0000081955--12-31falseFYhttp://fasb.org/us-gaap/2023#RelatedPartyMemberhttp://fasb.org/us-gaap/2023#RelatedPartyMember0.1111.33330.40000081955Tilson Technology Management, Inc. - 70,176 Series D Preferred2022-12-310000081955DSD Operating, LLC - 3,063,276 Term Note2022-12-310000081955rand:RegularQuarterlyDividendMember2023-09-300000081955rand:RegularQuarterlyDividendMember2023-10-012023-12-310000081955SciAps, Inc. - $2,090,000 Second Amended and Restated Secured Subordinated Promissory Note at 12%2022-01-012022-12-310000081955ITA Acquisition, LLC - $1,500,000 Term Note at 12% (+5% PIK) through September 30, 20242023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:NonControlAndNonAffiliateLoanAndDebtInvestmentsMember2022-12-310000081955SciAps, Inc. - 117,371 Series B Convertible Preferred2022-01-012022-12-310000081955FCM Industries Holdco LLC $420,000 Convertible Note at 10%2023-01-012023-12-310000081955Barings BDC, Inc. - 40,000 shares2023-12-310000081955TOTAL INVESTMENTS – 126.8%2023-12-310000081955rand:ClearviewSocialIncMemberus-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955ITA Acquisition, LLC - 1,124 Class A Preferred Units and 1,924 Class B Common Units2021-12-310000081955Filterworks2022-01-012022-12-310000081955GoNoodle, Inc. - Warrant for 21,948 Series D Preferred2023-12-310000081955Applied Image, Inc. - $1,750,000 Term Note at 10%2022-12-310000081955rand:RegularQuarterlyDividendMember2022-07-012022-09-300000081955Other changes to investments, DSD Operating, LLC interest conversion2023-01-012023-12-310000081955Knoa Software, Inc. - 1,876,922 Series B Preferred2022-01-012022-12-310000081955rand:BlockerCorporationsMember2022-01-012022-12-310000081955Lumious - $850,000 Replacement Term Note2023-12-310000081955rand:ClearviewSocialIncMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955Seybert’s Billiards Corporation - $1,435,435 Term Note2022-01-012022-12-310000081955DSD Operating, LLC2023-01-012023-12-310000081955Seybert’s Billiards Corporation - 4,139,444 Term Note2023-01-012023-12-310000081955rand:SocialflowIncMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955Seybert’s Billiards Corporation - $4,139,444 Term Note at 12%2022-12-310000081955Applied Image, Inc.2022-12-310000081955Other changes to investments, Filterworks Acquisition USA, LLC interest conversion2023-01-012023-12-310000081955rand:ScenarioTwoMember2023-01-012023-12-310000081955Filterworks Acquisition USA, LLC DBA Autotality - 626.2 shares Class A-1 Units2022-12-310000081955Open Exchange, Inc - 397,899 Series C Preferred2022-12-310000081955PostProcess Technologies, Inc. - 360,002 Series A1 Preferred2023-12-310000081955Caitec, Inc. - 36,261 Series A Preferred2023-12-310000081955FS KKR Capital Corp. - 48,000 shares2022-01-012022-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Memberrand:FilterworksAcquisitionUsaLlcMember2022-01-012022-12-310000081955SciAps, Inc. - $2,090,000 Subordinated Promissory Note2022-01-012022-12-310000081955Barings BDC, Inc. - 40,000 shares2022-01-012022-12-310000081955Rheonix, Inc.2022-12-310000081955Total ITA Acquisition, LLC2021-12-310000081955LIABILITIES IN EXCESS OF OTHER ASSETS - (26.8%)2023-12-310000081955rand:BlockerCorporationsMember2023-12-310000081955SciAps, Inc. - 147,059 Series D Convertible Preferred2023-01-012023-12-310000081955Control and Affiliate Investments2023-01-012023-12-310000081955us-gaap:RetainedEarningsMember2021-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:NewMonarchMachineToolIncMember2022-01-012022-12-3100000819552019-01-012019-12-310000081955ACV Auctions, Inc, - 194,934 shares2023-01-012023-12-310000081955rand:MicrocisionLlcMemberus-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955PostProcess Technologies, Inc. - 360,002 Series A1 Preferred2022-12-310000081955Lumious - $850,000 Replacement Term Note2023-01-012023-12-310000081955SciAps, Inc. - $2,090,000 Second Amended and Restated Secured Subordinated Promissory Note at 12%2023-01-012023-12-310000081955BMP Food Service Supply Holdco, LLC - 7,035,000 Second Amended and Restated Term Note, $2,215,0002023-12-310000081955rand:RegularQuarterlyDividendMember2022-10-012022-12-310000081955rand:IndustryConcentrationRiskMemberrand:InvestmentsAtFairValueMemberus-gaap:ServiceMember2022-01-012022-12-3100000819552023-06-300000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Member2023-12-310000081955BMP Food Service Supply Holdco, LLC - 7,035,000 Second Amended and Restated Term Note2023-12-310000081955Seybert’s Billiards Corporation - $1,435,435 Term Note at 12%2022-01-012022-12-310000081955Seybert’s Billiards Corporation - $1,435,435 Term Note2023-01-012023-12-310000081955Seybert’s Billiards Corporation - Warrant for 4% Membership Interest2022-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:CaitecIncMemberrand:LoanInvestmentsMember2022-01-012022-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:MercantileAdjustmentBureauLlcMember2023-01-012023-12-310000081955Knoa Software, Inc. - 973,533 Series A-1 Convertible Preferred2022-01-012022-12-310000081955rand:SocialflowIncMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:ItaAcquisitionLlcMember2022-01-012022-12-310000081955us-gaap:EquitySecuritiesMemberrand:SomersetGasTransmissionCompanyLlcSomersetMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955Lumious - $850,000 Replacement Term Note2022-01-012022-12-310000081955rand:DsdOperatingLlcMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955Investments repaid, sold or liquidated, Mercantile Adjustment Bureau, LLC escrow receipt2023-01-012023-12-310000081955Other changes to investments, Mattison Avenue Holdings, LLC interest conversion2023-01-012023-12-310000081955Filterworks Acquisition USA, LLC 626.2 shares Class A-1 Units.2023-12-310000081955srt:MinimumMember2022-12-310000081955New investments, Inter-National Electronic Alloys LLC2023-01-012023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:SeybertBilliardsCorporationMember2023-01-012023-12-310000081955ITA Acquisition, LLC - $1,900,000 Term Note2021-12-3100000819552023-12-310000081955DSD Operating, LLC2022-01-012022-12-310000081955us-gaap:FairValueInputsLevel3Memberus-gaap:DebtSecuritiesMemberrand:FilterworksAcquisitionUsaLlcMember2023-01-012023-12-310000081955Tilson Technology Management, Inc. - 211,567 A-1 Units of SQF Holdco LLC2022-12-310000081955Inter-National Electronic Alloys LLC2023-12-310000081955Seybert’s Billiards Corporation - 5.82 Common shares2022-12-310000081955Tilson Technology Management, Inc. - 211,567 A-1 Units of SQF Holdco LLC2023-12-310000081955Other changes to investments, Caitec, Inc. interest conversion2023-01-012023-12-310000081955us-gaap:SubsequentEventMember2024-02-262024-02-260000081955Caitec, Inc. - $1,750,000 Subordinated Secured Promissory Note2023-01-012023-12-310000081955us-gaap:RevolvingCreditFacilityMemberrand:CreditAgreementMember2022-12-310000081955rand:RegularQuarterlyDividendMember2023-01-012023-03-310000081955Inter-National Electronic Alloys LLC - 75.3 Class B Preferred Units2023-12-310000081955Applied Image, Inc. - $1,750,000 Term Note at 10%2021-12-310000081955Seybert’s Billiards Corporation2023-01-012023-12-310000081955Open Exchange2022-12-310000081955us-gaap:FairValueInputsLevel1Member2022-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Member2022-12-310000081955rand:MicrocisionLlcMemberus-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955Investments repaid, sold or liquidated, Microcision LLC additional proceeds2023-01-012023-12-310000081955us-gaap:FairValueInputsLevel3Memberus-gaap:DebtSecuritiesMember2023-01-012023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:AffiliateLoanAndDebtInvestmentsMember2022-12-310000081955Investments repaid, sold or liquidated, ACV Auctions, Inc. stock sold2023-01-012023-12-310000081955rand:TilsonTechnologyManagementIncMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Member2021-12-310000081955SciAps, Inc. - 147,059 Series D Convertible Preferred2022-01-012022-12-310000081955Applied Image, Inc.2023-01-012023-12-310000081955Tilson Technology Management, Inc. - 120,000 Series B Preferred2023-01-012023-12-310000081955FCM Industries Holdco LLC $3,380,000 Term Note at 13%2023-01-012023-12-310000081955us-gaap:DebtSecuritiesMember2022-12-310000081955BMP Food Service Supply2023-12-310000081955Seybert’s Billiards Corporation - $1,435,435 Term Note at 12%2023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:CaitecIncMember2022-01-012022-12-310000081955rand:IndustryConcentrationRiskMemberrand:DistributionMemberrand:InvestmentsAtFairValueMember2023-01-012023-12-310000081955Tilson Technology Management, Inc. - 23,077 Series F Preferred2023-12-310000081955Tilson Technology Management, Inc.2022-01-012022-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:AffiliateInvestmentsMember2022-12-3100000819552022-12-310000081955rand:InterNationalElectronicAlloysLlcMember2023-01-012023-12-310000081955SciAps, Inc. - 274,299 Series A1 Convertible Preferred2022-01-012022-12-310000081955Applied Image, Inc.2022-01-012022-12-310000081955rand:ScenarioOneMember2023-01-012023-12-310000081955rand:SoftwareMemberrand:IndustryConcentrationRiskMemberrand:InvestmentsAtFairValueMember2022-01-012022-12-310000081955Filterworks Acquisition USA, LLC DBA Autotality - $2,283,702 Term Note2021-12-310000081955Seybert’s Billiards Corporation - $1,435,435 Term Note2023-12-310000081955Caitec, Inc. - 36,261 Series A Preferred.2023-12-310000081955Highland All About People Holdings, Inc. $3,000,000 Term Note at 12%2023-01-012023-12-310000081955Pressure Pro, Inc.2023-12-310000081955ITA Acquisition, LLC $1,500,000 Term Note at 12%2023-01-012023-12-310000081955us-gaap:AdditionalPaidInCapitalMember2023-12-310000081955Highland All About People Holdings, Inc. - $3,000,000 Term Note at 12%2023-01-012023-12-310000081955srt:MinimumMemberrand:CreditAgreementMember2022-06-270000081955Tilson Technology Management, Inc. - 21,391 Series C Preferred2022-01-012022-12-310000081955GoNoodle, Inc. - Warrant for 21,948 Series D Preferred2022-01-012022-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:ControlInvestmentsMember2023-12-310000081955Caitec, Inc. - $1,750,000 Subordinated Secured Promissory Note One to 12%2023-12-310000081955us-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955rand:MattisonAvenueHoldingsLlcMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955ACV Auctions, Inc, - 319,934 shares2022-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:LoanInvestmentsMember2023-12-3100000819552022-04-012022-06-300000081955SciAps, Inc. - $2,090,000 Subordinated Promissory Note2022-12-310000081955srt:MinimumMemberrand:CreditAgreementMember2022-06-272022-06-270000081955ITA Acquisition, LLC 1,124 ITA Acquisition, LLC - 1,924 Class B Common Units.2023-12-310000081955us-gaap:EquitySecuritiesMemberrand:SocialflowIncMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955BMP Food Service Supply Holdco, LLC - 7,035,000 Second Amended and Restated Term Note, $4,820,0002023-12-310000081955us-gaap:CommonStockMember2022-01-012022-12-310000081955SciAps, Inc.2022-12-310000081955us-gaap:EquitySecuritiesMemberrand:TilsonTechnologyManagementIncMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955BMP Food Service Supply Holdco, LLC - $2,500,000 Term Note at 12%2022-12-310000081955Inter-National Electronic Alloys LLC 75.3 Class B Preferred Units2023-01-012023-12-310000081955rand:CashDividendMember2020-01-012020-12-310000081955BMP Food Service Supply Holdco, LLC - 24.83% Preferred Interest2022-01-012022-12-310000081955Applied Image, Inc.2021-12-310000081955srt:MaximumMember2022-01-012022-12-310000081955Seybert’s Billiards Corporation - 4,139,444 Term Note2022-12-310000081955Seybert’s Billiards Corporation - Warrant for 4% Membership Interest2021-12-310000081955Applied Image, Inc. - Warrant for 1,167 shares2022-01-012022-12-310000081955PostProcess Technologies, Inc. - 360,002 Series A1 Preferred2023-01-012023-12-310000081955BMP Swanson Holdco, LLC $1,600,000 Term Note at 12%2023-12-310000081955ITA Acquisition, LLC - $1,500,000 Term Note2023-01-012023-12-310000081955SciAps, Inc. - 113,636 Series C Convertible Preferred2023-01-012023-12-310000081955Seybert’s Billiards Corporation - Warrant for 4% Membership Interest2023-01-012023-12-310000081955Applied Image, Inc. - $1,750,000 Term Note at 10%2023-12-310000081955rand:AdministrationAgreementMember2021-01-012021-12-310000081955Open Exchange2023-12-310000081955Carolina Skiff LLC - 6.0825% Class A Common2022-01-012022-12-310000081955Barings BDC, Inc. - 40,000 shares2022-12-310000081955Tilson Technology Management, Inc. - *21,391 Series C Preferred2022-12-310000081955FCM Industries Holdco LLC - $3,380,000 Term Note at 13%2023-12-310000081955Other changes to investments, SciAps, Inc. OID amortization2023-01-012023-12-310000081955Total of new investments2023-01-012023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:SeybertBilliardsCorporationMember2022-01-012022-12-310000081955us-gaap:DomesticCountryMember2022-12-310000081955us-gaap:EquitySecuritiesMember2022-12-310000081955BMP Swanson Holdco, LLC2022-01-012022-12-310000081955Mattison Avenue Holdings LLC. - $1,794,944 Third Amended, Restated and Consolidated Promissory Note2023-01-012023-12-310000081955rand:SpecialDividendMember2022-12-310000081955Control Investments2022-01-012022-12-310000081955New investments, ITA Acquisition, LLC2023-01-012023-12-310000081955FCM Industries Holdco LLC $3,380,000 Term Note at 13%2023-12-310000081955us-gaap:CommonStockMember2023-04-1900000819552020-05-210000081955BMP Swanson Holdco, LLC - Preferred Membership Interest for 9.29%2021-12-310000081955us-gaap:AdditionalPaidInCapitalMember2022-12-310000081955GoNoodle, Inc. - 1,500,000 Secured Note2023-01-012023-12-310000081955us-gaap:FairValueInputsLevel3Member2023-12-310000081955BMP Food Service Supply Holdco, LLC 15.4% Preferred Interest2022-12-310000081955Carlyle Secured Lending Inc. - 86,000 shares2023-01-012023-12-310000081955BMP Food Service Supply Holdco, LLC $7,035,000 Second Amended and Restated Term Note, $4,820,000 at 12%, $2,215,000 at 13%2023-12-3100000819552020-05-212020-05-210000081955Caitec, Inc. - 36,261 Series A Preferred2023-01-012023-12-310000081955Caitec, Inc. - $1,750,000 Subordinated Secured Promissory Note to 12%2023-12-310000081955rand:BlockerCorporationMember2023-12-310000081955Tilson Technology Management, Inc. - 211,567 A-1 Units of SQF Holdco LLC.2022-01-012022-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:EmpireGenomicsCorpMember2022-01-012022-12-310000081955SciAps, Inc. - 147,059 Series D Convertible Preferred2023-12-310000081955HDI Acquisition LLC. - $1,245,119 Term Loan2023-12-310000081955rand:IndustryConcentrationRiskMemberrand:AutomotiveMemberrand:InvestmentsAtFairValueMember2023-01-012023-12-310000081955rand:InvestmentManagementAgreementMember2022-01-012022-12-310000081955rand:SpecialDividendMember2023-10-012023-12-310000081955LIABILITIES IN EXCESS OF OTHER ASSETS - (6.6%)2022-12-310000081955SciAps, Inc. - 187,500 Series A Preferred2021-12-310000081955PennantPark Investment Corporation - 195,000 shares2022-01-012022-12-310000081955rand:MattisonAvenueHoldingsLlcMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955rand:IndustryConcentrationRiskMemberrand:InvestmentsAtFairValueMember2023-01-012023-12-310000081955Carolina Skiff LLC - 6.0825% Class A Common Membership Interest2023-01-012023-12-310000081955SciAps, Inc. - $2,090,000 Second Amended and Restated Secured Subordinated Promissory Note at 12%2021-12-310000081955ITA Acquisition, LLC - 1,924 Class B Common Units2023-12-310000081955rand:RisksRelatedToOurBusinessAndStructureMember2023-01-012023-12-310000081955Tilson Technology Management, Inc. - 211,567 A-1 Units of SQF Holdco LLC.2023-12-310000081955Carolina Skiff LLC - 6.0825% Class A Common2022-12-310000081955Other changes to investments, ITA Acquisition, LLC interest conversion2023-01-012023-12-310000081955SciAps, Inc. - 369,698 Series C1 Convertible Preferred2023-01-012023-12-310000081955rand:MattisonAvenueHoldingsLlcMemberus-gaap:FairValueInputsLevel3Memberrand:LoanInvestmentsMember2022-01-012022-12-3100000819552020-01-012020-12-310000081955us-gaap:AdditionalPaidInCapitalMember2021-12-310000081955Tilson Technology Management, Inc. - 23,077 Series F Preferred2022-12-310000081955ITA Acquisition, LLC - $1,900,000 Term Note2022-12-310000081955Filterworks Acquisition USA, LLC $2,283,702 Term Note at 12%2022-12-310000081955rand:TilsonTechnologyManagementIncMember2023-01-012023-12-310000081955BMP Food Service Supply Holdco, LLC $2,215,000 at 13% Second Amended and Restated Term Note2023-12-310000081955rand:DsdOperatingLlcMemberus-gaap:FairValueInputsLevel3Memberrand:LoanInvestmentsMember2022-01-012022-12-310000081955OnCore Golf Technology, Inc. - 300,483 Preferred AA2023-01-012023-12-310000081955Highland All About People Holdings, Inc. $3,000,000 Term Note at 12%2023-12-310000081955rand:SpecialDividendMember2020-03-032020-03-030000081955FCM Industries Holdco LLC - $420,000 Convertible Note at 10%2023-01-012023-12-310000081955Barings BDC, Inc. - 40,000 shares2023-01-012023-12-310000081955us-gaap:FairValueInputsLevel3Memberus-gaap:DebtSecuritiesMember2021-12-310000081955Subtotal Affiliate Investments2022-12-3100000819552022-06-300000081955us-gaap:InvestmentUnaffiliatedIssuerMember2023-12-310000081955Seybert’s Billiards Corporation2021-12-310000081955BMP Food Service Supply Holdco, LLC - 15.4% Preferred Interest2023-01-012023-12-310000081955New investments, Tilson Technology Management, Inc.2023-01-012023-12-310000081955srt:MinimumMemberrand:ScenarioThreeMember2023-01-012023-12-310000081955Mezmeriz, Inc. - 1,554,565 Series Seed Preferred2022-12-310000081955Ares Capital Corporation - 21,000 shares2023-01-012023-12-310000081955ITA Acquisition, LLC - $1,500,000 Term Note2022-01-012022-12-310000081955us-gaap:RevolvingCreditFacilityMemberrand:CreditAgreementMember2023-01-012023-12-310000081955Tilson Technology Management, Inc. - 15,385 Series E Preferred2022-01-012022-12-310000081955us-gaap:FairValueInputsLevel3Memberus-gaap:DebtSecuritiesMemberrand:SeybertBilliardsCorporationMember2022-01-012022-12-310000081955us-gaap:AdditionalPaidInCapitalMember2023-01-012023-12-310000081955rand:SeybertsBilliardsCorporationMember2023-01-012023-12-310000081955Control Investments - 6.1% of net assets2022-12-310000081955SciAps, Inc. - Warrant to purchase Series D-1 Preferred2023-12-3100000819552023-04-012023-06-300000081955Open Exchange, Inc - 397,899 Common2022-01-012022-12-310000081955Investments repaid, sold or liquidated, DSD Operating, LLC debt repayment and equity sale2023-01-012023-12-3100000819552023-07-012023-09-300000081955BMP Swanson Holdco, LLC - Preferred Membership Interest for 9.29%2022-01-012022-12-310000081955Applied Image, Inc. - $1,750,000 Term Note2023-12-310000081955Ares Capital Corporation - 21,000 shares2022-01-012022-12-310000081955us-gaap:TreasuryStockCommonMember2022-12-310000081955rand:RegularQuarterlyDividendMember2022-06-300000081955us-gaap:InvestmentAffiliatedIssuerNoncontrolledMember2022-01-012022-12-310000081955Other