RAND CAPITAL CORPORATION
27TH ANNUAL REPORT
1995
Rand Capital Corporation is a registered closed-end
management investment company, investing in the securities of
small businesses, which offer unique opportunities for growth.
NET ASSET VALUE PER SHARE*
[A bar chart is presented]
Measurement Period Net Asset
(Year Covered) Value
Measurement Pt-12/31/86 $2.13
YE 12/31/87 $2.07
YE 12/31/88 $2.44
YE 12/31/89 $2.53
YE 12/31/90 $2.07
YE 12/31/91 $2.12
YE 12/31/92 $3.07
YE 12/31/93 $3.07
YE 12/31/94 $3.19
YE 12/31/95 $2.21
* Adjusted for stock distributions.
March 31, 1996
TO OUR SHAREHOLDERS:
Our net asset value at December 31, 1995 was
$9,333,305, or $2.21 per share, compared to $13,351,926, or $3.19
per share at December 31, 1994. Results of operations in 1995
showed a net loss of $641,941 as compared to a net loss of
$424,417 in 1994 primarily due to increased personnel related
expenses in 1995.
We reduced our valuations of Aria Wireless Systems and
Bydatel in the fourth quarter of 1995 from $5,575,000 and
$1,168,000, respectively, to $198,000 and $33,000, respectively.
The valuation adjustment was based on an analysis of the capital
requirements of Aria and the potential dilutive effects of any
new capital. Although the company displays enormous potential,
it lacks sufficient capital to execute its business plan and a
suitable strategic partner. We continue to monitor the situation
closely.
During 1995 we made the following new investments:
NAME OF COMPANY TYPE OF BUSINESS AMOUNT
American Tactile Corporation ADA signs for visually impaired $100,000
CAI Wireless Systems Wireless cable television system 237,547
operator
CableMaxx, Inc. Wireless cable television system 97,500
operator
Commercial Maintenance Org. Maintenance service network 80,000
Jamestown Community Bank Community bank 500,000
Reflection Technology, Inc. Virtual display technology 500,000
TGT, Inc. Biological alternatives to 56,000
chemical pesticides
TransWorld Telecom, Inc. Wireless cable television system 131,498
operator
Also in 1995, we increased our investment in Comptek
Research, Inc. via the purchase of 28,249 shares of common stock.
Additionally, we purchased 2,856 shares of Ultra-Scan Corporation
(formerly Niagara Technology, Inc.) at a cost of $99,984. We
sold our investment in International Imaging Materials, Inc. for
a pretax gain of $411,846. When ACSE was acquired by CAI
Wireless Systems, Inc. in 1995 for a combination of stock and
cash, we realized a pretax gain of $103,026.
The increase in value of Mobile Media Corporation is
noteworthy. Mobile Media's 1995 stock split of 1.4 common shares
for 1 resulted in 20,369 additional shares for our company,
increasing our investment value from $750,000 at December 31,
1994 to $1,586,200 at December 31, 1995.
During the year we wrote off our investments in Rand
Pharmaceutical (HK), Ltd. in the amount of $165,000 and in Trade
Winds Fan Co., Inc. of $520,000 due to their insolvency.
While 1995 ended on a disappointing financial note, we
did prepare for the future by attracting new management to
replace Mr. Donald Ross, who retired on December 31, 1995. Mr.
Ross, a founder and President of our company for the past 26
years, has agreed to continue to assist the company as a
consultant. He was replaced by a team consisting of Allen F.
Grum, who was elected President, and Nora B. Sullivan who will
serve as Executive Vice President. Robin K. Penberthy was
elected Secretary and Treasurer of our company.
We are optimistic about the long-term growth and
capital appreciation of Rand's assets. In conjunction with the
Board of Directors, management is conducting a strategic review
of our company during the first quarter of 1996. While
comprehensive in nature, it will focus on our company's cost
structure, investment strategy and investment management policy
in order to continue to ensure maximization of shareholder value.
Sincerely,
s/Thomas R. Beecher, Jr.
