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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 June 30, 2021

☐	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)

(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.

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 August 9, 2021, there were 2,582,169 shares of the registrant’s common stock outstanding.

RAND CAPITAL CORPORATION

TABLE OF CONTENTS FOR FORM 10-Q

PART I. – FINANCIAL INFORMATION



Item 1.	Financial Statements and Supplementary Data	1

	Consolidated Statements of Financial Position as of June 30, 2021 (Unaudited) and December 31, 2020	1

	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)	2

	Consolidated Statements of Changes in Net Assets for the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)	4

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 (Unaudited)	5

	Consolidated Schedule of Portfolio Investments as of June 30, 2021 (Unaudited)	6

	Consolidated Schedule of Portfolio Investments as of December 31, 2020	14

	Notes to the Consolidated Financial Statements (Unaudited)	22

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	54

Item 4.	Controls and Procedures	54

PART II. – OTHER INFORMATION

Item 1.	Legal Proceedings	55

Item 1A.	Risk Factors	55

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55

Item 3.	Defaults upon Senior Securities	55

Item 4.	Mine Safety Disclosures	55

Item 5.	Other Information	55

Item 6.	Exhibits	56

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


	June 30, 2021 (Unaudited)			December 31, 2020
ASSETS
Investments at fair value:
Control investments (cost of $1,753,590 and $0, respectively)	$	602,569		$	—
Affiliate investments (cost of $21,817,833 and $14,835,885, respectively)		20,873,147			13,891,199
Non-Control/Non-Affiliate investments (cost of $23,525,430 and $25,884,428, respectively)		38,331,679			26,157,302

Total investments, at fair value (cost of $47,096,853 and $40,720,313, respectively)		59,807,395			40,048,501
Cash and cash equivalents		12,944,885			20,365,415
Interest receivable (net of allowance of $15,000)		287,702			258,186
Prepaid income taxes		215,883			220,740
Other assets		182,563			74,100

Total assets	$	73,438,428		$	60,966,942

LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS)
Liabilities:
Debentures guaranteed by the SBA (net of debt issuance costs)	$	10,843,425		$	10,824,587
Dividend payable		—			3,434,117
Accounts payable and accrued expenses		161,093			171,373
Due to investment adviser		212,907			156,999
Capital gains incentive fees		3,660,000			—
Deferred revenue		332,126			153,895
Deferred taxes		109,056			121,141

Total liabilities		15,318,607			14,862,112
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: 2,582,169		264,892			264,892
Capital in excess of par value		52,003,545			52,003,545
Treasury stock, at cost: 66,747 shares at 6/30/21 and 12/31/20		(1,545,834	)		(1,545,834	)
Total distributable earnings		7,397,218			(4,617,773	)

Total stockholders’ equity (net assets) (per share – 6/30/21: $22.51, 12/31/20: $17.86)		58,119,821			46,104,830

Total liabilities and stockholders’ equity (net assets)	$	73,438,428		$	60,966,942

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended June 30, 2021			Three months ended June 30, 2020		Six months ended June 30, 2021			Six months ended June 30, 2020
Investment income:
Interest from portfolio companies:
Control investment	$	2,867		$	—	$	2,867		$	—
Affiliate investments		295,085			170,262		614,501			309,108
Non-Control/Non-Affiliate investments		344,254			400,424		735,600			797,279

Total interest from portfolio companies		642,206			570,686		1,352,968			1,106,387

Interest from other investments:
Non-Control/Non-Affiliate investments		243			2,754		12,870			86,004

Total interest from other investments		243			2,754		12,870			86,004

Dividend and other investment income:
Affiliate investments		13,125			13,125		108,051			26,250
Non-Control/Non-Affiliate investments		123,922			81,313		275,665			81,313

Total dividend and other investment income		137,047			94,438		383,716			107,563

Fee income:
Affiliate investments		24,562			4,167		63,918			5,417
Non-Control/Non-Affiliate investments		6,979			2,500		13,957			5,000

Total fee income		31,541			6,667		77,875			10,417

Total investment income		811,037			674,545		1,827,429			1,310,371

Expenses:
Base management fee (see Note 8)		212,907			141,386		388,516			281,763
Capital gains incentive fees (see Note 8)		1,060,000			—		3,660,000			—
Interest on SBA obligations		104,190			104,190		208,380			208,380
Professional fees		123,991			77,917		284,124			257,036
Stockholders and office operating		69,661			116,299		141,083			167,844
Directors’ fees		38,900			28,375		75,400			56,750
Insurance		9,380			7,400		19,707			18,068
Corporate development		821			132		8,303			2,006
Other operating		108			107		108			465

Total expenses		1,619,958			475,806		4,785,621			992,312

Net investment (loss) income before income taxes		(808,921	)		198,739		(2,958,192	)		318,059
Income tax expense (benefit)		1,966			—		19,723			(419,101	)

Net investment (loss) income		(810,887	)		198,739		(2,977,915	)		737,160

Net realized gain on sales and dispositions of investments:
Control investments		—			—		—			—
Affiliate investments		—			—		135,430			—
Non-Control/Non-Affiliate investments		1,817,350			18,595		1,992,675			2,412,046
Income tax benefit		—			—		—			—


Net realized gain on sales and dispositions of investments		1,817,350		18,595			2,128,105		2,412,046
Net change in unrealized appreciation/ depreciation on investments:
Affiliate investments		—		(5,613	)		—		(515,804	)
Non-Control/Non-Affiliate investments		3,495,322		211,850			13,382,354		(6,282	)

Change in unrealized appreciation/ depreciation before income taxes		3,495,322		206,237			13,382,354		(522,086	)
Deferred income tax expense		951		—			951		1,773,412

Net change in unrealized appreciation/ depreciation on investments		3,494,371		206,237			13,381,403		(2,295,498	)

Net realized and unrealized gain on investments		5,311,721		224,832			15,509,508		116,548

Net increase in net assets from operations	$	4,500,834	$	423,571		$	12,531,593	$	853,708

Weighted average shares outstanding		2,582,169		2,103,093			2,582,169		1,950,058
Basic and diluted net increase in net assets from operations per share	$	1.74	$	0.20		$	4.85	$	0.44

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)


	Three months ended June 30, 2021			Three months ended June 30, 2020			Six months ended June 30, 2021			Six months ended June 30, 2020
Net assets at beginning of period	$	53,877,204		$	54,058,653		$	46,104,830		$	53,628,516
Net investment (loss) income		(810,887	)		198,739			(2,977,915	)		737,160
Net realized gain on sales and dispositions of investments		1,817,350			18,595			2,128,105			2,412,046
Net change in unrealized appreciation/ depreciation on investments		3,494,371			206,237			13,381,403			(2,295,498	)

Net increase in net assets from operations		4,500,834			423,571			12,531,593			853,708

Purchase of treasury shares		—			(14,304	)		—			(14,304	)
Declaration of dividend		(258,217	)		(4,756,606	)		(516,602	)		(4,756,606	)

Net assets at end of period	$	58,119,821		$	49,711,314		$	58,119,821		$	49,711,314

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six months ended June 30, 2021			Six months ended June 30, 2020
Cash flows from operating activities:
Net increase in net assets from operations	$	12,531,593		$	853,708
Adjustments to reconcile net increase in net assets to net cash (used in) provided by operating activities:
Investments in portfolio companies		(11,273,836	)		(4,047,503	)
Proceeds from sale of portfolio investments		3,491,060			4,557,542
Proceeds from loan repayments		3,750,430			—
Net realized gain on sales and dispositions of portfolio investments		(2,128,105	)		(2,412,046	)
Change in unrealized (appreciation) depreciation on investments before income taxes		(13,382,354	)		522,086
Deferred income tax (benefit) expense		(12,085	)		1,427,175
Depreciation and amortization		18,838			18,837
Original issue discount amortization		(99,671	)		(29,303	)
Non-cash conversion of debenture interest		(116,418	)		(175,596	)
Changes in operating assets and liabilities:
Increase in interest receivable		(29,516	)		(228,038	)
(Increase) decrease in other assets		(108,463	)		205,965
Decrease in prepaid income taxes		4,857			308,025
Decrease in accounts payable and accrued expenses		(10,280	)		(49,718	)
Increase in due to investment adviser		55,908			91,935
Increase in capital gains incentive fees payable		3,660,000			—
Decrease in bonus payable		—			(80,000	)
Increase in deferred revenue		178,230			49,585

Total adjustments		(16,001,405	)		158,946

Net cash (used in) provided by operating activities		(3,469,812	)		1,012,654

Cash flows from financing activities:
Payment of cash dividend		(3,950,718	)		(4,756,606	)
Purchase of treasury shares		—			(14,304	)

Net cash used in financing activities		(3,950,718	)		(4,770,910	)

Net decrease in cash and cash equivalents		(7,420,530	)		(3,758,256	)
Cash and cash equivalents:
Beginning of period		20,365,415			25,815,720

End of period	$	12,944,885		$	22,057,464

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2021

(Unaudited)


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquired		(c) Equity			Cost		(d)(f) Fair Value		Percent of Net Assets
Non-Control/Non-Affiliate Investments – 66.0% of net assets: (j)

ACV Auctions, Inc. NASDAQ: ACVA (e)(g)(n)(o)	442,935 Restricted Class B		8/12/16		<1	%						24.3	%
Buffalo, NY. Live mobile wholesale auctions for new and used car dealers. (Software) www.acvauctions.com	Common stock valued at $23.61 per share. Restricted until September 20, 2021.						$	122,250	$	10,457,99
	147,645 Class A Common
	stock valued at $24.85.							40,750		3,669,470

	Total ACV							163,000		14,127,461


Advantage 24/7 LLC (g) (h)	$140,000 Term Note at 7% due		1/1/19		0	%						0.1	%
Williamsville, NY. Marketing program for wine and	January 1, 2022.							40,000		40,000
spirits dealers. (Marketing Company) www.advantage24-7.com

Ares Capital Corporation NASDAQ: ARCC (n)	27,000 shares.		3/16/20		<1	%		343,460		529,560		0.9	%
New York, NY.
(BDC Investment Fund)

Barings BDC, Inc. NYSE: BBDC (n)	40,000 shares.		8/13/20		<1	%		333,352		427,200		0.7	%
New York, NY.
(BDC Investment Fund)

Caitec, Inc.	$1,750,000 Subordinated		11/6/20		2	%						6.6	%
Halethorpe, MD. Pet product manufacturer and	Secured Promissory Note at
distributor. (Consumer Goods)	12% (+2% PIK) due June 1,
www.caitec.com	2026.							1,773,076		1,773,076
	150 Class A Units.		11/6/20		2	%		150,000		150,000
	(g) $1,750,000 Subordinated		11/6/20
	Secured Promissory Note at
	12% (+2% PIK) due June 1,
	2026.							1,773,076		1,773,076
	(g) 150 Class A Units.		11/6/20					150,000		150,000

