10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2023

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

For the Transition Period from _____ to _______

Commission File Number: 814-00235

Rand Capital Corporation

(Exact Name of Registrant as specified in its Charter)


New York		16-0961359
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

1405 Rand Building, Buffalo, NY		14203
(Address of Principal executive offices)		(Zip Code)

(716) 853-0802

(Registrant’s telephone number, including area code)

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

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Common Stock, $0.10 par value

RAND

Nasdaq Capital Market

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

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

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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☐
		Emerging growth company	☐

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

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

As of August 4, 2023, there were 2,581,021 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, 2023 (Unaudited) and December 31, 2022	1
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	2
	Consolidated Statements of Changes in Net Assets for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	3
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (Unaudited)	4
	Consolidated Schedule of Portfolio Investments as of June 30, 2023 (Unaudited)	5
	Consolidated Schedule of Portfolio Investments as of December 31, 2022	13
	Notes to the Consolidated Financial Statements (Unaudited)	21
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	45
Item 4.	Controls and Procedures	46
PART II. – OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	48

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


	June 30, 2023 (Unaudited)			December 31, 2022
ASSETS
Investments at fair value:
Control investments (cost of $5,155,545 and $4,660,017, respectively)	$	4,031,735		$	3,536,207
Affiliate investments (cost of $35,940,068 and $30,204,160, respectively)		43,090,799			38,241,589
Non-Control/Non-Affiliate investments (cost of $19,873,405 and $20,852,060, respectively)		19,669,209			19,726,463
Total investments, at fair value (cost of $60,969,018 and $55,716,237, respectively)		66,791,743			61,504,259
Cash		8,356,401			1,368,996
Interest receivable		199,587			208,338
Prepaid income taxes		—			76,396
Deferred tax asset		174,826			28,160
Other assets		532,280			295,043
Total assets	$	76,054,837		$	63,481,192
LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS)
Liabilities:
Due to investment adviser	$	255,867		$	562,221
Accounts payable and accrued expenses		79,983			66,680
Income taxes payable		253,870			—
Line of credit (see Note 6)		10,650,000			2,550,000
Capital gains incentive fees		2,949,000			2,167,000
Deferred revenue		464,089			413,971
Total liabilities		14,652,809			5,759,872
Commitments and contingencies (See Note 5)
Stockholders’ equity (net assets):
Common stock, $0.10 par; shares authorized 100,000,000; shares issued: 2,648,916; shares outstanding: 2,581,021 at 6/30/23 and 12/31/22		264,892			264,892
Capital in excess of par value		51,464,267			51,464,267
Treasury stock, at cost: 67,895 shares at 6/30/23 and 12/31/22		(1,566,605	)		(1,566,605	)
Total distributable earnings		11,239,474			7,558,766
Total stockholders’ equity (net assets) (per share –6/30/23: $23.79; 12/31/22: $22.36)		61,402,028			57,721,320
Total liabilities and stockholders’ equity (net assets)	$	76,054,837		$	63,481,192

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended June 30, 2023			Three months ended June 30, 2022			Six months ended June 30, 2023			Six months ended June 30, 2022
Investment income:
Interest from portfolio companies:
Control investments	$	179,922		$	—		$	330,838		$	—
Affiliate investments		941,201			614,997			1,729,022			1,185,113
Non-Control/Non-Affiliate investments		352,417			389,835			710,583			731,858
Total interest from portfolio companies		1,473,540			1,004,832			2,770,443			1,916,971
Interest from other investments:
Non-Control/Non-Affiliate investments		104			1			236			1
Total interest from other investments		104			1			236			1
Dividend and other investment income:
Affiliate investments		59,677			202,785			406,825			246,510
Non-Control/Non-Affiliate investments		132,920			113,735			260,515			243,000
Total dividend and other investment income		192,597			316,520			667,340			489,510
Fee income:
Control investments		4,311			—			8,211			—
Affiliate investments		138,902			22,515			206,744			52,820
Non-Control/Non-Affiliate investments		5,978			9,314			13,956			18,628
Total fee income		149,191			31,829			228,911			71,448
Total investment income		1,815,432			1,353,182			3,666,930			2,477,930
Expenses:
Base management fee (see Note 8)		255,867			230,767			501,260			471,042
Capital gains incentive fees (see Note 8)		491,000			(663,000	)		782,000			(902,760	)
Interest expense		258,912			—			417,312			—
Professional fees		100,307			212,138			271,282			443,221
Stockholders and office operating		85,080			64,890			149,384			121,588
Directors' fees		67,391			44,883			131,241			89,983
Administrative fees		37,250			—			74,500			—
Insurance		10,380			13,353			23,340			22,263
Corporate development		554			726			4,267			3,753
Other operating		—			45			—			90
Total expenses		1,306,741			(96,198	)		2,354,586			249,180
Net investment income before income taxes:		508,691			1,449,380			1,312,344			2,228,750
Income taxes, including excise tax expense		16,061			31,243			104,798			38,610
Net investment income		492,630			1,418,137			1,207,546			2,190,140
Net realized gain on sales and dispositions of investments:
Affiliate investments		2,537,765			167,159			2,596,094			167,159
Non-Control/Non-Affiliate investments		1,280,482			1,372,984			1,275,541			521,513
Net realized gain on sales and dispositions of investments, before income taxes		3,818,247			1,540,143			3,871,635			688,672
Income tax expense		338,158			—			338,158			—
Net realized gain on sales and dispositions of investments		3,480,089			1,540,143			3,533,477			688,672
Net change in unrealized appreciation/depreciation on investments:
Affiliate investments		(886,698	)		47,841			(886,698	)		47,841
Non-Control/Non-Affiliate investments		(480,572	)		(4,902,510	)		921,401			(5,233,579	)
Change in unrealized appreciation/depreciation before income taxes		(1,367,270	)		(4,854,669	)		34,703			(5,185,738	)
Deferred income tax benefit		(66,441	)		—			(66,441	)		—
Net change in unrealized appreciation/depreciation on investments		(1,300,829	)		(4,854,669	)		101,144			(5,185,738	)
Net realized and unrealized gain (loss) on investments		2,179,260			(3,314,526	)		3,634,621			(4,497,066	)
Net increase (decrease) in net assets from operations	$	2,671,890		$	(1,896,389	)	$	4,842,167		$	(2,306,926	)
Weighted average shares outstanding		2,581,021			2,581,021			2,581,021			2,581,021
Basic and diluted net increase (decrease) in net assets from operations per share	$	1.04		$	(0.73	)	$	1.88		$	(0.89	)