Chairman
s/Allen F. Grum
President
s/Nora B. Sullivan
Executive Vice President
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Rand Capital Corporation
Buffalo, New York
We have audited the accompanying statements of
financial position, including the portfolio of investments, of
Rand Capital Corporation as of December 31, 1995 and 1994, and
the related statements of operations and changes in net assets
for the years then ended, and the schedule of selected per share
data and ratios for each of the five years in the period ended
December 31, 1995. These financial statements and the schedule
of selected per share data and ratios are the responsibility of
the Corporation's management. Our responsibility is to express
an opinion on these financial statements and the schedule of
selected per share data and ratios based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and the schedule of selected per
share data and ratios are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements and the
schedule of selected per share data and ratios. Our procedures
included examination of securities owned as of December 31, 1995
and 1994. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement and schedule
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and the
schedule of selected per share data and ratios referred to above
present fairly, in all material respects, the financial position
of Rand Capital Corporation as of December 31, 1995 and 1994, and
the results of its operations and changes in its net assets for
the years then ended and selected per share data and ratios for
each of five years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
As explained in Note 1, the financial statements
include securities valued at $8,997,613 (96% of net assets), and
$13,698,913 (103% of net assets) at December 31, 1995 and 1994,
whose values have been estimated by the Board of Directors in the
absence of readily ascertainable market values. We have reviewed
the procedures used by the Board of Directors in arriving at its
estimate of value of such securities and have inspected
underlying documentation, and, in the circumstances, we believe
the procedures are reasonable and the documentation appropriate.
However, because of the inherent uncertainty of valuation, those
estimated values may differ significantly from the values that
would have been used had a ready market for the securities
existed, and the differences could be material.
Our audits were conducted for the purpose of forming an
opinion on the basic financial statements taken as a whole. The
supplemental schedule of changes in investments at cost for the
year ended December 31, 1995, listed in the table of contents, is
presented for the purpose of additional analysis and is not a
required part of the basic financial statements. This
supplemental schedule is the responsibility of the Corporation's
management. Such information in the schedule has been subjected
to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements
taken as a whole.
s/ Deloitte & Touche LLP
Certified Public Accountants
Buffalo, New York
February 9, 1996
December 31,
ASSETS 1995 1994
____ ____
Investments at Directors' valuation
(identified cost: 1995 - $5,761,573;
1994 - $4,550,713) (Note 1) $ 8,997,613 $13,698,913
Temporary investments, at market
value which approximates cost 545,050 1,676,008
Cash 162,509 430,395
Interest receivable (net of
allowance in 1995 - $20,400; 1994 -
$2,000) 147,556 395,855
Accounts receivable - other 0 1,707
Income taxes receivable (Note 2) 4,187 0
Other assets 46,957 55,141
_______ ______
TOTAL ASSETS $ 9,903,872 $16,258,019
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (NET ASSETS)
LIABILITIES:
Accounts payable and accrued
expenses (Notes 4 and 6) $ 226,808 $ 66,793
Loans payable other 0 50,000
Deferred taxes (Note 2) 343,759 2,789,300
_______ _________
TOTAL LIABILITIES 570,567 2,906,093
_______ _________
STOCKHOLDERS' EQUITY (NET ASSETS)
(Note 3)
Common stock, $.10 par - shares
authorized 7,000,000; issued and
outstanding, 1995 - 4,225,477 and
1994 - 4,185,477 422,548 334,833
Capital in excess of par value 4,810,369 4,729,364
Undistributed net investment loss (812,838) (319,192)
Undistributed net realized gain on
investments 2,867,302 2,962,721
Net unrealized appreciation of
investments 2,045,924 5,644,200
_________ _________
Net assets (per share in 1995 -
$2.21; 1994 - $3.19) 9,333,305 13,351,926
_________ __________
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 9,903,872 $16,258,019