	Total Caitec							3,846,152		3,846,152


Centivo Corporation (e)(g)	190,967 Series A-1 Preferred.		3/19/18		<1	%		200,000		320,042		2.4	%
New York, NY. Tech-enabled health solutions	337,808 Series A-2 Preferred.		3/19/18					101,342		566,132
company that helps self-insured employers and	298,347 Series B Preferred.		11/9/20					500,000		500,000

their employees save money and have a better	Total Centivo							801,342		1,386,174

experience.
(Health Care) www.centivo.com

First Wave Technologies, Inc. (e)(g)	670,443.2 Class A Common.		4/19/12		2	%		661,563		33,000		0.1	%
Batavia, NY. Sells First Crush automated pill crusher that crushes and grinds pills for nursing homes and medical institutions. (Health Care) www.firstwavetechnologies.com

FS KKR Capital Corp. NYSE: FSK (n)	54,000 shares.		3/16/20		<1	%		849,438		1,153,980		2.0	%
Philadelphia, PA.
(BDC Investment Fund)

Golub Capital BDC, Inc. NASDAQ: GBDC (n)	31,250 shares.		3/16/20		<1	%		403,910		484,688		0.8	%
New York, NY.
(BDC Investment Fund)

GoNoodle, Inc. (g)(l)	$1,500,000 Secured Note at		11/1/19		<1	%						2.6	%
Nashville, TN. Student engagement education	12% (1% PIK) due September
software providing core aligned physical activity	30, 2024.							1,525,136		1,525,136
breaks. (Software)	Warrant for 47,324 Series C		3/1/15
www.gonoodle.com	Preferred.							25		25
	Warrant for 21,948 Series D Preferred.		11/1/19					38		38

	Total GoNoodle							1,525,199		1,525,199

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2021 (Continued)

(Unaudited)


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquired	(c) Equity	Cost		(d)(f) Fair Value		Percent of Net Assets
HDI Acquisition LLC (Hilton Displays) (l)	$1,245,119 Term Loan at 12%	11/8/19	0%						2.2	%
Greenville, NC. HDI is engaged in manufacturing,	(+2% PIK) due June 20, 2023.				1,287,995		1,287,995
installation and maintenance of signage and brands.
(Manufacturing) www.hiltondisplays.com

Lumious (Tech 2000, Inc.) (g)	$850,000 Replacement Term Note	11/16/18	0%						1.5	%
Herndon, VA. Develops and delivers IT	at 14% due November 15, 2023.				860,777		860,777
training.
(Software) www.t2000inc.com

Mattison Avenue Holdings LLC (l)	$1,794,944.92 Third Amended,	6/23/21	0%						3.1	%
Dallas, TX. Provider of upscale salon spaces for	Restated and Consolidated
lease. (Professional Services)	Promissory Note at 14% (2% PIK)
www.mattisonsalonsuites.com	due June 9, 2022.				1,800,906		1,800,906

Mercantile Adjustment Bureau, LLC (g)	$1,199,039 Subordinated Secured	10/22/12	4%						0.9	%
Williamsville, NY. Full-service accounts	Note at 13% (8% effective August
receivable management and collections	2020) due January 31, 2022.				1,199,040		500,000
company. (Contact Center)	(e) $150,000 Subordinated	6/30/14
www.mercantilesolutions.com	Debenture at 8% due January 31,
	2022.				150,000		—
	Warrant for 3.29% Membership	10/22/12
	Interests. Option for 1.5%
	Membership Interests.				97,625		—

	Total Mercantile				1,446,665		500,000



Open Exchange, Inc.(e) (g)	397,899 Series C Preferred.	11/13/13	3%		1,193,697		2,785,000		9.6	%
(Formerly KnowledgeVision Systems, Inc.)	397,899 Common.	10/22/19			208,243		2,785,000

Lincoln, MA. Online presentation and training	Total Open Exchange				1,401,940		5,570,000

software. (Software) www.openexc.com

Owl Rock Capital Corporation NYSE:ORRC (n)	30,000 shares.	3/16/20	<1%		347,067		433,100		0.7	%
New York, NY.
(BDC Investment Fund)

PennantPark Investment Corporation	195,000 shares.	8/13/20	<1%		892,212		1,300,000		2.2	%
NASDAQ: PNNT (n)
New York, NY.
(BDC Investment Fund)

PostProcess Technologies, Inc. (e)(g)	360,002 Series A1 Preferred.	11/1/19	<1%		348,875		348,875		0.6	%
Buffalo, NY. Provides innovative solutions for the post-processing of additive manufactured 3D parts. (Manufacturing) www.postprocess.com

Rheonix, Inc. (e)	9,676 Common.	10/29/09	4%		—		—		1.2	%
Ithaca, NY. Developer of fully automated	(g) 1,839,422 Series A Preferred.	12/12/13			2,099,999		—
microfluidic based molecular assay and diagnostic	(g) 50,593 Common.	10/24/09			—		—
testing devices. (Health Care)	(g) 589,420 Series B Preferred.	9/29/15			702,732		702,732

www.rheonix.com	Total Rheonix				2,802,731		702,732


SocialFlow, Inc. (e)(g)	1,049,538 Series B Preferred.	4/5/13	4%		500,000		92,425		0.6	%
New York, NY. Provides instant analysis of	1,204,819 Series B-1 Preferred.	4/8/14			750,000		138,637
social networks using a proprietary, predictive	717,772 Series C Preferred.	6/26/15			500,000		92,425

analytic algorithm to optimize advertising and	Total Social Flow				1,750,000		323,487

publishing. (Software) www.socialflow.com

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2021 (Continued)

(Unaudited)


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquire d	(c) Equity	Cost		(d)(f) Fair Value		Percent of Net Assets
Somerset Gas Transmission Company,	26.5337 Units.	4/1/05	3%		719,097		500,000		0.9	%
LLC (e)(m)
Columbus, OH. Natural gas transportation.
(Oil and Gas) www.somersetgas.com

TCG BDC, Inc. NASDAQ: CGBD (n)	86,000 shares.	8/13/20	<1%		899,749		1,150,393		2.0	%
New York, NY.
(BDC Investment Fund)

Subtotal Non-Control/Non-Affiliate
Investments				$	23,525,430	$	38,331,679


Affiliate Investments – 35.9% of net assets (k)

BMP Swanson Holdco, LLC (g)(m)	$1,600,000 Term Note at 12% due	3/4/21	9%						3.2	%
Plano, TX. Designs, installs and maintains a	September 4, 2026.			$	1,600,000	$	1,600,000
variety of fire protection systems.	Preferred Membership Interest for	3/4/21
(Professional Services)	9.29%.				233,333		233,333

	Total BMP Swanson				1,833,333		1,833,333


Carolina Skiff LLC (g)(m)	6.0825% Class A Common	1/30/04	7%						2.6	%
Waycross, GA. Manufacturer of ocean fishing	Membership Interest.				15,000		1,500,000
and pleasure boats. (Manufacturing) www.carolinaskiff.com

Filterworks Acquisition USA, LLC (l)(m)	$2,283,702 Term Note at 12% (+2%	11/8/19	9%						5.1	%
Deerfield Beach, FL. Provides spray booth	PIK) due December 4, 2023.				2,373,519		2,373,519
equipment, frame repair machines and paint booth	562.5 Class A Units.				562,500		562,500

filter services for collision shops. (Automotive)	Total Filterworks				2,936,019		2,936,019

www.filterworksusa.com

ITA Acquisition, LLC (m)	$1,900,000 Term Note at 12% (+2%	6/22/21	24%						6.7	%
Ormond Beach, FL. Blind and shade	PIK) due June 22, 2026.				1,900,000		1,900,000
manufacturing. (Manufacturing)	(g) $1,500,000 Term Note at 12%	6/22/21
www.itainc.com	(+2% PIK) due June 22, 2026.				1,500,000		1,500,000
	(g) 500 Class A Preferred Units and	6/22/21
	500 Class B Common Units.				500,000		500,000

	Total ITA				3,900,000		3,900,000


Knoa Software, Inc. (e)(g)	973,533 Series A-1 Convertible	11/20/12	7%						1.7	%
New York, NY. End user experience	Preferred.				750,000		544,860
management and performance (EMP)	1,876,922 Series B Preferred.	6/9/14			479,155		479,155

solutions utilizing enterprise applications.	Total Knoa				1,229,155		1,024,015

(Software) www.knoa.com

Mezmeriz, Inc. (e)(g)	1,554,565 Series Seed Preferred.	5/14/15	12%		742,850		-		0.0	%
Ithaca, NY. Technology company developing novel reality capture tools for 3D mapping, reality modeling, object tracking and classification. (Electronics Developer) www.mezmeriz.com

Microcision LLC (g)	Membership Interest Purchase	1/10/20	5%						0.2	%
Pennsauken Township, NJ. Manufacturer of	Warrant for 5%.				110,000		95,000
precision machined medical implants,
components and assemblies.
(Manufacturing) www.microcision.com

New Monarch Machine Tool, Inc. (e)(g)	22.84 Common.	1/17/08	15%		22,841		22,841		0.0	%
Cortland, NY. Manufactures and services vertical/horizontal machining centers.
(Manufacturing) www.monarchmt.com

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2021 (Continued)

(Unaudited)


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquired	(c) Equity	Cost		(d)(f) Fair Value			Percent of Net Assets
OnCore Golf Technology, Inc. (e)(g)	300,483 Preferred AA.	11/30/18	5%		752,712		300,000			0.5	%
Buffalo, NY. Patented and proprietary golf balls utilizing technology and innovation.
(Consumer Product) www.oncoregolf.com

SciAps, Inc. (e)(g)	187,500 Series A Preferred.	7/12/13	6%		1,500,000		—			2.9	%
Woburn, MA. Instrumentation company	274,299 Series A1 Convertible	4/4/14
producing portable analytical devices using XRF,	Preferred.				504,710		—
LIBS and RAMAN spectroscopy to identify	117,371 Series B Convertible	8/31/15
compounds, minerals, and elements.	Preferred.				250,000		—
(Manufacturing)	113,636 Series C Convertible	4/7/16
www.sciaps.com	Preferred.				175,000		—
	369,698 Series C1 Convertible	4/7/16
	Preferred.				399,274		—
	147,059 Series D Convertible	5/9/17
	Preferred.				250,000		250,000
	Warrant to purchase Series D-1	5/9/17
	Preferred.				45,000		—
	$1,500,000 Secured Subordinated	4/23/20
	Promissory Note at 12% due April
	23, 2023.				1,472,500		1,472,500

	Total SciAps				4,596,484		1,722,500

	(i) Interest receivable $213,500.

