March 31, 1999 First Quarter April 27, 1999 To Our Shareholders: During the first quarter of 1999, we increased our investment in DataView, LLC by purchasing a Convertible Subordinated Note for $100,000. This increases our ownership to 5% on a converted basis. DataView provides value-added data-visualization information tools for financial market professionals to help spot trends and to enhance decision making. The product is currently used by several major brokerage houses through proprietary systems and over the Internet. During the quarter, Pathlight Technology, Inc. signed a multi-year agreement with IBM's Storage System Division to deliver the new IBM Storage Area Network, which is driven by Pathlight's proprietary technology. This contract represents a key milestone for the company and is indicative of the markets commercial acceptance of their technology. We ended the quarter with a net asset value of $1.43 per share and a cash position of $3.5 million. Our pipeline of potential transactions is very active and we hope to report on these transactions in the coming quarters. Thank you for your support. Allen F. Grum President Portfolio Valuation / March 31, 1999
March 31, 1999 December 31, 1998 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 due June 2000 systems to produce signage. and April 2001 with www.americantactile.com detachable warrants ARIA Wireless Systems, Inc. Common Stock - 5/23/97 438,000 122,000 0.02 122,000 0.02 (OTC:AWSI)* 488,000 shares Buffalo, NY. Markets wireless radio transmission communication equipment. www.ariawireless.com BioVector, Inc. Common Stock - 4/17/97 50,000 125,000 0.08 125,000 0.08 Buffalo, NY. 50,000 shares 360,000 360,000 360,000 Medical technological sales Convertible force company. Promissory Note at 8%, due April 2002 Option to purchase 165,000 Common Shares 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. DataView, LLC Convertible 10/1/98 200,000 200,000 0.04 100,000 0.02 Mt. Kisco, NY. Designs, Subordinated Note - develops and markets $200,000 browser based software for 8% Due October 15, investment professionals. 1999 www.marketgauge.com Fertility Acoustics, Inc. Common Stock 10/1/97 50,000 125,000 0.02 125,000 0.02 Buffalo, NY. Developer of -150,000 shares proprietary Option to purchase methods to diagnose onset of 15,000 shares ovulation. J. Giardino First mortgage 2/26/88 121,112 121,112 0.02 121,112 0.02 Buffalo, NY. Commercial real at 13% estate. Hammertime, Inc. Convertible 10/1/98 100,000 100,000 0.04 100,000 0.04 Clarence, NY. Exclusive Sears Preferred Stock - 100,000 100,000 100,000 licensed 1,000 Shares installer of kitchens and Senior Subordinated baths. Note at 12% due October 2000 HealthWay Products Company, Common Stock -1,000 3/18/96 100,100 100,100 0.02 100,000 0.02 Inc. shares Syracuse, NY. Manufactures Promissory Note at air filters and 24%, due June 1996 climate control devices. 4,667 warrants for www.healthway.com Series A Preferred Stock InfoMiners, Inc. 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 147,000 warrants support software for for shares of stock healthcare industries. www.infominers.com Lightbridge, Inc. Common Stock - 3/31/94 218,271 66,648 0.01 72,408 0.01 (NASDAQ:LTBG)* 13,165 shares Burlington, MA. Provides software based services for wireless telecommunications industry. www.lightbridge.com MINRAD, Inc. Common Stock - 8/4/97 429,000 949,512 0.17 949,512 0.17 Buffalo, NY. Developer of 118,689 shares laser guided surgical devices. Pathlight Technology, Inc. Class A Series 1(a) 10/7/97 100,000 100,000 0.04 100,000 0.04 Ithaca, NY. Develops high Convertible 100,000 100,000 100,000 technology Serial Preferred Storage Architecture for Stock - 100,000 computer industry. shares with 6% www.pathlight.com cumulative dividend. Subordinated Note at 7.5% due December 2000 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. Reflection Technology, Inc. Series J 10/4/95 500,000 150,000 0.02 150,000 0.03 Waltham, MA. Develops and Convertible licenses proprietary Preferred Stock - virtual display technology. 243,903 shares www.reflectiontech.com 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 Other investments Other 481,564 10,330 0.00 20,597 0.00 Total portfolio 4,137,633 3,471,243 0.61 3,387,170 0.59 investments ========= ========= ==== ========= ==== Cash and Cash 3,505,402 0.61 3,757,399 0.66 equivalents Net receivables 98,868 0.02 20,583 0.00 (payables) ------ ------ Net Assets before 7,075,513 1.24 7,165,152 1.25 Taxes Tax provision (1,071,880) (0.19) (1,071,880) (0.19) (benefit) ----------- ----------- Net Assets 8,147,393 8,237,032 ========= ========= Net Asset Value per 1.43 1.44 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 Nora B. Sullivan Executive Vice President nsullivan@randcap.com Daniel P. Penberthy Chief Financial Officer penberthy@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