changes to investments, BMP Swanson Holdco, LLC interest conversion2023-01-012023-12-310000081955SciAps, Inc. - 274,299 Series A1 Convertible Preferred2022-12-310000081955rand:TwoThousandTwentyCashDividendMember2020-12-210000081955Lumious - $850,000 Replacement Term Note2022-12-310000081955BMP Food Service Supply Holdco, LLC2023-01-012023-12-310000081955rand:RisksRelatedToOurIndebtednessMember2023-01-012023-12-310000081955Tilson Technology Management, Inc. - 23,077 Series F Preferred2021-12-310000081955rand:DsdOperatingLlcMemberus-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-3100000819552020-05-200000081955ITA Acquisition, LLC - 1,124 Class A Preferred Units2022-01-012022-12-310000081955rand:InvestmentManagementAgreementMember2023-01-012023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:CarolinaSkiffLlcCarolinaSkiffMember2023-01-012023-12-310000081955us-gaap:CommonStockMember2023-12-310000081955Control and Affiliate Investments2021-12-310000081955rand:RisksRelatedToUSFederalIncomeTaxMember2023-01-012023-12-310000081955us-gaap:DomesticCountryMember2023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:PostProcessTechnologiesIncMember2023-01-012023-12-310000081955Tilson Technology Management, Inc. - 70,176 Series D Preferred2023-12-310000081955SciAps, Inc. - 274,299 Series A1 Convertible Preferred2023-01-012023-12-310000081955rand:SciapsIncMemberus-gaap:FairValueInputsLevel3Memberus-gaap:DebtSecuritiesMember2023-01-012023-12-310000081955DSD Operating, LLC 1,067 Class A Preferred shares2022-12-310000081955rand:HdiAcquisitionLlcMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955us-gaap:RevolvingCreditFacilityMember2023-12-310000081955ITA Acquisition, LLC2022-12-310000081955SciAps, Inc. - 147,059 Series D Convertible Preferred2022-12-310000081955Tilson Technology Management, Inc. - 15,385 Series E Preferred2023-12-310000081955Open Exchange, Inc - 397,899 Common2022-12-310000081955us-gaap:RetainedEarningsMember2022-12-310000081955Tilson Technology Management, Inc. - 120,000 Series B Preferred2022-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:EmpireGenomicsCorpMemberrand:LoanInvestmentsMember2022-01-012022-12-310000081955Other changes to investments, FCM Industries Holdco LLC interest conversion2023-01-012023-12-310000081955Tilson Technology Management, Inc.2021-12-310000081955Tilson Technology Management, Inc. - 21,391 Series C Preferred2023-12-310000081955Tilson Technology Management, Inc. - 250 Class D-1 Units of SQF Holdco LLC2023-01-012023-12-310000081955Tilson Technology Management, Inc. - *15,385 Series E Preferred2022-12-310000081955us-gaap:EquitySecuritiesMemberrand:SciapsIncMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955us-gaap:EquitySecuritiesMemberrand:SomersetGasTransmissionCompanyLlcSomersetMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955Inter-National Electronic Alloys LLC $3,288,235 Term Note at 12%2023-12-310000081955srt:MinimumMember2022-01-012022-12-310000081955Other changes to investments, Pressure Pro, Inc. OID amortization and interest conversion2023-01-012023-12-310000081955Knoa Software, Inc.2023-12-310000081955Tilson Technology Management, Inc. - *21,391 Series C Preferred2022-01-012022-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:CaitecIncMember2023-01-012023-12-310000081955us-gaap:RetainedEarningsMember2022-01-012022-12-310000081955BMP Food Service Supply Holdco, LLC - 15.4% Preferred Interest2023-12-310000081955Seybert’s Billiards Corporation - $4,139,444 Term Note at 12%2023-01-012023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:InterNationalElectronicAlloysLlcMember2023-01-012023-12-310000081955Tilson Technology Management, Inc. - 23,077 Series F Preferred2022-01-012022-12-310000081955Control Investments - 6.8% of net assets2023-12-310000081955Carolina Skiff LLC - 6.0825% Class A Common Membership Interest2021-12-310000081955ITA Acquisition, LLC - $1,900,000 Term Note2022-01-012022-12-310000081955Applied Image, Inc. - $1,750,000 Term Note2022-01-012022-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:BmpFoodServiceSupplyHoldcoLlcMember2022-01-012022-12-310000081955BMP Swanson Holdco, LLC2023-01-012023-12-310000081955us-gaap:RevolvingCreditFacilityMemberrand:CreditAgreementMember2022-01-012022-12-310000081955DSD Operating, LLC - 1,067 Class A Preferred shares2022-01-012022-12-310000081955rand:RegularQuarterlyDividendMember2022-12-310000081955Filterworks Acquisition USA, LLC 417.7 shares Class A-0 Units2022-12-310000081955ITA Acquisition, LLC - $1,500,000 Term Note2021-12-310000081955Investments, NET ASSETS - 100%2022-12-310000081955us-gaap:RevolvingCreditFacilityMember2022-12-310000081955PennantPark Investment Corporation - 195,000 shares2022-12-310000081955rand:BlockerCorporationsMember2023-01-012023-12-310000081955Tilson Technology Management, Inc. - *70,176 Series D Preferred2022-12-310000081955Caitec, Inc.2022-12-310000081955Nailbiter, Inc.2023-12-310000081955Affiliate Investments2023-12-310000081955Total of other changes to investments2023-01-012023-12-310000081955SciAps, Inc.2021-12-310000081955Other changes to investments, Highland All About People Holdings, Inc. interest conversion2023-01-012023-12-310000081955us-gaap:RetainedEarningsMember2023-01-012023-12-310000081955rand:SciapsIncMember2022-01-012022-12-310000081955SciAps, Inc. - Warrant to purchase Series D-1 Preferred2023-01-012023-12-310000081955rand:BmpSwansonHoldcoLlcMemberus-gaap:FairValueInputsLevel3Memberrand:LoanInvestmentsMember2023-01-012023-12-310000081955Affiliate Investments2021-12-3100000819552022-03-310000081955BMP Swanson Holdco, LLC $1,600,000 Term Note at 12%2023-01-012023-12-310000081955Filterworks Acquisition USA, LLC d/b/a Autotality - $2,283,702 Term Note2023-12-310000081955SciAps, Inc.2022-01-012022-12-310000081955SciAps2022-12-310000081955rand:NetRealizedGainLossOfInvestmentMember2021-01-012021-12-310000081955Microcision LLC - Membership Interest Purchase Warrant for 5%2023-01-012023-12-310000081955rand:MicrocisionLlcMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955rand:InvestmentManagementAgreementMember2023-12-310000081955BMP Food Service Supply Holdco, LLC - 24.83% Preferred Interest2022-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Memberrand:PostProcessTechnologiesIncMember2022-01-012022-12-310000081955rand:NetChangeInUnrealizedDepreciationAppreciationMember2019-01-012019-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:NonControlAndNonAffiliateLoanAndDebtInvestmentsMember2023-12-310000081955SciAps, Inc. - 117,371 Series B Convertible Preferred2022-12-310000081955BMP Food Service Supply Holdco, LLC - $2,500,000 Term Note2022-12-310000081955us-gaap:EquitySecuritiesMemberrand:PressureProIncMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955Control and Affiliate Investments2022-01-012022-12-310000081955rand:InvestmentManagementAgreementMember2021-01-012021-12-310000081955Subtotal Affiliate Investments2023-12-310000081955rand:USSmallBusinessAdministrationMember2021-11-012021-11-300000081955us-gaap:FairValueInputsLevel1Member2023-12-310000081955New investments, Caitec, Inc.2023-01-012023-12-310000081955BMP Swanson Holdco, LLC - Preferred Membership Interest for 9.29%2023-12-310000081955DSD Operating, LLC - $3,063,276 Term Note at 12%2023-01-012023-12-310000081955Tilson Technology Management, Inc. - *120,000 Series B Preferred2022-01-012022-12-310000081955rand:SpecialDividendMember2023-12-310000081955Investments - 106.6 %2022-12-310000081955rand:LoanInvestmentsMember2023-12-310000081955Tilson Technology Management, Inc. - *15,385 Series E Preferred2023-12-310000081955rand:BlockerCorporationMember2022-12-310000081955us-gaap:RevolvingCreditFacilityMemberrand:CreditAgreementMember2023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:FcmIndustriesHoldcoLlcMemberus-gaap:DebtSecuritiesMember2023-01-012023-12-310000081955DSD Operating, LLC - 3,063,276 Term Note2022-01-012022-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Memberrand:OpenExchangeIncMember2023-01-012023-12-310000081955SciAps, Inc. - 187,500 Series A Preferred2022-01-012022-12-310000081955Seybert’s Billiards Corporation - Warrant for 4% Membership Interest2022-01-012022-12-310000081955rand:BmpFoodServiceSupplyHoldcoLlcMember2023-01-012023-12-310000081955Investments repaid, sold or liquidated, HDI Acquisition LLC debt repayment2023-01-012023-12-310000081955Carolina Skiff LLC - 6.0825% Class A Common Membership Interest2022-12-310000081955Knoa Software, Inc. - 973,533 Series A-1 Convertible Preferred2022-12-310000081955Knoa Software, Inc. - 1,876,922 Series B Preferred2023-01-012023-12-310000081955Carlyle Secured Lending Inc. - 86,000 shares2022-12-310000081955Total of investments repaid, sold, liquidated or converted2023-01-012023-12-310000081955rand:SoftwareMemberrand:IndustryConcentrationRiskMemberrand:InvestmentsAtFairValueMember2023-01-012023-12-310000081955Microcision - Membership Interest Purchase Warrant for 5%2022-01-012022-12-310000081955Tilson Technology Management, Inc. - *120,000 Series B Preferred2022-12-310000081955rand:GonoodleIncMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955us-gaap:TreasuryStockCommonMember2021-12-3100000819552022-01-012022-12-310000081955Caitec, Inc. - 150 Class A Units2022-01-012022-12-310000081955ITA Acquisition, LLC - 1,124 Class A Preferred Units and 1,924 Class B Common Units2023-12-310000081955Open Exchange, Inc - 397,899 Series C Preferred2022-01-012022-12-310000081955DSD Operating, LLC2022-12-310000081955Carolina Skiff LLC - 6.0825% Class A Common Membership Interest2022-01-012022-12-310000081955ITA Acquisition, LLC - $2,297,808 Amended and Restated Term Note at 12%2023-01-012023-12-310000081955New investments, Highland All About People Holdings, Inc.2023-01-012023-12-310000081955GoNoodle, Inc. - Warrant for 47,324 Series C Preferred2023-01-012023-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Memberrand:NewMonarchMachineToolIncMember2022-01-012022-12-310000081955ITA Acquisition, LLC - $1,500,000 Term Note at 12%2022-12-310000081955FCM Industries Holdco LLC $420,000 Convertible Note at 10%2023-12-310000081955Investments repaid, sold or liquidated, SocialFlow, Inc. escrow loss2023-01-012023-12-310000081955Affiliate Investments – Net assets2022-12-310000081955rand:IndustryConcentrationRiskMemberrand:AutomotiveMemberrand:InvestmentsAtFairValueMember2022-01-012022-12-310000081955rand:ConsumerProductMemberrand:IndustryConcentrationRiskMemberrand:InvestmentsAtFairValueMember2022-01-012022-12-3100000819552024-03-050000081955rand:NetChangeInUnrealizedDepreciationAppreciationMember2023-01-012023-12-310000081955rand:RegularQuarterlyDividendMember2023-03-310000081955rand:NetChangeInUnrealizedDepreciationAppreciationMember2021-01-012021-12-310000081955Seybert’s Billiards Corporation - 5.82 Common shares2023-12-310000081955Applied Image, Inc. - $1,750,000 Term Note2022-12-310000081955BMP Food Service Supply Holdco, LLC $7,035,000 Second Amended and Restated Term Note, $4,820,000 at 12%, $2,215,000 at 13%2023-01-012023-12-310000081955Knoa Software, Inc.2023-01-012023-12-310000081955rand:HdiAcquisitionLlcMemberus-gaap:FairValueInputsLevel3Memberus-gaap:DebtSecuritiesMember2023-01-012023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:FilterworksAcquisitionUsaLlcMember2022-01-012022-12-310000081955rand:IndustryConcentrationRiskMemberrand:InvestmentsAtFairValueMemberrand:ManufacturingMember2023-01-012023-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel1Member2022-12-310000081955us-gaap:InvestmentAffiliatedIssuerControlledMember2022-12-310000081955DSD2022-12-310000081955SciAps, Inc. - Warrant to purchase Series D-1 Preferred2022-12-310000081955rand:IndustryConcentrationRiskMemberrand:InvestmentsAtFairValueMember2022-01-012022-12-310000081955FCM Industries Holdco LLC2023-01-012023-12-310000081955Mattison Avenue Holdings LLC. - $1,794,944 Third Amended, Restated and Consolidated Promissory Note2022-12-310000081955Knoa Software, Inc.2022-12-310000081955New Monarch Machine Tool, Inc. - 22.84 Common2022-12-310000081955us-gaap:InvestmentAffiliatedIssuerNoncontrolledMember2022-12-310000081955Filterworks Acquisition USA, LLC d/b/a Autotality - $2,283,702 Term Note2023-01-012023-12-310000081955Nailbiter, Inc. - Warrants for Preferred Stock2023-01-012023-12-310000081955Affiliate Investments2023-01-012023-12-310000081955Pressure Pro, Inc. - Warrant for 10% Membership Interest2023-01-012023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:LumiousMemberrand:LoanInvestmentsMember2022-01-012022-12-310000081955BMP Swanson Holdco, LLC2021-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:LoanInvestmentsMemberrand:ItaAcquisitionLlcMember2022-01-012022-12-310000081955Tilson Technology Management, Inc. - 120,000 Series B Preferred2022-01-012022-12-310000081955SciAps, Inc. - 274,299 Series A1 Convertible Preferred2023-12-310000081955rand:RisksRelatedToOurCommonStockMember2023-01-012023-12-310000081955Tilson Technology Management, Inc. - *2.5% dividend payable quarterly2023-12-310000081955BMP Food Service Supply Holdco, LLC $4,820,000 at 12% Second Amended and Restated Term Note2023-12-310000081955rand:RegularQuarterlyDividendMember2022-04-012022-06-300000081955GoNoodle, Inc. - Warrant for 21,948 Series D Preferred2022-12-310000081955rand:CaitecIncMember2022-01-012022-12-310000081955SciAps, Inc. - 117,371 Series B Convertible Preferred2021-12-310000081955Knoa Software, Inc. - 1,876,922 Series B Preferred2021-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:NonControlAndNonAffiliateInvestmentsMember2023-12-310000081955Filterworks Acquisition USA, LLC d/b/a Autotality2023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:LoanInvestmentsMember2023-01-012023-12-310000081955Filterworks Acquisition USA, LLC d/b/a Autotality - 626.2 shares Class A-1 Units2023-12-3100000819552022-07-012022-09-300000081955Seybert’s Billiards Corporation - 5.82 Common shares2023-01-012023-12-310000081955Filterworks Acquisition USA, LLC DBA Autotality -417.7 shares Class A-0 Units2022-01-012022-12-310000081955Other changes to investments, GoNoodle, Inc. interest conversion2023-01-012023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:AffiliateLoanAndDebtInvestmentsMember2023-12-310000081955us-gaap:InvestmentAffiliatedIssuerNoncontrolledMember2023-12-310000081955Carolina Skiff LLC - 6.0825% Class A Common2023-01-012023-12-310000081955ITA Acquisition, LLC - 1,124 Class A Preferred Units and 1,924 Class B Common Units2023-01-012023-12-310000081955SciAps, Inc. - 187,500 Series A Preferred2023-01-012023-12-310000081955Tilson Technology Management, Inc. - *21,391 Series C Preferred2023-01-012023-12-310000081955Filterworks2021-12-310000081955Seybert’s Billiards Corporation - 5.82 Common shares2022-01-012022-12-310000081955us-gaap:FairValueInputsLevel3Memberus-gaap:DebtSecuritiesMemberrand:FilterworksAcquisitionUsaLlcMember2022-01-012022-12-310000081955rand:NetRealizedGainLossOfInvestmentMember2022-01-012022-12-310000081955Ares Capital Corporation - 21,000 shares2023-12-310000081955DSD Operating, LLC - $3,063,276 Term Note at 12%2022-01-012022-12-310000081955Rheonix, Inc. - 1,839,422 Series A Preferred2022-12-310000081955Knoa Software, Inc.2021-12-310000081955Inter-National Electronic Alloys LLC - $3,288,235 Term Note at 12%2023-12-310000081955BMP Swanson Holdco, LLC - $1,600,000 Term Note at 12%2022-12-310000081955Caitec, Inc.2023-12-310000081955rand:DsdOperatingLlcMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955Tilson Technology Management, Inc. - 250 Class D-1 Units of SQF Holdco LLC2023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:PostProcessTechnologiesIncMember2022-01-012022-12-310000081955us-gaap:InvestmentUnaffiliatedIssuerMember2023-01-012023-12-310000081955FS KKR Capital Corp. - 48,000 shares2023-12-310000081955Caitec, Inc. - 150 Class A Units2023-12-310000081955Caitec, Inc. - 150 Class A Units2023-01-012023-12-310000081955Tilson Technology Management, Inc. - 70,176 Series D Preferred2022-01-012022-12-310000081955rand:NonControlAndNonAffiliateInvestmentsMemberus-gaap:FairValueInputsLevel3Member2022-12-310000081955SciAps, Inc. - 369,698 Series C1 Convertible Preferred2022-01-012022-12-310000081955ITA Acquisition, LLC - $1,500,000 Term Note2023-12-3100000819552023-01-012023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:LoanInvestmentsMemberrand:ItaAcquisitionLlcMember2023-01-012023-12-310000081955HDI Acquisition LLC. - $1,245,119 Term Loan2022-01-012022-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:OpenExchangeIncMember2022-01-012022-12-310000081955Tilson Technology Management, Inc. - *70,176 Series D Preferred2023-01-012023-12-310000081955Filterworks Acquisition USA, LLC DBA Autotality - $2,283,702 Term Note2022-12-310000081955SciAps, Inc. - 369,698 Series C1 Convertible Preferred2022-12-310000081955DSD Operating, LLC 1,067 Class B Common shares2023-12-310000081955DSD Operating, LLC - 1,067 Class A Preferred shares2021-12-310000081955rand:ControlDebtMemberus-gaap:FairValueInputsLevel3Member2022-12-310000081955rand:RegularQuarterlyDividendMember2023-12-310000081955BMP Swanson Holdco, LLC $1,600,000 Term Note at 12%2022-12-310000081955Other changes to investments, HDI Acquisition LLC interest conversion2023-01-012023-12-3100000819552018-12-310000081955ITA Acquisition, LLC - $1,900,000 Term Note at 12%2022-12-310000081955SciAps, Inc. - 147,059 Series D Convertible Preferred2021-12-310000081955us-gaap:FairValueInputsLevel3Memberus-gaap:DebtSecuritiesMemberrand:BmpFoodServiceSupplyHoldcoLlcMember2022-01-012022-12-310000081955GoNoodle, Inc. - 1,500,000 Secured Note2022-12-310000081955us-gaap:InvestmentUnaffiliatedIssuerMember2021-01-012021-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Memberrand:SeybertBilliardsCorporationMember2022-01-012022-12-310000081955Tilson Technology Management, Inc. - 15,385 Series E Preferred2022-12-310000081955Filterworks Acquisition USA, LLC DBA Autotality - 626.2 shares Class A-1 Units2021-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Memberrand:OpenExchangeIncMember2022-01-012022-12-310000081955srt:MaximumMemberrand:ScenarioTwoMember2023-01-012023-12-310000081955DSD Operating, LLC 1,067 Class A Preferred shares2023-12-310000081955srt:MinimumMember2023-12-310000081955HDI Acquisition LLC. - $1,245,119 Term Loan2022-12-310000081955ITA Acquisition, LLC - $2,297,808 Amended and Restated Term Note at 12% (+5% PIK) through September 30, 20242023-12-310000081955Open Exchange, Inc - 397,899 Series C Preferred2023-01-012023-12-310000081955Seybert’s2022-12-310000081955Applied Image, Inc. - $1,750,000 Term Note at 10%2023-01-012023-12-310000081955ITA Acquisition, LLC - $1,500,000 Term Note at 12%2022-01-012022-12-310000081955rand:NonControlAndNonAffiliateEquityInvestmentsMemberus-gaap:FairValueInputsLevel3Member2023-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel1Member2023-12-310000081955Nailbiter, Inc. - $2,250,000 Subordinated Secured Promissory