=========== ===========
See notes to financial statements
STATEMENTS OF OPERATIONS
December 31,
1995 1994
____ ____
Investment Income (Note 5):
Interest from portfolio
companies $ 225,042 $ 169,779
Interest from other investments 85,896 125,640
Other income 37,266 5,985
______ _____
348,204 301,404
_______ _______
Expenses:
Salaries 469,985 322,661
Employee benefits 166,412 117,298
Directors' fees 17,750 17,250
Legal fees 82,612 70,827
Auditing and accounting 14,715 19,473
Consulting fees 3,447 3,897
Stockholders and office expense 31,808 30,881
Occupancy expenses 20,560 18,900
Insurance 35,942 28,356
Travel 27,140 20,228
Other operating expenses 119,324 35,725
Interest expense 0 40,325
______ ______
989,695 725,821
_______ _______
Investment (loss) before income
taxes (641,491) (424,417)
Income taxes (Note 2) 14,100 18,000
Deferred income tax (benefit)
(Note 2) (245,660) (167,500)
_________ _________
Investment (loss) - net (409,931) (274,917)
_________ _________
Realized and unrealized gain (loss)
on investments:
Realized loss from investments:
Cost of sales and dispositions (65,416) (742,399)
________ _________
Realized loss before income taxes (65,416) (742,399)
Deferred income tax provision
(benefit) 30,003 (313,800)
______ _________
Net realized loss (95,419) (428,599)
________ _________
Unrealized appreciation:
Beginning of year 9,064,200 7,170,880
End of year 3,236,040 9,064,200
_________ _________
(Decrease) increase in unrealized
appreciation before income taxes (5,828,160) 1,893,320
(Benefit) provision for deferred
income taxes (Note 2) (2,229,884) 732,600
___________ ________
Net (decrease) increase in
unrealized appreciation (3,598,276) 1,160,720
___________ _________
Net realized and unrealized (loss)
gain on investments (3,693,695) 732,121
___________ ________
Net (decrease) increase in net
assets from operations $(4,103,626) $ 457,204
============ ===========
See notes to financial statements
STATEMENTS OF CHANGES IN NET ASSETS
December 31,
1995 1994
____ ____
Net assets at beginning of period
(includes undistributed net investment
(loss) income of $(319,192) in 1994 and
$22,699 in 1993) $13,351,926 $10,320,448
Operations:
Net investment loss (409,931) (274,917)
Net realized loss on investments (95,419) (428,599)
Net (decrease) increase in unrealized
appreciation of investments (3,598,276) 1,160,720
___________ _________
Net (decrease) increase in net assets
from operations (4,103,626) 457,204
___________ _______
Net proceeds of private offering,
40,000 shares in 1995 and 530,000
shares in 1994 85,005 2,574,274
______ _________
Net assets at end of period (includes
undistributed net investment loss of
$812,838 in 1995 and $319,192 in 1994) $ 9,333,305 $13,351,926
=========== ===========
See notes to financial statements
SCHEDULE OF SELECTED PER SHARE DATA AND RATIOS
Five Years Ended December 31, 1995
Selected data for each share of capital stock outstanding throughout the five
most current years is as follows:
Year Ended December 31,
1995 1994** 1993** 1992** 1991**
____ ______ ______ ______ ______
Investment income $ 0.09 $ 0.07 $ 0.13 $ 0.17 $ 0.22
Expenses 0.23 0.17 0.18 0.18 0.20
____ ____ ____ ____ ____
Investment (loss)
income before
income taxes (0.14) (0.10) (0.05) (0.01) 0.02
Provision for income
taxes (benefit) (0.05) (0.03) (0.01) 0.00 0.00
______ ______ ______ ____ ____
Net investment
(loss) income (0.09) (0.07) (0.04) (0.01) 0.02
Net realized and
unrealized gain
(loss) on
investments (net of
taxes) (0.89) 0.18 (0.02) 0.96 0.04
______ ____ ______ ____ ____
Increase
(decrease)
in net asset value
before cumulative
effect of change
in method of
accounting (0.98) 0.11 (0.06) 0.95 0.06
Cumulative effect of
change in method of
accounting for
income taxes
(Note 2) 0.00 0.00 0.06 0.00 0.00
____ ____ ____ ____ ____
Increase
(decrease)
in net asset value (0.98) 0.11 0.00 0.95 0.06
Net asset value -
beginning 3.19 3.07 3.07 2.12 2.06
Net proceeds of
private placement 0.00 0.01 0.00 0.00 0.00
____ ____ ____ ____ ____
Net asset value -
ending $ 2.21 $ 3.19 $ 3.07 $ 3.07 $ 2.12
====== ====== ====== ===== =====
Ratio of expenses to
average net assets 8.73% 6.13% 5.86% 6.66% 9.34%
Ratio of net
investment (loss)
income to average
net assets (3.48)% (2.32)% (1.11)% (0.38)% 0.92%
Number of shares
outstanding at end
of period 4,225,477 4,185,477 3,357,352 3,357,352 3,357,352
** Per share data presented has been restated from prior years to reflect
the 25% stock distributions of the Corporation occurring in 1995, 1994
and 1993.