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)


	Three months ended June 30, 2023			Three months ended June 30, 2022			Six months ended June 30, 2023			Six months ended June 30, 2022
Net assets at beginning of period	$	59,375,393		$	59,947,726		$	57,721,320		$	60,745,416
Net investment income		492,630			1,418,137			1,207,546			2,190,140
Net realized gain on sales and dispositions of investments		3,480,089			1,540,143			3,533,477			688,672
Net change in unrealized appreciation/depreciation on investments		(1,300,829	)		(4,854,669	)		101,144			(5,185,738	)
Net increase (decrease) in net assets from operations		2,671,890			(1,896,389	)		4,842,167			(2,306,926	)
Declaration of dividend		(645,255	)		(387,153	)		(1,161,459	)		(774,306	)
Net assets at end of period	$	61,402,028		$	57,664,184		$	61,402,028		$	57,664,184

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six months ended June 30, 2023			Six months ended June 30, 2022
Cash flows from operating activities:
Net increase (decrease) in net assets from operations	$	4,842,167		$	(2,306,926	)
Adjustments to reconcile net increase (decrease) in net assets to net cash provided by operating activities:
Investments in portfolio companies		(10,260,000	)		(2,742,086	)
Proceeds from sale of portfolio investments		5,907,298			3,527,630
Proceeds from loan repayments		3,511,481			90,175
Net realized gain on sales and dispositions of portfolio investments		(3,871,635	)		(688,672	)
Change in unrealized (appreciation) depreciation on investments		(34,703	)		5,185,738
Deferred income tax benefit		(146,666	)		(58,155	)
Amortization		12,500			—
Original issue discount amortization		(13,004	)		(12,504	)
Non-cash conversion of debenture interest		(521,980	)		(290,591	)
Changes in operating assets and liabilities:
Decrease (increase) in interest receivable		8,751			(65,760	)
Increase in other assets		(254,678	)		(178,635	)
Decrease in prepaid income taxes		76,396			245,650
Increase in income taxes payable		253,870			—
Increase in accounts payable and accrued expenses		13,303			4,244
Decrease in due to investment adviser		(306,354	)		(660,321	)
Increase (decrease) in capital gains incentive fees payable		782,000			(902,760	)
Increase (decrease) in deferred revenue		50,118			(17,450	)
Total adjustments		(4,793,303	)		3,436,503
Net cash provided by operating activities		48,864			1,129,577
Cash flows from financing activities:
Proceeds from line of credit		8,100,000			—
Payment of cash dividend		(1,161,459	)		(774,306	)
Net cash provided by (used in) financing activities		6,938,541			(774,306	)
Net increase in cash		6,987,405			355,271
Cash:
Beginning of period		1,368,996			833,875
End of period	$	8,356,401		$	1,189,146

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2023

(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 – 32.0% of net assets: (g) (j)
ACV Auctions, Inc. (e)(n) NASDAQ: ACVA	194,934 shares of Class A Common Stock valued at $17.32 per share.	8/12/16	<1%	$	53,094	$	3,376,907	5.5%
Buffalo, NY. Live mobile wholesale auctions for new and used car dealers. (Software)
www.acvauctions.com
Ares Capital Corporation (n) NASDAQ: ARCC New York, NY. (BDC Investment Fund)	21,000 shares.	3/16/20	<1%		267,140		393,470	0.6%
Barings BDC, Inc. (n) NYSE: BBDC New York, NY. (BDC Investment Fund)	40,000 shares.	8/13/20	<1%		333,352		314,000	0.5%
Caitec, Inc. (l) Halethorpe, MD. Pet product manufacturer and distributor. (Consumer Goods)	$1,750,000 Subordinated Secured Promissory Note at 12% (+2% PIK) due June 1, 2026.	11/6/20	4%		1,846,399		1,846,399	6.5%
www.caitec.com	150 Class A Units.	11/6/20			150,000		150,000
	$1,750,000 Subordinated Secured Promissory Note at 12% (+2% PIK) due June 1, 2026.	11/6/20			1,846,399		1,846,399
	150 Class A Units.	11/6/20			150,000		150,000
	Total Caitec				3,992,798		3,992,798
Carlyle Secured Lending Inc. (n) NASDAQ: CGBD New York, NY. (BDC Investment Fund)	86,000 shares.	8/13/20	<1%		899,749		1,263,340	2.0%
FS KKR Capital Corp. (n) NYSE: FSK Philadelphia, PA. (BDC Investment Fund)	48,000 shares.	3/16/20	<1%		755,058		916,800	1.5%
GoNoodle, Inc. (l) Nashville, TN. Student engagement education	$1,500,000 Secured Note at 12% (1% PIK) due September 30, 2024.	11/1/19	<1%		1,418,835		1,418,835	2.3%
software providing core aligned physical	Warrant for 47,324 Series C Preferred.	3/1/15			25		25
activity breaks. (Software)	Warrant for 21,948 Series D Preferred.	11/1/19			38		38
www.gonoodle.com	Total GoNoodle				1,418,898		1,418,898
HDI Acquisition LLC (Hilton Displays) (h) (l) Greenville, NC. Manufacturing, installation	$1,245,119 Term Loan at 12% (+2% PIK) due June 30, 2025.	11/8/19	0%		1,039,650		1,039,650	1.7%
and maintenance of signage and brands. (Manufacturing)
www.hiltondisplays.com
Lumious (Tech 2000, Inc.) Herndon, VA. Develops and delivers IT	$850,000 Replacement Term Note at 14% due December 1, 2024.	11/16/18	0%		789,944		789,944	1.3%
training. (Software)
www.t2000inc.com
Mattison Avenue Holdings LLC (l) Dallas, TX. Provider of upscale salon spaces for lease. (Professional Services)	$1,794,944 Third Amended, Restated and Consolidated Promissory Note at 12% (+2% PIK) due December 9, 2023.	6/23/21	0%		1,875,252		1,875,252	3.1%
www.mattisonsalonsuites.com