Note2022-01-012022-12-310000081955rand:BlockerCorporationsMember2022-12-310000081955BMP Swanson Holdco, LLC - $1,600,000 Term Note2023-01-012023-12-310000081955Filterworks Acquisition USA, LLC DBA Autotality -417.7 shares Class A-0 Units2022-12-310000081955BMP Food Service Supply Holdco, LLC - $2,500,000 Term Note2022-01-012022-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:ItaAcquisitionLlcMember2023-01-012023-12-310000081955Highland All About People Holdings, Inc. - 1,000,000 Class A Units2023-12-310000081955Mezmeriz, Inc. - 1,554,565 Series Seed Preferred2022-01-012022-12-310000081955srt:MaximumMember2023-01-012023-12-310000081955BMP Swanson Holdco, LLC Preferred Membership Interest for 9.29%2023-01-012023-12-310000081955rand:BlockerCorporationsMember2023-01-012023-12-310000081955Nailbiter, Inc.2022-12-310000081955Other changes to investments, Seybert’s Billiards Corporation OID amortization and interest conversion2023-01-012023-12-310000081955Rheonix, Inc. - 1,839,422 Series A Preferred2022-01-012022-12-310000081955Tilson Technology Management, Inc. - 23,077 Series F Preferred2023-01-012023-12-310000081955Filterworks Acquisition USA, LLC d/b/a Autotality - 626.2 shares Class A-1 Units2023-01-012023-12-310000081955rand:GonoodleIncMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955Tilson Technology Management, Inc. - *15,385 Series E Preferred2022-01-012022-12-310000081955rand:InvestmentManagementAgreementMember2022-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Memberrand:PostProcessTechnologiesIncMember2023-01-012023-12-310000081955ITA Acquisition, LLC2023-12-310000081955rand:ConsumerProductMemberrand:IndustryConcentrationRiskMemberrand:InvestmentsAtFairValueMember2023-01-012023-12-310000081955Caitec, Inc. - 150 Class A Units One2023-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Memberrand:MercantileAdjustmentBureauLlcMember2023-01-012023-12-310000081955Applied Image, Inc. - $1,750,000 Term Note2023-01-012023-12-310000081955Mezmeriz, Inc. - 1,554,565 Series Seed Preferred2023-01-012023-12-310000081955Carlyle Secured Lending Inc. - 86,000 shares2023-12-310000081955rand:BlockerCorporationsMember2021-01-012021-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:CarolinaSkiffLlcCarolinaSkiffMember2022-01-012022-12-310000081955Pressure Pro, Inc. - $3,000,000 Term Note at 12%2023-01-012023-12-310000081955rand:HdiAcquisitionLlcMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955Seybert’s Billiards Corporation2023-12-310000081955Inter-National Electronic Alloys LLC2023-01-012023-12-310000081955GoNoodle, Inc.2023-12-310000081955Applied Image, Inc.2023-12-310000081955Tilson Technology Management, Inc. - *2.5% dividend payable quarterly2022-12-310000081955OnCore Golf Technology, Inc. - 300,483 Preferred AA2023-12-310000081955ITA Acquisition, LLC2023-01-012023-12-310000081955rand:GivegabIncMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955rand:MattisonAvenueHoldingsLlcMemberus-gaap:FairValueInputsLevel3Memberrand:LoanInvestmentsMember2023-01-012023-12-310000081955rand:RegularQuarterlyDividendMember2022-03-310000081955SciAps, Inc. - 187,500 Series A Preferred2023-12-310000081955DSD Operating, LLC 1,067 Class A Preferred shares2023-01-012023-12-310000081955Control Investments2023-01-012023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:ControlInvestmentsMember2022-12-310000081955us-gaap:EstimateOfFairValueFairValueDisclosureMember2023-12-310000081955Inter-National Electronic Alloys LLC $3,288,235 Term Note at 12%2023-01-012023-12-310000081955srt:MaximumMember2023-12-310000081955Other changes to investments, Inter-National Electronic Alloys LLC interest conversion2023-01-012023-12-310000081955ITA Acquisition, LLC - 1,124 Class A Preferred Units2022-12-310000081955rand:HighlandAllAboutPeopleHoldingsIncMemberus-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955Pressure Pro, Inc. - $3,000,000 Term Note at 12%2023-12-310000081955SciAps, Inc. - 187,500 Series A Preferred2022-12-310000081955us-gaap:TreasuryStockCommonMember2023-12-3100000819552023-09-300000081955Knoa Software, Inc. - 973,533 Series A-1 Convertible Preferred2023-01-012023-12-310000081955Total ITA Acquisition, LLC2022-01-012022-12-310000081955rand:TilsonTechnologyManagementIncMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955us-gaap:InvestmentAffiliatedIssuerNoncontrolledMember2023-01-012023-12-310000081955Rheonix, Inc. - 50,593 Common2022-01-012022-12-310000081955Mattison Avenue Holdings LLC. - $1,794,944 Third Amended, Restated and Consolidated Promissory Note2022-01-012022-12-310000081955ITA Acquisition, LLC - $2,297,808 Amended and Restated Term Note at 12%2022-12-310000081955Tilson Technology Management, Inc. - 15,385 Series E Preferred2021-12-310000081955BMP Food Service Supply Holdco, LLC 15.4% Preferred Interest2023-01-012023-12-310000081955rand:HdiAcquisitionLlcMemberus-gaap:FairValueInputsLevel3Memberus-gaap:DebtSecuritiesMember2022-01-012022-12-310000081955Rheonix, Inc. - 50,593 Common2022-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:OpenExchangeIncMember2023-01-012023-12-310000081955rand:GonoodleIncMemberus-gaap:FairValueInputsLevel3Memberus-gaap:DebtSecuritiesMember2023-01-012023-12-310000081955SciAps, Inc. - 117,371 Series B Convertible Preferred2023-01-012023-12-310000081955Tilson Technology Management, Inc.2023-12-310000081955HDI Acquisition LLC. - $1,245,119 Term Loan2023-01-012023-12-310000081955DSD Operating, LLC2021-12-310000081955rand:NetRealizedGainLossOfInvestmentMember2023-01-012023-12-310000081955us-gaap:RevolvingCreditFacilityMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMemberrand:MAndTBankMemberrand:CreditAgreementMember2022-06-272022-06-270000081955us-gaap:FairValueInputsLevel3Memberrand:LumiousMember2022-01-012022-12-310000081955Control and Affiliate Investments2022-12-310000081955rand:BmpSwansonHoldcoLlcMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-3100000819552020-12-310000081955rand:ControlDebtMemberus-gaap:FairValueInputsLevel3Member2023-12-310000081955SciAps, Inc. - $2,090,000 Second Amended and Restated Secured Subordinated Promissory Note at 12%2022-12-310000081955New investments, Pressure Pro, Inc.2023-01-012023-12-310000081955SciAps, Inc. - 369,698 Series C1 Convertible Preferred2021-12-310000081955rand:TilsonTechnologyManagementIncMemberus-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955Seybert’s Billiards Corporation - 4,139,444 Term Note2022-01-012022-12-310000081955rand:SciapsIncMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:AffiliateInvestmentsMember2023-12-310000081955SciAps, Inc. - 117,371 Series B Convertible Preferred2023-12-310000081955Mattison Avenue Holdings LLC. - $1,794,944 Third Amended, Restated and Consolidated Promissory Note2023-12-310000081955BMP Swanson Holdco, LLC - $1,600,000 Term Note2022-01-012022-12-310000081955GoNoodle, Inc. - Warrant for 21,948 Series D Preferred2023-01-012023-12-310000081955us-gaap:InvestmentUnaffiliatedIssuerMember2022-01-012022-12-310000081955Seybert’s Billiards Corporation - 5.82 Common shares2021-12-310000081955rand:ScenarioThreeMember2023-01-012023-12-310000081955Microcision - 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$2,250,000 Subordinated Secured Promissory Note2023-01-012023-12-310000081955rand:RegularQuarterlyDividendMember2023-07-012023-09-300000081955PostProcess Technologies, Inc. - 360,002 Series A1 Preferred2022-01-012022-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:AffiliateEquityInvestmentsMember2023-12-310000081955rand:IndustryConcentrationRiskMemberrand:ProfessionalAndBusinessServicesMemberrand:InvestmentsAtFairValueMember2023-01-012023-12-310000081955us-gaap:StateAndLocalJurisdictionMember2022-12-310000081955ITA Acquisition, LLC - 1,124 Class A Preferred Units and 1,924 Class B Common Units2022-01-012022-12-310000081955Tilson Technology Management, Inc. - *120,000 Series B Preferred2023-12-310000081955rand:OncoreGolfTechnologyIncOncoreMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955Subtotal Control Investments2023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:CaitecIncMemberrand:LoanInvestmentsMember2023-01-012023-12-310000081955DSD Operating, LLC - 1,067 Class B Common sharesInvestments – 66.3% of net assets DSD Operating, LLC Type of Investment 1,067 Class B Preferred Shares.2022-12-310000081955Highland All About People Holdings, Inc.2023-12-310000081955rand:NetChangeInUnrealizedDepreciationAppreciationMember2022-01-012022-12-310000081955Highland All About People Holdings, Inc.2023-01-012023-12-310000081955Knoa Software, Inc. - 973,533 Series A-1 Convertible Preferred2023-12-310000081955Non-Control/Non-Affiliate Investments - Net assets2023-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:RheonixIncMember2023-01-012023-12-310000081955Seybert’s2023-12-310000081955us-gaap:RevolvingCreditFacilityMemberrand:MAndTBankMemberrand:CreditAgreementMember2022-06-270000081955DSD Operating, LLC - 1,067 Class B Common shares2022-12-3100000819552021-12-310000081955Applied Image, Inc. - $1,750,000 Term Note at 10%2022-01-012022-12-310000081955rand:NetRealizedGainLossOfInvestmentMember2020-01-012020-12-310000081955rand:RisksRelatedToOurInvestmentsMember2023-01-012023-12-310000081955Subtotal Non-Control/Non-Affiliate Investments2022-12-310000081955Caitec, Inc. - $1,750,000 Subordinated Secured Promissory Note2022-12-310000081955Pressure Pro, Inc.2023-01-012023-12-310000081955Control Investments2023-12-310000081955rand:DsdOperatingLlcMemberus-gaap:FairValueInputsLevel3Memberrand:LoanInvestmentsMember2023-01-012023-12-310000081955us-gaap:InvestmentAffiliatedIssuerNoncontrolledMember2021-01-012021-12-310000081955Tilson Technology Management, Inc. - 211,567 Class A-1 Units of SQF Holdco LLC2021-12-310000081955Filterworks Acquisition USA, LLC DBA Autotality - $2,283,702 Term Note2022-01-012022-12-310000081955Investments repaid, sold or liquidated, Rheonix, Inc. liquidated2023-01-012023-12-310000081955Inter-National Electronic Alloys LLC 75.3 Class B Preferred Units2023-12-310000081955rand:HighlandAllAboutPeopleHoldingsIncMemberus-gaap:FairValueInputsLevel3Memberus-gaap:DebtSecuritiesMember2023-01-012023-12-310000081955Tilson Technology Management, Inc. - *21,391 Series C Preferred2023-12-310000081955PennantPark Investment Corporation - 195,000 shares2023-01-012023-12-310000081955Filterworks Acquisition USA, LLC 417.7 shares Class A-0 Units2023-12-310000081955Seybert’s Billiards Corporation - 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113,636 Series C Convertible Preferred2022-01-012022-12-310000081955Investments repaid, sold or liquidated, BMP Food Service Supply Holdco, LLC debt repayment and equity sale2023-01-012023-12-310000081955Seybert’s Billiards Corporation2022-01-012022-12-310000081955rand:SomersetGasTransmissionCompanyLlcSomersetMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955rand:RegularQuarterlyDividendMember2022-09-300000081955rand:IndustryConcentrationRiskMemberrand:OilAndGasIndustryMemberrand:InvestmentsAtFairValueMember2022-01-012022-12-310000081955Applied Image, Inc. - Warrant for 1,167 shares2022-12-310000081955FCM Industries Holdco LLC - $420,000 Convertible Note at 10%2023-12-310000081955us-gaap:InvestmentUnaffiliatedIssuerMember2022-12-310000081955Tilson Technology Management, Inc. - 21,391 Series C Preferred2021-12-310000081955BMP Swanson Holdco, LLC2023-12-310000081955BMP Swanson Holdco, LLC Preferred Membership Interest for 9.29%2023-12-310000081955OnCore Golf Technology, Inc. - 300,483 Preferred AA2022-12-310000081955BMP Swanson Holdco, LLC - $1,600,000 Term Note at 12%2022-01-012022-12-310000081955rand:TilsonTechnologyManagementIncMember2022-01-012022-12-310000081955rand:SciapsIncMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955BMP Food Service Supply Holdco, LLC - 7,035,000 Second Amended and Restated Term Note, $4,820,0002023-01-012023-12-310000081955rand:AdministrationAgreementMember2023-01-012023-12-310000081955Caitec, Inc. - 36,261 Series A Preferred One2023-12-310000081955SciAps, Inc. - $2,090,000 Second Amended and Restated Secured Subordinated Promissory Note at 12%2023-12-310000081955Open Exchange, Inc - 397,899 Common2023-01-012023-12-310000081955New investments, FCM Industries Holdco LLC2023-01-012023-12-310000081955ITA Acquisition, LLC - $1,900,000 Term Note at 12%2022-01-012022-12-310000081955rand:MicrocisionLlcMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955Seybert’s Billiards Corporation2022-12-310000081955rand:RegularQuarterlyDividendMember2023-04-012023-06-300000081955Filterworks Acquisition USA, LLC2022-12-310000081955New Monarch Machine Tool, Inc. - 22.84 Common2022-01-012022-12-310000081955Filterworks2022-12-310000081955FCM Industries Holdco LLC - $3,380,000 Term Note at 13%2023-01-012023-12-310000081955Caitec, Inc. - $1,750,000 Subordinated Secured Promissory Note2023-12-310000081955Highland All About People Holdings, Inc. - $3,000,000 Term Note at 12%2023-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Memberrand:BmpFoodServiceSupplyHoldcoLlcMember2022-01-012022-12-310000081955Highland All About People Holdings, Inc. 1,000,000 Class A Units2023-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Memberrand:ItaAcquisitionLlcMember2022-01-012022-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:FcmIndustriesHoldcoLlcMember2023-01-012023-12-310000081955BMP Swanson Holdco, LLC - $1,600,000 Term Note2022-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Memberrand:InterNationalElectronicAlloysLlcMember2023-01-012023-12-310000081955BMP Swanson Holdco, LLC - Preferred Membership Interest for 9.29%2023-01-012023-12-310000081955srt:MinimumMemberrand:ScenarioTwoMember2023-01-012023-12-310000081955Filterworks Acquisition USA, LLC d/b/a Autotality -417.7 shares Class A-0 Units2023-12-310000081955rand:PressureProIncMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955Filterworks Acquisition USA, LLC $2,283,702 Term Note at 12%2023-12-310000081955DSD Operating, LLC - $3,063,276 Term Note at 12%2023-12-310000081955us-gaap:FairValueInputsLevel3Memberus-gaap:DebtSecuritiesMember2022-01-012022-12-310000081955GoNoodle, Inc. - Warrant for 47,324 Series C Preferred2022-12-310000081955Control and Affiliate Investments2023-12-310000081955FS KKR Capital Corp. - 48,000 shares2023-01-012023-12-310000081955SciAps, Inc. - 369,698 Series C1 Convertible Preferred2023-12-310000081955srt:MaximumMemberrand:ScenarioOneMember2023-01-012023-12-310000081955ITA Acquisition, LLC $1,500,000 Term Note at 12%2023-12-310000081955BMP Food Service Supply Holdco, LLC 15.4% Preferred Interest2023-12-310000081955rand:PressureProIncMemberus-gaap:FairValueInputsLevel3Memberus-gaap:DebtSecuritiesMember2023-01-012023-12-310000081955Tilson Technology Management, Inc. - *120,000 Series B Preferred2023-01-012023-12-310000081955GoNoodle, Inc. - 1,500,000 Secured Note2023-12-310000081955ACV Auctions, Inc, - 319,934 shares2022-01-012022-12-310000081955SciAps, Inc. - 113,636 Series C Convertible Preferred2021-12-3100000819552023-03-310000081955Tilson Technology Management, Inc. - 211,567 A-1 Units of SQF Holdco LLC.2022-12-310000081955Investments repaid, sold or liquidated, ClearView Social Inc. escrow receipt2023-01-012023-12-310000081955GoNoodle, Inc.2022-12-310000081955BMP Swanson Holdco, LLC2022-12-310000081955Mezmeriz, Inc. - 1,554,565 Series Seed Preferred2023-12-310000081955us-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955Applied Image, Inc. - Warrant for 1,167 shares2023-01-012023-12-310000081955rand:GivegabIncMemberus-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955BMP Food Service Supply Holdco, LLC $7,035,000 Second Amended and Restated Term Note, $4,820,000 at 12%, $2,215,000 at 13%2022-12-310000081955rand:KnoaSoftwareIncMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955BMP Food Service Supply Holdco, LLC2022-12-310000081955ITA Acquisition, LLC - 1,124 Class A Preferred Units2023-12-3100000819552019-12-310000081955Affiliate Investments – Net assets2023-12-310000081955us-gaap:FairValueInputsLevel3Member2023-01-012023-12-310000081955Subtotal Non-Control/Non-Affiliate Investments2023-12-310000081955ITA Acquisition, LLC - $2,297,808 Amended and Restated Term Note at 12%2023-12-310000081955Filterworks Acquisition USA, LLC DBA Autotality - 626.2 shares Class A-1 Units2022-01-012022-12-310000081955Carolina Skiff LLC - 6.0825% Class A Common2023-12-310000081955rand:SpecialDividendMember2022-10-012022-12-310000081955us-gaap:InvestmentAffiliatedIssuerControlledMember2023-12-3100000819552021-01-012021-12-310000081955SciAps, Inc. - 113,636 Series C Convertible Preferred2022-12-310000081955BMP Swanson2023-12-310000081955rand:DsdOperatingLlcMember2022-01-012022-12-310000081955Seybert’s Billiards Corporation - $4,139,444 Term Note at 12%2022-01-012022-12-310000081955rand:OncoreGolfTechnologyIncOncoreMemberus-gaap:EquitySecuritiesMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955SciAps, Inc. - 113,636 Series C Convertible Preferred2023-12-3100000819552023-01-012023-03-310000081955us-gaap:FairValueInputsLevel3Memberrand:LoanInvestmentsMember2022-01-012022-12-310000081955us-gaap:EquitySecuritiesMemberrand:KnoaSoftwareIncMemberus-gaap:FairValueInputsLevel3Member2022-01-012022-12-310000081955Filterworks Acquisition USA, LLC $2,283,702 Term Note at 12%2023-01-012023-12-310000081955BMP Swanson Holdco, LLC - $1,600,000 Term Note2023-12-3100000819552022-09-300000081955Caitec, Inc. - $1,750,000 Subordinated Secured Promissory Note2022-01-012022-12-310000081955PennantPark Investment Corporation - 195,000 shares2023-12-310000081955Knoa Software, Inc.2022-01-012022-12-310000081955us-gaap:FairValueInputsLevel3Member2021-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:AffiliateEquityInvestmentsMember2022-12-310000081955Affiliate Investments2022-12-310000081955us-gaap:InvestmentAffiliatedIssuerControlledMember2022-01-012022-12-310000081955us-gaap:FairValueInputsLevel3Member2022-12-310000081955rand:NetChangeInUnrealizedDepreciationAppreciationMember2020-01-012020-12-310000081955us-gaap:FairValueInputsLevel3Memberrand:BmpFoodServiceSupplyHoldcoLlcMember2023-01-012023-12-310000081955Seybert’s Billiards Corporation - $1,435,435 Term Note2022-12-310000081955OnCore Golf Technology, Inc. - 300,483 Preferred AA2022-01-012022-12-310000081955Ares Capital Corporation - 21,000 shares2022-12-310000081955us-gaap:StateAndLocalJurisdictionMember2023-12-310000081955rand:RegularQuarterlyDividendMember2022-01-012022-03-310000081955Inter-National Electronic Alloys LLC - $3,288,235 Term Note at 12%2023-01-012023-12-310000081955us-gaap:CommonStockMember2021-12-310000081955Tilson Technology Management, Inc. - *70,176 Series D Preferred2022-01-012022-12-310000081955ACV Auctions, Inc, - 194,934 shares2023-12-310000081955New investments, BMP Food Service Supply Holdco, LLC2023-01-012023-12-310000081955rand:NetRealizedGainLossOfInvestmentMember2019-01-012019-12-31rand:Unitsxbrli:purexbrli:sharesiso4217:USDxbrli:sharesiso4217:USD
Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