See notes to financial statements.
RAND CAPITAL CORPORATION
Portfolio of Investments - December 31, 1995 and 1994
December 31, 1995 December 31, 1994
Year
First Percent
Type of Acquired Equity Directors' Directors'
Company Investment (a) (b) Cost Valuation Cost Valuation
_______ __________ ________ _______ ____ _________ ____ _________
ARIA Wireless Common stock - 1991 18.0 $400,000 $198,000 $400,000 $5,750,000
Systems, Inc., NY. 23,000 shares
(Formerly Bison
Data Corp.)
Manufactures and
markets radio
transmission
communication
equipment.
American Tactile Debenture at 8% 1995 - 100,000 100,000 0 0
Corp., NY. due June 23,
Develops equipment 2000
and systems to convertible to
produce ADA signs preferred
for the visually shares to 12.5%
impaired. equity
Auto Radiator Common stock - 1991 10.0 125,000 250,000 125,000 250,000
Sales, Inc., NY. 25 shares
Manufactures and Debenture at 14 375,000 750,000 375,000 750,000
distributes 2/3% due August
replacement 31, 2000,
automobile convertible at
products. $5,000 per
share
Bydatel Corp., NY Common stock - 1989 20.3 350,000 33,000 350,000 350,000
Licensor of 219,262 shares
telecommunication Demand loans at 170,000 0 170,000 170,000
technology. 6%
Warrants to
purchase
Shares equal to 0 0 0 648,000
15.25% equity,
expiring 1998
CAI Wireless Sys., Common stock - 1995 0.31 237,547 467,447 0 0
Inc., NY 48,570 shares
Wireless cable
television systems
operator.
CableMaxx, Inc., Common stock - 1995 0.16 97,500 114,400 0 0
TX 15,000 shares
Wireless cable
television systems
operator.
Chem Pub LP, NY Limited 1988 6.5 5,535 183,775 38,267 204,267
Limited partnership
partnership interest
invested in
"Chemical Week"
magazine.
Commercial Common stock - 1995 20.0 80,000 80,000 0 0
Maintenance 160 shares
Organization, FL
Maintenance
service network
for retailers,
restaurants and
vendors.
Comptek Research, Term loan at 1994 - 154,017 154,017 164,285 164,285
Inc., NY prime less 1%,
Develops due June 13,
electronic systems 1998
for military and Common stock - 1995 0.63 500,007 238,307 0 0
nonmilitary 28,249 shares
applications.
Corel Systems, Convertible 1994 1.3 200,000 200,000 200,000 200,000
Inc., CO. preferred stock
Develops fraud - 200,000
prevention shares
software for the
wireless industry.
J. Giardino, NY First mortgage 1988 - 228,516 228,516 238,501 238,501
Owns and leases at 10%
commercial
property.
International Common stock - 1991 - 0 0 305,000 991,300
Imaging Materials, 30,500 shares
Inc., NY
Manufactures and
sells thermal
transfer ribbons.
Jamestown Savings Common stock - 1995 15.0 500,000 500,000 0 0
Bank, NY 50,000 shares
Community Savings
Bank
Mobile Media Corp, Common stock - 1990 0.4 61,428 1,586,200 86,000 750,000
NY 50,923 shares
(Merger of Local
Area Telecom,
Inc.)
Provider of paging Split - 1.4 to 1995 2.23 24,572
and other wireless 1 -
data services. 20,369 shares
Phoenix Data Convertible 1994 1.1 100,000 100,000 100,000 100,000
Communications preferred stock
Corp., Rt. - 4,000 shares
Develops computer
networking and
multi-protocol
software.
Rand Common stock - 1993 - 0 0 15,000 15,000
Pharmaceuticals 500 shares
(HK) Ltd., Hong Term loan at 0 0 150,000 150,000
Kong 10%, due
Distributes over- November 19,
the-counter drug 1998
products to
developing
countries.
