10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2024

☐ 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.)

14 Lafayette Square, Suite 1405, Buffalo, NY		14203
(Address of Principal executive offices)		(Zip Code)

(716) 853-0802

(Registrant’s telephone number, including area code)

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

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, indicate by check mark if the registrant has elected not to use the 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 is a shell company (as defined in Rule 12b-2 of the Act). Yes  No ☑

As of November 6, 2024, there were 2,581,021 shares of the registrant’s common stock outstanding.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


	September 30, 2024 (Unaudited)			December 31, 2023
ASSETS
Investments at fair value:
Control investments (cost of $6,043,779 and $5,272,770, respectively)	$	4,919,969		$	4,148,960
Affiliate investments (cost of $39,484,404 and $45,720,974, respectively)		50,859,581			53,499,372
Non-Control/Non-Affiliate investments (cost of $21,524,089 and $17,371,862, respectively)		19,256,017			19,477,380
Total investments, at fair value (cost of $67,052,272 and $68,365,606, respectively)		75,035,567			77,125,712
Cash		3,352,734			3,295,321
Interest receivable		408,247			244,600
Prepaid income taxes		185,602			127,869
Deferred tax asset, net		367,765			39,179
Other assets		448,204			189,301
Total assets	$	79,798,119		$	81,021,982
LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS)
Liabilities:
Due to investment adviser	$	487,483		$	979,297
Accounts payable and accrued expenses		104,381			145,516
Line of credit (see Note 6)		3,900,000			16,250,000
Capital gains incentive fees		4,346,000			2,279,700
Deferred revenue		513,619			552,256
Total liabilities		9,351,483			20,206,769
Commitments and contingencies (see Note 5)
Stockholders’ equity (net assets):
Common stock, $0.10 par; shares authorized 100,000,000; shares issued: 2,648,916; shares outstanding: 2,581,021 at 9/30/24 and 12/31/23		264,892			264,892
Capital in excess of par value		55,801,170			55,801,170
Treasury stock, at cost: 67,895 shares at 9/30/24 and 12/31/23		(1,566,605	)		(1,566,605	)
Total distributable earnings		15,947,179			6,315,756
Total stockholders’ equity (net assets) (per share – 9/30/24: $27.29; 12/31/23: $23.56)		70,446,636			60,815,213
Total liabilities and stockholders’ equity (net assets)	$	79,798,119		$	81,021,982

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended September 30, 2024			Three months ended September 30, 2023			Nine months ended September 30, 2024			Nine months ended September 30, 2023
Investment income:
Interest from portfolio companies:
Control investments	$	164,167		$	175,962		$	550,535		$	506,800
Affiliate investments		1,164,525			1,002,553			3,522,726			2,731,575
Non-Control/Non-Affiliate investments		616,903			357,162			1,681,209			1,067,745
Total interest from portfolio companies		1,945,595			1,535,677			5,754,470			4,306,120
Interest from other investments:
Non-Control/Non-Affiliate investments		113			456			2,171			692
Total interest from other investments		113			456			2,171			692
Dividend and other investment income:
Affiliate investments		13,125			13,126			39,375			419,951
Non-Control/Non-Affiliate investments		44,000			141,290			242,760			401,805
Total dividend and other investment income		57,125			154,416			282,135			821,756
Fee income:
Control investments		4,515			4,515			13,547			12,726
Affiliate investments		202,834			40,072			331,369			246,816
Non-Control/Non-Affiliate investments		8,272			5,978			38,130			19,934
Total fee income		215,621			50,565			383,046			279,476
Total investment income		2,218,454			1,741,114			6,421,822			5,408,044
Expenses:
Base management fee (see Note 8)		309,265			268,609			934,532			769,869
Income based incentive fees (see Note 8)		178,218			—			178,218			—
Capital gains incentive fees (see Note 8)		313,000			(41,300	)		2,066,300			740,700
Interest expense		245,006			290,522			1,028,198			707,834
Professional fees		113,168			120,828			436,935			392,110
Stockholders and office operating		57,869			57,097			209,564			206,481
Directors' fees		66,550			66,550			196,950			197,791
Administrative fees		40,000			37,250			118,167			111,750
Insurance		10,467			10,380			33,891			33,720
Corporate development		387			—			10,813			4,267
Total expenses		1,333,930			809,936			5,213,568			3,164,522
Net investment income before income taxes:		884,524			931,178			1,208,254			2,243,522
Income tax (benefit) expense, including excise tax expense		(2,511	)		132,595			(1,171	)		237,393
Net investment income		887,035			798,583			1,209,425			2,006,129
Net realized gain (loss) on sales and dispositions of investments:
Affiliate investments		6,980,728			—			6,148,837			2,596,094
Non-Control/Non-Affiliate investments		249,354			(2,802,731	)		4,959,445			(1,527,190	)
Net realized gain (loss) on sales and dispositions of investments, before income taxes		7,230,082			(2,802,731	)		11,108,282			1,068,904
Income tax expense		—			—			—			338,158
Net realized gain (loss) on sales and dispositions of investments		7,230,082			(2,802,731	)		11,108,282			730,746
Net change in unrealized appreciation/depreciation on investments:
Affiliate investments		(5,153,166	)		—			3,596,779			(886,698	)
Non-Control/Non-Affiliate investments		(512,375	)		2,599,652			(4,373,590	)		3,521,053
Change in unrealized appreciation/depreciation before income taxes		(5,665,541	)		2,599,652			(776,811	)		2,634,355
Deferred income tax benefit		(184,940	)		—			(232,774	)		(66,441	)
Net change in unrealized appreciation/depreciation on investments		(5,480,601	)		2,599,652			(544,037	)		2,700,796
Net realized and unrealized gain (loss) on investments		1,749,481			(203,079	)		10,564,245			3,431,542
Net increase in net assets from operations	$	2,636,516		$	595,504		$	11,773,670		$	5,437,671
Weighted average shares outstanding		2,581,021			2,581,021			2,581,021			2,581,021
Basic and diluted net increase in net assets from operations per share	$	1.02		$	0.23		$	4.56		$	2.11

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)


	Three months ended September 30, 2024			Three months ended September 30, 2023			Nine months ended September 30, 2024		Nine months ended September 30, 2023
Net assets at beginning of period	$	68,558,616		$	61,402,028		$	60,815,213	$	57,721,320
Net investment income		887,035			798,583			1,209,425		2,006,129
Net realized gain (loss) on sales and dispositions of investments		7,230,082			(2,802,731	)		11,108,282		730,746
Net change in unrealized appreciation/depreciation on investments		(5,480,601	)		2,599,652			(


PART I. – FINANCIAL INFORMATION
Item 1.	Financial Statements and Supplementary Data	1
	Consolidated Statements of Financial Position as of September 30, 2024 (Unaudited) and December 31, 2023	1
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited)	2
	Consolidated Statements of Changes in Net Assets for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited)	3
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 (Unaudited)	4
	Consolidated Schedule of Portfolio Investments as of September 30, 2024 (Unaudited)	5
	Consolidated Schedule of Portfolio Investments as of December 31, 2023	12
	Notes to the Consolidated Financial Statements (Unaudited)	20
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	48
Item 4.	Controls and Procedures	48
PART II. – OTHER INFORMATION
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults upon Senior Securities	50
Item 4.	Mine Safety Disclosures	50
Item 5.	Other Information	50
Item 6.	Exhibits	51