Rand Capital Announces First Quarter 2017 Results

BUFFALO, NY -- (Marketwired) -- 04/27/17 --

  • Filed a formal license application in April with the U.S. Small Business Administration ("SBA") to establish new Small Business Investment Company ("SBIC") fund in support of strategic growth plan
  • Invested $450,000 in three follow-on transactions during the first quarter
  • Net Asset Value per share was $5.10 at March 31

Rand Capital Corporation (NASDAQ: RAND) ("Rand"), a venture capital company which invests in early stage and emerging growth businesses with unique product, service or technology concepts, announced its results for the quarter ended March 31, 2017.

Allen F. ("Pete") Grum, President and Chief Executive Officer of Rand Capital, commented, "We continued to advance our long-term strategic growth plan with the filing of our formal license application with the SBA. The proposed new fund will become our primary investing vehicle and we will begin investing from the fund under the terms of the SBA's pre-licensing investment protocols prior to receiving our formal approval."

The Company previously announced that it had filed its license application to the SBA to form a new SBIC. The application was filed pursuant to the "Green Light" letter received from the SBA in December 2016 which invited Rand to continue its license application process. The combination of Rand's capital contribution of $7.5 million and the expected $15.0 million of SBA debentures creates Rand's second SBIC fund with $22.5 million in available investment capital.

Mr. Grum continued, "Our current portfolio of 33 companies continues to mature and several companies are analyzing various approaches to monetize their enterprise value. Although I cannot predict the timing of these exits, we are working with the companies to assist with their processes and enhance the likelihood of transactions."

First Quarter 2017 Financial Highlights

  • Reported $5.10 net asset value (NAV) per share at March 31, 2017, compared with $5.16 at December 31, 2016. Lower NAV reflects net unrealized loss on investments.
  • Supported three current portfolio companies with $450,000 of debt investments during the quarter:
  • Genicon, Inc. $300,000
  • Mercantile Adjustment Bureau, LLC $100,000
  • KnowledgeVision Systems, Inc. $ 50,000
  • Investment income increased 69% over the prior year period.
  • At March 31, 2017, portfolio fair value was $27.6 million and cash was $10.7 million, or approximately 33% of net assets.

Mr. Grum concluded, "With the exit of Gemcor and the receipt of a debt instrument repayment last year, we are actively seeking and investing in instruments that provide current investment income to offset our expenses. In the first quarter, our investment income increased to approximately $329,000 from approximately $194,000. We will continue on this path with the goal to have our investment income cover our expenses on an annual basis."

Total expenses in the first quarter were approximately $516,000.

Selected portfolio highlights:

  • Genicon, Inc. produces patented surgical instrumentation focused exclusively on laparoscopic, or minimally invasive, surgery. Genicon has been on a solid path of growth. Rand provided a $300,000 promissory note in the first quarter of 2017, supporting the company's global growth initiatives. This is Rand's fifth follow-on since the initial investment in April 2015, bringing its total investment in Genicon to $3.0 million as of March 31, 2017.
  • SciAps, Inc. develops portable analytical instruments which identify virtually any compound, mineral or element on earth. A customer recently announced a major breakthrough with the first use of handheld LIBS (laser-induced breakdown spectroscopy) to directly measure lithium in geological samples in Western Australia. SciAps recently successfully raised $1.9 million of capital to support its ongoing product development and growth initiatives. Rand holds a $2.1 million investment in SciAps as of March 31, 2017.
  • eHealth Global Technologies, Inc. is the industry-leading provider of clinically-informed referral services. The company serves more than half of the top 100 hospitals in the U.S. as well as the leading health information exchanges. The company recently announced that it plans to expand and add 84 jobs over the next three years, including customer service and research and development jobs. These investments will support eHealth's ability to digitally organize the growing volume of electronic medical records, facilitating advanced patient care services. Rand holds a $1.5 million investment in eHealth as of March 31, 2017.

As of March 31, 2017, Rand's portfolio consisted of 33 companies. At that date, the portfolio was comprised of approximately 63% in equity investments and 37% in debt investments, compared with 75% in equity investments and 25% in debt investments at the same time last year.

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 wholly-owned subsidiary is licensed by the U.S. Small Business Administration (SBA) as a Small Business Investment Company (SBIC). 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.