Seybert’s Billiards Corporation	$1,400,000 Term Note at 12% (+2%	1/19/21	4%							4.9	%
Coldwater, MI. Billiard supplies.	PIK) due January 19, 2026.				1,389,712		1,389,712
(Consumer Product)	Warrant for 4%.	1/19/21			25,000		25,000
www.seyberts.com	(g) $1,400,000 Term Note at 12%	1/19/21
	(+2% PIK) due January 19, 2026.				1,389,712		1,389,712
	Warrant for 4%.	1/19/21			25,000		25,000

	Total Seybert’s				2,829,424		2,829,424


Tilson Technology Management, Inc. (g)	*120,000 Series B Preferred.	1/20/15	9%		600,000		1,950,000			8.1	%
Portland, ME. Provides network deployment	*21,391 Series C Preferred.	9/28/16			200,000		347,604
construction and information system services	*70,176 Series D Preferred.	9/29/17			800,000		1,140,360
management for cellular, fiber optic and wireless	*15,385 Series E Preferred.	3/15/19			500,012		500,012
systems providers. Its affiliated entity, SQF, LLC	211,567 SQF Hold Co. Common.	3/15/19			—		22,036
is a CLEC supporting small cell 5G deployment.	23,077 Series F Preferred.	6/15/20			750,003		750,003

(Professional Services)	Total Tilson				2,850,015		4,710,015

www.tilsontech.com	*2.5% dividend payable quarterly.

Subtotal Affiliate Investments				$	21,817,833	$	20,873,147


Control Investments – 1.0% of net assets (p)

Empire Genomics, Corp. (g)	$444,915.88 Secured Promissory	5/3/21	29%							1.0	%
Buffalo, NY. Molecular diagnostics company	Note at 8% due December 31, 2026.			$	444,915	$	444,915
that offers a comprehensive menu of assay	1,576,499 common shares	5/3/21			1,308,675		157,654

services for diagnosing and guiding patient	Total Empire				1,753,590		602,569

therapeutic treatments. (Health Care) www.empiregenomics.com

Subtotal Control Investments				$	1,753,590	$	602,569

TOTAL INVESTMENTS – 102.9%				$	47,096,853	$	59,807,395
OTHER ASSETS IN EXCESS OF LIABILITIES – (2.9%)						($	1,687,574	)

NET ASSETS – 100%						$	58,119,821

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2021 (Continued)

(Unaudited)

Notes to the Consolidated Schedule of Portfolio Investments

(a) At June 30, 2021, restricted securities represented 85% of the fair value of the investment portfolio. This includes $10,457,991, or 18% of the portfolio, of restricted and currently non-saleable shares of ACV Auctions, Inc. (NASDAQ: ACVA) (“ACV”). Restricted securities are subject to one or more restrictions on resale and are not freely marketable. Type of investment for equity position is in the form of shares unless otherwise noted as units or interests, i.e., preferred shares, common shares.

(b) The Date Acquired column indicates the date on which the Corporation first acquired an investment.

(c) Each equity percentage estimates the Corporation’s ownership interest in the applicable portfolio investment. The estimated ownership is calculated based on the percent of outstanding voting securities held by the Corporation or the potential percentage of voting securities held by the Corporation upon exercise of warrants or conversion of debentures, or other available data. If applicable, the symbol “<1%” indicates that the Corporation holds an equity interest of less than one percent.

(d) The Corporation’s investments are carried at fair value in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures,” which defines fair value and establishes guidelines for measuring fair value. At June 30, 2021, ASC 820 designates 67% of the Corporation’s investments as “Level 3” assets, and also identifies the restricted holdings of ACVA, 18% of investments as Level 2 assets. Under the valuation policy of the Corporation, unrestricted publicly traded securities are valued at the average closing price for these securities for the last three trading days of the reporting period. Restricted securities are subject to restrictions on resale and are valued at fair value as determined by our external investment advisor Rand Capital Management, LLC (“RCM”) and submitted to the Board of Directors for approval. Fair value is considered to be the amount that the Corporation may reasonably expect to receive for portfolio securities when sold on the valuation date. Valuations as of any particular date, however, are not necessarily indicative of amounts which may ultimately be realized as a result of future sales or other dispositions of securities and these favorable or unfavorable differences could be material. Among the factors considered in determining the fair value of restricted securities are the financial condition and operating results, projected operations, and other analytical data relating to the investment. Also considered are the market prices for unrestricted securities of the same class (if applicable) and other matters which may have an impact on the value of the portfolio company (see Note 3. “Investments” to the Consolidated Financial Statements).

(e) These investments are non-income producing. All other investments are income producing. Non-income producing investments have not generated cash payments of interest or dividends including LLC tax-related distributions within the last twelve months or are not expected to do so going forward. If a debt or a preferred equity investment fails to make its most recent payment, then the investment will also be classified as non-income producing.

(f) As of June 30, 2021, the total cost of investment securities was approximately $47.1 million. Net unrealized appreciation was approximately $12.7 million, which was comprised of $23.5 million of unrealized appreciation of investment securities and ($10.8) million of unrealized depreciation of investment securities. At June 30, 2021, the aggregate gross unrealized gain for federal income tax purposes was $10.1 million and the aggregate gross unrealized loss for federal income tax purposes was ($11.3) million. The net unrealized loss for federal income tax purposes was ($1.2) million based on a tax cost of $40.9 million.

(g) Rand Capital SBIC, Inc. investment.

(h) Reduction in cost and value from previously reported balances reflects current principal repayment.

(i) Represents interest due (amounts over $50,000) from investments included as interest receivable on the Corporation’s Consolidated Statements of Financial Position.

(j) Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments.

(k) Affiliate Investments are defined by the Investment Company Act of 1940, as amended (“1940 Act”), as those Non-Control investments in companies in which between 5% and 25% of the voting securities are owned by the Corporation.

(l) Payment in kind (PIK) represents earned interest that is added to the cost basis of the investment and due at maturity. The amount of PIK earned is included in the interest rate detailed in the “Type of Investment” column, unless it has been noted with a (+), in which case the PIK is in addition to the face amount of interest due on the security.

(m) Equity holdings are held in a wholly owned (100%) “blocker corporation” of Rand Capital Corporation or Rand Capital SBIC, Inc. for federal income tax and Regulated Investment Company (RIC) compliance.

(n) Publicly traded company.

(o) On March 24,2021, ACV completed its initial public offering of its Class A common stock. The closing price for ACV’s Class A common stock was $25.63 per share on June 30, 2021. ACV’s Class A common stock had a trading range on Nasdaq between $22.83 to $37.04 for the period April 1 through June 30, 2021. Rand’s ACV holdings consist of 147,645 shares of Class A common stock and 442,935 shares of Class B common stock. The Class A common stock are freely tradable and are valued at $24.85 per share, which is the average closing price of the Class A common stock for the last three trading days of the quarter. The Class B restricted common stock are nonsaleable through September 20, 2021, or earlier if certain conditions are met, and are valued at the average closing price of the Class A common stock for the last three trading days of the quarter and have been discounted due to the transfer restriction and are valued at $23.61 per share.

(p) Control Investments are defined by the 1940 Act as investments in companies in which more than 25% of the voting securities are owned by the Corporation or where greater than 50% of the board representation is maintained.

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2021 (Continued)

(Unaudited)

Investments in and Advances to Affiliates


Company	Type of Investment	January 1, 2021, Fair Value		Net Change in Unrealized Appreciation (Depreciation)		Gross Additions (1)		Gross Reductions (2)			June 30, 2021 Fair Value		Net Realized (Losses) Gains		Amount of Interest/ Dividend / Fee Income (3)
Control
Investments:
Empire Genomics	$444,915.88 Secured Promissory Note at
	8% due December 31, 2026.	$	—	$	—	$	444,915	$	—		$	444,915	$	—	$	2,867
	1,576,499 common shares.		—		—		157,654		—			157,654		—		—

	Total Empire	$	—	$	—	$	602,569	$	—		$	602,569	$	—	$	2,867

	Total Control Investments	$	—	$	—	$	602,569	$	—		$	602,569	$	—	$	2,867

Affiliate
Investments:
BMP Swanson	$1,600,000 Term Note at 12% due
Holdco, LLC	September 4, 2026	$	—	$	—	$	1,600,000	$	—		$	1,600,000	$	—	$	65,156
	Preferred Membership Interest for 9.29%		—		—		233,333		—			233,333		—		—

	Total BMP Swanson		—		—		1,833,333		—			1,833,333		—		65,156

Carolina Skiff LLC	6.0825% Class A Common Membership
	interest.		1,500,000		—		—		—			1,500,000		—		81,801

ClearView Social,	312,500 Series Seed Plus Preferred.		200,000		—		—		(200,000	)		—		135,430		—
Inc.

Filterworks	$2,283,702 Term Note at 12%.		2,349,831		—		23,688		—			2,373,519		—		165,818
Acquisition USA,	562.5 Class A Units.		562,500		—		—		—			562,500		—		—

LLC	Total Filterworks		2,912,331		—		23,688		—			2,936,019		—		165,818


ITA Acquisition	$1,900,000 Term Note at 12% (+2%
	PIK) due June 22, 2026.		—		—		1,900,000		—			1,900,000		—		5,911
	(g) $1,500,000 Term Note at 12% (+2%
	PIK) due June 22, 2026.		—		—		1,500,000					1,500,000		—		4,667
	(g) 500 Class A Preferred Units and 500
	Class B Common Units.		—		—		500,000		—			500,000		—		—

	Total ITA		—		—		3,900,000					3,900,000		—		10,578


Knoa Software, Inc.	973,533 Series A-1 Convertible
	Preferred.		544,860		—		—		—			544,860		—		—
	1,876,922 Series B Preferred.		479,155		—		—		—			479,155		—		—

	Total Knoa		1,024,015		—		—		—			1,024,015		—		—


Mezmeriz, Inc.	1,554,565 Series Seed Preferred.		—		—		—		—			—		—		—
Microcision	$1,500,000 Subordinated Promissory
	Note at 10%.		1,411,997		—		88,003		(1,500,000	)		—		—		126,711
	Membership Interest Purchase Warrant
	for 5%.		95,000		—		—		—			95,000		—		—

	Total Microcision		1,506,997		—		88,003		(1,500,000	)		95,000		—		126,711


New Monarch	22.84 Common.		22,841		—		—		—			22,841		—
Machine Tool, Inc.

OnCore Golf	300,483 Series AA Preferred.		300,000		—		—		—			300,000		—		—
Technology, Inc.

