Rand Capital Announces Third Quarter 2017 Results

Net Asset Value per share grew sequentially to $5.01 at September 30

BUFFALO, NY -- (Marketwired) -- 11/06/17 -- Rand Capital Corporation (NASDAQ: RAND) ("Rand"), a venture capital company which invests in growth businesses with unique product, service or technology concepts, announced its results for the quarter and year-to-date periods ended September 30, 2017.

Allen F. ("Pete") Grum, President and Chief Executive Officer of Rand Capital, commented, "We closed on one investment during the third quarter. Centivo Corporation is a tech-enabled health solutions company and is a new addition to our portfolio. They are developing exciting new technology and administration services for self-insured companies."

He continued, "At the end of the quarter, we had $5.7 million of cash in our small business investment company subsidiaries and we continue to evaluate investment opportunities."

Third Quarter 2017 Financial Highlights

  • Reported $5.01 net asset value (NAV) per share at September 30, 2017, compared with $5.00 at June 30, 2017. The growth was due in part to increasing investment income, as more income-producing debt investments were originated in recent quarters.
  • Invested $100,000 in a new portfolio company, Centivo, a tech-enabled health solutions company that is developing solutions to help self-insured employers and their employees save money and have a better experience.
  • Investment income increased 26% over the prior-year third quarter.
  • At September 30, 2017, portfolio fair value was $30.7 million and consolidated cash was
    $6.4 million.

Total investment income in the third quarter of 2017 grew to approximately $397,000, up from $316,000 in the third quarter of 2016. The $81,000 increase was driven by the Company's success with focusing investments in income producing instruments. Total expenses in the 2017 and 2016 third quarters were approximately $439,000 and $487,000, respectively.

Mr. Grum added, "The increase in our investment income is moving us closer to operating cash breakeven."

Total investment income was approximately $1.1 million and $731,000 year-to-date in 2017 and 2016, respectively. Similar to the third quarter, the growth was driven by the Company's recent investment focus on income-generating instruments. Total expenses on a year-to-date basis were approximately $1.6 million in 2017, down from $2.9 million in 2016. The 2016 expenses included higher incentive compensation expenses related to the Company's Gemcor exit.

Selected Portfolio Highlights

  • PostProcess Technologies Inc. is the pioneer of the automated post-printing industry. It is the first and only provider of a comprehensive post-printing solution for additive manufacturing, including intelligent software, user-friendly hardware, and proprietary chemistry. PostProcess increases the consistency, throughput, and productivity of the third step of 3D printing -- post-printing. PostProcess has been growing rapidly, from three employees in early 2016 to 26 currently. With plans to grow revenue to $100 million in 2021, the company recently signed up its first channel partner and is seeking to expand its international presence in 2018 where 3D printing adoption is also quickly expanding. PostProcess recently launched a new product, the Hybrid DECI Duo, the world's only 2-in-1 automated post-processing solution that provides both surface finishing and support removal of 3D printed parts. At September 30, 2017 Rand's investment in PostProcess was valued at $300,000.
  • GiveGab, Inc. is a user-friendly social platform that cultivates long-term giving relationships by connecting donors and volunteers with nonprofits. The GiveGab team helps nonprofits thrive, providing an affordable, secure and customized way to engage with supporters, raise funds online, and manage data. The company is experiencing a break-out year in 2017, having over 8,000 nonprofits registered to raise money on its platform. Revenue is on pace to grow more than 600% in 2017, and transaction volume is expected to be up more than 900%. The significant growth is driven by multiple and larger Giving Days, including The Big Give in San Antonio, Give for Good Louisville and Cornell Giving Day, among many others. At September 30, 2017 Rand's investment in GiveGab was valued at $424,000.
  • Knoa Software, Inc. provides on-premise and cloud solutions that generate unique insights for the optimization of the end-user experience with solutions for vendors including SAP®. Earlier in 2017, Knoa launched a new version of its SAP® User Experience Management ("SAP UEM") application, providing support for the SAP S/4HANA® platform and the SAP SuccessFactors HCM Suite. SAP UEM delivers unprecedented visibility into user behavior to drive adoption and effective use of SAP® software, reducing costs and risks during or following migration projects. Further, it allows SAP® customers to leverage Knoa's user analytics for a broader range of operating environments, including end-user mobile devices, browser configurations and business applications. At September 30, 2017 Rand's investment in Knoa was valued at $498,000.

As of September 30, 2017, Rand's portfolio consisted of 30 active companies. At that date, the portfolio was comprised of approximately 58% in equity investments and 42% in debt investments, compared with 64% in equity investments and 36% in debt investments at the same time last year. The change in investment mix reflects Rand's strategy to generate sufficient investment income to cover operating expenses.