[ x ]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2023

 

 

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Transition Period from _____ to _______

 

Commission File Number: 814-00235

Rand Capital Corporation

(Exact name of registrant as specified in its charter)

New York

 

16-0961359

 (State or Other Jurisdiction of

Incorporation or organization)

 

 (IRS Employer Identification No.)

 

 

 

1405 Rand Building, Buffalo, NY

 

14203

(Address of Principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (716) 853-0802

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock, $0.10 par value

RAND

Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 under the Securities Act. Yes No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicated by check mark if the registrant has elected not to use extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

The aggregate market value of the registrant’s outstanding common stock held by non-affiliates of the registrant as of June 30, 2023 was approximately $10,780,000 based upon the closing price as reported on the Nasdaq Capital Market on such date.

As of March 5, 2024 there were 2,581,021 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Corporation’s definitive proxy statement for the 2024 Annual Meeting of Shareholders are incorporated by reference into Part III of this report.

 


Table of Contents

 

RAND CAPITAL CORPORATION

TABLE OF CONTENTS FOR FORM 10-K

 

PART I

Item 1.

Business

1

 

 

 

Item 1A.

Risk Factors

14

 

 

 

Item 1B.

Unresolved Staff Comments

27

 

 

 

Item 1C.

Cybersecurity

27

 

 

 

Item 2.

Properties

28

 

 

 

Item 3.

Legal Proceedings

28

 

 

 

Item 4.

Mine Safety Disclosures

28

 

 

 

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

29

 

 

 

Item 6.

(Reserved.)

32

 

 

 

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

33

 

 

 

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

47

 

 

 

Item 8.

Financial Statements and Supplementary Data

49

 

 

 

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

95

 

 

 

Item 9A.

Controls and Procedures

95

 

 

 

Item 9B.

Other Information

95

 

 

 

Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

95

 

 

 

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

96

 

 

 

Item 11.

Executive Compensation

96

 

 

 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

96

 

 

 

Item 13.

Certain Relationships and Related Transactions, and Director Independence

96

 

 

 

Item 14.

Principal Accountant Fees and Services

96

 

 

 

PART IV

Item 15.

Exhibits and Financial Statement Schedules

97

 

 

 

Item 16.

Form 10-K Summary

98

 

 


Table of Contents

 

PART I

Item 1. Business

Rand Capital Corporation (“Rand”, “we”, “us” and “our”) was incorporated under the laws of New York in February 1969. We completed our initial public offering in 1971 and operated as an internally managed, closed-end, management investment company from that time until November 2019.

In November 2019, Rand completed a stock sale transaction (the “Closing”) with East Asset Management (“East”). The transaction consisted of a $25 million investment in Rand by East, in the form of cash and contributed portfolio assets, in exchange for approximately 8.3 million shares of Rand common stock. East owns approximately 64% of Rand Capital’s outstanding common stock at December 31, 2023. Concurrent with the Closing, Rand Capital Management, LLC (“RCM”), a registered investment adviser, was retained by Rand as its external investment adviser and administrator (the Closing and the retention of RCM as our investment adviser and administrator are collectively referred to herein as the “Transaction”). The term of the new investment advisory and management agreement (the “Investment Management Agreement”) with RCM was extended after its renewal was approved by our Board of Directors (the “Board”) in October 2023 and is now set to expire on December 31, 2024. In addition, the term of the administration agreement (the “Administration Agreement”) with RCM was extended after its renewal was approved by the Board in October 2023 and is now set to expire on December 31, 2024. The Investment Management Agreement and Administration Agreement can continue for successive annual periods after December 31, 2024 provided that such continuance is specifically approved at least annually by (i)(A) the affirmative vote of a majority of the Board or (B) the affirmative vote of a majority of our outstanding voting securities, and (ii) the affirmative vote of a majority of our directors who are not “interested persons,” as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the "1940 Act"), of us, RCM or our respective affiliates. Pursuant to the terms of the Investment Management Agreement, Rand pays RCM a base management fee and may pay an incentive fee, if specified benchmarks are met.

In connection with the Closing, we also entered into a shareholder agreement by and between Rand and East (the “Shareholder Agreement”). Pursuant to the terms of the Shareholder Agreement, East has the right to designate two or three persons, depending upon the size of the Board, for nomination for election to the Board. East has the right to designate (i) up to two persons if the size of the Board is composed of fewer than seven directors or (ii) up to three persons if the size of the Board is composed of seven or more directors. East’s right to designate persons for nomination for election to the Board under the Shareholder Agreement is the exclusive means by which East may designate or nominate persons for election to the Board. The Board currently consists of five directors, and East has designated Adam S. Gusky and Benjamin E. Godley for nomination to the Board.

We are an externally managed, closed-end, non-diversified management investment company. We have elected to be regulated as a business development company (“BDC”) under the 1940 Act. As a BDC, we are required to comply with certain regulatory requirements specified in the 1940 Act. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets” and provide managerial assistance to the portfolio companies in which we invest. See “Item 1. Business - Regulations.”

Prior to 2021, we made the majority of our investments through our wholly owned subsidiary, Rand Capital SBIC, Inc. (“Rand SBIC”), which operated as a small business investment company (“SBIC”) and was licensed by the U.S. Small Business Administration (“SBA”) from 2002 to 2021. Until December 2021, Rand SBIC also operated as a BDC.

In November 2021, Rand SBIC repaid, in full, 100% of its outstanding SBA-guaranteed debentures and surrendered its SBIC license. In connection with the surrender of its SBIC license, Rand SBIC changed its name to Rand Capital Sub, Inc. (“Rand Sub”), withdrew its election to be regulated as a BDC, and merged with and into Rand Capital Sub LLC, a Delaware limited liability company, a wholly owned subsidiary of Rand.

In this Annual Report on Form 10-K, (“Annual Report”), unless the context otherwise requires, “we”, the “Corporation”, “us”, and “our” refer to Rand Capital Corporation and its wholly owned subsidiaries.

In connection with the completion of the Transaction, we have shifted to an investment strategy focused on higher yielding debt investments and elected U.S. Federal tax treatment as a regulated investment company (“RIC”) as of January 1, 2020 on our U.S. Federal tax return for the 2020 tax year. As required for the RIC election, we paid a special dividend to shareholders to distribute all of our accumulated earnings and profits since inception to 2019. In order to continue to qualify as a RIC, Rand holds several of its equity investments in holding companies that facilitate a tax structure that is advantageous to the RIC election. These wholly owned subsidiaries (the "Blocker Corps") are consolidated using United States generally accepted accounting principles ("GAAP") for financial reporting purposes.

1


Table of Contents

 

 

Rand's Board of Directors (the "Board") declared the following cash dividends during the year ended December 31, 2023:

 

Quarter

 

Dividend/Share
Amount

 

 

Record Date

 

Payment Date

 

Type

1st

 

$

0.20

 

 

March 13, 2023

 

March 27, 2023

 

Regular Quarterly

2nd

 

$

0.25

 

 

May 31, 2023

 

June 14, 2023

 

Regular Quarterly

3rd

 

$

0.25

 

 

August 31, 2023

 

September 14, 2023

 

Regular Quarterly

4th

 

$

0.25

 

 

December 18, 2023

 

December 29, 2023

 

Regular Quarterly

4th

 

$

0.38

 

 

December 18, 2023

 

December 29, 2023

 

Special

 

The Board declared the following cash dividends during the year ended December 31, 2022:

 

Quarter

 

Dividend/Share
Amount

 

 

Record Date

 

Payment Date

 

Type

1st

 

$

0.15

 

 

March 14, 2022

 

March 28, 2022

 

Regular Quarterly

2nd

 

$

0.15

 

 

June 1, 2022

 

June 15, 2022

 

Regular Quarterly

3rd

 

$

0.15

 

 

September 1, 2022

 

September 15, 2022

 

Regular Quarterly

4th

 

$

0.20

 

 

December 19, 2022

 

December 30, 2022

 

Regular Quarterly

4th

 

$

0.18

 

 

December 19, 2022

 

December 30, 2022

 

Special

 

Rand effected a 1-for-9 reverse stock split of its common stock effective May 21, 2020. The reverse stock split affected all issued and outstanding shares of Rand's common stock, including shares held in treasury. The reverse stock split reduced the number of issued and outstanding shares of Rand’s common stock from 23,845,470 shares and 23,304,424 shares, respectively, to 2,648,916 shares and 2,588,800 shares, respectively. The reverse stock split affected all shareholders uniformly and did not alter any shareholder's percentage interest in Rand’s outstanding common stock, except for adjustments for fractional shares.

 

On October 7, 2020, Rand, RCM and certain of their affiliates received an exemptive order from the Securities and Exchange Commission (“SEC”) to permit Rand to co-invest in portfolio companies with certain affiliates, including other BDCs and registered investment companies, managed by RCM and certain of its affiliates in a manner consistent with Rand’s investment objective, policies, strategies and restrictions as well as regulatory requirements, subject to compliance with certain conditions (the “Order”). On March 29, 2021, the SEC granted Rand, Callodine Group, LLC (“Callodine”), which holds a controlling interest in RCM, and certain of their affiliates a new exemptive order (the “New Order”) that superseded the Order and permits Rand to co-invest with affiliates managed by RCM and Callodine. Callodine is a yield focused asset management platform. Pursuant to the New Order, Rand is generally permitted to co-invest with affiliates covered by the New Order if a “required majority” (as defined in Section 57(o) of the 1940 Act) of Rand’s independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to Rand and its shareholders and do not involve overreaching in respect of Rand or its shareholders on the part of any person concerned, (2) the transaction is consistent with the interests of Rand’s shareholders and is consistent with Rand’s investment objective and strategies and, (3) the investment by Rand’s affiliates would not disadvantage Rand, and Rand’s participation would not be on a basis different from or less advantageous than that on which Rand’s affiliates are investing. In addition, on September 6, 2022, the SEC granted an amendment to the New Order to permit Rand to participate in follow-on investments in its existing portfolio companies with certain Affiliated Funds (as defined in the New Order) that do not hold any investments in such existing portfolio companies.

Our corporate office is located in Buffalo, NY and our website address is www.randcapital.com. We make available on our website our annual and quarterly reports, proxy statements and other information as soon as reasonably practicable after such material is filed with the SEC. Our shares are traded on the Nasdaq Capital Market under the symbol “RAND.”

Our Investment Objectives and Strategy

Our investment activities are managed by our external investment adviser, RCM. Our investment objective is to generate current income and, when possible, complement this current income with capital appreciation. As a result, the investments made by Rand during 2023 were, and the investments to be made by Rand in the future are expected to be, made primarily in debt instruments. At times when excess cash is available on our balance sheet, we may also invest in high yielding publicly traded equity instruments that provide income through dividends and are relatively more liquid than our private company equity investments.