Reflection Convertible 1995 2.38 500,000 500,000 0 0
Technology, Inc. preferred stock
MA - 161,290
Develops and shares
licenses propriety
virtual display
technology.
TGT, Inc. NY Convertible 1995 0.56 56,000 56,000 0 0
Develops and preferred stock
manufactures - 32,000 shares
biological
alternatives to
chemical
pesticides.
TelSoft Mobile Convertible 1994 3.4 100,000 197,800 100,000 100,000
Data, Inc. Canada debenture at
Develops mobile 7.5%, due
data software. December 15,
1996
Warrants to
purchase:
184,000 shares
at $2.25
(Canadian)
each, expiring
1995
Three Sixty Corp. Common stock - 1987 7.0 399,900 600,000 399,900 600,000
NJ 300 shares
Acquires and Debenture at 136,700 200,000 136,700 200,000
manages cable 8%, convertible
television at $1,333 per
properties. share
Debenture at 451,306 451,306 500,000 500,000
15%,
convertible at
$4,700 per
share
Trade Winds Fan Common stock - 1992 - 0 0 133,333 0
Co., Inc., NY 179,969 shares
Manufactures and Term loan at 0 0 266,667 0
sells ceiling fan 8.5%, due July
products and 31, 2000
systems. Demand loan at 0 0 120,000 70,000
10%
TransWorld Common stock - 1995 0.46 131,498 136,998 0 0
Telecom, Inc., UT 132,826 shares
Wireless cable
television system
operator.
Ultra-Scan Corp., Common stock - 1992 15.7 276,986 1,665,386 152,000 1,472,500
NY 47,583 shares
(formerly Niagara Term Loan at 9% 0 0 25,000 25,000
Technology, Inc.) due June 30,
Ultrasonic 1995
fingerprint
scanning
technology.
Other investments 61 6,461 60 60
__ _____ __ __
Total
Investments $5,761,573 $8,997,613 $4,550,713 $13,698,913
========== ========== ========== ===========
Notes to Consolidated Portfolio of Investments
(a) The Year First Acquired column indicates the year in which Rand Capital Corporation acquired their
first investment in the company or a predecessor company. Cost represents the Federal income tax
basis of the security.
(b) The equity percentages express the percent of outstanding voting securities held by the Company or
the potential percentage of voting securities that could be held by the Company upon exercise of its
warrants or conversion of debentures. Warrants issuable to others were included in determining the
percentages.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Corporation operates as a closed-end management
investment company registered under the Investment Company Act of
1940. The Corporation's former wholly owned subsidiary, Rand
SBIC, Inc., which was licensed in accordance with the provisions
of the Small Business Investment Act of 1958 was merged with Rand
Capital Corporation effective September 30, 1994.
The Corporation reports investments to portfolio companies
on the value method of accounting and, accordingly, does not
consolidate or recognize income or loss by use of the equity
method of accounting for any investments. Under the value
method, investments are carried in the statement of financial
position at their fair value determined in good faith by the
Board of Directors. Such valuations recognize changes in value
as unrealized appreciation or depreciation from original cost.
Substantially all of the Corporation's investments are
restricted securities and may be subject to various restrictions
on their disposition consistent with the Securities Act of 1933.
This factor is taken into account by the Directors in valuing the
Corporation's portfolio. The Directors also give consideration
to the operating results, financial position, 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 impact on the value of a portfolio company.
Securities of a class which are publicly traded, but which
the Corporation believes are not readily marketable, are valued
at a price discounted from that of the public market.
Substantially all of the debt securities in the
Corporation's portfolio are subordinated, in varying degrees, to
other indebtedness of the investee. Prevailing interest rates
were considered in valuing these securities.
Amounts reported as realized gains and losses are measured
by the difference between the proceeds of sale or exchange and
the cost basis of the investment without regard to unrealized
gains or losses reported in prior periods. The costs of
securities that have, in the Directors' judgment, become
worthless are written off and reported as realized losses.
Interest income generally is recorded on the accrual basis
except where the investment is valued at less than cost to
reflect risk of loss. In such cases, interest is recorded at the
time of receipt. A reserve for possible losses on interest
receivable is maintained when appropriate.
Nonmonetary transactions are recorded on the basis of the
fair value of the assets transferred.
Certain reclassifications have been made to prior years for
comparative purposes.