SciAps, Inc.	187,500 Series A Preferred.		—		—		—		—			—		—		—
	274,299 Series A-1 Convertible
	Preferred.		—		—		—		—			—		—		—
	117,371 Series B Convertible Preferred.		—		—		—		—			—		—		—
	113,636 Series C Convertible Preferred.		—		—		—		—			—		—		—
	369,698 Series C-1 Convertible
	Preferred.		—		—		—		—			—		—		—
	147,059 Series D Convertible Preferred.		250,000		—		—		—			250,000		—		—
	Warrant to Purchase Series D-1
	Preferred.		—		—		—					—
	$1,500,000 Subordinated Promissory
	Note at 12%.		1,465,000		—		7,500		—			1,472,500		—		107,500

	Total SciAps		1,715,000		—		7,500		—			1,722,500		—		107,500


Company	Type of Investment	January 1, 2021, Fair Value		Net Change in Unrealized Appreciation (Depreciation)		Gross Additions (1)		Gross Reductions (2)			June 30, 2021 Fair Value		Net Realized (Losses) Gains		Amount of Interest/ Dividend / Fee Income (3)
Seybert’s Billiards	$1,400,000 Term Note at 12% (+2% PIK)
Corporation	due January 19, 2026.		—		—		1,389,712		—			1,389,712		—		108,376
	Warrant for 4%.		—		—		25,000					25,000		—		—
	(g) $1,400,000 Term Note at 12% (+2%
	PIK) due January 19, 2026.		—		—		1,389,712		—			1,389,712		—		94,280
	Warrant for 4%.		—		—		25,000		—			25,000		—		—

	Total Seybert’s		—		—		2,829,424					2,829,424		—		202,656


Tilson Technology	120,000 Series B Preferred.		1,950,000		—		—		—			1,950,000		—		26,250
Management, Inc.	21,391 Series C Preferred.		347,604		—		—		—			347,604		—		—
	70,176 Series D Preferred.		1,140,360		—		—		—			1,140,360		—		—
	15,385 Series E Preferred.		500,012		—		—		—			500,012		—		—
	23,077 Series F Preferred.		750,003		—		—		—			750,003		—		—
	211,567 SQF Hold Co. Common.		22,036		—		—		—			22,036		—		—

	Total Tilson		4,710,015		—		—		—			4,710,015		—		26,250


	Total Affiliate Investments	$	13,891,199		—	$	8,681,948	($	1,700,000	)	$	20,873,147	$	135,430	$	786,470

	Total Control and Affiliate Investments	$	13,891,199		—	$	9,284,517	($	1,700,000	)	$	21,475,716	$	135,430	$	789,337

This schedule should be read in conjunction with the Corporation’s Consolidated Financial Statements, including the Notes to the Consolidated Financial Statements and the Consolidated Schedule of Portfolio Investments.

(1)

Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow on investments, capitalized interest and the accretion of discounts. Gross additions also include the movement of an existing portfolio company into this category and out of another category.

(2)	Gross reductions include decreases in the cost basis of investments resulting from principal repayments, sales, note conversions, the exchange of existing securities for new securities and the movement of an existing portfolio company out of this category and into another category.

(3)	Represents the total amount of interest, fees or dividends credited to income for the portion of the period an investment was included in “Control or Affiliate” categories, respectively.

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2021 (Continued)

(Unaudited)


Industry Classification		Percentage of Total Investments (at fair value) as of June 30, 2021
Software		39.2%
Professional Services		14.8
Manufacturing		14.8
Consumer Product		11.7
BDC Investment Fund		9.2
Automotive		4.9
Healthcare		4.6
Oil and Gas		0.8

Total Investments		100%

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2020


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquired		(c) Equity			Cost		(d)(f) Fair Value		Percent of Net Assets
Non-Control/Non-Affiliate Investments – 56.8% of net assets: (j)
ACV Auctions, Inc. (e)(g)	1,181,160 Series A Preferred.		8/12/16		<1	%	$	163,000	$	6,531,815		14.2	%
Buffalo, NY. Live mobile wholesale auctions for
new and used car dealers. (Software) www.acvauctions.com

Advantage 24/7 LLC (g)(h)	$140,000 Term Note at 7% due		1/1/19		0	%						0.1	%
Williamsville, NY. Marketing program for wine and	January 1, 2022.							55,000		55,000
spirits dealers. (Marketing Company) www.advantage24-7.com

Apollo Investment Corporation NASDAQ: AINV	35,000 shares.		3/16/20		<1	%		364,084		371,700		0.8	%
(n) Public BDC
New York, NY.

Ares Capital Corporation NASDAQ: ARCC (n)	27,000 shares.		3/16/20		<1	%		343,460		451,800		1.0	%
Public BDC
New York, NY.

Barings BDC, Inc. NYSE: BBDC (n) Public BDC	40,000 shares.		8/13/20		<1	%		333,352		366,933		0.8	%
New York, NY.

Caitec, Inc.	$1,750,000 Subordinated		11/6/20		2	%						8.3	%
Halethorpe, MD. Pet product manufacturer.	Secured Promissory Note at
(Manufacturing)	12% (+2% PIK) due June 1,
www.caitec.com	2026.							1,755,351		1,755,351
	150 Class A Units.		11/6/20		2	%		150,000		150,000
	(g) $1,750,000 Subordinated		11/6/20
	Secured Promissory Note at
	12% (+2% PIK) due June 1,
	2026.							1,755,351		1,755,351
	(g) 150 Class A Units.		11/6/20					150,000		150,000

	Total Caitec							3,810,702		3,810,702


Centivo Corporation (e)(g)	190,967 Series A-1 Preferred.		3/19/18		<1	%		200,000		320,042		3.0	%
New York, NY. Tech-enabled health solutions	337,808 Series A-2 Preferred.		3/19/18					101,342		566,132
company that helps self-insured employers and	298,347 Series B Preferred.		11/9/20					500,000		500,000

their employees save money and have a better	Total Centivo							801,342		1,386,174

experience.
(Health Care) www.centivo.com

Empire Genomics, LLC (g)	$1,209,014 Senior Secured		6/13/14		0	%						1.3	%
Buffalo, NY. Molecular diagnostics company that	Convertible Term Notes at 10%
offers a comprehensive menu of assay services for	due February 28, 2021.							1,308,675		157,654
diagnosing and guiding patient therapeutic treatments.	$444,915 Promissory Note at		10/1/18
(Health Care)	9% due February 28, 2021.							444,915		444,915

www.empiregenomics.com	Total Empire							1,753,590		602,569


First Wave Technologies, Inc. (e)(g)	670,443.2 Class A Common.		4/19/12		2	%		661,563		33,000		0.1	%
Batavia, NY. Sells First Crush automated pill crusher that crushes and grinds pills for nursing homes and medical institutions. (Health Care) www.firstwavetechnologies.com

FS KKR Capital Corp. NYSE: FSK (n) Public BDC	25,000 shares.		3/16/20		<1	%		338,980		412,417		0.9	%
Philadelphia, PA.

GiveGab, Inc. (e)(g)	5,084,329 Series Seed		1/14/15		4	%						1.3	%
Ithaca, NY. Nonprofit giving platform that provides an easy and effective way for fundraising professionals to raise money online. (Software) www.givegab.com	Preferred.							616,221		616,221

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2020 (Continued)


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquired		(c) Equity			Cost		(d)(f) Fair Value		Percent of Net Assets
Golub Capital BDC, Inc. NASDAQ: GBDC	31,250 shares.		3/16/20		<1	%		403,910		435,520		0.9	%
(n) Public BDC
New York, NY.

GoNoodle, Inc. (g)(l)	$1,500,000 Secured Note at 12%		11/1/19		<1	%						3.3	%
Nashville, TN. Student engagement education	(1% PIK) due September 30, 2024.							1,517,539		1,517,539
software providing core aligned physical activity	Warrant for 47,324 Series C		3/1/15
breaks. (Software)	Preferred.							25		25
www.gonoodle.com	Warrant for 21,948 Series D		11/1/19
	Preferred.						38		38

	Total GoNoodle							1,517,602		1,517,602


HDI Acquisition LLC (Hilton Displays) (l)	$1,245,119 Term Loan at 12%		11/8/19		0	%						2.8	%
Greenville, NC. HDI is engaged in manufacturing,	(+2% PIK) due June 20, 2023.							1,275,140		1,275,140
installation and maintenance of signage and brands.
(Manufacturing) www.hiltondisplays.com

Lumious (Tech 2000, Inc.) (g)	$850,000 Replacement Term Note		11/16/18		0	%						1.9	%
Herndon, VA. Develops and delivers IT	at 14% due November 15, 2021.							860,777		860,777
training.
(Software) www.t2000inc.com

Mattison Avenue Holdings LLC (l)	$1,031,406 Second Amended,		11/8/19		0	%						2.5	%
Dallas, TX. Provider of upscale salon spaces for	Restated and Consolidated
lease. (Professional Services)	Promissory Note at 14% (2% PIK)
www.mattisonsalonsuites.com	due June 9, 2022.							1,122,204		1,122,204

Mercantile Adjustment Bureau, LLC (g)	$1,199,039 Subordinated Secured		10/22/12		4	%						1.1	%
Williamsville, NY. Full-service accounts	Note at 13% (8% effective August
receivable management and collections	2020) due January 31, 2022.							1,199,040		500,000
company. (Contact Center)	(e) $150,000 Subordinated		6/30/14
www.mercantilesolutions.com	Debenture at 8% due January 31,
	2022.							150,000		—
	Warrant for 3.29% Membership		10/22/12
	Interests. Option for 1.5%
	Membership Interests.							97,625		—

	Total Mercantile							1,446,665		500,000


Open Exchange, Inc.(e) (g)	397,899 Series C Preferred.		11/13/13		4	%		1,193,697		543,283		1.4	%
(Formerly KnowledgeVision Systems, Inc.)	397,899 Common.		10/22/19					208,243		108,656

Lincoln, MA. Online presentation and training	Total Open Exchange							1,401,940		651,939

software. (Software) www.openexc.com

Owl Rock Capital Corporation NYSE:	30,000 shares.		3/16/20		<1	%		347,067		380,900		0.8	%
ORRC (n) Public BDC
New York, NY.

PennantPark Investment Corporation	100,000 shares.		8/13/20		<1	%		370,130		458,667		1.0	%
NASDAQ: PNNT (n) Public BDC
New York, NY.

PostProcess Technologies, Inc. (e)(g)	360,002 Series A1 Preferred.		11/1/19		<1	%		348,875		471,603		1.0	%
Buffalo, NY. Provides innovative solutions for the post-processing of additive manufactured 3D parts. (Manufacturing) www.postprocess.com

Rheonix, Inc. (e)	9,676 Common.		10/29/09		4	%		—		—		1.5	%
Ithaca, NY. Developer of fully automated	(g) 1,839,422 Series A Preferred.		12/12/13					2,099,999		—
microfluidic based molecular assay and diagnostic	(g) 50,593 Common.		10/24/09					—		—
testing devices. (Health Care)	(g) 589,420 Series B Preferred.		9/29/15					702,732		702,732

www.rheonix.com	Total Rheonix							2,802,731		702,732

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2020 (Continued)


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquired		(c) Equity			Cost		(d)(f) Fair Value		Percent of Net Assets
Science and Medicine Group, Inc. (SMG) (g)	$1,900,000 Participation Agreement		7/31/20		0	%						4.1	%
Arlington, VA. Research and advisory firm	of $5,000,000 Promissory Note at
serving the life science, analytical instrument, diagnostic, healthcare, radiology, and dental industries. (Health Care) www.scienceandmedicinegroup.com	12% due March 5, 2023.							1,900,000		1,900,000

SocialFlow, Inc. (e)(g)	1,049,538 Series B Preferred.		4/5/13		4	%		500,000		92,425		0.7	%
New York, NY. Provides instant analysis of	1,204,819 Series B-1 Preferred.		4/8/14					750,000		138,637
social networks using a proprietary,	717,772 Series C Preferred.		6/26/15					500,000		92,425

predictive analytic algorithm to optimize	Total Social Flow							1,750,000		323,487

advertising and publishing. (Software) www.socialflow.com

Somerset Gas Transmission Company,	26.5337 Units.		4/1/05		3	%		719,097		500,000		1.1	%
LLC (e)(m)
Columbus, OH. Natural gas transportation.
(Oil and Gas) www.somersetgas.com

TCG BDC, Inc. NASDAQ: CGBD (n) Public	40,000 shares.		8/13/20		<1	%		376,996		418,400		0.9	%
BDC
New York, NY.