We expect to co-invest in privately held, lower middle market companies with committed and experienced management in a broad variety of industries. We seek to invest in businesses that have sustainable, differentiated and market-accepted products and have revenue of greater than $10 million and a path to free cash flow or are already generating greater than $1.5 million in EBITDA.

2


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We primarily provide funding to companies that need growth or expansion capital or are looking to finance an ownership transition. We typically are a minority investor and work with other lenders, investment partners and sponsors to source and fund investment opportunities.

Going forward, our initial investment in any one portfolio company is expected to be in the range of $2 million to $4 million . The debt instruments we invest in are not expected to be rated by any rating agency and, if they were, would be expected to be below investment grade. Because of the higher risk nature of our investments, we seek board observation or information rights and may require a board seat.

The maximum size of our investment in any single portfolio company and the diversification of our overall portfolio is subject to compliance with SEC and IRS regulation requirements.

We may engage in various investment strategies to achieve our investment objectives based on the types of opportunities we discover and the competitive landscape. We expect to focus on current cash yields in order to achieve our income producing goals.

Our Investment Process

The investment process is comprised of the sourcing and qualifying of investment opportunities, evaluating and negotiating the investment instrument and documentation, due diligence of the business plan, operations and prospects of the prospective investee and follow through investment monitoring, follow on investments and portfolio management.

RCM’s investment team identifies investment opportunities through a network of investment referral relationships. Investment proposals may come to RCM or us from other sources, including unsolicited proposals from companies and referrals from accountants, bankers, lawyers and other members of the financial community. We believe that RCM’s and our reputation and experience in the investment community provide a competitive advantage in originating quality investments.

In a typical private financing, a member of RCM’s investment committee (the “Investment Committee”) will review and analyze through due diligence, the business plan and operations of the potential portfolio company. Additionally, the Investment Committee will familiarize themselves with the portfolio company’s industry and competitive landscape and may conduct reference checks with its customers and suppliers. RCM’s Investment Committee will then review the transaction and, if approved, the transaction will be funded by Rand.

Following our initial investment, we may make follow-on investments to take advantage of warrants or other preferential rights granted to us to increase or maintain our position in a promising portfolio company or provide additional funds to allow a portfolio company to fully implement its business plans, develop a new line of business or recover from unexpected business problems. Follow-on investments in a portfolio company are evaluated on an individual basis by RCM’s Investment Committee.

Disposition of Investments

We may exit investments upon the maturity of a debt security or when a liquidity event takes place, such as the sale, recapitalization, or initial public offering of a portfolio company. The method and timing of the disposition of our portfolio investments can be critical to the realization of maximum total return. We generally expect to dispose of our equity securities through private sales of securities to other investors or through the sale or merger of the portfolio company. We anticipate the principal amount of our debt investments will be repaid with interest and we may realize further appreciation from warrants or other equity type instruments received in connection with an investment.

Current Portfolio Companies

For a description of our current portfolio company investments, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Composition of the Investment Portfolio.”

Competition

We compete for quality investments with other venture capital firms, individual investors, business development companies, and investment funds (including private equity funds and mezzanine funds). We believe we are able to compete with these entities primarily on the basis of RCM’s and our referral network, RCM’s and our investing reputation and experience, RCM’s responsive,

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quick, and efficient investment analysis and decision-making process, the size of our initial investment, and the investment terms we offer. For information concerning the competitive risks we face, see “Item 1A. Risk Factors.”

Employees

We do not have any employees. Our operations are managed by RCM, our investment adviser and administrator.

Daniel Penberthy serves as President and Chief Executive Officer of Rand and Margaret Brechtel serves as Executive Vice President, Treasurer, Chief Financial Officer and Secretary of Rand. Daniel Penberthy and Margaret Brechtel also serve as officers of RCM, our investment adviser and administrator.

We reimburse our administrator, RCM, for the allocable portion of overhead and other expenses incurred by it in performing its obligations, on behalf of Rand, under the Administration Agreement. For a more detailed discussion of the administration agreement with RCM, see “Administration Agreement” below.

Investment Advisory and Management Agreement

RCM serves as our investment adviser (the “Adviser”) under the terms of the Investment Management Agreement. The Adviser is a registered investment adviser under the Investment Advisers Act of 1940, as amended. The Adviser manages the investment and reinvestment of our assets and, without limiting the generality of the foregoing:

(i)
determines the composition of Rand’s portfolio, the nature and timing of the changes therein and the manner of implementing such changes;
(ii)
identifies, evaluates and negotiates the structure of the investments;
(iii)
executes, closes, services and monitors the investments;
(iv)
determines the securities and other assets that we will purchase, retain or sell;
(v)
performs due diligence on prospective portfolio companies and investments;
(vi)
provides us with other investment advisory, research and related services that may, from time to time, be required for the investment of our assets; and
(vii)
assists us in the valuation of portfolio investments.

The Adviser’s services under the Investment Management Agreement are not exclusive, and it does furnish similar services to other entities and funds. In addition, subject to compliance with the requirements of the 1940 Act, the Adviser is authorized to enter into one or more sub-advisory agreements with other investment advisors (each a “Sub-Advisor”), including for purposes of recommending specific securities or other investments based upon our investment objectives and policies, and working, along with the Adviser, in structuring, negotiating, arranging or effecting the acquisition or disposition of our investments and monitoring our investments. Under the terms of the Investment Management Agreement, the Adviser, and not us, will be responsible for any compensation payable to any Sub-Advisor.

About the Investment Process of the Adviser

The Adviser’s principal investment portfolio managers are Daniel Penberthy and Scott Barfield, who collectively manage the Adviser on a day-to-day basis. All decisions to acquire or dispose of assets on our behalf are made by the Adviser’s Investment Committee. Each decision must be approved by a majority vote of the Investment Committee members.

From January 1, 2023 to March 1, 2023, the Investment Committee was comprised of the following five individuals:

Scott Barfield;
Brian Collins;
Adam Gusky;
James Morrow; and
Daniel Penberthy.

 

 

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From March 2, 2023 to December 31, 2023, the Investment Committee was comprised of the following five individuals:

 

Scott Barfield;
Brian Collins;
Steven Brannon;
James Morrow; and
Daniel Penberthy.

We believe that each member of the Investment Committee during 2023 had significant and substantial experience making and managing investments in debt and equity instruments that are consistent with our investment objectives and strategies across market cycles and industries. We believe that the experience and investing acumen of RCM’s Investment Committee provides us with a competitive advantage in identifying, originating, investing in and managing a portfolio of investments in lower middle-market companies.

All potential investment opportunities undergo an initial informal review by members of the Investment Committee and each potential investment opportunity that is determined to have merit is then presented and evaluated at Investment Committee meetings in which the members of the Investment Committee discuss the qualities and risks of that potential investment opportunity and the pricing and structure for the investment.

Fees Paid to Adviser

Under the Investment Management Agreement, we pay the Adviser, as compensation for the investment advisory and management services, fees consisting of two components: (i) the Base Management Fee; and (ii) the Incentive Fees.

Base Management Fee

The “Base Management Fee” is calculated at an annual rate of 1.50% of our total assets (other than cash or cash equivalents but including assets purchased with borrowed funds), determined according to procedures duly adopted by the Board.

The Base Management Fee is calculated based on the average value of our total assets (other than cash or cash equivalents but including assets purchased with borrowed funds) at the end of the two most recently completed calendar quarters.

Incentive Fees

The “Incentive Fees” are comprised of two parts: (1) the Income Based Fee; and (2) the Capital Gains Fee.

Income Based Fee

The “Income Based Fee” is calculated and payable quarterly in arrears based on the Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter and is payable promptly following the filing of our financial statements for such quarter.

Under the Investment Management Agreement, “Pre-Incentive Fee Net Investment Income” is defined as interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees we receive from portfolio companies) we accrue during the relevant calendar quarter, minus the operating expenses for such calendar quarter (including the Base Management Fee, expenses payable under the Administration Agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding any portion of Incentive Fee).

Pre-Incentive Fee Net Investment Income includes any accretion of original issue discount, market discount, payment-in-kind interest, payment-in-kind dividends or other types of deferred or accrued income, including in connection with zero coupon securities, that we have recognized in accordance with GAAP, but have not yet received in cash (collectively, “Accrued Unpaid Income”). Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized and unrealized capital losses, or unrealized capital appreciation or depreciation.

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Pre-Incentive Fee Net Investment Income, expressed as a rate of return on the value of our net assets (defined as total assets less indebtedness) at the end of the immediately preceding calendar quarter, is compared to a “hurdle rate”, expressed as a rate of return on the value of our net assets at the end of the most recently completed calendar quarter, of 1.75% per quarter (7% annualized). We pay the Adviser an Incentive Fee with respect to our Pre-Incentive Fee Net Investment Income in each calendar quarter as follows:

(i)
no Income Based Fee in any quarter in which the Pre-Incentive Fee Net Investment Income for such quarter does not exceed the hurdle rate of 1.75% (7.00% annualized);
(ii)
100% of the Pre-Incentive Fee Net Investment Income for any calendar quarter with respect to that portion of the Pre-Incentive Fee Net Investment Income for such calendar quarter, if any, that exceeds the hurdle rate of 1.75% (7.00% annualized) but is less than 2.1875% (8.75% annualized); and
(iii)
20% of the amount of the Pre-Incentive Fee Net Investment Income for any calendar quarter with respect to that portion of the Pre-Incentive Fee Net Investment Income for such calendar quarter, if any, that exceeds 2.1875% (8.75% annualized).

However, the Income Based Fee paid to the Adviser shall not be in excess of the Incentive Fee Cap. The “Incentive Fee Cap” for any quarter is an amount equal to (1) 20.0% of the Cumulative Net Return (as defined below) during the relevant Income Based Fee Calculation Period (as defined below) minus (2) the aggregate Income Based Fee that was paid in respect of the calendar quarters included in the relevant Income Based Fee Calculation Period.

For purposes of the calculation of the Income Based Fee, “Income Based Fee Calculation Period” is defined as, with reference to a calendar quarter, the period of time consisting of such calendar quarter and the additional quarters that comprise the eleven calendar quarters immediately preceding such calendar quarter.

For purposes of the calculation of the Income Based Fee, “Cumulative Net Return” is defined as (1) the aggregate net investment income in respect of the relevant Income Based Fee Calculation Period minus (2) any Net Capital Loss, if any, in respect of the relevant Income Based Fee Calculation Period. If, in any quarter, the Incentive Fee Cap is zero or a negative value, we pay no Income Based Fee to the Adviser for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is a positive value but is less than the Income Based Fee that is payable to the Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, we pay an Income Based Fee to the Adviser equal to the Incentive Fee Cap for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is equal to or greater than the Income Based Fee that is payable to the Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, we pay an Income Based Fee to the Adviser equal to the Income Based Fee calculated as described above for such quarter without regard to the Incentive Fee Cap.

For purposes of the calculation of the Income Based Fee, “Net Capital Loss,” in respect of a particular period, means the difference, if positive, between (1) aggregate capital losses, whether realized or unrealized, in such period minus (2) aggregate capital gains, whether realized or unrealized, in such period.

Any Income Based Fee otherwise payable under the Investment Management Agreement with respect to Accrued Unpaid Income (such fees being the “Accrued Unpaid Income Based Fees”) shall be deferred, on a security-by-security basis, and shall become payable to the Adviser only if, as, when and to the extent cash is received by us in respect of any Accrued Unpaid Income. Any Accrued Unpaid Income that is subsequently reversed by us in connection with a write-down, write-off, impairment, or similar treatment of the investment giving rise to such Accrued Unpaid Income will, in the applicable period of reversal, (1) reduce Pre-Incentive Fee Net Investment Income and (2) reduce the amount of Accrued Unpaid Income Based Fees. Subsequent payments of Accrued Unpaid Income Based Fees that are deferred shall not reduce the amounts otherwise payable for any quarter as an Income Based Fee.

Capital Gains Fee

The “Capital Gains Fee” is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Management Agreement). Under the terms of the Investment Management Agreement, the Capital Gains Fee is calculated at the end of each applicable year by subtracting (1) the sum of our cumulative aggregate realized capital losses and aggregate unrealized capital depreciation from (2) our cumulative aggregate realized capital gains, in each case calculated from the effective date of the Prior Investment Management Agreement. If this amount is positive at the end of any calendar year, then the Capital Gains Fee for such year is equal to 20% of such amount, less the cumulative aggregate amount of Capital Gains Fees paid in all prior years. If such amount is negative, then there is no Capital Gains Fee payable for that calendar year. If the Investment Management Agreement is terminated as of a date that is not a calendar year end, the termination date shall be treated as though it were a calendar year end for purposes of calculating and paying the Capital Gains Fee.

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For purposes of the Capital Gains Fee:

The cumulative aggregate realized capital gains are calculated as the sum of the differences, if positive, between (a) the net sales price of each investment in our portfolio when sold and (b) the accreted or amortized cost basis of such investment.
The cumulative aggregate realized capital losses are calculated as the sum of the amounts by which (a) the net sales price of each investment in our portfolio when sold is less than (b) the accreted or amortized cost basis of such investment.
The aggregate unrealized capital depreciation is calculated as the sum of the differences, if negative, between (a) the valuation of each investment in our portfolio as of the applicable Capital Gains Fee calculation date minus (b) the accreted or amortized cost basis of such investment.

The accreted or amortized cost basis of an investment shall mean, with respect to an investment owned by us as of the effective date of the Prior Investment Management Agreement, the fair value of that investment as set forth in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019, as filed with the SEC on November 7, 2019, and, with respect to an investment acquired by us subsequent to the effective date of the Prior Investment Management Agreement or the Investment Management Agreement, the accreted or amortized cost basis of such investment as reflected in the our financial statements.

Example 1: Income Based Fee Calculations: *

Alternative 1

Assumptions:

Investment income (including interest, dividends, fees, etc.) = 1.25%

Hurdle rate(1) = 1.75%

Base Management Fee(2) = 0.375%

Other expenses (legal, accounting, transfer agent, etc.) = 0.20%

Pre-Incentive Fee Net Investment Income (investment income – (Base Management Fee + other expenses)) = 0.675%

Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate, therefore there is no Income Based Fee is payable for the calendar quarter.

Alternative 2

Assumptions:

Investment income (including interest, dividends, fees, etc.) = 2.70%

Hurdle rate(1) = 1.75%

Base Management Fee(2) = 0.375%

Other expenses (legal, accounting, transfer agent, etc.) = 0.20%

Pre-Incentive Fee Net Investment Income (investment income – (Base Management Fee + other expenses)) = 2.125%

Income Based Fee (subject to “catch up”)(3) = 100.00% × (2.125% – 1.75%) = 0.375%

Pre-Incentive Fee Net Investment Income exceeds the hurdle rate, but does not fully satisfy the “catch-up” provision, therefore the Income Based Fee payable for the calendar quarter is 0.375%.

Alternative 3

Assumptions:

Investment income (including interest, dividends, fees, etc.) = 3.50%

Hurdle rate(1) = 1.75%

Base Management Fee(2) = 0.375%

Other expenses (legal, accounting, transfer agent, etc.) = 0.20%

Pre-Incentive Fee Net Investment Income (investment income – (Base Management Fee + other expenses)) = 2.925%

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Income Based Fee (subject to “catch up”)(3) = 100.00% × “catch-up” + (20.00% × (Pre-Incentive Fee Net Investment Income above 2.1875%))

Catch-up = 2.1875% – 1.75% = 0.4375%

Income Based Fee = (100.00% × .4375%) + (20.00% × (2.925% – 2.1875%))

= 0.4375% + (20.00% × 0.7375%)

= 0.4375% + 0.1475%

= 0.585%

Pre-Incentive Fee Net Investment Income exceeds the hurdle rate, and fully satisfies the “catch-up” provision, therefore the Income Based Fee payable for the calendar quarter is 0.585%.

* For ease of review, (i) the hypothetical amounts of Pre-Incentive Fee Net Investment Income, investment income, Base Management Fee, other expenses, and Income Based Fee are each expressed as a percentage of total assets, though as described in greater detail above, each of these amounts are calculated as a numerical dollar amount as set forth in the Investment Management Agreement, (ii) the hypothetical amount of the Base Management Fee is assumed to be consistent from quarter to quarter, and (iii) these examples each assume that the Incentive Fee Cap is not yet in effect.

(1)
Represents 7.00% annualized hurdle rate.
(2)
Represents 1.50% annualized Base Management Fee.
(3)
The “catch-up” provision is intended to provide the Adviser with an Income Based Fee of 20.00% on all Pre-Incentive Fee Net Investment Income as if a hurdle rate did not apply when Rand’s Pre-Incentive Net Investment Income exceeds 1.75% in any calendar quarter.