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2023 (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
Nailbiter, Inc. Reston, VA. Video-metrics data analytics supporting name brand Consumer Products Groups (CPG) shopping behavioral insight. (Professional Services)	$2,250,000 Membership Interest of USB Focus Fund Nailbiter I, LLC with economic interest of $2,250,000 Subordinated Secured Promissory Note at net 9% due November 23, 2024.	11/22/21	<1%		2,250,000		2,250,000	3.7%
www.nailbiter.com	Warrants for Preferred Stock.	11/22/21			—		—
	Total Nailbiter				2,250,000		2,250,000
	(i) Interest Receivable $52,901
OnCore Golf Technology, Inc. (e) Buffalo, NY. Patented and proprietary golf balls utilizing technology and innovation. (Consumer Product) www.oncoregolf.com	300,483 Preferred AA.	11/30/18	3%		752,712		100,000	0.2%
Open Exchange, Inc. (e)	397,899 Series C Preferred.	11/13/13	3%		1,193,697		700,000	1.1%
Lincoln, MA. Online presentation and training	397,899 Common.	10/22/19			208,243		—
software. (Software)	Total Open Exchange				1,401,940		700,000
www.openexc.com
PennantPark Investment Corporation (n) NASDAQ: PNNT New York, NY. (BDC Investment Fund)	195,000 shares.	8/13/20	<1%		892,212		1,138,150	1.8%
PostProcess Technologies, Inc. (e) Buffalo, NY. Provides innovative solutions for the post-processing of additive manufactured 3D parts. (Manufacturing) www.postprocess.com	360,002 Series A1 Preferred.	11/1/19	<1%		348,875		100,000	0.2%
Rheonix, Inc. (e)	9,676 Common.	10/29/09	4%		—		—	0.0%
Ithaca, NY. Developer of fully automated	1,839,422 Series A Preferred.	12/12/13			2,099,999		—
microfluidic based molecular assay and	50,593 Common.	10/24/09			—		—
diagnostic testing devices. (Health Care)	589,420 Series B Preferred.	9/29/15			702,732		—
www.rheonix.com	Total Rheonix				2,802,731		—
Subtotal Non-Control/Non-Affiliate Investments				$	19,873,405	$	19,669,209
Affiliate Investments – 70.2% of net assets (g) (k)
Applied Image, Inc. Rochester, NY. Global supplier of precision	$1,750,000 Term Note at 10% due February 1, 2029.	12/31/21	12%		1,750,000		1,750,000	2.8%
imaged optical components and calibration	Warrant for 1,167 shares.	12/31/21			—		—
standards for a wide range of industries and	Total Applied Image				1,750,000		1,750,000
applications. (Manufacturing) www.appliedimage.com
BMP Food Service Supply Holdco, LLC (h)(m)	$4,820,000 Term Note at 12% due November 22, 2027.	11/22/22	17%		4,779,953		4,779,953	8.4%
Salt Lake City, UT. Provides design,	16.7% Preferred Interest.	11/22/22			390,000		390,000
distribution, and installation services for	Total BMP Food Service Supply				5,169,953		5,169,953
commercial kitchen renovations and new builds. (Professional Services) www.foodservicesupply.com
BMP Swanson Holdco, LLC (l) (m) Plano, TX. Designs, installs, and maintains a	$1,600,000 Term Note at 12% due September 4, 2026.	3/4/21	9%		1,649,026		1,649,026	3.1%
variety of fire protection systems.	Preferred Membership Interest for 9.29%.	3/4/21			233,333		233,333
(Professional Services)	Total BMP Swanson				1,882,359		1,882,359
www.swansonfire.com