Subtotal Non-Control/Non-Affiliate
Investments							$	25,884,428	$	26,157,302


Affiliate Investments – 30.1% of net assets (k) Carolina Skiff LLC (g)(m)	6.0825% Class A Common		1/30/04		7	%						3.2	%
Waycross, GA. Manufacturer of ocean	Membership Interest.						$	15,000	$	1,500,000
fishing and pleasure boats. (Manufacturing) www.carolinaskiff.com

ClearView Social, Inc. (e)(g)	312,500 Series Seed Plus Preferred.		1/4/16		6	%		200,000		200,000		0.4	%
Buffalo, NY. Social media publishing tool for law, CPA and professional firms. (Software) www.clearviewsocial.com

Filterworks Acquisition USA, LLC (l)(m)	$2,283,702 Term Note at 12% (+2%		11/8/19		9	%						6.3	%
Deerfield Beach, FL. Provides spray booth	PIK) due December 4, 2023.							2,349,831		2,349,831
equipment, frame repair machines and paint booth	562.5 Class A Units.							562,500		562,500

filter services for collision shops. (Automotive)	Total Filterworks							2,912,331		2,912,331

www.filterworksusa.com

Knoa Software, Inc. (e)(g)	973,533 Series A-1 Convertible		11/20/12		7	%						2.2	%
New York, NY. End user experience	Preferred.							750,000		544,860
management and performance (EMP)	1,876,922 Series B Preferred.		6/9/14					479,155		479,155

solutions utilizing enterprise applications.	Total Knoa							1,229,155		1,024,015

(Software) www.knoa.com

Mezmeriz, Inc. (e)(g)	1,554,565 Series Seed Preferred.		5/14/15		12	%		742,850		—		0.0	%
Ithaca, NY. Technology company developing novel reality capture tools for 3D mapping, reality modeling, object tracking and classification. (Electronics Developer) www.mezmeriz.com

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2020 (Continued)


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquired		(c) Equity			Cost		(d)(f) Fair Value		Percent of Net Assets
Microcision LLC (g)	$1,500,000 Subordinated Promissory		1/10/20		5	%						3.3	%
Pennsauken Township, NJ. Manufacturer of	Note at 11% due January 10, 2025.							1,411,997		1,411,997
precision machined medical implants,	Membership Interest Purchase		1/10/20
components and assemblies.	Warrant for 5%.							110,000		95,000

(Manufacturing)	Total Microcision							1,521,997		1,506,997

www.microcision.com

New Monarch Machine Tool, Inc. (e)(g)	22.84 Common.		1/17/08		15	%		22,841		22,841		0.1	%
Cortland, NY. Manufactures and services vertical/horizontal machining centers.
(Manufacturing) www.monarchmt.com

OnCore Golf Technology, Inc. (e)(g)	300,483 Preferred AA.		11/30/18		5	%		752,712		300,000		0.7	%
Buffalo, NY. Patented and proprietary golf balls utilizing technology and innovation.
(Consumer Product) www.oncoregolf.com

SciAps, Inc. (e)(g)	187,500 Series A Preferred.		7/12/13		6	%		1,500,000		—		3.7	%
Woburn, MA. Instrumentation company	274,299 Series A1 Convertible		4/4/14
producing portable analytical devices using XRF,	Preferred.							504,710		—
LIBS and RAMAN spectroscopy to identify	117,371 Series B Convertible		8/31/15
compounds, minerals, and elements.	Preferred.							250,000		—
(Manufacturing)	113,636 Series C Convertible		4/7/16
www.sciaps.com	Preferred.							175,000		—
	369,698 Series C1 Convertible		4/7/16
	Preferred.							399,274		—
	147,059 Series D Convertible		5/9/17
	Preferred.							250,000		250,000
	Warrant to purchase Series D-1		5/9/17
	Preferred.							45,000		—
	$1,500,000 Secured Subordinated		4/23/20
	Promissory Note at 12% due April
	23, 2023.							1,465,000		1,465,000

	Total SciAps							4,588,984		1,715,000

	(i) Interest receivable $123,500.

Tilson Technology Management, Inc. (g)	*120,000 Series B Preferred.		1/20/15		9	%		600,000		1,950,000		10.2	%
Portland, ME. Provides network deployment	*21,391 Series C Preferred.		9/28/16					200,000		347,604
construction and information system services	*70,176 Series D Preferred.		9/29/17					800,000		1,140,360
management for cellular, fiber optic and wireless	*15,385 Series E Preferred.		3/15/19					500,012		500,012
systems providers. Its affiliated entity, SQF, LLC	211,567 SQF Hold Co. Common.		3/15/19					—		22,036
is a CLEC supporting small cell 5G deployment.	23,077 Series F Preferred.		6/15/20					750,003		750,003

(Professional Services)	Total Tilson							2,850,015		4,710,015

www.tilsontech.com	*2.5% dividend payable quarterly.


Subtotal Affiliate Investments							$	14,835,885	$	13,891,199



TOTAL INVESTMENTS – 86.9%							$	40,720,313	$	40,048,501

OTHER ASSETS IN EXCESS OF LIABILITIES – 13.1%									$	6,056,329


NET ASSETS – 100%									$	46,104,830

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2020 (Continued)

Notes to the Consolidated Schedule of Portfolio Investments

(a) At December 31, 2020, restricted securities represented 92% of the fair value of the investment portfolio. Restricted securities are subject to one or more restrictions on resale and are not freely marketable. Type of investment for equity position is in the form of shares unless otherwise noted as units or interests, i.e., preferred shares, common shares.

(b) The Date Acquired column indicates the date on which the Corporation first acquired an investment.

(d) The Corporation’s investments are carried at fair value in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures,” which defines fair value and establishes guidelines for measuring fair value. At December 31, 2020, ASC 820 designates 92% of the Corporation’s investments as “Level 3” assets. Under the valuation policy of the Corporation, unrestricted publicly traded securities are valued at the average closing price for these securities for the last three trading days of the reporting period. Restricted securities are subject to restrictions on resale and are valued at fair value as determined by our external investment advisor Rand Capital Management, LLC (“RCM”) and submitted to the Board of Directors for approval. Fair value is considered to be the amount that the Corporation may reasonably expect to receive for portfolio securities when sold on the valuation date. Valuations as of any particular date, however, are not necessarily indicative of amounts which may ultimately be realized as a result of future sales or other dispositions of securities and these favorable or unfavorable differences could be material. Among the factors considered in determining the fair value of restricted securities are the financial condition and operating results, projected operations, and other analytical data relating to the investment. Also considered are the market prices for unrestricted securities of the same class (if applicable) and other matters which may have an impact on the value of the portfolio company (see Note 3. “Investments” to the Consolidated Financial Statements).

(e) These investments are non-income producing. All other investments are income producing. Non-income producing investments have not generated cash payments of interest or dividends including LLC tax-related distributions within the last twelve months or are not expected to do so going forward. However, if a debt or a preferred equity investment fails to make its most recent payment, then the investment will also be classified as non-income producing.

(f) As of December 31, 2020, the total cost of investment securities was approximately $40.7 million. Net unrealized depreciation was approximately ($672) thousand, which was comprised of $10.6 million of unrealized appreciation of investment securities and ($11.3) million of unrealized depreciation of investment securities. At December 31, 2020, the aggregate gross unrealized gain for federal income tax purposes was $10.1 million and the aggregate gross unrealized loss for federal income tax purposes was ($11.3) million. The net unrealized loss for federal income tax purposes was ($1.2) million based on a tax cost of $40.9 million.

(g) Rand Capital SBIC, Inc. investment.

(h) Reduction in cost and value from previously reported balances reflects current principal repayment.

(i) Represents interest due (amounts over $50,000) from investments included as interest receivable on the Corporation’s Consolidated Statements of Financial Position.

(j) Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments.

(n) Publicly traded company.

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2020 (Continued)

Investments in and Advances to Affiliates


Company	Type of Investment	December 31, 2019 Fair Value		Net Change in Unrealized Appreciation (Depreciation)			Gross Additions (1)		Gross Reductions (2)			December 31, 2020 Fair Value		Net Realized (Losses) Gains			Amount of Interest/ Dividend/ Fee Income (3)
Control Investments:
	Total Control Investments	$	—	$	—		$	—	$	—		$	—	$	—		$	—


Affiliate Investments:
BeetNPath, LLC	1,119,024 Series A-2 Preferred Membership Units.	$	—	$	—		$	—	$	—		$	—	($	359,000	)	$	—
	1,032,918 Series B Preferred Membership Units.		—		—			—		—			—		(261,277	)		—
	$262,626.64 Convertible Secured Notes at 8%.		—		—			—		—			—		(262,627	)		—

	Total BeetNPath		—		—			—		—			—		(882,904	)		—


Carolina Skiff LLC	6.0825% Class A Common Membership interest.		1,750,000		(250,000	)		—		—			1,500,000		—			66,230

ClearView Social, Inc.	312,500 Series Seed Plus Preferred.		200,000		—			—		—			200,000		—			—

Filterworks	$2,283,702 Term Note at 12%.		2,302,653		—			47,178		—			2,349,831		—			330,251
Acquisition USA, LLC	562.5 Class A Units.		562,500		—			—		—			562,500		—			—

	Total Filterworks		2,865,153		—			47,178		—			2,912,331		—			330,251


Genicon, Inc.	1,586,902 Series B Preferred.		—		—			—		—			—		(1,000,000	)		—
	$3,250,000 Promissory Notes at 10%.		500,000		(500,000	)		—		—			—		(3,743,377	)		17,054
	$250,000 Promissory Note at 10%		250,000		(250,000	)		—		—			—		(262,184	)		—
	Warrant for Common.		—		—			—		—			—		(120,000	)		—

	Total Genicon		750,000		(750,000	)		—		—			—		(5,125,561	)		17,054


G-TEC Natural Gas Systems	16.639% Class A Membership Interest. 8% cumulative dividend.		—		—			—		—			—		(400,000	)		—

Knoa Software, Inc.	973,533 Series A-1 Convertible Preferred.		750,000		(205,140	)		—		—			544,860		—			—
	1,876,922 Series B Preferred.		479,155		—			—		—			479,155		—			—

	Total Knoa		1,229,155		(205,140	)		—		—			1,024,015		—			—


Mezmeriz, Inc.	1,554,565 Series Seed Preferred.		—		—			—		—			—		—			—

Microcision	$1,500,000 Subordinated Promissory Note at 10%.		—		—			1,500,000		(88,003	)		1,411,997		—			187,414
	Membership Interest Purchase Warrant for 5%		—		(15,000	)		110,000		—			95,000		116,991			—