Example 2: Capital Gains Fee Calculations:

Alternative 1

Assumptions:

Year 1: $20.0 million investment made in Company A (“Investment A”), and $30.0 million investment made in Company B (“Investment B”)

Year 2: Investment A sold for $50.0 million and fair market value (“FMV”) of Investment B determined to be $32.0 million

Year 3: FMV of Investment B determined to be $25.0 million

Year 4: Investment B sold for $31.0 million

The Capital Gains Fees, if any, would be calculated as follows:

Year 1: None

Year 2: Capital Gains Fee of $6.0 million — ($30.0 million realized capital gains on sale of Investment A multiplied by 20.0%)

Year 3: None — $5.0 million (20.0% multiplied by ($30.0 million cumulative capital gains less $5.0 million cumulative capital depreciation)) less $6.0 million (previous Capital Gains Fee paid in Year 2)

Year 4: Capital Gains Fee of $0.2 million — $6.2 million ($31.0 million cumulative realized capital gains multiplied by 20.0%) less $6.0 million (Capital Gains Fee taken in Year 2)

Alternative 2

Assumptions:

Year 1: $20.0 million investment made in Company A (“Investment A”), $30.0 million investment made in Company B (“Investment B”) and $25.0 million investment made in Company C (“Investment C”)

Year 2: Investment A sold for $50.0 million, FMV of Investment B determined to be $25.0 million and FMV of Investment C determined to be $25.0 million

Year 3: FMV of Investment B determined to be $27.0 million and Investment C sold for $30.0 million

Year 4: FMV of Investment B determined to be $35.0 million

Year 5: Investment B sold for $20.0 million

The Capital Gains Fees, if any, would be calculated as follows:

Year 1: None

Year 2: $5.0 million Capital Gains Fee - 20.0% multiplied by $25.0 million ($30.0 million realized capital gains on Investment A less $5.0 million unrealized capital depreciation on Investment B)

Year 3: $1.4 million Capital Gains Fee - $6.4 million (20.0% multiplied by $32.0 million ($35.0 million cumulative realized capital gains less $3.0 million unrealized capital depreciation)) less $5.0 million Capital Gains Fee received in Year 2

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Year 4: $0.6 million Capital Gains Fee - $7.0 million (20.0% multiplied by $35.0 million cumulative realized capital gains) less cumulative $6.4 million Capital Gains Fee received in Year 2 and Year 3

Year 5: None — $5.0 million (20.0% multiplied by $25.0 million (cumulative realized capital gains of $35.0 million less realized capital losses of $10.0 million)) less $7.0 million cumulative Capital Gains Fee paid in Year 2, Year 3 and Year 4

Payment of Expenses

Under the terms of Investment Management Agreement, all investment professionals of the Adviser and its staff, when and to the extent engaged in providing investment advisory services to us, and the compensation of such personnel and the general office and facilities and overhead expenses incurred by the Adviser in maintaining its place of business allocable to these services, are provided, and paid for by the Adviser and not by us. We will bear all other costs and expenses of its operations and transactions, related to the Corporation, including those relating to:

(i)
organization;
(ii)
calculating our net asset value (including the cost and expenses of any independent valuation firm);
(iii)
expenses incurred by the Adviser payable to third parties, including agents, consultants or other advisors, in monitoring financial and legal affairs and in monitoring our investments and performing due diligence on prospective portfolio companies;
(iv)
interest payable on debt, if any, incurred to finance our investments;
(v)
offerings of our common stock and other securities;
(vi)
investment advisory and management fees payable under the Investment Management Agreement, but excluding any fees payable to any Sub-Adviser;
(vii)
administration fees payable under the Administration Agreement;
(viii)
transfer agent and custodial fees;
(ix)
federal and state registration fees;
(x)
all costs of registration and listing our shares on any securities exchange;
(xi)
federal, state and local taxes;
(xii)
directors’ fees and expenses;
(xiii)
costs of preparing and filing reports or other documents required by governmental bodies (including the SEC);
(xiv)
costs of any reports, proxy statements or other notices to shareholders, including printing costs;
(xv)
our allocable portion of the fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums;
(xvi)
direct costs and expenses of administration, including independent auditors and outside legal costs; and
(xvii)
all other expenses incurred by us or the Adviser in connection with administering our business (including payments under the Administration Agreement based upon our allocable portion of the Adviser’s overhead in performing its obligations under the Administration Agreement, including rent and the allocable portion of the cost of our chief financial officer and chief compliance officer and their respective staffs (including travel expenses)).

Indemnification under the Investment Management Agreement

The Investment Management Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, the Adviser, its members and their respective officers, managers, partners, agents, employees, controlling persons, members and any other person affiliated with any of them (collectively, the “Indemnified Parties”), are entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) incurred by the Indemnified Parties in or by reason of any pending, threatened or completed action, suit, investigation or other proceeding (including an action or suit by or in the right of us or our security holders) arising out of or otherwise based upon the performance of any of the Adviser’s duties or obligations under the Investment Management Agreement or otherwise as an investment adviser.

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Duration and Termination

The Investment Management Agreement was executed on December 31, 2020 and had an initial term of two years after this date. Our Board approved the Investment Management Agreement on October 29, 2020 and it was approved by our shareholders at the Special Meeting held on December 16, 2020. Thereafter, the Investment Management Agreement will continue to renew automatically for successive annual periods so long as such continuance is specifically approved at least annually by:

(i)
the vote of our Board, or by the vote of shareholders holding a majority of the outstanding voting securities of Rand; and
(ii)
the vote of a majority of our independent directors, in either case, in accordance with the requirements of the 1940 Act.

On October 18, 2023, our Board, including all four independent directors, approved the renewal of the Investment Management Agreement for a period of twelve months commencing December 31, 2023 and ending on December 31, 2024.

The Investment Management Agreement may be terminated at any time, without the payment of any penalty, upon sixty days’ written notice, by: (a) vote of a majority of the Board or by vote of a majority of the outstanding voting securities of Rand (as defined in the 1940 Act); or (b) the Adviser. Furthermore, the Investment Management Agreement will automatically terminate in the event of its “assignment” (as such term is defined for purposes of Section 15(a)(4) of the 1940 Act). See Part I, Item 1A. “Risk Factors - Our investment adviser and administrator, RCM, has the right to resign on sixty days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.”

Notwithstanding the termination or expiration of the Investment Management Agreement, the Adviser will be entitled to any amounts owed as payment of the Base Management Fees and the Incentive Fees through the date of termination or expiration.

Administration Agreement

In connection with the Closing, we entered into the Prior Administration Agreement with the Adviser, and on December 31, 2020, concurrent with the execution of the Investment Management Agreement, we entered into the Administration Agreement with the Adviser. Under the terms of the Administration Agreement, the Adviser agreed to perform (or oversee, or arrange for, the performance of) the administrative services necessary for our operations, including, but not limited to, office facilities, equipment, clerical, bookkeeping, finance, accounting, compliance and record keeping services at such office facilities and such other services as the Adviser, subject to review by the Board, will from time to time determine to be necessary or useful to perform its obligations under the Administration Agreement. The Adviser also, on our behalf, arranges for the services of, and oversees, custodians, depositories, transfer agents, dividend disbursing agents, other shareholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks, and such other persons in any such other capacity deemed to be necessary or desirable. The Adviser makes reports to our Board regarding the performance of its obligations under the Administration Agreement and furnishes advice and recommendations with respect to such other aspects of our business and affairs as it determines to be desirable.

The Adviser is responsible for our financial and other records that are required to be maintained and prepares all reports and other materials required to be filed with the SEC or any other regulatory authority, including reports to shareholders. In addition, the Adviser assists us in determining and publishing our Net Asset Value (“NAV”), overseeing the preparation and filing of our tax returns, and the preparation and dissemination of reports to shareholders, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others. The Adviser provides, on our behalf, significant managerial assistance to those portfolio companies to which we are required to provide such assistance.

In full consideration of the provision of the services of the Adviser, we reimburse the Adviser for the costs and expenses incurred by the Adviser in performing its obligations and providing personnel and facilities. Costs and expenses to be paid by us include those relating to: organization; calculating NAV (including the cost and expenses of any independent valuation firm); expenses incurred by the Adviser payable to third parties, including agents, consultants or other advisors, in monitoring our financial and legal affairs and in monitoring our investments and performing due diligence on its prospective portfolio companies; interest payable on debt, if any, incurred to finance our investments; offerings of our common stock and other securities; investment advisory and management fees (other than fees (if any) payable to a sub-advisor retained by the Adviser under the Investment Management Agreement); administration fees; transfer agent and custodial fees; federal and state registration fees; all costs of registration and listing of our common stock on any securities exchange; federal, state, local and other taxes; directors’ fees and expenses; costs of preparing and filing reports or other documents required by governmental bodies (including the SEC); costs of any reports, proxy statements or other notices to shareholders, including printing costs; our allocable portion of the fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums; direct costs and expenses of administration, including independent auditors and outside legal costs; and all other expenses incurred by us or the Adviser in connection with

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administering our business, including payments under the Administration Agreement based upon our allocable portion of the Adviser’s overhead in performing its obligations under the Administration Agreement, and our allocable portion of the cost of the chief financial officer and chief compliance officer and their respective staffs (including travel expenses).

The Administration Agreement was executed on December 31, 2020, the same date as the Investment Management Agreement, and had an initial term of two years after that date, and thereafter will continue automatically for successive annual periods so long as such continuance is specifically approved at least annually by the Board, including a majority of the independent directors. On October 18, 2023, our Board, including all four independent directors, approved the renewal of the Administration Agreement for a period of twelve months commencing December 31, 2023 and ending on December 31, 2024. The Administration Agreement may be terminated at any time, without the payment of any penalty, by vote of our directors, or by the Adviser, upon 60 days’ written notice to the other party. The Administration Agreement may not be assigned by a party without the consent of the other party.

Regulations

The following discussion is a general summary of the material laws and regulations governing BDCs. It does not purport to be a complete description of all of the laws and regulations affecting BDCs.

We have elected to be regulated as a BDC under the 1940 Act. Although the 1940 Act exempts a BDC from registration under the 1940 Act as a registered investment company, the 1940 Act contains significant limitations on the operations of BDCs. Among other things, the 1940 Act contains prohibitions and restrictions relating to transactions between a BDC and its affiliates, principal underwriters and affiliates of its affiliates or underwriters. The 1940 Act also prohibits a BDC from changing the nature of its business so as to cease to be, or to withdraw its election as, a BDC unless so authorized by a vote of the holders of a majority of its outstanding voting securities. BDCs are not required to maintain fundamental investment policies relating to diversification and concentration of investments within a single industry. More specifically, in order to qualify as a BDC, a company must:

(1)
be a domestic company;
(2)
have registered a class of its equity securities or have filed a registration statement with the SEC pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”);
(3)
operate for the purpose of investing in the securities of certain types of companies, namely immature or emerging companies and businesses suffering or just recovering from financial distress. Generally, a BDC must be primarily engaged in the business of furnishing capital and providing managerial expertise to companies that do not have ready access to capital through conventional financial channels. Such companies are termed “eligible portfolio companies;”
(4)
extend significant managerial assistance to such portfolio companies; and
(5)
have a majority of “disinterested” directors (as defined in the 1940 Act).

 

As a BDC, we are required under the 1940 Act, with certain limited exceptions, to meet an asset coverage ratio computed as the value of the Corporation’s total assets (less total liabilities other than senior securities) to total senior securities, which includes all of our borrowings and any preferred stock we may issue in the future, in order to incur borrowings and issue debt securities. In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our shareholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase.

 

On January 24, 2024, the Board, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the Board, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, our asset coverage requirement under the 1940 Act for senior securities will be changed from 200% to 150%, effective January 24, 2025 (i.e., we will be able to borrow up to two dollars for every dollar we have in assets less all liabilities and indebtedness not represented by senior securities issued by us). We monitor our compliance with this coverage ratio on a regular basis.

 

As of December 31, 2023 and 2022, our asset coverage ratio, as computed in accordance with the 1940 Act, was 474.2% and 2,363.6%, respectively.

Qualifying Assets

Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of their total assets. An eligible portfolio company is, generally, a private domestic operating company, or a public domestic operating

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company whose securities are not listed on a national securities exchange. In addition, any small business investment company that is licensed by the SBA and is a wholly owned subsidiary of a BDC is an eligible portfolio company.

Qualifying assets include:

(1)
securities of companies that were eligible portfolio companies at the time the BDC acquired their securities;
(2)
securities of bankrupt or insolvent companies that were eligible at the time of the BDC’s initial acquisition of their securities but are no longer eligible, provided that the BDC has maintained a substantial portion of its initial investment in those companies;
(3)
securities received in exchange for or distributed on or with respect to any of the foregoing; and
(4)
cash items, government securities and high-quality short-term debt.

The 1940 Act also places restrictions on the nature of the transactions in which, and the persons from whom, securities can be purchased in order for the securities to be considered qualifying assets.

A BDC is permitted to invest in the securities of public companies and other investments that are not qualifying assets, but those non-qualifying investments may not exceed 30% of the BDC’s total asset value at the time of the investment. At December 31, 2023, we were in compliance with this rule.

Managerial Assistance to Portfolio Companies

In order to count portfolio securities as qualifying assets for purposes of the 70% test discussed above, a BDC must either control the issuer of the securities or must offer to make available significant managerial assistance; except that, where the BDC purchases the securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance. Making available significant managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or external adviser, offers to provide and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company through monitoring of portfolio company operations, selective participation in board and management meetings, consulting with and advising a portfolio company’s officers or other organizational or financial guidance.

Taxation as a Regulated Investment Company

The Corporation elected U.S. federal tax treatment as a regulated investment company (“RIC”) as of January 1, 2020 under subchapter M of the Internal Revenue Code of 1986, as amended, on our U.S. Federal tax return for the 2020 tax year. In order to qualify to make the RIC election, we, among other things, distributed our previously undistributed “accumulated earnings and profits” to shareholders, through the special dividend paid to shareholders in May 2020. RIC qualifications also require meeting specified source-of-income and asset-diversification requirements. In addition, in order to maintain our RIC status, we must distribute to our shareholders, with respect of each taxable year, dividends for U.S. federal income tax purposes in an amount generally at least equal to 90% of our “investment company taxable income,” which is generally equal to the sum of our net ordinary income plus the excess of our realized net short-term capital gains over our realized net long-term capital losses, determined without regard to any deduction for distributions paid (the “Annual Distribution Requirement”). As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute to our shareholders. Even if we qualify as a RIC, we generally will be subject to corporate-level U.S. federal income tax on our undistributed taxable income and could be subject to U.S. federal excise, state, local and foreign taxes. Additionally, we will be subject to U.S. federal income tax at the regular corporate rates on any income earned on certain investments that need to remain in a taxable subsidiary in order to maintain RIC status.

We will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless we distribute in a timely manner an amount at least equal to the sum of:

(1)
98% of our ordinary income for each calendar year;
(2)
98.2% of our capital gain net income for the one-year period ending October 31 in that calendar year; and
(3)
any income recognized, but not distributed, in preceding years and on which we paid no U.S. federal income tax.

In order to maintain qualification as a RIC for U.S. federal income tax purposes going forward, we must, among other things:

(1)
meet the Annual Distribution Requirement;
(2)
qualify to be regulated as a BDC or be registered as a management investment company under the 1940 Act;

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(3)
derive in each taxable year at least 90% of gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock or other securities or currencies or other income derived with respect to the business of investing in such stock, securities or currencies and net income derived from an interest in a “qualified publicly-traded partnership” (as defined in the Internal Revenue Code); and
(4)
diversify our holdings so that at the end of each quarter of the taxable year:
(a)
at least 50% of the value of our assets consists of cash, cash equivalents, U.S. Government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer (which for these purposes includes the equity securities of a “qualified publicly-traded partnership”); and
(b)
no more than 25% of the value of our assets is invested in the securities, other than U.S. Government securities or securities of other RICs, (i) of one issuer, (ii) of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or (iii) of one or more “qualified publicly-traded partnerships”.

We may be required to recognize taxable income in circumstances in which we do not receive cash. For example, if we hold debt obligations that have original issue discount (OID) or debt instruments with payment-in-kind (“PIK”) interest, we must include in income, each year, a portion of this non-cash income that accrues over the life of the obligation, regardless of whether cash is received by us in that taxable year. We may also have to include in income other amounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. Because any OID income or other amounts accrued will be included in our investment company taxable income for the year of accrual, we may be required to make a distribution to our shareholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash.

Under the 1940 Act, we are not permitted to make distributions to our shareholders while our debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met. If we are prohibited to make distributions, we may fail to qualify for tax treatment as a RIC and become subject to tax as an ordinary corporation.

As long as we qualify for taxation as a RIC, distributions out of our earnings and profits to shareholders generally will be taxable to shareholders for U.S. federal income tax purposes, either as ordinary income or capital gains, depending upon the nature of the income giving rise to the distribution. The tax consequences to a shareholder attributable to the acquisition, ownership, and disposition of our common stock, are complex and will depend on the facts of the shareholder’s unique circumstances.

 

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Item 1A. Risk Factors

Investing in our securities involves a high degree of risk. In addition to the other information contained in this annual report on Form 10-K, the following information should be carefully considered before making an investment in our common stock. The risk factors described below are the principal risk factors associated with an investment in our securities, as well as those factors generally associated with a business development company with investment objectives, investment policies, capital structure or trading markets similar to ours. The risks set out below are not the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us might also impair our operations and performance. If any of the following events occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, our NAV and the trading price of our common stock could decline, resulting in potential investment loss.

We have listed below the risk factors applicable to us grouped into the following categories: Risks related to our Business and Structure, Risks related to our Investments, Risks related to our Indebtedness, Risks related to our Common Stock and Risks Relating to U.S. Federal Income Tax.

Risks related to our Business and Structure

We are dependent upon RCM for our future success.

Our day-to-day investment operations are managed by our investment adviser and administrator, RCM, subject to oversight by our Board. After the completion of the Transaction, we no longer have any employees, and, as a result, RCM’s investment team evaluates, negotiates, structures, closes and monitors our investments. We depend on the diligence, skill, investment expertise and network of business contacts of RCM’s investment professionals, and the Investment Committee to source appropriate investments for us. We also depend on members of RCM’s investment team and the Investment Committee to analyze potential investments for us and monitor those investments, and on members of the Investment Committee to make investment decisions for us. Our future success depends on the continued availability of members of RCM’s investment team and the Investment Committee and the other investment professionals available to RCM. The Corporation does not have any employment agreements with key personnel of RCM, including members of the Investment Committee, and we cannot provide any assurance that unforeseen business, medical, personal or other circumstances would not lead any such individual to terminate his or her relationship with RCM. In addition, it is not expected that members of RCM's investment team and the Investment Committee will devote all of their business time to our operations and each such person will have other demands on their time as a result of their other activities. As a result, RCM may need to hire, train, supervise and manage new investment professionals to participate in our investment selection and monitoring process and may not be able to find investment professionals in a timely manner or at all. The loss of a material number of investment professionals to which RCM has access or members of the Investment Committee, could have a material adverse effect on our ability to achieve our investment objectives as well as on our financial condition and results of operations.

Our financial results will depend on RCM’s skill to manage and deploy capital effectively.

Our ability to achieve long-term capital appreciation on our equity investments and to maintain a current cash flow from our debt investments while shifting our portfolio to contain a greater percentage of interest-yielding debt securities depends on RCM’s capability to effectively identify, invest, and manage our capital.

Accomplishing this investment objective effectively and on a cost effective basis will be based on RCM’s handling of the investment process, starting with its ability to find investments that offer favorable terms and meet our investment objective, and its ability to provide competent, attentive and efficient services to us. RCM will also need to monitor our portfolio companies’ performance and may be called upon to provide managerial assistance. These competing demands on their time may slow the rate of investment or the effective deployment of capital.

Even if RCM is able to grow and build on our investment portfolio, any failure by RCM to manage the growth of our portfolio effectively could have a material adverse effect on our business, financial condition, results of operations and prospects. If RCM cannot successfully manage our investment portfolio or implement our investment objectives, this could negatively impact our results of operation and financial condition.