Net assets per share are based on the number of shares of
common stock outstanding during the respective year. The prior
years have been restated to show the effects of a twenty-five
percent stock distribution that occurred during 1995, 1994 and
1993 and a private offering which occurred during 1995 and 1994.
2. INCOME TAXES
The Corporation does not presently qualify as a regulated
investment company for income tax purposes.
Deferred income taxes of $1,196,000 and $3,416,000 at
December 31, 1995 and 1994, respectively, relate to net
unrealized appreciation of investments. Such appreciation is not
included in taxable income until realized.
Included in deferred taxes on the accompanying statements of
financial position is approximately $85,000 and $88,300 at
December 31, 1995 and 1994, respectively, applicable to a gain
being reported under the installment method for income tax
purposes. This amount will be reduced in future periods as
payments are received.
The Corporation accounts for income taxes in accordance with
FASB Statement No. 109, Accounting for Income Taxes. A
requirement of FASB Statement No. 109 is that deferred tax assets
and liabilities are recorded for temporary differences between
the financial statement and tax bases of assets and liabilities
using the currently enacted tax rate expected to be in effect
when the taxes are actually paid or recovered.
Income Taxes:
The net deferred tax liability presented in the balance sheet
includes the following:
1995 1994
______________ ______________
Deferred tax liability $ 1,280,976 $ 3,514,600
Deferred tax asset 937,217 725,300
______________ ______________
Net deferred tax liability $ 343,759 $ 2,789,300
============== ==============
The tax effect of the major temporary difference and
carryforwards that give rise to the Corporation's net deferred
tax liability are as follows:
1995 1994
_______________ _____________
Operations $ (3,700) $ 9,581
Investments 1,280,976 3,505,059
Net Operating loss
carryforwards (478,490) (240,310)
Capital loss carryforwards (455,027) (485,030)
_______________ _______________
Net deferred tax liability $ 343,759 $ 2,789,300
============== ===============
Income tax expense (benefit) is reported in the statements of
operations:
1995 1994
_______________ _____________
Tax currently payable
on income:
State 14,100 18,000
_______________ _____________
14,100 18,000
_______________ _____________
Deferred:
Tax (benefit) provision on change in unrealized appreciation:
Federal (2,084,137) 234,900
State (361,404) 16,400
_______________ ______________
(2,445,541) 251,300
_______________ ______________
Total $ (2,431,441) $ 269,300
================ ==============
A reconciliation of the benefit for income taxes at the federal
statutory rate to the benefit reported is as follows:
1995 1994
_______________ _____________
Net investment gain and
realized gain before income
taxes $ 6,535,067 $ 726,504
============== =============
Expected tax (benefit)
expense at statutory rate
of 34% $ (2,239,193) $ 247,000
State, net of federal effect (592,727 50,000
Other 400,479 (27,700)
_______________ ______________
Total $ (2,431,441) $ 269,300
=============== =============
At December 31, 1995, the Corporation had a Federal and a State
net operating loss carryforward of approximately $1,185,000 and
$590,000, respectively, which expires commencing in 2007.
3. STOCKHOLDERS' EQUITY
On June 16, 1995 and June 16, 1994, the Corporation issued
837,150 and 669,738 shares of common stock, respectively, to
shareholders of record as of May 26, 1995 and May 27, 1994,
respectively, in conjunction with a 25% stock distribution
declared by the Board of Directors. On October 19, 1995, the
Corporation completed the sale of 40,000 shares of authorized and
unissued common stock of the Corporation at $3.32 per share. Per
share amounts reported in the financial statements and in the
schedule of selected per share data and ratios have been restated
to reflect the stock distributions. An amount equal to par value
was charged to undistributed net investment income and credited
to common stock.
At December 31, 1995 and 1994 there were 500,000 shares of
$10 par value preferred stock authorized and unissued.