	Total Microcision		—		(15,000	)		1,610,000		(88,003	)		1,506,997		116,991			187,414


New Monarch Machine Tool, Inc.	22.84 Common.		22,841		—			—		—			22,841		—

OnCore Golf Technology, Inc.	300,483 Series AA Preferred.		300,000		—			—		—			300,000		—			—

SciAps, Inc.	187,500 Series A Preferred.		—		—			—		—			—		—			—
	274,299 Series A-1 Convertible Preferred.		—		—			—		—			—		—			—
	117,371 Series B Convertible Preferred.		250,000		(250,000	)		—		—			—		—			—
	113,636 Series C Convertible Preferred.		175,000		(175,000	)		—		—			—		—			—
	369,698 Series C-1 Convertible Preferred.		399,274		(399,274	)		—		—			—		—			—
	147,059 Series D Convertible Preferred.		250,000		—			—		—			250,000		—			—
	Warrant to Purchase Series D-1 Preferred.		—		( 45,000	)		45,000					—
	$1,500,000 Subordinated Promissory Note at 12%.		—		—			1,500,000		(35,000	)		1,465,000		—			147,667

	Total SciAps		1,074,274		(869,274	)		1,545,000		(35,000	)		1,715,000		—			147,667


Teleservices Solutions	250,000 Class B Preferred Units.		—		—			—		—			—		(250,000	)		—
Holdings, LLC	1,000,000 Class C Preferred Units.		—		—			—		—			—		(1,190,680	)		—
	80,000 Class D Preferred Units.		—		—			—		—			—		(91,200	)		—
	PIK Dividend for Series C and D at 12% and 14%, respectively.		—		—			—		—			—		(104,198	)		—

	Total Teleservices		—		—			—		—			—		(1,636,078	)		—

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2020 (Continued)

Investments in and Advances to Affiliates


Company	Type of I nvestment	December 31, 2019 Fair Value		Net Change in Unrealized Appreciation (Depreciation)			Gross Additions (1)		Gross Reductions (2)			December 31, 2020 Fair Value		Net Realized (Losses) Gains			Amount of Interest/ Dividend/ Fee Income (3)
Tilson Technology Management, Inc.	120,000 Series B Preferred.		1,950,000		—			—		—			1,950,000		—			52,500
	21,391 Series C Preferred.		347,604		—			—		—			347,604		—			—
	70,176 Series D Preferred.		1,140,360		—			—		—			1,140,360		—			—
	15,385 Series E Preferred.		500,012		—			—		—			500,012		—			—
	23,077 Series F Preferred.		—		—			750,003		—			750,003		—			—
	211,567 SQF Hold Co. Common.		22,036		—			—		—			22,036		—			—

	Total Tilson		3,960,012		—			750,003		—			4,710,015		—			52,500

	Total Affiliate Investments	$	12,151,435	($	2,089,414	)	$	3,952,181	($	123,003	)	$	13,891,199	($	7,927,552	)	$	801,116

	Total Control and Affiliate Investments	$	12,151,435	($	2,089,414	)	$	3,952,181	($	123,003	)	$	13,891,199	($	7,927,552	)	$	801,116

(1)

(2)	Gross reductions include decreases in the cost basis of investments resulting from principal repayments, sales, note conversions, the exchange of existing securities for new securities and the movement of an existing portfolio company out of this category and into another category.

(3)	Represents the total amount of interest, fees or dividends credited to income for the portion of the period an investment was included in “Control or Affiliate” categories, respectively.

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2020 (Continued)


Industry Classification		Percentage of Total Investments (at fair value) as of December 31, 2020
Software		29.3%
Manufacturing		16.2
Professional Services		14.6
Healthcare		11.6
Consumer Product		10.3
BDC Investment Funds		8.2
Automotive		7.3
Oil and Gas		1.2
Contact Center		1.2
Marketing		0.1

Total Investments		100%

Rand Capital Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

(Unaudited)

Note 1. ORGANIZATION

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 as an internally managed, closed-end, diversified, investment management company. We have elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). As a BDC, we are required to comply with certain regulatory requirements. 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 - Business Development Company Regulations in our Annual Report on Form 10-K for the year ended December 31, 2020.

In 2002, Rand formed a wholly-owned subsidiary for the purpose of operating it as a small business investment company (“SBIC”) licensed by the U.S. Small Business Administration (“SBA”). The subsidiary received an SBA license to operate as an SBIC in 2002. The subsidiary, which had been organized as a Delaware limited partnership, was converted into a New York corporation on December 31, 2008, at which time its operations as a licensed SBIC were continued by the newly formed corporation under the name of Rand Capital SBIC, Inc. (“Rand SBIC”). In 2012, the SEC (as defined herein) granted an Order of Exemption for Rand with respect to the operations of Rand SBIC. At that time, although Rand SBIC was operated as if it were a BDC, it was registered as an investment company under the 1940 Act. Upon Rand’s receipt of the order granting the exemptions, Rand SBIC filed an election to be regulated as a BDC under the 1940 Act.

In November 2019, Rand completed (the “Closing”) a stock sale transaction with East Asset Management (“East”). The transaction consisted of a $25 million investment in Rand by East, in exchange for approximately 8.3 million shares of Rand common stock. The consideration paid by East for the shares of Rand common stock was comprised of approximately $15.5 million of cash and a contribution of $9.5 million of portfolio assets (the “Contributed Assets”). Concurrent with the Closing, Rand’s management and staff became employees of Rand Capital Management, LLC (“RCM”), a registered investment adviser that has been retained by Rand as its external investment adviser. In connection with retaining RCM as our investment adviser on November 8, 2019, Rand entered into an investment advisory and management agreement (the “Prior Investment Management Agreement”) and an administration agreement (the “Prior Administration Agreement”) with RCM pursuant to which RCM serves as Rand’s 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”). In connection with a change of control of RCM, Rand’s shareholders approved a new investment advisory and management agreement (the “Investment Management Agreement”) with RCM at a special meeting of shareholders held on December 16, 2020 (the “Special Meeting”). The terms of the Investment Management Agreement are identical to those contained in the Prior Investment Management Agreement, with RCM continuing to provide investment advisory and management services to Rand. Following approval by Rand’s shareholders at the Special Meeting, Rand, on December 31, 2020, entered into the Investment Management Agreement and a new administration agreement (the “Administration Agreement”) with RCM and terminated the Prior Administration Agreement. The terms of the Administration Agreement are identical to those contained in the Prior Administration Agreement. 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 completion of the Transaction, Rand has shifted to an investment strategy focused on higher yielding debt investments and intends to elect U.S. Federal tax treatment as a regulated investment company (“RIC”) as of January 1, 2020 on its timely filed U.S. Federal tax return for the 2020 tax year. As required for the RIC election, Rand paid a special dividend to shareholders to distribute all of its accumulated earnings and profits since inception to 2019. Rand’s Board of Directors declared a special dividend of $23.7 million, or approximately $1.62 per share, on March 3, 2020. The cash and shares of Rand’s common stock comprising the special dividend were distributed on May 11, 2020 to shareholders. In addition, Rand’s Board of Directors declared a 2020 cash dividend of $1.33 per share on December 21, 2020. This 2020 cash dividend was paid on January 19, 2021 to shareholders of record as of December 31, 2020. This 2020 cash dividend is expected to represent over 90% of estimated taxable income of Rand for 2020.

The Board of Directors declared a quarterly cash dividend of $0.10 per share on February 26, 2021 to shareholders of record as of March 15, 2021. This quarterly cash dividend was paid on March 29, 2021. The Board of Directors declared a second quarter cash dividend of $0.10 per share on April 29, 2021 to shareholders of record as of June 2, 2021 which was paid on June 16, 2021.

In order to qualify to make the RIC election, Rand placed several of its investments in newly formed holding companies that facilitate a tax structure that is advantageous to the RIC election. The following investments are held in blocker companies: Rand Somerset Holdings Corp., Rand Carolina Skiff Holdings Corp., Rand Filterworks Holdings Corp., Rand ITA Holdings Corp., and Rand BMP Swanson Hold Co., LLC (the “Blocker Corps”) as wholly owned subsidiaries of Rand to hold certain equity investments. These subsidiaries are consolidated using United States generally accepted accounting principles (“GAAP”) for financial reporting purposes.

In addition, 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 exemptive relief from the Securities and Exchange Commission (“SEC”) to permit Rand to co-invest in portfolio companies with certain other funds, including other BDCs and registered investment companies, managed by RCM and certain of its affiliates in a manner consistent with Rand’s investment objective, positions, policies, strategies and restrictions as well as regulatory requirements, subject to compliance with certain conditions (the “Order”). Pursuant to the Order, Rand is generally permitted to co-invest with affiliated funds 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 to Rand or its shareholders on the part of any person concerned and (2) the transaction is consistent with the interests of Rand’s shareholders and is consistent with Rand’s investment objective and strategies. On March 29, 2021, the SEC granted approval for a new exemptive relief order (the “New Order”) that supersedes the Order and permits the Corporation to co-invest with affiliates of RCM and Callodine Group, LLC (“Callodine”) under RCM’s current ownership structure after the completion of the Adviser Change of Control (as defined below).

The accompanying financial statements describe the operations of Rand and its wholly-owned subsidiaries Rand SBIC, Rand Somerset Holdings Corp., Rand Carolina Skiff Holdings Corp., Rand ITA Holdings Corp., Rand Filterworks Holdings Corp., and Rand BMP Swanson Hold Co., LLC, (collectively, the “Corporation”).

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

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - It is our opinion that the accompanying consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair presentation in accordance with GAAP of the consolidated financial position, results of operations, cash flows and statement of changes in net assets for the interim periods presented. Certain information and note disclosures normally included in audited annual consolidated financial statements prepared in accordance with GAAP have been omitted; however, we believe that the disclosures made are adequate to make the information presented herein not misleading. The interim results for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year.

These statements should be read in conjunction with the consolidated financial statements and the notes included in our Annual Report on Form 10-K for the year ended December 31, 2020. Information contained in this filing should also be reviewed in conjunction with our related filings with the SEC prior to the date of this report.

Reclassification - Certain balance sheet accounts have been reclassified to comply with regulatory rules.

Principles of Consolidation - The consolidated financial statements include the accounts of Rand and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Fair Value of Financial Instruments - The carrying amounts reported in the consolidated statement of financial position of cash, interest receivable, accounts payable and accrued expenses approximate fair value because of the immediate or short-term nature of these financial instruments.

Fair Value of SBA Debentures - In March 2021, the SBIC Funding Corporation completed a pooling of SBA debentures that have a coupon rate of 1.667%, excluding a mandatory SBA annual charge estimated to be 0.271%, resulting in a total estimated ten-year fixed rate of 1.938%. The carrying value of Rand’s SBA debentures is a reasonable estimate of fair value because their stated interest rates approximate current interest rates that are available for debt with similar terms.