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2023 (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
Carolina Skiff LLC (m) Waycross, GA. Manufacturer of ocean fishing	6.0825% Class A Common Membership Interest.	1/30/04	7%		15,000		1,957,000	3.2%
and pleasure boats. (Manufacturing) www.carolinaskiff.com
Filterworks Acquisition USA, LLC DBA Autotality (l)(m) Deerfield Beach, FL. Provides spray booth equipment, frame repair machines and paint booth filter services for collision shops.	$2,283,702 Term Note modified to 3% (+11% PIK) through June 30, 2023, then 6% (+8% PIK) through November 30, 2023, thereafter 12% (+2% PIK), due August 30, 2024.	11/18/19	8%		2,780,743		2,780,743	5.2%
(Automotive)	626.2 shares Class A-1 Units.	6/3/22			626,243		256,994
www.autotality.com	417.7 shares Class A-0 Units.	9/30/22			139,232		139,232
	Total Filterworks				3,546,218		3,176,969
Inter-National Electronic Alloys LLC (l)(m) Oakland, NJ. Stocking distributor of controlled	$3,288,235 Term Note at 12% (+2% PIK) due April 4, 2028.	4/4/23	6%		3,304,154		3,304,154	7.0%
expansion alloys, electronic grade nickels,	75.3 Class B Preferred Units.	4/4/23			1,011,765		1,011,765
refractory grade metals and alloys, and soft	Total INEA				4,315,919		4,315,919
magnetic alloys. (Distribution) www.nealloys.com
Knoa Software, Inc.	973,533 Series A-1 Convertible Preferred.	11/20/12	7%		750,000		—	0.2%
New York, NY. End user experience	1,876,922 Series B Preferred.	6/9/14			479,155		100,000
management and performance (EMP) solutions	Total Knoa				1,229,155		100,000
utilizing enterprise applications. (Software)
www.knoa.com
Mezmeriz, Inc. (e)	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
Pressure Pro, Inc. (l) Harrisonville, MO. A provider of branded tire	$3,000,000 Term Note at 12% (+3% PIK) due January 19, 2028.	1/19/23	10%		3,013,635		3,013,635	4.9%
pressure monitoring systems consisting	Warrant for 10% Membership Interest.	1/19/23			30,000		30,000
of a suite of proprietary hardware	Total Pressure Pro				3,043,635		3,043,635
and software. (Manufacturing)
www.pressurepro.us
SciAps, Inc.	187,500 Series A Preferred.	7/12/13	6%		1,500,000		1,500,000	8.5%
Woburn, MA. Instrumentation company	274,299 Series A1 Convertible Preferred.	4/4/14			504,710		504,710
producing portable analytical devices using	117,371 Series B Convertible Preferred.	8/31/15			250,000		250,000
XRF, LIBS and RAMAN spectroscopy to	113,636 Series C Convertible Preferred.	4/7/16			175,000		175,000
identify compounds, minerals, and elements.	369,698 Series C1 Convertible Preferred.	4/7/16			399,274		399,274
(Manufacturing)	147,059 Series D Convertible Preferred.	5/9/17			250,000		250,000
www.sciaps.com	Warrant to purchase Series D-1 Preferred.	5/9/17			45,000		45,000
	$2,090,000 Second Amended and Restated Secured Subordinated Promissory Note at 12% due August 20, 2024.	8/20/21			2,090,000		2,090,000
	Total SciAps				5,213,984		5,213,984
Seybert’s Billiards Corporation (l) Coldwater, MI. Billiard supplies.	$4,139,444 Term Note at 12% (+2% PIK) due January 19, 2026.	11/22/21	8%		4,228,943		4,228,943	9.7%
(Consumer Product)	Warrant for 4% Membership Interest.	1/19/21			25,000		25,000
www.seyberts.com	$1,435,435 Term Note at 12% (+2% PIK) due January 19, 2026.	1/19/21			1,458,037		1,458,037
	Warrant for 4% Membership Interest.	1/19/21			25,000		25,000
	5.82 Common shares.	10/24/22			194,000		194,000
	Total Seybert’s				5,930,980		5,930,980

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2023 (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
Tilson Technology Management, Inc.	*120,000 Series B Preferred.	1/20/15	9%		600,000		4,559,500		17.2%
Portland, ME. Provides network deployment	*21,391 Series C Preferred.	9/28/16			200,000		812,800
construction and information system services	*70,176 Series D Preferred.	9/29/17			800,000		2,666,400
management for cellular, fiber optic and	*15,385 Series E Preferred.	3/15/19			500,012		584,500
wireless systems providers. Its affiliated	23,077 Series F Preferred.	6/15/20			750,003		876,800
entity, SQF, LLC is a CLEC supporting	211,567 A-1 Units of SQF Holdco LLC.	3/15/19			—		800,000
small cell 5G deployment.	250 Class D-1 Units of SQF Holdco LLC.	2/16/23			250,000		250,000
(Professional Services)	Total Tilson				3,100,015		10,550,000
www.tilsontech.com	*2.5% dividend payable quarterly.
Subtotal Affiliate Investments				$	35,940,068	$	43,090,799
Control Investments - 6.6% of net assets (o)
ITA Acquisition, LLC (l)(m) Ormond Beach, FL. Blind and shade manufacturing. (Manufacturing)	$2,297,808 Amended and Restated Term Note at 12% (+5% PIK) due June 21, 2026.	6/22/21	37%		2,426,675		2,426,675		6.6%
www.itawindownfashions.com	$1,500,000 Term Note at 12% (+5% PIK) due June 21, 2026.	6/22/21			1,605,060		1,605,060
	1,124 Class A Preferred Units and 1,924 Class B Common Units.	6/22/21			1,123,810		—
	Total ITA				5,155,545		4,031,735
Subtotal Control Investments				$	5,155,545	$	4,031,735
TOTAL INVESTMENTS – 108.8%				$	60,969,018	$	66,791,743
LIABILITIES IN EXCESS OF OTHER ASSETS - (8.8%)							(5,389,715	)
NET ASSETS – 100%						$	61,402,028

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2023 (Continued)

(Unaudited)

Notes to the Consolidated Schedule of Portfolio Investments

(a)

At June 30, 2023, restricted securities represented 89% 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.