Summary of changes in capital accounts:
Undistributed Undistributed Net Unrealized
Net Investment Realized Gain Appreciation on
Income on Investments Investments
Balance December 31,
1993 $ 22,699 $ 3,391,320 $ 4,483,480
Net (decrease) increase
in net assets from
operations (274,917) (428,599) 1,160,720
Stock Distribution (66,974) 0 0
____________ ______________ _____________
Balance December 31,
1994 (319,192) 2,962,721 5,644,200
Net decrease in net
assets from operations (409,931) (95,419) (3,598,276)
Stock distribution (83,715) 0 0
____________ _______________ ______________
Balance December 31,
1995 $ (812,838) $ 2,867,302 $ 2,045,924
============ ============== =============
-----------Common Stock-----------
Capital in
Shares Amount Excess of Par
______________ ________________ _____________
Balance, December 31,
1993 (1) 2,148,589 (1) $ 214,859 (1) $ 2,208,090 (1)
Private Offering (1) 530,000 (1) 53,000 (1) 2,521,274 (1)
Stock distribution (1) 669,738 (1) 66,974 (1) 0
_______________ ________________ ______________
Balance, December 31,
1994 (1) 3,348,327 (1) 334,833 (1) 4,729,364 (1)
Stock distribution 837,150 83,715 0
Private Offering 40,000 4,000 81,005
_______________ ________________ ______________
Balance, December 31,
1995 4,225,477 $ 422,548 $ 4,810,369
=============== ================= ===============
(1) As previously reported, pre-1995 stock distribution.
4. COMMITMENTS AND CONTINGENCIES
The Corporation has entered into an agreement with a former
officer of the Corporation which, among other things, stipulates
the following:
a) From the date of retirement until the earlier of
December 31, 1999 or death, the Corporation will employ
this former officer as a consultant at an annual fee of
$10,000. This contract is subject to renewal.
b) This former officer will continue to be compensated
under terms of a deferred compensation agreement.
Payments under this agreement are expected to be paid
out over the period of January 1, 1996 through
September 31, 1999. The amounts under this agreement
have been accrued as of December 31, 1995 due to all
terms of the contract being satisfied by this fiscal
year end.
c) The Company offers health and dental benefits to this
former officer and his family under terms of the
deferred compensation agreement. These benefits are
accounted for under Statement of Financial Accounting
Standard No. 106, "Employers Accounting for
Postretirement Benefits Other Than Pensions (FASB
106)", requiring the accrual method of accounting for
these benefits.
5. TRANSACTIONS WITH AFFILIATES
Income from affiliates of the Corporation as of December 31
was as follows:
1995 1994
______________ ______________
Interest Income $ 85,896 $ 125,640
Other 32,014 3,493
______________ ______________
Total $ 117,910 $ 129,133
============= ==============
6. PENSION EXPENSE
The Corporation maintains contributory and noncontributory
retirement plans for all employees meeting specified age and
service requirements. Benefits are determined based on
compensation history. The Corporation's policy is to accrue and
fund the cost for the year. For the years ended December 31,
1995 and 1994, total retirement plan expense amounted to $81,131
and $83,646, respectively.
Net pension expense for the defined benefit retirement plan
consisted of the following:
1995 1994
______________ ______________
Service cost $ 17,625 $ 32,815
Interest cost 34,335 31,331
Actual return on assets (34,977) (33,133)
Net amortization and
deferral 4,415 7,606
_____________ _____________
Net pension expense $ 21,398 $ 38,619
============= =============
Actual contribution to this plan amounted to $78,718 and $62,214
in 1995 and 1994, respectively. The following table sets forth
the Plan's funded status at December 31:
1995 1994
___________ ____________
Fair value of plan assets $ 496,340 $ 493,294
___________ ____________
Actuarial present value of benefit
obligations:
Vested benefits (498,671) (504,156)
Non-vested benefits 0 0
___________ ____________
Accumulated benefit
obligations (498,671) (504,156)
Effect of projected future salary
increases (11,321) (7,574)
___________ ____________
Projected benefit obligations (509,992) (511,730)
___________ ____________
Funded status (13,652) (18,436)
Unrecognized transition amount 56,765 61,925
Unrecognized gain 84,412 26,716
Adjustment required to recognize
minimum liability (129,856) (81,067)
___________ ____________
Pension liability $ (2,331) $ (10,862)
=========== ============
The projected benefit obligation for both 1995 was determined
using an assumed discount rate of 7.0% and an assigned rate of
compensation increase of 3%. The assumed long-term rate of
return on plan assets was 7% for both years.
Management of the Corporation anticipates a former officer will
receive a lump sum payment from the pension fund during 1996.