Investment Classification - In accordance with the provisions of the 1940 Act, the Corporation classifies its investments by level of control. Under the 1940 Act, “Control Investments” are investments in companies that the Corporation is deemed to “Control” because it owns more than 25% of the voting securities of the company or has greater than 50% representation on the company’s board. “Affiliate Investments” are companies in which the Corporation owns between 5% and 25% of the voting securities. “Non-Control/Non-Affiliate Investments” are those companies that are neither Control Investments nor Affiliate Investments.

Investments - Investments are valued at fair value as determined in good faith by RCM and approved by our Board of Directors. The Corporation invests in loan instruments, debt instruments, and equity instruments. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistent valuation process. The Corporation analyzes and values each investment quarterly, and records unrealized depreciation for an investment that it believes has become impaired, including where collection of a loan or debt security or realization of the recorded value of an equity security is doubtful. Conversely, the

Corporation will record unrealized appreciation if it believes that an underlying portfolio company has appreciated in value and, therefore, its equity securities have also appreciated in value. These estimated fair values may differ from the values that would have been used had a ready market for the investments existed and these differences could be material if RCM’s assumptions and judgments differ from results of actual liquidation events. Under the valuation policy of the Corporation, unrestricted publicly traded securities are valued at the average closing price for these securities for the last three trading days of the reporting period.

Qualifying Assets - More than 70% of the Corporation’s investments were made in qualifying privately held small business enterprises, that were not investment companies, are principally based in the United States, and represent qualifying assets as defined by Section 55(a) of the 1940 Act.

Cash and Cash Equivalents - Temporary cash investments having a maturity of less than a year when purchased are considered to be cash equivalents.

Revenue Recognition - Interest Income - Interest income is recognized on the accrual basis except where the investment is in default or otherwise presumed to be in doubt. In such cases, interest is recognized at the time of receipt. A reserve for possible losses on interest receivable is maintained when appropriate.

Rand SBIC’s interest accrual is also regulated by the SBA’s “Accounting Standards and Financial Reporting Requirements for Small Business Investment Companies.” Under these rules, interest income cannot be recognized if collection is doubtful, and a 100% reserve must be established. The collection of interest is presumed to be in doubt when there is substantial doubt about a portfolio company’s ability to continue as a going concern or a loan is in default for more than 120 days. Management also uses other qualitative and quantitative measures to determine the value of a portfolio investment and the collectability of any accrued interest.

The following investment is on non-accrual status: a portion of the Mercantile Adjustment Bureau, LLC (Mercantile) outstanding loan balance.

The Corporation holds debt securities in its investment portfolio that contain payment-in-kind (“PIK”) interest provisions. PIK interest, computed at the contractual rate specified in each debt agreement, is added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment.

Revenue Recognition - Dividend Income - The Corporation may receive cash distributions from portfolio companies that are limited liability companies or corporations, and these distributions are classified as dividend income on the consolidated statement of operations. Dividend income is recognized on an accrual basis when it can be reasonably estimated.

The Corporation may hold preferred equity securities that contain cumulative dividend provisions. Cumulative dividends are recorded as dividend income, if declared and deemed collectible, and any dividends in arrears are recognized into income and added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred equity is redeemed.

Revenue Recognition - Fee Income - Consists of the revenue associated with the amortization of financing fees charged to the portfolio companies upon successful closing of SBIC financings and income associated with portfolio company board attendance fees.

Realized Gain or Loss and Unrealized Appreciation or Depreciation of Investments - Amounts reported as realized gains and losses are measured by the difference between the proceeds from the sale or exchange and the cost basis of the investment without regard to unrealized gains or losses recorded in prior periods. The cost of securities that have, in management’s judgment, become worthless are written off and reported as realized losses when appropriate. Unrealized appreciation or depreciation reflects the difference between the fair value of the investments and the cost basis of the investments.

Original Issue Discount - Investments may include “original issue discount” or OID income. This occurs when the Corporation purchases a warrant and a note from a portfolio company simultaneously, which requires an allocation of a portion of the purchase price to the warrant and reduces the note or debt instrument by an equal amount in the form of a note discount or OID.

Deferred Debenture Costs - SBA debenture origination and commitment costs, which are netted against the debenture obligation (See Note 6 “SBA Debentures”), will be amortized ratably over the terms of the SBA debentures.

SBA Debentures - The Corporation had $11,000,000 in outstanding SBA debentures at June 30, 2021 and December 31, 2020, respectively, with a weighted average interest rate, including the SBA annual fee, of 3.45% at June 30, 2021. The debentures are presented net of deferred debenture costs (See Note 6 “SBA Debentures”). The $11,000,000 in outstanding SBA leverage matures from 2022 through 2029.

In the event of a future default of such SBA obligations, the Corporation has consented to the exercise, by the SBA, of all rights of the SBA under 13 C.F.R. 107.1810(i) “SBA remedies for automatic events of default” and has agreed to take all actions that the SBA may so require. These actions may include the Corporation’s automatic consent to the appointment of the SBA, or its designee, as receiver under Section 311(c) of the Small Business Investment Act of 1958.

Net Assets per Share - Net assets per share are based on the number of shares of common stock outstanding, adjusted retroactively for the reverse stock split that occurred in May 2020. The Corporation does not have any common stock equivalents outstanding.

Supplemental Cash Flow Information - Income taxes paid (refunded) during the six months ended June 30, 2021 and 2020 were $27,902 and ($380,890), respectively. Interest paid during each of the six months ended June 30, 2021 and 2020 was $187,985 and $189,023, respectively. The Corporation converted $116,418 and $175,596 of interest receivable into investments during the six months ended June 30, 2021 and 2020, respectively.

Accounting Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Stockholders’ Equity (Net Assets) - At June 30, 2021 and December 31, 2020, there were 500,000 shares of $10.00 par value preferred stock authorized and unissued.

On April 22, 2021, the Board of Directors approved a new share repurchase plan, which authorizes the Corporation to repurchase shares of the Corporation’s outstanding common stock with an aggregate cost of up to $1,500,000 at prices per share of common stock no greater than the then current net asset value. This new share repurchase authorization lasts for a period of 12 months from the authorization date until April 22, 2022. This new share repurchase plan replaces the share repurchase authorization that was previously approved by the Board of Directors in April 2020. No shares of common stock were repurchased during the six months ended June 30, 2021 and 1,300 shares were repurchased for a total cost of $14,304 during the six months ended June 30, 2020.

In May 2020, the Corporation effected a 1-for-9 reverse stock split of its common stock (the “Reverse Stock Split”). The Reverse Stock Split affected all issued and outstanding shares of its common stock, including shares held in treasury. The Reverse Stock Split reduced the number of issued and outstanding shares of the Corporation’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 did not change the authorized number of shares or the par value of the Corporation’s common stock. Share and per share data included herein has been retroactively restated to reflect the effect of the Reverse Stock Split, as applicable. The Reverse Stock Split affected all shareholders uniformly and did not alter any shareholder’s percentage interest in the Corporation’s outstanding common stock, except for minor adjustments resulting from the cash payment received for any fractional shares that would have been received as a result of the Reverse Stock Split.

Income Taxes – The Corporation intends to elect U.S. federal tax treatment as a RIC as of January 1, 2020 on its timely filed U.S. Federal tax return for the 2020 tax year. In order to qualify as a RIC, among other things, the Corporation is required to meet certain source of income and asset diversification requirements and timely distribute to its shareholders at least 90% of its investment company taxable income, as defined by the Code (as defined below), for each tax year. If the Corporation makes the requisite distributions to its shareholders, this will generally relieve the Corporation from any requirement to pay corporate-level U.S. federal income taxes with respect to all income distributed to its shareholders.

In anticipation of the RIC election and in accordance with GAAP, a net deferred tax asset of $1,451,658 was eliminated during the first quarter of 2020. This asset related to book/tax differences that are no longer applicable now that the Corporation intends to elect RIC status for income tax purposes.

Certain investments that generate non-qualifying income for RIC purposes, and the deferred tax liability related to these investments of $247,460, were contributed to the Corporation’s blocker corporations in December 2019. These blocker corporations will be subject to federal and state income taxes.

The Corporation reviews the tax positions it has taken to determine if they meet a “more likely than not threshold” for the benefit of the tax position to be recognized in the consolidated financial statements. A tax position that fails to meet the more likely than not recognition threshold will result in either a reduction of a current or deferred tax asset or receivable, or the recording of a current or deferred tax liability. There were no uncertain tax positions recorded at June 30, 2021 or December 31, 2020.

Under the provisions of Section 382 the Internal Revenue Code of 1986, as amended, (the “Code”), net operating loss and credit carryforwards and other tax attributes may be subject to limitations if there has been a significant change in ownership in the Corporation, as defined by the Code. Prior to the completion of the Transaction, the Corporation was able to utilize its remaining federal net operating losses (“NOL”). The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), made changes to the NOL carryback rules for businesses, and the Corporation was able to carryback a portion of its NOL under the CARES Act receiving a tax benefit of $90,141 during the six months ended June 30, 2020.

The Corporation is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2017 through 2020. In general, the Corporation’s state income tax returns are open to audit under the statute of limitations for the years ended December 31, 2017 through 2020.

It is the Corporation’s policy to include interest and penalties related to income tax liabilities in income tax expense. There was $2,627 recognized for the six months ended June 30, 2021 and no amounts recognized for the six months ended June 30, 2020.

Concentration of Credit and Market Risk – The Corporation’s financial instruments potentially subject it to concentrations of credit risk. Cash is invested with banks in amounts which, at times, exceed insurable limits. The Corporation does not anticipate non-performance by such banks.

The following are the concentrations of the top five portfolio company values compared to the fair value of the Corporation’s total investment portfolio:


	June 30, 2021
ACV Auctions, Inc. (ACV)		24	%
Open Exchange, Inc. (Open Exchange)		9	%
Tilson Technology Management, Inc. (Tilson)		8	%
ITA Acquisition, LLC (ITA)		7	%
Caitec, Inc. (Caitec)		6	%


	December 31, 2020
ACV Auctions, Inc. (ACV)		16	%
Tilson Technology Management, Inc. (Tilson)		12	%
Caitec, Inc. (Caitec)		10	%
Filterworks Acquisition USA, LLC (Filterworks)		7	%
Science and Medicine Group, Inc. (SMG Group)		5	%

Note 3. INVESTMENTS

The Corporation’s investments are carried at fair value in accordance with FASB Accounting Standards Codification (ASC) 820, “Fair Value Measurements and Disclosures”, which defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements.

Loan investments are defined as traditional loan financings with no equity features. Debt investments are defined as debt financings that include one or more equity features such as conversion rights, stock purchase warrants, and/or stock purchase options. A financing may also be categorized as a debt financing if it is accompanied by the direct purchase of an equity interest in the portfolio company.

The Corporation uses several approaches to determine the fair value of an investment. The main approaches are:

•

Loan and debt securities are valued at cost when it is representative of the fair value of the investment or sufficient assets or liquidation proceeds are expected to exist from a sale of a portfolio company at its estimated fair value. However, they may be valued at an amount other than cost given the carrying interest rate versus the related inherent portfolio risk of the investment. A loan or debt instrument may be reduced in value if it is judged to be of poor quality, collection is in doubt or insufficient liquidation proceeds exist.