(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, 2023, ASC 820 designates 89% 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 in good faith by our external investment advisor Rand Capital Management, LLC (“RCM”) and approved by the Board of Directors. 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, 2023, the total cost of investment securities was approximately $61.0 million. Net unrealized appreciation was approximately $5.8 million, which was comprised of $13.6 million of unrealized appreciation of investment securities and ($7.8) million of unrealized depreciation of investment securities. At June 30, 2023, the aggregate gross unrealized gain for federal income tax purposes was $13.6 million and the aggregate gross unrealized loss for federal income tax purposes was ($6.9) million. The net unrealized gain for federal income tax purposes was $6.7 million based on a tax cost of $60.5 million.

(g)

All of the Corporation’s portfolio assets are pledged as collateral for purposes of securing the Corporation’s senior secured revolving credit facility pursuant to a general security agreement, dated June 27, 2022, between the Corporation, the subsidiaries listed therein, and the Lender (as defined herein).

(h)

Reduction in cost and fair 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 Sub LLC for federal income tax and Regulated Investment Company (RIC) compliance.

(n)

Publicly traded company.

(o)

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, 2023 (Continued)

(Unaudited)

Investments in and Advances to Affiliates


Company	Type of Investment	January 1, 2023, Fair Value		Net Change in Unrealized Appreciation (Depreciation)			Gross Additions (1)		Gross Reductions (2)			June 30, 2023, Fair Value		Net Realized Gains (Losses)		Amount of Interest/ Dividend/ Fee Income (3)
Control Investments:
ITA Acquisition, LLC	$2,297,808 Amended and Restated Term Note at 12% (+5% PIK) due June 21, 2026.	$	1,976,116	$	—		$	450,559	$	—		$	2,426,675	$	—	$	194,492
	$1,500,000 Term Note at 12% (+5% PIK) due June 21, 2026.		1,560,091		—			44,969		—			1,605,060		—		144,557
	1,124 Class A Preferred Units and 1,924 Class B Common Units.		—		—			—		—			—		—		—
	Total ITA		3,536,207		—			495,528		—			4,031,735		—		339,049
	Total Control Investments	$	3,536,207	$	—		$	495,528	$	—		$	4,031,735	$	—	$	339,049
Affiliate Investments:
Applied Image, Inc.	$1,750,000 Term Note at 10% due February 1, 2029.	$	1,750,000	$	—		$	—	$	—		$	1,750,000	$	—	$	91,038
	Warrant for 1,167 shares.		—		—			—		—			—		—		—
	Total Applied Image		1,750,000		—			—		—			1,750,000		—		91,038
BMP Food Service Supply Holdco, LLC	$4,820,000 Term Note at 12% due November 22, 2027.		2,500,000		—			2,320,000		(40,047	)		4,779,953		—		312,708
	16.7% Preferred Interest.		600,000		—			—		(210,000	)		390,000		—		—
	Total FSS		3,100,000		—			2,320,000		(250,047	)		5,169,953		—		312,708
BMP Swanson Holdco, LLC	$1,600,000 Term Note at 12% due September 4, 2026.		1,600,000		—			49,026		—			1,649,026		—		100,360
	Preferred Membership Interest for 9.29%.		233,333		—			—		—			233,333		—		—
	Total BMP Swanson		1,833,333		—			49,026		—			1,882,359		—		100,360
Carolina Skiff LLC	6.0825% Class A Common Membership Interest.		1,957,000		—			—		—			1,957,000		—		299,173
DSD Operating, LLC	$3,063,276 Term Note at 12% (+2% PIK) due September 30, 2026.		3,139,782		—			31,652		(3,171,434	)		—		—		324,000
	1,067 Class A Preferred shares.		1,954,198		(886,698	)		—		(1,067,500	)		—		2,537,765		62,565
	1,067 Class B Common shares.		—		—			—		—			—		—		—
	Total DSD		5,093,980		(886,698	)		31,652		(4,238,934	)		—		2,537,765		386,565
Filterworks Acquisition USA, LLC	$2,283,702 Term Note modified to 3% (+11% PIK) through June 30, 2023, then 6% (+8% PIK) through November 30, 2023, thereafter 12% (+2% PIK), due August 30, 2024.		2,633,105		—			147,638		—			2,780,743		—		187,903
	626.2 shares Class A-1 Units.		256,994		—			—		—			256,994		—		—
	417.7 shares Class A-0 Units.		139,232		—			—		—			139,232		—		—
	Total Filterworks		3,029,331		—			147,638		—			3,176,969		—		187,903
Inter-National Electronic Alloys LLC	$3,288,235 Term Note at 12% (+2% PIK) due April 4, 2028.		—		—			3,304,154		—			3,304,154		—		114,719
	75.3 Class B Preferred Units.		—		—			1,011,765		—			1,011,765		—		—
	Total INEA		—		—			4,315,919		—			4,315,919		—		114,719
Knoa Software, Inc.	973,533 Series A-1 Convertible Preferred.		—		—			—		—			—		—		34,850
	1,876,922 Series B Preferred.		100,000		—			—		—			100,000		—		—
	Total Knoa		100,000		—			—		—			100,000		—		34,850
Mezmeriz, Inc.	1,554,565 Series Seed Preferred.		—		—			—		—			—		—		—
Microcision LLC	Membership Interest Purchase Warrant for 5%.		—		—			—		—			—		58,329		—
Pressure Pro, Inc.	$3,000,000 Term Note at 12% (+3% PIK) due January 19, 2028.		—		—			3,013,635		—			3,013,635		—		231,573
	Warrant for 10% Membership Interest.		—		—			30,000		—			30,000		—		—
	Total Pressure Pro		—		—			3,043,635		—			3,043,635		—		231,573