Rand Capital Corporation and Subsidiary  
Consolidated Statements of Financial Position  
    March 31,        
    2017     December 31,  
    (Unaudited)     2016  
  Investments at fair value:                
    Control investments (cost of $99,500 and $99,500, respectively)   $ 99,500     $ 99,500  
    Affiliate investments (cost of $17,947,514 and $17,589,623, respectively)     13,963,865       13,605,974  
    Non-Control/Non-Affiliate investments (cost of $14,046,954 and $13,941,907, respectively).     13,519,410       13,795,007  
  Total investments, at fair value (cost of $32,093,968 and $31,631,030, respectively     27,582,775       27,500,481  
  Cash     10,689,392       12,280,140  
  Interest receivable (net of allowance: $161,000 at 3/31/17 and 12/31/16)     368,140       324,237  
  Deferred tax asset     1,437,250       1,165,164  
  Other assets     726,643       1,148,508  
      Total assets   $ 40,804,200     $ 42,418,530  
  Debentures guaranteed by the SBA, net   $ 7,834,623     $ 7,827,773  
  Profit sharing and bonus payable     132,000       1,270,052  
  Income tax payable     391,119       320,008  
  Accounts payable and accrued expenses     136,465       324,537  
  Deferred revenue     40,111       46,797  
      Total liabilities     8,534,318       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 3/31/17 and 12/31/16     686,304       686,304  
  Capital in excess of par value     10,581,789       10,581,789  
  Accumulated net investment loss     (1,693,112 )     (1,577,848 )
  Undistributed net realized gain on investments     27,127,054       27,127,054  
  Net unrealized depreciation on investments     (2,963,048 )     (2,718,831 )
  Treasury stock, at cost; 541,046 shares as of 3/31/17 and 12/31/16     (1,469,105 )     (1,469,105 )
      Total stockholders' equity (net assets) (per share 3/31/17: $5.10, 12/31/16: $5.16)     32,269,882       32,629,363  
      Total liabilities and stockholders' equity (net assets)   $ 40,804,200     $ 42,418,530  
Rand Capital Corporation and Subsidiary  
Consolidated Statements of Operations  
    For the Quarter Ended
March 31,
    2017     2016  
Investment income:                
  Interest from portfolio companies:                
    Control investments   $ -     $ 11,828  
    Affiliate investments     136,757       64,962  
    Non-Control/Non-Affiliate investments     109,334       61,104  
      Total interest from portfolio companies     246,091       137,894  
  Interest from other investments:                
    Non-Control/Non-Affiliate investments     10,975       3,061  
      Total interest from other investments     10,975       3,061  
  Dividend and other investment income:                
    Affiliate investments     62,373       47,565  
    Non-Control/Non-Affiliate investments     2,512       -  
      Total dividend and other investment income     64,885       47,565  
  Fee income:                
    Control investments     -       2,000  
    Affiliate investments     917       695  
    Non-Control/Non-Affiliate investments     5,769       2,916  
      Total fee income     6,686       5,611  
Total investment income     328,637       194,131  
  Salaries     165,413       155,438  
  Bonus and profit sharing     -       1,411,659  
  Employee benefits     52,370       89,511  
  Directors' fees     34,875       47,375  
  Professional fees     84,002       64,760  
  Stockholders and office operating     67,210       62,494  
  Insurance     11,302       11,260  
  Corporate development     21,708       15,470  
  Other operating     1,960       3,600  
        438,840       1,861,567  
  Interest on SBA obligations     77,569       77,569  
  Total expenses     516,409       1,939,136  
Net investment loss before income taxes     (187,772 )     (1,745,005 )
  Income tax benefit     (72,508 )     (663,027 )
Net investment loss     (115,264 )     (1,081,978 )
Net realized gain on investments:                
  Control investments     -       13,176,313  
  Net realized gain before income tax expense     -       13,176,313  
  Income tax expense     -       4,942,961  
  Net realized gain on investments     -       8,233,352  
Net change in unrealized depreciation or appreciation on investments:                
  Control investments     -       (11,362,500 )
  Affiliate investments     -       (422,800 )
  Non-Control/Non-Affiliate investments     (380,644 )     -  
  Change in unrealized depreciation or appreciation before income tax benefit     (380,644 )     (11,785,300 )
  Deferred income tax benefit     (136,427 )     (4,416,406 )
  Net change in unrealized deprecation or appreciation on investments     (244,217 )     (7,368,894 )
Net realized and unrealized (loss) gain on investments     (244,217 )     864,458  
Net decrease in net assets from operations   $ (359,481 )   $ (217,520 )
Weighted average shares outstanding     6,321,988       6,328,538  
Basic and diluted net decrease in net assets from operations per share   $ (0.06 )   $ (0.04 )

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

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