This payout will approximate $478,000.
CHANGES IN INVESTMENTS AT COST AND REALIZED LOSS
Year Ended December 31, 1995
Cost
Increase Realized
(Decrease) Gain (Loss)
__________ ___________
Additional investments:
ASCE $ 237,546 $ 0
American Tactile Corp. 100,000 0
CAI Wireless Systems, Inc. 237,547 0
CableMaxx, Inc. 97,500 0
Comptek Research, Inc. 500,007 0
Commercial Maintenance Organization 80,000 0
Jamestown Savings Bank 500,000 0
Reflection Technology, Inc. 500,000 0
TGT, Inc. 56,000 0
TransWorld Telecom, Inc. 141,398 0
Ultra-Scan Corporation 99,986 0
____________ ____________
Total 2,549,984 0
____________ ____________
Investments sold:
ASCE (237,546) 103,026
International Imaging Materials, Inc. (305,000) 411,846
TransWorld Telecom, Inc. (9,900) 6,214
____________ ____________
Total (552,446) 521,086
____________ ____________
Investments written off:
Rand Pharmaceuticals (HK), Ltd. (165,000) (189,041)
Trade Winds Fan Co., Inc. (520,000) (524,244)
____________ ____________
Total (685,000) (713,285)
____________ ____________
Other changes:
Repayment of loans:
J. Giardino (9,984) 0
Three Sixty Corporation (48,694) 0
Other:
Chem Pub L.P. (32,732) 126,783
Comptek Research, Inc. (10,268) 0
_____________ ____________
Total (101,678) 126,783
_____________ ____________
Net change in investments at cost and
realized loss $ 1,210,860 $ (65,416)
============ =============
STOCK BID PRICE DATA*
1995 1994
High Low High Low
_____________ _____________
1st Quarter 4 1/4 3 1/2 5 5/8 4 3/8
2nd Quarter 5 3/8 4 1/2 6 5/8 4 3/4
3rd Quarter 7 5 1/4 4 3/4 4 1/2
4th Quarter 6 1/2 3 4 1/2 3 3/4
* Stock bid price data has been adjusted for stock distribution
HOW TO APPLY FOR FUNDS
To help applicants for investment funds, we are pleased to
reprint in full the eligible subjects we would prefer to be
included in investment applications. Please send this
information to us so that we may study it before arranging a
personal meeting to discuss the investment:
1. Brief history of company, nature of business or
service and main products; Standard Industrial
Classification (SIC) number of the industry;
number of employees.
2. Biographical sketches of all executives, key
personnel, directors and major stockholders;
signed personal statement of net worth for each
principal.
3. Personal, business and technical references.
4. Financial statements for the past five years,
preferably audited.
5. Amount requested, and proposed use of funds;
growth projections, if available.
6. Names of principal suppliers and customers.
7. Brief analysis of the market and industry, method
of distribution, and competition.
8. Samples of promotional or descriptive literature
on products or services offered.
BOARD OF DIRECTORS
* Thomas R. Beecher, Jr. Chairman of the Board,
Attorney-at-law, Buffalo, N.Y.
*c Robert P. Fine Attorney-at-law, Hurwitz &
Fine, P.C., Buffalo, N.Y.
acp Emma K. Harrod, M.D. Physician, Buffalo, N.Y.
a Willis S. McLeese Chairman, Colmac Holdings,
Ltd., Toronto, Canada
*a Reginald B. Newman II President, NOCO Energy Corp.,
Tonawanda, N.Y.
*cp Jayne K. Rand Vice President, M&T Bank,
Buffalo, N.Y.
*p Donald A. Ross Consultant
OFFICERS
Allen ("Pete") F. Grum President, Chief Executive Officer
Nora B. Sullivan Executive Vice President
Robin K. Penberthy Secretary and Treasurer
* Member of Executive Committee
a Member of Audit Committee
c Member of Compensation Committee
p Member of Pension Committee
CORPORATE DATA
General Counsel Hodgson, Russ, Andrews, Woods &
Goodyear, LLP
Independent Accountants Deloitte & Touche LLP
Transfer Agent & Continental Stock Transfer & Trust
Registrar Company
Stock Listing Over the Counter NASDAQ symbol RAND