Capital Allocation Priority

Rand's priority for allocating capital continues to be investment in its portfolio. Additionally, the Board of Directors has authorized a share repurchase program of up to an aggregate of 1,000,000 shares of common stock. Approximately 459,000 shares remain available for repurchase under the program, which the Board recently extended through October 26, 2018.

Webcast and Conference Call

Rand will host a conference call and live webcast today, November 6, 2017, at 1:30 p.m. Eastern Time to review its financial condition and results for the 2017 third quarter, as well as its strategy and outlook. The review will be accompanied by a slide presentation which will be available on Rand's website at www.randcapital.com under the heading "Investor Relations." A question-and-answer session will follow the formal presentation.

Rand's conference call can be accessed by calling (201) 689-8263. Alternatively, the webcast can be monitored on Rand's website at www.randcapital.com under the heading "Investor Relations."

A telephonic replay will be available from approximately 4:30 p.m. Eastern Time today through Monday, November 13, 2017. To listen to the archived call, dial (412) 317-6671, and enter conference ID number 13671708. A transcript of the call will be placed on Rand's website, once available.

ABOUT RAND CAPITAL
Rand Capital (NASDAQ: RAND) provides investors the ability to participate in venture capital opportunities through an investment in the Company's stock. Rand is a Business Development Company (BDC), and its first wholly-owned subsidiary is licensed by the U.S. Small Business Administration (SBA) as a Small Business Investment Company (SBIC). Its second SBIC is undergoing the approval process with the SBA. Rand focuses its equity investments in early or expansion stage companies and generally lends to more mature companies. Rand looks for strong leadership who is bringing to market new or unique products, technologies or services that have a high potential for growth. Additional information can be found at the Company's website where it regularly posts information: http://www.randcapital.com/.

Safe Harbor Statement
This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements concerning future net asset value growth, investment returns and opportunities as well as Rand's plans for utilizing proceeds from sales of portfolio companies when and if received. These statements involve known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the results expressed or implied by such statements, including general economic and business conditions, conditions affecting the portfolio companies' markets, competitor responses, and market acceptance of their products and services and other factors disclosed in the Corporation's periodic reports filed with the Securities and Exchange Commission. Consequently, such forward-looking statements should be regarded as the Corporation's current plans, estimates and beliefs. The Corporation assumes no obligation to update the forward-looking information contained in this release.

FINANCIAL TABLES FOLLOW

 
Rand Capital Corporation and Subsidiaries
Consolidated Statements of Financial Position
             
    September 30,     December 31,  
    2017     2016  
    (Unaudited)        
ASSETS            
  Investments at fair value:                
    Control investments (cost of $99,500)   $ 99,500     $ 99,500  
    Affiliate investments (cost of $19,356,165 and $17,589,623, respectively)     14,706,841       13,605,974  
    Non-Control/Non-Affiliate investments (cost of $16,358,555 and $13,941,907, respectively)     15,889,347       13,795,007  
  Total investments, at fair value (cost of $35,814,220 and $31,631,030, respectively)     30,695,688       27,500,481  
  Cash     6,373,128       12,280,140  
  Interest receivable (net of allowance: $161,000)     202,562       324,237  
  Deferred tax asset     1,708,081       1,165,164  
  Prepaid income taxes     266,935       -  
  Other assets     584,010       1,148,508  
      Total assets   $ 39,830,404     $ 42,418,530  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (NET ASSETS)  
  Liabilities:                
  Debentures guaranteed by the SBA, net   $ 7,848,323     $ 7,827,773  
  Profit sharing and bonus payable     132,000       1,270,052  
  Accounts payable and accrued expenses     114,365       324,537  
  Deferred revenue     43,240       46,797  
  Income tax payable     -       320,008  
      Total liabilities     8,137,928       9,789,167  
                 
  Stockholders' equity (net assets):                
  Common stock, $.10 par; shares authorized 10,000,000; shares issued 6,863,034; shares outstanding of 6,321,988 as of 9/30/17 and 12/31/16    
686,304
     
686,304
 
  Capital in excess of par value     10,581,789       10,581,789  
  Accumulated net investment loss     (1,876,712 )     (1,577,848 )
  Undistributed net realized gain on investments     27,127,054       27,127,054  
  Net unrealized depreciation on investments     (3,356,854 )     (2,718,831 )
  Treasury stock, at cost; 541,046 shares     (1,469,105 )     (1,469,105 )
      Total stockholders' equity (net assets) (per share $5.01 at 9/30/17; $5.16 at 12/31/16)     31,692,476       32,629,363  
      Total liabilities and stockholders' equity (net assets)   $ 39,830,404     $ 42,418,530  
                       