We are subject to risks created by our highly regulated environment.

We are regulated by the SEC as a BDC and subject to the requirements applicable to BDCs under the 1940 Act. The 1940 Act imposes numerous constraints on the operations of BDCs and their external advisers. Changes in the laws or regulations that govern BDCs could significantly affect our business. Regulations and laws may be changed periodically, and the interpretations of

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the relevant regulations and laws are also subject to change. Any change in the regulations and laws governing our business could have a material impact on our financial condition and our results of operations. Moreover, the laws and regulations that govern BDCs may place conflicting demands on the manner in which we operate, and the resolution of those conflicts may restrict or otherwise adversely affect our operations. Furthermore, any failure to comply with the requirements imposed on BDCs by the 1940 Act could cause the SEC to bring an enforcement action against us and/or expose us to claims of private litigants.

The 1940 Act permits us to issue senior securities, which include borrowing money from banks or other financial institutions, in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after each issuance of senior securities, subject to certain disclosure requirements. On January 24, 2024, the Board, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the Board, approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Small Business Credit Availability Act. Therefore, the Company’s asset coverage requirements for senior securities will automatically be changed from 200% to 150%, effective January 24, 2025. If our asset coverage is not at least 200% or, beginning January 24, 2025, at least 150%, we are not permitted to pay distributions or issue additional senior securities. As a result and if we are unable to comply with our asset coverage requirement under the 1940 Act, we could have difficulty meeting the distribution requirements necessary to maintain RIC tax treatment. Moreover, if the value of our assets declines, we may also be unable to satisfy this asset coverage test. If that happens, we may be required to liquidate a portion of our investments and repay a portion of our indebtedness at a time when we may be unable to do so or unable to do so on favorable terms.

We are subject to risks created by the valuation of our portfolio investments.

At December 31, 2023, 91% of our investments are in private securities that are not publicly traded. There is typically no public market for securities of the small privately held companies in which we typically invest. Investments are valued on a quarterly basis in accordance with our established valuation policy and are stated at fair value and approved by our Board. The inputs into the determination of fair value of these investments may require significant judgment or estimation. In the absence of a readily ascertainable market value, the estimated value of our investment portfolio may differ significantly, favorably or unfavorably, from the values that would be placed on the portfolio if a ready market for the securities existed and may fluctuate significantly over short periods of time. Any changes in estimated value of our investments are recorded in our consolidated statement of operations as “Net change in unrealized appreciation/depreciation on investments.” In addition, the participation of RCM’s investment professionals in our valuation process may result in a conflict of interest as RCM’s Base Management Fee under the Investment Management Agreement is based, in part, on the value of our gross assets, and the Incentive Fees payable under the Investment Management Agreement are based, in part, on realized gains and realized and unrealized losses.

RCM, acting as our investment adviser, operates in a competitive market for investment opportunities.

RCM faces significant competition in effecting our investing activities from many entities including private venture capital funds, investment affiliates of large companies, wealthy individuals and other domestic or foreign investors. The competition is not limited to entities that operate in the same general geographical areas as we do. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors have a lower cost of capital and access to funding sources that are not available to us, including from the Small Business Administration. In addition, increased competition for attractive investment opportunities allows debtors to demand more favorable terms and offer fewer contractual protections to creditors. Some of our competitors have higher risk tolerances or different risk assessments than we do. These characteristics have allowed, and could continue to allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than we are able to offer. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we choose to match our competitors’ pricing, terms and structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. As a regulated BDC, we are also required to disclose quarterly and annually the name and business description of our portfolio companies and the value of their portfolio securities. Most of our competitors are not subject to this public disclosure requirement or similar types of disclosure requirements. This obligation to disclose this information could hinder RCM’s ability to invest in potential portfolio companies on our behalf. Additionally, other regulations, current and future, may make us less attractive as a potential investor to a given portfolio company than a private fund that is not subject to these regulations.

There are potential conflicts of interest, including the management of other investment funds and accounts by the principals and certain members of the Investment Committee of RCM, which could impact our investment returns.

The principals and certain members of the Investment Committee of RCM manage other funds and accounts, including for entities affiliated with members of the Investment Committee. Accordingly, they have obligations to those investors, the fulfillment of which may not be in the best interests of, or may be adverse to the interests of, us or our shareholders. Although the principals, members of the Investment Committee and other professional staff of RCM are expected to devote as much time to our management as appropriate to enable RCM to perform its duties in accordance with the Investment Management Agreement, the members of the

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Investment Committee and investment professionals of RCM may have conflicts in allocating their time and services among RCM, on the one hand, and the other managed investment vehicles, on the other hand.

RCM, including members of its Investment Committee, may face conflicts in allocating investment opportunities between us and other investment vehicles affiliated with members of the Investment Committee that have overlapping investment objectives with ours. Although RCM, including members of the Investment Committee, and its affiliates that manage other investment portfolios will endeavor to allocate investment opportunities in a fair and equitable manner in accordance with its written allocation policies and procedures, it is possible that, in the future, we may not be given the opportunity to participate in investments made by investment funds managed by RCM or members of the Investment Committee given the requirements or application of such allocation policies and procedures or if such investment is prohibited by laws that are applicable to us.

RCM and its affiliates, including some of our officers and directors, face conflicts of interest caused by compensation arrangements with us, which could result in actions that are not in the best interests of our shareholders.

RCM and its affiliates receive fees from us in return for their services, including certain incentive fees based on the performance of our investments. These fees could influence the advice provided to us. Generally, the greater the risk assumed by us with respect to our investments, the greater the potential for growth in our assets and profits, and, correlatively, the fees payable by us to RCM under the terms of the Investment Management Agreement. These compensation arrangements could affect RCM or its affiliates’ judgment with respect to investments made by us, which allows RCM to earn increased asset management fees.

Our ability to enter into transactions with our affiliates is restricted.

We are prohibited under the 1940 Act from participating in certain transactions with certain of our affiliates without the prior approval of the “required majority” of our directors as defined in Section 57(o) of the 1940 Act and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities will be our affiliate for purposes of the 1940 Act, and we will generally be prohibited from buying from, or selling to, such affiliate any securities, absent the prior approval of the “required majority” of our directors as defined in Section 57(o) of the 1940 Act. The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, including other funds or clients advised by RCM or its affiliates, which in certain circumstances could include investments in the same portfolio company (whether at the same or different times to the extent the transaction involves a joint investment), without prior approval of our Board and, in some cases, the SEC. If a person acquires more than 25% of our voting securities, or is otherwise deemed to control, be controlled by, or be under common control with us, we will be prohibited from buying from, or selling to, such person or certain of that person’s affiliates any securities, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC. For example, given East’s approximately 64% ownership position in our common stock, this prohibition impacts our ability to participate in certain transactions or investments where East is involved, including with respect to certain of the loans and other securities that were contributed to us by East as part of the consideration for East’s purchase of our common stock in the Transaction, to the extent such loans and other securities are also held by East or another one of our affiliates. Similar restrictions limit our ability to transact business with our officers or directors or their affiliates or anyone who is under common control with us. As a result of these restrictions, we may also be prohibited from buying securities from, or selling securities to, any portfolio company that is controlled by a fund managed by either RCM or its affiliates without the prior approval of the SEC, which may limit the scope of investment or disposition opportunities that would otherwise be available to us. The analysis of whether a particular transaction constitutes a joint transaction requires a review of the relevant facts and circumstances then existing.

On October 7, 2020, we, RCM and certain of our affiliates received the Order from the SEC to permit us to co-invest in portfolio companies with certain other affiliates, including other BDCs and registered investment companies, managed by RCM and certain of its affiliates in a manner consistent with our investment objective, subject to compliance with certain conditions. On March 29, 2021, the SEC granted us, RCM, Callodine, and certain of their affiliates the New Order that superseded the Order and permits us to co-invest with affiliates managed by RCM and Callodine. The New Order was sought in connection with the completion of the Adviser Change of Control. After the Adviser Change of Control, Callodine held a controlling interest in RCM. Pursuant to the New Order, we generally are permitted to co-invest with affiliates covered by the New Order if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to us and our shareholders and do not involve overreaching of us or our shareholders on the part of any person concerned, (2) the transaction is consistent with the interests of our shareholders and is consistent with our investment objective and strategies, and (3) the investment by our affiliates would not disadvantage us, and our participation would not be on a basis different from or less advantageous than that on which our affiliates are investing. In addition, on September 6, 2022, the SEC granted an amendment to the New Order to permit us to participate in follow-on investments in our existing portfolio companies with certain Affiliated Funds (as defined in the New Order) that do not hold any investments in such existing portfolio companies.

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In situations when co-investment with funds managed by RCM or its affiliates is not permitted under the 1940 Act and related rules, existing or future staff guidance, or the terms and conditions of the exemptive relief granted to us by the SEC, RCM and its affiliates will need to decide which client or clients (including us) will proceed with the investment. Generally, we will not be entitled to make a co-investment in these circumstances and, to the extent that a client (other than us) is granted the opportunity to proceed with the investment, we will not be permitted to participate in the investment we otherwise may have made.

RCM may be paid incentive compensation even if we incur a net loss, and we cannot recover any portion of the incentive fee previously paid.

RCM is entitled to incentive compensation under our Investment Management Agreement for each fiscal quarter under the Income Based Fee in an amount equal to a percentage of our pre-incentive fee net investment income, subject to a hurdle rate, a catch-up provision, a cap and a deferral mechanism. For purposes of calculating the Income Based Fee, our pre-incentive fee net investment income excludes realized and unrealized capital losses that we may incur in the fiscal quarter, even if such capital losses result in a net loss for that quarter. Thus, we may be required to pay RCM incentive compensation under the Income Based Fee for a fiscal quarter even if we incur a net loss for that quarter. In addition, if we pay the Capital Gains Fee and thereafter experience additional realized capital losses or unrealized capital losses, we will not be able to recover any portion of the incentive fee previously paid.

RCM’s liability is limited under the Investment Management Agreement and the Administration Agreement, and we are required to indemnify RCM against certain liabilities, which may lead RCM to act in a riskier manner on our behalf than it would when acting for its own account.

Under the Investment Management Agreement and the Administration Agreement, RCM does not assume any responsibility to us other than to render the services described in the Investment Management Agreement and Administration Agreement, as applicable, and it is not responsible for any action of our Board in declining to follow RCM’s advice or recommendations. Pursuant to the Investment Management Agreement and the Administration Agreement, RCM, its members and their respective officers, managers, partners, agents, employees, controlling persons, members and any other person affiliated with any of them are not liable to us for their acts under the Investment Management Agreement and Administration Agreement, as applicable, absent willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties. We have agreed to indemnify, defend and protect RCM, its members and their respective officers, managers, partners, agents, employees, controlling persons and any other person affiliated with any of them with respect to all damages, liabilities, costs and expenses arising out of or otherwise based upon the performance of any of RCM’s duties or obligations under the Investment Management Agreement or Administration Agreement, as applicable, or otherwise as investment adviser or administrator, as applicable, for us, and not arising out of willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties under the Investment Management Agreement or the Administration Agreement. These protections may lead RCM to act in a riskier manner when acting on our behalf than it would when acting for its own account.

Our investment adviser and administrator, RCM, has the right to resign on 60 days’ written notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.

Our investment adviser and administrator, RCM, has the right, under both the Investment Management Agreement and the Administration Agreement, to resign at any time upon not less than 60 days’ written notice, whether we have found a replacement or not. If RCM resigns, we may not be able to find a new investment adviser or administrator or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations are likely to be adversely affected and the market price of our common stock may decline. Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our investment objectives may result in additional costs and time delays that may adversely affect our financial condition, business and results of operations.

If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to maintain our qualification as a BDC or be precluded from investing according to our current business strategy.

As a BDC, we may not acquire any assets other than “qualifying assets” unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets.

We believe that most of the investments that we may acquire in the future will constitute qualifying assets. However, we may be precluded from investing in what we believe to be attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we could violate the 1940 Act provisions applicable to BDCs. As a result of such violation, specific rules under the 1940 Act could prevent us, for example, from making

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follow-on investments in existing portfolio companies (which could result in the dilution of our position) or could require us to dispose of investments at inappropriate times in order to come into compliance with the 1940 Act. If we need to dispose of such investments quickly, it could be difficult to dispose of such investments on favorable terms. We may not be able to find a buyer for such investments and, even if we do find a buyer, we may have to sell the investments at a substantial loss. Any such outcomes could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If we do not maintain our status as a BDC, we would be subject to regulation as a registered closed-end investment company under the 1940 Act. As a registered closed-end investment company, we would be subject to substantially more regulatory restrictions under the 1940 Act, which would significantly decrease our operating flexibility.

The fee structure under the Investment Management Agreement may induce RCM to pursue investments and incur leverage, which may not be in the best interests of the shareholders.

Under the terms of the Investment Management Agreement, the Base Management Fee is payable even if the value of our investment portfolio declines. The Base Management Fee is calculated based on the total assets (other than cash or cash equivalents but including assets purchased with borrowed funds), as determined according to procedures duly adopted by the Board. Accordingly, the Base Management Fee is payable regardless of whether the value of Rand’s total assets or investment portfolio has decreased during the then-current quarter and creates an incentive for RCM to incur leverage, such as borrowings under our Credit Facility, which may not be consistent with our shareholders’ interests.

The Incentive Fee payable to RCM is calculated based on a percentage of our return on invested capital. The terms of the Incentive Fee calculation may create an incentive for RCM to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. Unlike the Base Management Fee, the Income Based Fee is payable only if the hurdle rate is achieved. Because the portfolio earns investment income on gross assets while the hurdle rate is based on net assets, and because the use of leverage, such as borrowings under our Credit Facility, increases gross assets without any corresponding increase in net assets, RCM may be incentivized to incur leverage to grow the portfolio, which will tend to enhance returns where our portfolio has positive returns and increase the chances that the hurdle rate is achieved. Conversely, the use of leverage may increase losses where our portfolio has negative returns, which would impair the value of our common stock.

In addition, RCM receives the Incentive Fees based, in part, upon net capital gains realized on our investments under the Capital Gains Fee. Unlike the Income Based Fee, there is no hurdle rate applicable to the Capital Gains Fee. As a result, RCM may have an incentive to invest more capital in investments that are likely to result in capital gains as compared to income producing securities. Such a practice could result in our investing in more speculative equity securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.

We may need to raise additional capital to grow.

We may need additional capital to fund new investments and grow. We may access the capital markets periodically to issue equity securities as a means to raise additional capital. Pursuant to the restrictions of the 1940 Act, we are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock at a price below the then-current net asset value of our common stock if our Board determines that such sale is in the best interests of the Corporation and our shareholders, and our shareholders also approve the sale, giving us the authority to do so. Although we currently do not have such authorization, we may seek such authorization in the future.

In addition to amounts available to be borrowed under our Credit Facility, we may also issue debt securities or borrow additional amounts from financial institutions in order to obtain such additional capital, up to the maximum amount permitted by the 1940 Act. The 1940 Act permits us to issue debt securities or incur indebtedness only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200%, or beginning after January 24, 2025, at least 150%, immediately after such issuance or incurrence. Unfavorable economic conditions could increase our funding costs and limit our access to the capital markets or result in a decision by lenders not to extend credit to us. Furthermore, the debt capital that may be available to us in the future, if any is available at all, may be at a higher costs and on less favorable terms and conditions. A reduction in the availability of new capital could limit our ability to grow. In addition, we are required to distribute at least 90% of our net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any, to our shareholders to maintain our RIC election. As a result, our earnings may not be able to be retained by the Corporation to fund new investments and, instead, may need to be distributed to shareholders.

If we are unable to access the capital markets or if we are unable to borrow from financial institutions, we may be unable to grow our business and execute our business strategy fully, and our earnings, if any, could decrease, which could have an adverse effect on the value of our common stock.

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We are subject to cybersecurity risks and incidents that may adversely affect our operations, the operations of RCM or the companies in which we invest. A failure in our, or RCM’s, cybersecurity systems could impair our ability to conduct business and damage our business relationships, compromise or corrupt our confidential information and ultimately negatively impact business, financial condition and operating results.

Our and RCM’s operations are dependent on secure information technology systems for data processing, storage and reporting. Increased cybersecurity vulnerabilities, threats and more sophisticated and targeted cyber-attacks pose a risk to the security of our and RCM’s information and the information of our portfolio companies. Like other companies, we or RCM may experience threats to our data and systems, including malware and computer virus attacks, unauthorized access, system failures and disruptions. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary and other information stored in, or transmitted through, our or RCM’s computer systems and networks, or otherwise cause interruptions or malfunctions in our or RCM’s operations, which could result in damage to our or RCM’s reputation, financial losses, litigation, increased costs or regulatory penalties. Furthermore, if one of these events were to occur at one of our portfolio companies, it could impact their business, financial condition and results of operations, which could negatively impact our investment. In addition, these cyber-attacks could affect our and RCM’s computer network, our website or our other service providers (such as, but not limited to, accountants, lawyers, and transfer agents) and could result in operating disruptions or information misappropriation, which could have a material adverse effect on our business operations and the integrity and availability of our financial information. We and RCM have attempted to mitigate these cybersecurity risks by employing a number of processes, procedures and internal controls within our organization and RCM, but we remain potentially vulnerable to additional known and unknown threats.

We may experience fluctuations in our annual and quarterly results.

We could experience fluctuations in our annual and quarterly operating results due to a number of factors, some of which are beyond our control, including RCM’s ability or inability to make investments in companies that meet our investment criteria, RCM’s transition of our portfolio to include more interest-yielding securities, the interest rate payable on the debt securities acquired and the default rate on such securities, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses and the timing of RCM’s decision to exit from certain of our investments, the degree to which we encounter competition in the markets in which we operate and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future quarters or any future fiscal years.

We are subject to risks related to corporate social responsibility.

Our business and the businesses of our portfolio companies are facing increasing public scrutiny related to environmental, social and governance (“ESG”) activities. We risk damage to our reputation if we fail to act responsibly in several areas, such as diversity, equity and inclusion, environmental stewardship, support for local communities, corporate governance and transparency, and having RCM consider ESG factors in their investment processes on our behalf. Failure to act responsibly with respect to ESG activities could negatively impact our reputation, our relationship with existing and future portfolio companies, and our relationships with our investors, all of which could adversely affect our business and results of operations. Additionally, new regulatory initiatives related to ESG could adversely affect our business and the businesses of our portfolio companies. New laws and regulations increase our regulatory burden and could make compliance more difficult and expensive, affect the manner in which we or our portfolio companies conduct our businesses and adversely affect our results of operation.