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2023 (Continued)

(Unaudited)


Company	Type of Investment	January 1, 2023, Fair Value		Net Change in Unrealized Appreciation (Depreciation)			Gross Additions (1)		Gross Reductions (2)			June 30, 2023, Fair Value		Net Realized Gains (Losses)		Amount of Interest/ Dividend/ Fee Income (3)
SciAps, Inc.	187,500 Series A Preferred.		1,500,000		—			—		—			1,500,000		—		—
	274,299 Series A1 Convertible Preferred.		504,710		—			—		—			504,710		—		—
	117,371 Series B Convertible Preferred.		250,000		—			—		—			250,000		—		—
	113,636 Series C Convertible Preferred.		175,000		—			—		—			175,000		—		—
	369,698 Series C1 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		—		—
	$2,090,000 Second Amended and Restated Secured Subordinated Promissory Note at 12% due August 20, 2024.		2,085,000		—			5,000		—			2,090,000		—		135,900
	Total SciAps		5,208,984		—			5,000		—			5,213,984		—		135,900
Seybert’s Billiards Corporation	$4,139,444 Term Note at 12% (+2% PIK) due January 19, 2026.		4,184,106		—			44,837		—			4,228,943		—		312,488
	Warrant for 4% Membership Interest.		25,000		—			—		—			25,000		—		—
	$1,435,435 Term Note at 12% (+2% PIK) due January 19, 2026.		1,440,855		—			17,182		—			1,458,037		—		109,064
	Warrant for 4% Membership Interest.		25,000		—			—		—			25,000		—		—
	5.82 Common shares.		194,000		—			—		—			194,000		—		—
	Total Seybert’s		5,868,961		—			62,019		—			5,930,980		—		421,552
Tilson Technology	120,000 Series B Preferred.		4,559,500		—			—		—			4,559,500		—		26,250
Management, Inc.	21,391 Series C Preferred.		812,800		—			—		—			812,800		—		—
	70,176 Series D Preferred.		2,666,400		—			—		—			2,666,400		—		—
	15,385 Series E Preferred.		584,500		—			—		—			584,500		—		—
	23,077 Series F Preferred.		876,800		—			—		—			876,800		—		—
	211,567 A-1 Units of SQF Holdco LLC.		800,000		—			—		—			800,000		—		—
	250 Class D-1 Units of SQF Holdco LLC.		—		—			250,000		—			250,000		—		—
	Total Tilson		10,300,000		—			250,000		—			10,550,000		—		26,250
	Total Affiliate Investments	$	38,241,589	$	(886,698	)	$	10,224,889	$	(4,488,981	)	$	43,090,799	$	2,596,094	$	2,342,591
	Total Control and Affiliate Investments	$	41,777,796	$	(886,698	)	$	10,720,417	$	(4,488,981	)	$	47,122,534	$	2,596,094	$	2,681,640

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.

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2023 (Continued)

(Unaudited)


Industry Classification	Percentage of Total Investments (at fair value) as of June 30, 2023
Professional Services		32.5	%
Manufacturing		25.7
Consumer Product		15.0
Software		9.5
Distribution		6.5
BDC Investment Funds		6.0
Automotive		4.8
Total Investments		100	%