 
Rand Capital Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
                         
    For the Quarter Ended
September 30,
    For the Nine Months Ended
September 30,
 
    2017     2016     2017     2016  
Investment income:                                
  Interest from portfolio companies:                                
    Control investments   $ -     $ -     $ -     $ 11,828  
    Affiliate investments     142,247       113,643       416,247       273,218  
    Non-Control/Non-Affiliate investments     167,675       110,395       417,406       240,027  
      Total interest from portfolio companies     309,922       224,038       833,653       525,073  
                                 
  Interest from other investments:                                
    Non-Control/Non-Affiliate investments     6,348       11,974       24,182       33,683  
      Total interest from other investments     6,348       11,974       24,182       33,683  
                                 
  Dividend and other investment income:                                
    Affiliate investments     74,408       69,010       189,805       149,807  
    Non-Control/Non-Affiliate investments     2,405       3,011       7,598       3,011  
      Total dividend and other investment income     76,813       72,021       197,403       152,818  
                                 
  Fee income:                                
    Control investments     -       -       -       2,000  
    Affiliate investments     2,166       2,083       6,250       3,945  
    Non-Control/Non-Affiliate investments     1,770       5,770       13,307       13,004  
      Total fee income     3,936       7,853       19,557       18,949  
Total investment income     397,019       315,886       1,074,795       730,523  
                                 
Expenses:                                
  Salaries     165,413       155,437       496,239       466,312  
  Bonus and profit sharing     -       -       -       1,411,659  
  Employee benefits     38,454       38,730       138,523       164,952  
  Directors' fees     36,374       47,380       107,623       142,135  
  Professional fees     48,433       86,938       310,628       237,986  
  Stockholders and office operating     45,355       50,846       193,290       174,882  
  Insurance     8,058       8,358       25,618       25,876  
  Corporate development     16,621       17,794       49,938       49,319  
  Other operating     2,772       3,495       8,055       9,470  
      361,480       408,978       1,329,914       2,682,591  
  Interest on SBA obligations     77,568       77,570       232,706       232,709  
  Total expenses     439,048       486,548       1,562,620       2,915,300  
Net investment loss before income taxes     (42,029 )     (170,662 )     (487,825 )     (2,184,777 )
  Income tax benefit     (17,050 )     (55,934 )     (188,961 )     (833,525 )
Net investment loss     (24,979 )     (114,728 )     (298,864 )     (1,351,252 )
                                 
Net realized gain on sales and dispositions of investments:                                
  Control investments     -       1,412,500       -       14,588,813  
  Non-Control/Non-Affiliate investments     -       -       -       168,140  
  Net realized gain before income tax expense     -       1,412,500       -       14,756,953  
  Income tax expense     -       526,862       -       5,504,343  
  Net realized gain on investments     -       885,638       -       9,252,610  
                                 
Net change in unrealized (depreciation) or appreciation on investments:                                
  Control investments     -       (1,412,500 )     -       (12,775,000 )
  Affiliate investments     -       (666,011 )     (665,675 )     (1,413,811 )
  Non-Control/Non-Affiliate investments     111,000       -       (322,308 )     69,444  
  Change in unrealized depreciation or appreciation before income tax expense (benefit)     111,000       (2,078,511 )     (987,983 )     (14,119,367 )
  Deferred income tax expense (benefit)     28,090       (736,301 )     (349,960 )     (5,231,097 )
  Net change in unrealized depreciation or appreciation on investments     82,910       (1,342,210 )     (638,023 )     (8,888,270 )
                                 
Net realized and unrealized gain (loss) on investments     82,910       (456,572 )     (638,023 )     364,340  
Net increase (decrease) in net assets from operations   $ 57,931     $ (571,300 )   $ (936,887 )   $ (986,912 )
Weighted average shares outstanding     6,321,988       6,325,299       6,321,988       6,327,074  
Basic and diluted net increase (decrease) in net assets from operations per share   $ 0.01     $ (0.09 )   $ (0.15 )   $ (0.16 )

Contacts:

Company:
Allen F. ("Pete") Grum
President and CEO
Phone: 716.853.0802
Email: pgrum@randcapital.com

Investors:
Deborah K. Pawlowski / Karen L. Howard
Kei Advisors LLC
Phone: 716.843.3908 / 716.843.3942
Email: dpawlowski@keiadvisors.com / khoward@keiadvisors.com

Source: Rand Capital Corporation