Risks related to our Investments

We have a limited number of companies in our portfolio of investments and may be subjected to greater risk if any of these companies default.

Our portfolio investment values are concentrated in a small number of companies and as such, we may experience a significant loss in our net asset value if one or more of these companies performs poorly or goes out of business. The unrealized or realized depreciation in the value of the securities of any one of these companies would negatively impact our net asset value.

The lack of liquidity in our investments may adversely affect our business.

RCM, on our behalf, invests, and we expect that RCM will continue, on our behalf, to invest, primarily in portfolio companies whose securities are not publicly traded and may be subject to restrictions on resale, and as a result will be less liquid than publicly traded securities. Most of our investments are or will be either equity securities or debt securities acquired directly from small, private companies. The illiquidity of most of our portfolio may adversely affect our ability to dispose of the securities at times when it may be advantageous for us to liquidate investments. In addition, we may not realize the full value of these private investments if we have to liquidate all or a part of our portfolio investment quickly, given the lack of available markets for their sale.

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Economic downturns or recessions may adversely affect our portfolio companies’ financial performance and therefore harm our operating results.

The United States economy has periodically experienced periods of instability and recessions, including as a result of the COVID-19 pandemic, and the financial results of the small companies in which we invest could be more acutely affected negatively by this instability and suffer deterioration in operational or financial results. This deterioration may have a negative effect on our financial performance.

Investing in private companies involves a high degree of risk.

We typically invest a substantial portion of our assets in small private companies. These private businesses may be thinly capitalized, unproven companies with risky technologies, products or services, may lack management depth, and may not have attained profitability. Because of the speculative nature and the lack of a public market for these investments, there is significantly greater risk of loss than is the case with securities traded on a public exchange. We expect that some of our investments will become worthless and that some will appear likely to become successful but will never realize their potential. We have historically been risk seeking rather than risk averse in our approach to our investments. Given the incentive compensation components of our arrangement with RCM under the Investment Management Agreement, RCM may have similar incentives to be risk seeking rather than risk averse in making its investment decisions on our behalf.

Even if our portfolio companies are able to develop commercially viable technologies, products or services, the market for those new technologies, products and services is likely to be highly competitive and rapidly changing. Commercial success is difficult to predict and the marketing and other efforts of our portfolio companies may not be successful.

Any unrealized losses we experience in our portfolio may be an indication of future realized losses, which could reduce our income available for distribution.

As a BDC, we are required to carry our investments at fair value as determined in good faith by our Board. Decreases in the fair values of our investments are recorded as unrealized depreciation. Any unrealized losses in our portfolio of debt investments could be an indication of a portfolio company’s inability to meet its debt repayment obligations to us with respect to the affected investments. Any unrealized losses in our portfolio of equity investments could be an indication of operating or other problems at a portfolio company and the possibility that this investment may become worthless in the future. In either such case, this could result in realized losses in the future and ultimately in reductions of our income available for distribution in future periods.

We may be subject to risks associated with our origination of, or investment in, covenant-lite loans to our portfolio companies.

We have originated or invested in, and may in the future originate or invest in, covenant-lite loans to our portfolio companies, which means the loan agreement or other debt instrument governing these debt obligations contains fewer maintenance covenants than other loan agreements or debt obligations, or no maintenance covenants, and may not include covenants that we could use to monitor the financial performance of the portfolio company borrower, including covenants based upon compliance with financial ratios, and declare a default under the loan agreement or other debt instrument if the specified covenants are breached. While these loans or other debt obligations to portfolio company borrowers may still contain other collateral protections, a covenant-lite loan may carry more risk than a covenant-heavy loan made to the same portfolio company borrower as it does not require this borrower to provide affirmation that certain specific financial tests have been satisfied on a routine basis, as is generally required under a covenant-heavy loan agreement or other debt instrument. Generally, covenant-lite loans or other debt instruments provide borrowers more freedom, which may negatively impact lenders because these covenants, if any, tend to be incurrence-based, meaning they are only tested and can only be breached following an affirmative action of the borrower, rather than by deterioration in the borrower’s financial condition. Should the financial condition of a portfolio company borrower begin to deteriorate, our investment in or origination of covenant-lite loans or other debt instruments to such portfolio company borrower may potentially reduce our ability to restructure such problematic loan and mitigate potential loss. As a result of our investment in or origination of covenant-lite loans, our exposure to losses may be increased, which could result in an adverse impact on the Corporation’s revenues, net income and NAV per share.

We provide debt and equity capital primarily to small companies, which may present a greater risk of loss than providing debt and equity capital to larger companies.

Our portfolio consists primarily of debt and equity investments in small companies. Compared to larger companies, small companies generally have more limited access to capital and higher funding costs, may be in a weaker financial position and may need more capital to expand, compete and operate their business. They also typically have fewer administrative resources, which can lead to greater uncertainty in their ability to generate accurate and reliable financial data, including their ability to deliver audited financial statements. In addition, many small companies may be unable to obtain financing from the public capital markets or other traditional

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sources, such as commercial banks, in part because loans made to these types of companies entail higher risks than loans made to companies that have larger businesses, greater financial resources or are otherwise able to access traditional credit sources on more attractive terms.

A variety of factors may affect the ability of borrowers to make scheduled payments on debt securities or loans, including failure to satisfy financial targets and covenants, a downturn in a borrower’s industry or changes in the economy in general. In addition, investing in small companies in general involves a number of significant risks, including that small companies:

may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment;
typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render small companies more vulnerable to competitors’ actions and market conditions, as well as general economic downturns;
are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;
generally have less predictable operating results, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position;
may from time to time be parties to litigation;
may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity; and
may be particularly vulnerable to changes in customer preferences and market conditions, depend on a limited number of customers, and face intense competition, including from companies with greater financial, technical, managerial and marketing resources.

Any of these factors or changes thereto could impair a small company’s financial condition, results of operation, cash flow or result in other adverse events, such as bankruptcy, any of which could limit a borrower’s ability to make scheduled payments on our debt securities. This, in turn, could result in losses in our investments and a decrease in our net interest income and NAV per share.

We may have limited access to information about privately held companies in which we invest.

We invest primarily in privately held companies. Generally, little public information exists about these companies, and we are required to rely on the ability of RCM’s investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies. These companies and their financial information are not subject to the Sarbanes-Oxley Act of 2002 and other rules that govern public companies. If we are unable to uncover all material information about these companies, RCM may not make a fully informed investment decision, and we may lose money on our investment.

Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our returns on equity.

We are subject to the risk that investments intended to be held over long periods are, instead, repaid prior to maturity. When this occurs, we will generally reinvest these proceeds in temporary investments that will typically have substantially lower yields than the debt being prepaid or repay outstanding borrowings under our Credit Facility that has a lower interest rate than the yield of the debt being prepaid, and we could experience significant delays in reinvesting these amounts. Any future investment may also be at lower yields or on less favorable terms than the debt that was repaid. As a result, our results of operations could be materially adversely affected if one or more of our portfolio companies elects to prepay amounts owed by them. Additionally, prepayments could negatively impact our return on equity, which could result in a decline in the market price of our common stock.

Our portfolio companies may incur debt that ranks equal with, or senior to, our investments in such companies.

We invest primarily in debt securities issued by our portfolio companies. In some cases portfolio companies are permitted to have other debt that ranks equal with, or senior to, the debt securities in which we invest. By their terms, such debt instruments may provide that the holders thereof are entitled to receive payment of interest or principal on or before the dates on which we are entitled to receive payments in respect of the debt securities in which we invest. Also, in the event of insolvency, liquidation, dissolution,

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reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equal with debt securities in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company.

There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.

Even though we may have structured certain of our investments as senior loans, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, including the size of our investment and the extent to which we actually provided managerial assistance to that portfolio company, a bankruptcy court might recharacterize our debt investment and subordinate all or a portion of our claim to that of other creditors. In addition, lenders can be subject to lender liability claims for actions taken by them where they become too involved in the borrower’s business or exercise control over the borrower. It is possible that we could become subject to a lender’s liability claim, including as a result of actions taken in rendering significant managerial assistance.

We generally do not control our portfolio companies.

We do not have an expectation to control the decision making in our portfolio companies, even though we may have a board seat or board observation rights. Because of this, we are subject to the risk that our portfolio companies will make business decisions with which we disagree or will incur risks or otherwise act in ways that do not maximize their value and serve our interests as minority debt and equity holders. Due to the lack of liquidity in our investments in these private companies, we may not be able to dispose of our investment in these portfolio companies as freely as we would like or at a valuation that we believe is appropriate. As a result, a portfolio company may make decisions that could decrease the value of our portfolio holdings.

We typically are a minority shareholder in our portfolio companies in which we have made equity investments.

In connection with equity investments, we typically invest as a minority shareholder in our portfolio companies. As a minority shareholder, we are unable to require the company to seek or entertain liquidity events as a way to exit our investments. This may cause us to hold equity investments longer than planned or to seek a sale that may not reflect the full value of our equity investment.

We may not have the funds or ability to make follow-on investments in our portfolio companies.

We may not have the funds or ability to make additional investments in our portfolio companies. After our initial investment in a company, we may be asked to participate in another round of financing by the company. There is no assurance that we will make, have sufficient funds to make or be permitted to make under the 1940 Act, these follow-on investments. Any decision to not make an additional investment in a portfolio company may have a negative impact on the portfolio company in need of the capital and have a negative impact on our investment in the company.

Risks related to our Indebtedness

We borrow money, which magnifies the potential for loss on amounts invested and increases the risk of investing with us.

Leverage is generally considered a speculative investment technique, and we intend to continue to borrow money as part of our business plan. The use of leverage magnifies the potential for gain or loss on amounts invested and, therefore, increases the risks associated with investing in us. Lenders of senior debt securities, such as under our Credit Facility, have fixed dollar claims on our assets that are superior to the claims of our shareholders.

We have outstanding existing indebtedness and, subject to the limitations imposed under our Credit Agreement, may in the future borrow additional money under our Credit Facility with M&T Bank, as lender, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing with us. Our ability to service our existing and potential future debt depends largely on our financial performance, which is impacted by the financial performance of our portfolio companies, and is subject to prevailing economic conditions and competitive pressures.

If the fair value of our consolidated assets decreases while we have debt outstanding, leveraging would cause our NAV to decline more sharply than it otherwise would have had we not leveraged. In addition, if the fair value of our consolidated assets declines substantially, we may fail to maintain the asset coverage ratios imposed upon us by the 1940 Act or our Lender. Similarly,

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any decrease in our consolidated income while we have debt outstanding would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to pay distributions to shareholders and the price of our common stock.

On January 24, 2024, the Board, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the Board, approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Small Business Credit Availability Act (“SBCAA”). Therefore, the Company’s asset coverage requirements for senior securities will automatically be changed from 200% to 150%, effective January 24, 2025. As a result, if we comply with certain disclosure requirements, we will be able to incur additional indebtedness, which may increase the risk of investing in us.

As of December 31, 2023, we had $16.25 million in principal amount of outstanding indebtedness under our Credit Facility, which had an annualized interest cost of 8.72%. For us to cover these annualized interest payments on indebtedness, we must achieve annual returns on our investments of at least 8.72%. Since we pay interest at a floating rate on our Credit Facility, an increase in interest rates will generally increase our borrowing costs. We expect that our annualized interest cost and returns required to cover interest will increase if we issue additional debt securities.

In order to assist investors in understanding the effects of leverage, the following table illustrates the effect of leverage on returns from an investment in our common stock assuming our asset coverage equals (i) our actual asset coverage as of December 31, 2023, (ii) 200% asset coverage as of December 31, 2023, and (iii) 150% asset coverage as of December 31, 2023, at various annual returns, net of expenses. Leverage generally magnifies the return of shareholders when the portfolio return is positive and magnifies their losses when the portfolio return is negative. Actual returns may be greater or less than those appearing in the table. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing below.

Effects of Leverage Based on Actual Amount of Borrowings Incurred by us as of December 31, 2023

 

 

 

Assumed Return on Our Portfolio (net of expenses) (1)

 

 

 

-10%

 

 

-5%

 

 

0%

 

 

5%

 

 

10%

 

 

15%

 

Corresponding return to a shareholder assuming actual asset coverage as of December 31, 2023 (2)

 

 

-15.7

%

 

 

-9.0

%

 

 

-2.3

%

 

 

4.3

%

 

 

11.0

%

 

 

17.7

%

Corresponding return to a shareholder assuming 200% asset coverage as of December 31, 2023 (3)

 

 

-28.7

%

 

 

-18.7

%

 

 

-8.7

%

 

 

1.3

%

 

 

11.3

%

 

 

21.3

%

Corresponding return to a shareholder assuming 150% asset coverage as of December 31, 2023 (4)

 

 

-47.4

%

 

 

-32.4

%

 

 

-17.4

%

 

 

-2.4

%

 

 

12.6

%

 

 

27.6

%

 

(1) The assumed portfolio return is required by SEC regulations and is not a prediction of, and does not represent, our projected or actual performance. Actual returns may be greater or less than those appearing in the table. Pursuant to SEC regulations, this table is calculated as of December 31, 2023. As a result, it has not been updated to take into account any changes in assets or leverage since December 31, 2023.

(2) In order to compute the “Corresponding return to a shareholder assuming actual asset coverage as of December 31, 2023,” the “Assumed Return on Our Portfolio” is multiplied by the total value of our assets at December 31, 2023 to obtain an assumed return to us. From this amount, the interest expense (calculated by multiplying the weighted average stated interest rate of 8.72% by the approximately $16.25 million of principal debt outstanding as of December 31, 2023) is subtracted to determine the return available to shareholders. The return available to shareholders is then divided by the total value of our net assets as of December 31, 2023 to determine the “Corresponding return to a shareholder assuming actual asset coverage as of December 31, 2023.”

(3) In order to compute the “Corresponding return to a shareholder assuming 200% asset coverage as of December 31, 2023,” the “Assumed Return on Our Portfolio” is multiplied by the total value of our assets at December 31, 2023 to obtain an assumed return to us. From this amount, the interest expense (calculated by multiplying the weighted average stated interest rate of 8.72% by the approximately $41 million of principal debt outstanding, assuming 200% asset coverage) is subtracted to determine the return available to shareholders. The return available to shareholders is then divided by the total value of our net assets as of December 31, 2023, assuming 200% asset coverage to determine the “Corresponding return to a shareholder assuming 200% asset coverage as of December 31, 2023.”

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(4) In order to compute the “Corresponding return to a shareholder assuming 150% asset coverage as of December 31, 2023,” the “Assumed Return on Our Portfolio” is multiplied by the total value of our assets at December 31, 2023 to obtain an assumed return to us. From this amount, the interest expense (calculated by multiplying the weighted average stated interest rate of 8.72% by the approximately $54 million of principal debt outstanding, assuming 150% asset coverage) is subtracted to determine the return available to shareholders. The return available to shareholders is then divided by the total value of our net assets as of December 31, 2023, assuming 150% asset coverage to determine the “Corresponding return to a shareholder assuming 150% asset coverage as of December 31, 2023.”

Because we often borrow money to make our investments, if market interest rates continue to increase, our cost of capital under our Credit Facility is likely to also increase, which could reduce our net investment income.

Because we often borrow money to make investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds under our Credit Facility (which is variable rate indebtedness) to make an investment and the rate at which we invest those funds (which, with respect to our debt investments, is fixed rate indebtedness). When interest rates increase, our debt service obligations under our Credit Facility increase even though the amount borrowed remains the same. As a result, an increase in market interest rates, as has occurred in the recent past, may have an adverse effect on our net investment income in the event we use debt to finance our investments and those debt investments carry a fixed interest rate. In periods of rising interest rates, our cost of funds would increase with respect to amounts borrowed under our Credit Facility, but the interest income received from our portfolio companies under our fixed interest rate debt investments will remain constant, which has reduced, and could in the future continue to reduce, our net investment income.

Legislation allows us to incur additional leverage.

Under the 1940 Act, a BDC generally is not permitted to incur borrowings, issue debt securities or issue preferred stock unless immediately after the borrowing or issuance the ratio of total assets (less total liabilities other than indebtedness) to total indebtedness plus preferred stock is at least 200%. However, under the SBCAA, which became law in March 2018, BDCs have the ability to elect to become subject to a lower asset coverage requirement of 150%, subject to the receipt of the requisite board or shareholder approvals under the SBCAA and satisfaction of certain other conditions.

 

On January 24, 2024, the Board, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the Board, approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the SBCAA. Therefore, the Company’s asset coverage requirements for senior securities will automatically be changed from 200% to 150%, effective January 24, 2025. Pursuant to Section 61(a) of the 1940 Act, as amended by the SBCAA, we will be permitted to potentially increase our maximum debt-to-equity ratio from an effective level of one-to-one to two-to-one.

 

As a result, you may face increased investment risk. We may not be able to implement our strategy to utilize additional leverage successfully.

Provisions in our Credit Facility or any other future borrowing facility limit our discretion in operating our business.

The Credit Facility is, and any future borrowing facility may be, backed by all of our portfolio company investments on which the lenders will or, in the case of a future facility, may have a security interest. We expect that any security interests we grant will be set forth in a pledge and security agreement and evidenced by the filing of financing statements by the agent for the lenders. If we were to default under the terms of any debt instrument, including under the Credit Facility, the agent for the lenders would be able to assume control of the timing of disposition of any or all of our assets securing such debt, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, any security interests as well as negative covenants under the Credit Facility or any other borrowing facility may limit our ability to create liens on assets to secure additional debt and may make it difficult for us to restructure or refinance indebtedness at or prior to maturity or obtain additional debt or equity financing. In addition, if our borrowing base under the Credit Facility or any other borrowing facility were to decrease, we would be required to secure additional assets in an amount equal to any borrowing base deficiency. In the event that all of our assets are secured at the time of such a borrowing base deficiency, we could be required to repay advances under the Credit Facility or any other borrowing facility, which could have a material adverse impact on our ability to fund future investments and to make distributions to shareholders.

An event of default under the Credit Facility or any other borrowing fa