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2022


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 – 34.2% of net assets: (g) (j)
ACV Auctions, Inc. (e)(n) NASDAQ: ACVA	319,934 shares of Class A Common Stock valued at $7.87 per share.	8/12/16	<1%	$	87,219	$	2,517,881	4.4%
Buffalo, NY. Live mobile wholesale auctions for new and used car dealers. (Software)
www.acvauctions.com
Ares Capital Corporation (n) NASDAQ: ARCC New York, NY. (BDC Investment Fund)	21,000 shares.	3/16/20	<1%		267,140		389,130	0.7%
Barings BDC, Inc. (n) NYSE: BBDC New York, NY. (BDC Investment Fund)	40,000 shares.	8/13/20	<1%		333,352		326,400	0.6%
Caitec, Inc. (l) Halethorpe, MD. Pet product manufacturer and distributor. (Consumer Goods)	$1,750,000 Subordinated Secured Promissory Note at 12% (+2% PIK) due June 1, 2026.	11/6/20	4%		1,827,941		1,827,941	6.9%
www.caitec.com	150 Class A Units.	11/6/20			150,000		150,000
	$1,750,000 Subordinated Secured Promissory Note at 12% (+2% PIK) due June 1, 2026.	11/6/20			1,827,941		1,827,941
	150 Class A Units.	11/6/20			150,000		150,000
	Total Caitec				3,955,882		3,955,882
Carlyle Secured Lending Inc. (formerly TCG BDC, Inc.) (n) NASDAQ: CGBD New York, NY. (BDC Investment Fund)	86,000 shares.	8/13/20	<1%		899,749		1,229,227	2.1%
FS KKR Capital Corp. (n) NYSE: FSK Philadelphia, PA. (BDC Investment Fund)	48,000 shares.	3/16/20	<1%		755,058		835,360	1.4%
GoNoodle, Inc. (h) (l) Nashville, TN. Student engagement education	$1,500,000 Secured Note at 12% (1% PIK) due September 30, 2024.	11/1/19	<1%		1,411,768		1,411,768	2.4%
software providing core aligned physical	Warrant for 47,324 Series C Preferred.	3/1/15			25		25
activity breaks. (Software)	Warrant for 21,948 Series D Preferred.	11/1/19			38		38
www.gonoodle.com	Total GoNoodle				1,411,831		1,411,831
HDI Acquisition LLC (Hilton Displays) (l) Greenville, NC. Manufacturing, installation	$1,245,119 Term Loan at 12% (+2% PIK) due June 20, 2023.	11/8/19	0%		1,327,782		1,327,782	2.3%
and maintenance of signage and brands. (Manufacturing)
www.hiltondisplays.com
Lumious (Tech 2000, Inc.) (h) Herndon, VA. Develops and delivers IT	$850,000 Replacement Term Note at 14% due November 15, 2023.	11/16/18	0%		789,944		789,944	1.4%
training. (Software)
www.t2000inc.com
Mattison Avenue Holdings LLC (l) Dallas, TX. Provider of upscale salon spaces for lease. (Professional Services)	$1,794,944 Third Amended, Restated and Consolidated Promissory Note at 12% (2% PIK) due December 9, 2023.	6/23/21	0%		1,856,536		1,856,536	3.2%
www.mattisonsalonsuites.com

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2022 (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
Nailbiter, Inc. Reston, VA. Video-metrics data analytics supporting name brand Consumer Products Groups (CPG) shopping behavioral insight. (Professional Services)	$2,250,000 Membership Interest of USB Focus Fund Nailbiter I, LLC with economic interest of $2,250,000 Subordinated Secured Promissory Note at net 9% due November 23, 2024.	11/22/21	<1%		2,250,000		2,250,000	3.9%
www.nailbiter.com	Warrants for Preferred Stock.				—		—
	Total Nailbiter, Inc.				2,250,000		2,250,000
OnCore Golf Technology, Inc. (e) Buffalo, NY. Patented and proprietary golf balls utilizing technology and innovation. (Consumer Product) www.oncoregolf.com	300,483 Preferred AA.	11/30/18	3%		752,712		100,000	0.2%
Open Exchange, Inc. (e)	397,899 Series C Preferred.	11/13/13	3%		1,193,697		1,193,697	2.4%
Lincoln, MA. Online presentation and training	397,899 Common.	10/22/19			208,243		208,243
software. (Software)	Total Open Exchange				1,401,940		1,401,940
www.openexc.com
PennantPark Investment Corporation (n) NASDAQ: PNNT New York, NY. (BDC Investment Fund)	195,000 shares.	8/13/20	<1%		892,212		1,109,550	1.9%
PostProcess Technologies, Inc. (e) Buffalo, NY. Provides innovative solutions for the post-processing of additive manufactured 3D parts. (Manufacturing) www.postprocess.com	360,002 Series A1 Preferred.	11/1/19	<1%		348,875		100,000	0.2%
Rheonix, Inc. (e)	9,676 Common.	10/29/09	4%		—		—	0.0%
Ithaca, NY. Developer of fully automated	1,839,422 Series A Preferred.	12/12/13			2,099,999		—
microfluidic based molecular assay and	50,593 Common.	10/24/09			—		—
diagnostic testing devices. (Health Care)	589,420 Series B Preferred.	9/29/15			702,732		—
www.rheonix.com	Total Rheonix				2,802,731		—
Somerset Gas Transmission Company, LLC (e)(m) Columbus, OH. Natural gas transportation. (Oil and Gas) www.somersetgas.com	26.5337 Units.	4/1/05	3%		719,097		125,000	0.2%
Subtotal Non-Control/Non-Affiliate Investments				$	20,852,060	$	19,726,463
Affiliate Investments – 66.3% of net assets (g) (k)
Applied Image, Inc. Rochester, NY. Global supplier of precision	$1,750,000 Term Note at 10% due February 1, 2029.	12/31/21	12%		1,750,000		1,750,000	3.0%
imaged optical components and calibration	Warrant for 1,167 shares.	12/31/21			—		—
standards for a wide range of industries and	Total Applied Image				1,750,000		1,750,000
applications. (Manufacturing) www.appliedimage.com
BMP Food Service Supply Holdco, LLC (m) Salt Lake City, UT. Provides design,	$2,500,000 Term Note at 12% due November 22, 2027.	11/22/22	24%		2,500,000		2,500,000	5.4%
distribution, and installation services for	24.83% Preferred Interest				600,000		600,000
commercial kitchen renovations and new builds.	Total BMP Food Service Supply				3,100,000		3,100,000
(Professional Services) www.foodservicesupply.com
BMP Swanson Holdco, LLC (m) Plano, TX. Designs, installs, and maintains a	$1,600,000 Term Note at 12% due September 4, 2026.	3/4/21	9%		1,600,000		1,600,000	3.2%
variety of fire protection systems.	Preferred Membership Interest for 9.29%.	3/4/21			233,333		233,333
(Professional Services)	Total BMP Swanson				1,833,333		1,833,333
www.swansonfire.com

