 50,000 0.01
Medina, NY. Develops Debentures at 8%
equipment and systems due June 2000
to produce signage. and April 2001 with
www.americantactile.com detachable warrants
ARIA Wireless Systems, Inc. Common Stock - 5/23/97 543,840 288,840 0.05 172,000 0.03
(OTC:AWSI)* 488,000 shares
Buffalo, NY. Markets wireless $105,840 Demand Notes
radio transmission at 15%
communication equipment.
www.ariawireless.com
BioVector, Inc. 4/17/97 - 370,000 0.06
Buffalo, NY.
Medical technological sales
force company.
Merged with MINRAD,
Inc. December 1999.
BioWorks, Inc. Series A 11/6/95 56,000 56,000 0.01 56,000 0.01
Geneva, NY. Develops and Convertible
manufactures Preferred Stock -
biological alternative to 32,000 shares
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. Cable shares
television operator.
Contracting Staffing Series A 8% 11/8/99 100,000 100,000 0.02
Buffalo, NY. Cumulative
PEO providing human Preferred
resource adminstration Stock - 10,000
for small business. shares
www.contactstaffing.com
DataView, LLC 5.5% Membership 10/1/98 310,357 343,357 0.06 200,000 0.04
Mt. Kisco, NY. Designs, Interest
develops and markets
browser based software for
investment professionals.
www.dataviewllc.com/marketgauge/
Ellicottville Energy, Inc. Note at 9.3%, due 6/29/99 - 145,000 0.03
Ellicottville, NY. June 29, 2000
Cogeneration facility selling Note Repaid
electricity to a regional December 16, 1999
utility.
Fertility Acoustics, Inc. Common Stock - 10/1/97 50,000 125,000 0.02 125,000 0.02
Buffalo, NY. Developer of 600,000 shares
proprietary Option to purchase
methods to diagnose onset of 180,000 shares
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. Manufacturers and Membership Interest
distributes systems that allow 8% Cumulative
natural gas to be used as an Dividend
alternative fuel to gases.
www.gas-tec.com
Hammertime, Inc. Convertible 10/1/98 300,000 300,000 0.05 300,000 0.05
Clarence, NY. Exclusive Sears Preferred Stock -
licensed installer 1,000 Shares
of kitchens and baths. Senior Subordinated
Note at 12% due
October 2000
Promissory Note at
15%, due August 1999
HCI Systems Series B Preferred 12/15/99 100,500 100,500 0.02
Wells, ME. Facilities Stock - 67,000 Shares
management software 5% Cumulative Dividend
solution.
www.hci.com
InfoMiners.com Bridge loan at 10% 12/21/98 420,000 420,000 0.07 420,000 0.07
Amherst, NY. Data warehousing due June 1999
and decision 147,360 warrants
support software for for shares of stock
healthcare industries.
www.infominers.com
MemberWare Technologies, Inc. Promissory Note at 9/16/99 100,000 150,000 0.03 100,000 0.02
Pittsford, NY. Internet Prime Rate + 4.5%
company engaged in web related due September 2004.
consulting services. Common Stock -
www.memberware.com 40,000 Shares
34,000 warrants for
shares of stock
MINRAD, Inc. 595,507 Common 8/4/97 874,030 1,111,000 0.19 741,000 0.13
Buffalo, NY. Developer of Shares. 53,628
laser guided surgical devices. Preferred Shares
Merged with BioVector, Inc.
December 1999.
Pathlight Technology, Inc. Class A Series 10/7/97 425,000 610,000 0.11 425,000 0.11
Ithaca, NY. Develops SAN Convertible
technology for Preferred
computer industry. Stock - 200,000
www.pathlight.com shares with 6%
cumulative
dividend.
Preferred Class B -
117,187 shares
67,578 warrants for
shares of stock
Platform Technology Holdings, Two units with 9/24/97 8,045 60,000 0.01 60,000 0.01
LLC option for two
Charlottesville, VA. Provides additional units
sales support and
management for unique medical
businesses.
UStec, Inc. Promissory Note at 12/17/98 100,000 100,000 0.02 100,000 0.02
Victor, NY. Manufacturers and 12% due December
markets digital wiring 2003
systems for residential new 50,000 warrants for
home construction. common shares
www.ustecnet.com
Vanguard Modular Preferred 12/16/99 270,000 270,000 0.05
Building Systems Units - 2,673
Philadelphia, PA. Units with
Leases and sells Warrants
high-end modular
space solutions.
Preferred Stock Portfolio Merrill Lynch - 7/15/99 1,047,888 897,000 0.15 987,350 0.17
Merrill Lynch (MER-F), 12,000 shares;
Motorola (MOT-A), Citicorp Motorola - 10,000
(CIH-A), Texaco (TXC-A) shares; Citicorp -
10,000 shares;
Texaco - 12,000
shares
Other investments Other 971,396 160 1,824 0.00
Total Portfolio 6,182,597 5,319,398 0.93 4,793,715 0.84
investments =========
Cash and Cash 1,137,233 0.20 1,657,362 0.29
equivalents
NET 74,561 0.01 91,797 0.01
receivables(payables) ------ ------
Net Assets before 6,531,192 1.14 6,542,874 1.14
Taxes
TAX PROVISION (1,071,880) (0.19) (1,071,880) (0.19)
(benefit) ----------- -----------
NET ASSETS 7,603,072 7,614,754
========= =========
Net Asset Value per 1.33 1.33
Share (5,708,034
shares outstanding
during both periods)
* Publicly owned company ^ Unrestricted securities as defined in Note (a)
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.
Rand Capital Corporation
Board of Directors (Elected by Shareholders April 27, 1999)
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 Email
- -------- ----- ----
Allen F. Grum President, Chief Executive Officer 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
General Counsel Hodgson, Russ, Andrews, Woods & Goodyear, LLP
Independent Accountants Deloitte & Touche LLP
Number of Shareholders 786 (as of March 15, 1999)
Rand is actively seeking business opportunities for investment
consideration. If you are aware of such businesses which 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