•

Equity securities may be valued using the “asset approach”, “market approach” or “income approach.” The asset approach involves estimating the liquidation value of the portfolio company’s assets. To the extent the value exceeds the remaining principal amount of the debt or loan securities of the portfolio company, the fair value of such securities is generally estimated to be their cost. However, where value is less than the remaining principal amount of the loan and debt securities, the Corporation may discount the value of an equity security. The market approach uses observable prices and other relevant information generated by similar market transactions. It may include the use of market multiples derived from a set of comparables to assist in pricing the investment. Additionally, the Corporation adjusts valuations if a subsequent significant equity financing has occurred that includes a meaningful portion of the financing by a sophisticated, unrelated new investor. The income approach employs a cash flow and discounting methodology to value an investment.

ASC 820 classifies the inputs used to measure fair value into the following hierarchy:

Level 1: Quoted prices in active markets for identical assets or liabilities, used in the Corporation’s valuation at the measurement date. Under the valuation policy, the Corporation values unrestricted publicly traded companies, categorized as Level 1 investments, at the average closing price for the last three trading days of the reporting period.

Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.

Level 3: Unobservable and significant inputs to determining the fair value.

Financial assets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Any changes in estimated fair value are recorded in the statement of operations.

At June 30, 2021, 15% of the Corporation’s investments are Level 1, 18% are in Level 2 and 67% of the are in Level 3. At December 31, 2020, 8% of the Corporation’s investments were Level 1 investments and 92% were Level 3 investments. There were no Level 2 investments at December 31, 2020.

Under the valuation policy of the Corporation, unrestricted publicly traded securities are valued at the average closing price for these securities for the last three trading days of the reporting period.

In the valuation process, the Corporation values restricted securities categorized as Level 3 investments, using information from these portfolio companies, which may include:

•

Audited and unaudited statements of operations, balance sheets and operating budgets;

•

Current and projected financial, operational and technological developments of the portfolio company;

•

Current and projected ability of the portfolio company to service its debt obligations;

•

The current capital structure of the business and the seniority of the various classes of equity if a deemed liquidation event were to occur;

•

Pending debt or capital restructuring of the portfolio company;

•

Current information regarding any offers to purchase the investment, or recent fundraising transactions;

•

Current ability of the portfolio company to raise additional financing if needed;

•

Changes in the economic environment which may have a material impact on the operating results of the portfolio company;

•

Internal circumstances and events that may have an impact (both positive and negative) on the operating performance of the portfolio company;

•

Qualitative assessment of key management;

•

Contractual rights, obligations or restrictions associated with the investment; and

•

Other factors deemed relevant to assess valuation.

The valuation may be reduced if a portfolio company’s performance and potential have deteriorated significantly. If the factors that led to a reduction in valuation are overcome, the valuation may be readjusted.

Equity Securities

Equity securities may include preferred stock, common stock, warrants and limited liability company membership interests.

The significant unobservable inputs used in the fair value measurement of the Corporation’s equity investments are earnings before interest, tax and depreciation and amortization (EBITDA) and revenue multiples, where applicable, the financial and operational performance of the business, and the debt and senior equity preferences that may exist in a deemed liquidation event. Standard industry multiples may be used when available; however, the Corporation’s portfolio companies are typically small and in early stages of development and these industry standards may be adjusted to more closely match the specific financial and operational performance of the portfolio company. Due to the nature of certain investments, fair value measurements may be based on other criteria, which may include third party appraisals. Significant changes in any of these unobservable inputs may result in a significantly higher or lower fair value estimate.

Another key factor used in valuing equity investments is a significant recent arms-length equity transaction entered into by the portfolio company with a sophisticated, non-strategic, unrelated, new investor. The terms of these equity transactions may not be identical to the equity transactions between the portfolio company and the Corporation, and the impact of the difference in transaction terms on the market value of the portfolio company may be difficult or impossible to quantify.

When appropriate the Black-Scholes pricing model is used to estimate the fair value of warrants for accounting purposes. This model requires the use of highly subjective inputs including expected volatility and expected life, in addition to variables for the valuation of minority equity positions in small private and early stage companies. Significant changes in any of these unobservable inputs may result in a significantly higher or lower fair value estimate.

For investments made within the last year, the Corporation generally relies on the cost basis, which is deemed to represent the fair value, unless other fair value inputs are identified causing the Corporation to depart from this basis.

Loan and Debt Securities

The significant unobservable inputs used in the fair value measurement of the Corporation’s loan and debt securities are the financial and operational performance of the portfolio company, similar debt with similar terms with other portfolio companies, as well as the market acceptance for the portfolio company’s products or services. These inputs will likely provide an indicator as to the probability of principal recovery of the investment. The Corporation’s loan and debt investments are often junior secured or unsecured securities. Fair value may also be determined based on other criteria where appropriate. Significant changes to the unobservable inputs may result in a change in fair value. For recent investments, the Corporation generally relies on the cost basis, which is deemed to represent the fair value, unless other fair value inputs are identified causing the Corporation to depart from this basis.

The following table provides a summary of the significant unobservable inputs used to determine the fair value of the Corporation’s Level 3 portfolio investments as of June 30, 2021:


Investment Type	Market Approach EBITDA Multiple		Market Approach Liquidation Seniority		Market Approach Revenue Multiple		Market Approach Transaction Pricing		Totals
Non-Control/Non-Affiliate Equity	$	—	$	500,000	$	1,026,219	$	7,638,112	$	9,164,331
Non-Control/Non-Affiliate Loan and Debt		3,588,901		2,385,913		—		3,586,152		9,560,966

Total Non-Control/Non-Affiliate	$	3,588,901	$	2,885,913	$	1,026,219	$	11,224,264	$	18,725,297

Affiliate Equity	$	2,062,500	$	22,841	$	1,274,015	$	5,888,348	$	9,247,704
Affiliate Loan and Debt		2,373,519		—		—		9,251,924		11,625,443

Total Affiliate	$	4,436,019	$	22,841	$	1,274,015	$	15,140,272	$	20,873,147


Control Equity	$	—	$	—	$	—	$	157,654	$	157,654
Control Debt		—		—		—		444,915		444,915

Total Control	$	—	$	—	$	—	$	602,569	$	602,569

Total Level 3 Investments	$	8,024,920	$	2,908,754	$	2,300,234	$	26,967,105	$	40,201,013


Range	5-6X	1X	2X-4X	Not Applicable

Unobservable Input	EBITDA Multiple	Asset Value	Revenue Multiple	Transaction Price

Weighted Average	5.5X	1X	2.9X	Not Applicable

The following table provides a summary of the components of Level 1, 2 and 3 Assets Measured at Fair Value at June 30, 2021:


			Fair Value Measurements at Reported Date Using
Description	June 30, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Other Significant Unobservable Inputs (Level 3)
Loan investments	$	11,692,750	$	—	$	—	$	11,692,750
Debt investments		9,938,574		—		—		9,938,574
Equity investments		38,176,071		9,148,391		10,457,991		18,569,689

Total	$	59,807,395	$	9,148,391	$	10,457,991	$	40,201,013

The following table provides a summary of the components of Level 1, 2 and 3 Assets Measured at Fair Value at December 31, 2020:


			Fair Value Measurements at Reported Date Using
Description	December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Other Significant Unobservable Inputs (Level 3)
Loan investments	$	6,771,394	$	—	$	—	$	6,771,394
Debt investments		9,799,365		—		—		9,799,365
Equity investments		23,477,742		3,296,337		—		20,181,405

Total	$	40,048,501	$	3,296,337	$	—	$	36,752,164

The following table provides a summary of changes in Assets Measured at Fair Value Using Significant Unobservable Inputs (Level 3) for the six months ended June 30, 2021:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Description	Loan Investments			Debt Investments			Equity Investments			Total
Ending Balance December 31, 2020, of Level 3 Assets	$	6,771,394		$	9,799,365		$	20,181,405		$	36,752,164
Realized gain included in net change in net assets from operations:
ClearView Social, Inc. (Clearview Social)		—			—			135,430			135,430
GiveGab, Inc. (Givegab)		—			—			1,817,350			1,817,350

*Total realized gains*		—			—			1,952,780			1,952,780
Unrealized gains/(losses) included in net change in net assets from operations:
Open Exchange, Inc. (Open Exchange)		—			—			4,918,061			4,918,061
Post Process technologies, Inc. (Post Process)		—			—			(122,728	)		(122,728	)

*Total unrealized gains (losses)*		—			—			4,795,333			4,795,333
Purchases of securities/changes to securities/non-cash conversions:
Caitec, Inc. (Caitec)		35,450			—			—			35,450
Filterworks Acquisition USA, LLC (Filterworks)		—			23,688			—			23,688
GoNoodle, Inc. (GoNoodle)		—			7,597			—			7,597
HDI Acquisition LLC (Hilton Displays)		—			12,855			—			12,855
ITA Acquisition, LLC (ITA)		3,400,000			—			500,000			3,900,000
Mattison Avenue Holdings LLC (Mattison)		673,091			5,611			—			678,702
Microcision, LLC (Microcision)		—			88,003			—			88,003
Seybert’s Billiards Corporation (Seybert’s)		—			2,779,424			50,000			2,829,424
SciAps, Inc. (Sciaps)		—			7,500			—			7,500
BMP Swanson Holdco, LLC (Swanson)		1,600,000			—			233,333			1,833,333

*Total purchases of securities/changes to securities/non-cash conversions*		5,708,541			2,924,678			783,333			9,416,552
Repayments and sale of securities:
Advantage 24/7, LLC (Advantage 24/7)		(15,000	)		—			—			(15,000	)
Clearview Social		—			—			(335,430	)		(335,430	)
Givegab		—			—			(2,433,571	)		(2,433,571	)
Microcision		—			(1,500,000	)		—			(1,500,000	)
Science and Medicine Group, Inc. (SMG)		(1,900,000	)		—			—			(1,900,000	)

*Total repayments and sale of securities*		(1,915,000	)		(1,500,000	)		(2,769,001	)		(6,184,001	)
Transfers within Level 3		1,127,815			(1,285,469	)		157,654			—
Transfers out of Level 3		—			—			(6,531,815	)		(6,531,815	)

Ending Balance June 30, 2021, of Level 3 Assets	$	11,692,750		$	9,938,574		$	18,569,689		$	40,201,013


Change in unrealized appreciation/depreciation on investments for the period included in changes in net assets	$	13,382,354

Net realized gain on investments for the period included in changes in net assets	$	2,128,105

The following table provides a summary of changes in Assets Measured at Fair Value Using Significant Unobservable Inputs (Level 3) for the six months ended June 30, 2020:

Fair Value Measurements Using Significant
Unobservable Inputs (Level 3)

Description

Loan
Investments

Debt
Investments

Equity
Investments

Total

Ending Balance, December&nbs

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company