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2022 (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
Carolina Skiff LLC (m) Waycross, GA. Manufacturer of ocean fishing	6.0825% Class A Common Membership Interest.	1/30/04	7%		15,000		1,957,000	3.4%
and pleasure boats. (Manufacturing) www.carolinaskiff.com
DSD Operating, LLC (l)(m) Duluth, GA. Design and renovate auto	$3,063,276 Term Note at 12% (+2% PIK) due September 30, 2026.	9/30/21	11%		3,139,782		3,139,782	8.8%
dealerships. (Automotive)	1,067 Class A Preferred shares.				1,067,500		1,954,198
www.dsdteam.com	1,067 Class B Common shares.				—		—
	Total DSD				4,207,282		5,093,980
Filterworks Acquisition USA, LLC DBA Autotality (l)(m) Deerfield Beach, FL. Provides spray booth equipment, frame repair machines and paint booth filter services for collision shops.	$2,283,702 Term Note at 12% (+2% PIK) modified to 8% PIK and 6% payable in A-0 shares for the period May 1, through December 31, 2022, due December 4, 2023.	11/18/19	8%		2,633,105		2,633,105	5.3%
(Automotive)	626.2 shares Class A-1 Units.	6/3/22			626,243		256,994
www.autotality.com	417.7 shares Class A-0 Units.	9/30/22			139,232		139,232
	Total Filterworks				3,398,580		3,029,331
Knoa Software, Inc.	973,533 Series A-1 Convertible Preferred.	11/20/12	7%		750,000		—	0.2%
New York, NY. End user experience	1,876,922 Series B Preferred.	6/9/14			479,155		100,000
management and performance (EMP) solutions	Total Knoa				1,229,155		100,000
utilizing enterprise applications. (Software)
www.knoa.com
Mezmeriz, Inc. (e)	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
SciAps, Inc.	187,500 Series A Preferred.	7/12/13	6%		1,500,000		1,500,000	9.0%
Woburn, MA. Instrumentation company	274,299 Series A1 Convertible Preferred.	4/4/14			504,710		504,710
producing portable analytical devices using	117,371 Series B Convertible Preferred.	8/31/15			250,000		250,000
XRF, LIBS and RAMAN spectroscopy to	113,636 Series C Convertible Preferred.	4/7/16			175,000		175,000
identify compounds, minerals, and elements.	369,698 Series C1 Convertible Preferred.	4/7/16			399,274		399,274
(Manufacturing)	147,059 Series D Convertible Preferred.	5/9/17			250,000		250,000
www.sciaps.com	Warrant to purchase Series D-1 Preferred.	5/9/17			45,000		45,000
	$2,090,000 Second Amended and Restated Secured Subordinated Promissory Note at 12% due August 20, 2024.	8/20/21			2,085,000		2,085,000
	Total SciAps				5,208,984		5,208,984
Seybert’s Billiards Corporation (l) Coldwater, MI. Billiard supplies.	$4,139,444 Term Note at 12% (+2% PIK) due January 19, 2026.	11/22/21	8%		4,184,106		4,184,106	10.2%
(Consumer Product)	Warrant for 4% Membership Interest.	1/19/21			25,000		25,000
www.seyberts.com	$1,435,435 Term Note at 12% (+2% PIK) due January 19, 2026.	1/19/21			1,440,855		1,440,855
	Warrant for 4% Membership Interest.	1/19/21			25,000		25,000
	5.82 Common shares	10/24/22			194,000		194,000
	Total Seybert’s				5,868,961		5,868,961

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2022 (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
Tilson Technology Management, Inc.	*120,000 Series B Preferred.	1/20/15	9%		600,000		4,559,500		17.8%
Portland, ME. Provides network deployment	*21,391 Series C Preferred.	9/28/16			200,000		812,800
construction and information system services	*70,176 Series D Preferred.	9/29/17			800,000		2,666,400
management for cellular, fiber optic and	*15,385 Series E Preferred.	3/15/19			500,012		584,500
wireless systems providers. Its affiliated entity, SQF, LLC is a CLEC supporting	211,567 Class A-1 Units of SQF Holdco LLC.	3/15/19			—		800,000
small cell 5G deployment.	23,077 Series F Preferred.	6/15/20			750,003		876,800
(Professional Services)	Total Tilson				2,850,015		10,300,000
www.tilsontech.com	*2.5% dividend payable quarterly.
Subtotal Affiliate Investments				$	30,204,160	$	38,241,589
Control Investments - 6.1% of net assets (o)
ITA Acquisition, LLC (l)(m) Ormond Beach, FL. Blind and shade	$1,900,000 Term Note at 12% (+2% PIK) due June 21, 2026.	6/22/21	37%		1,976,116		1,976,116		6.1%
manufacturing. (Manufacturing) www.itainc.com	$1,500,000 Term Note at 12% (+2% PIK) due June 21, 2026.	6/22/21			1,560,091		1,560,091
	1,124 Class A Preferred Units and 1,924 Class B Common Units.	6/22/21			1,123,810		—
	Total ITA				4,660,017		3,536,207
Subtotal Control Investments				$	4,660,017	$	3,536,207
TOTAL INVESTMENTS – 106.6%				$	55,716,237	$	61,504,259
LIABILITIES IN EXCESS OF OTHER ASSETS - (6.6%)							(3,782,939	)
NET ASSETS – 100%						$	57,721,320

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2022 (Continued)

Notes to the Consolidated Schedule of Portfolio Investments

(a)

At December 31, 2022, restricted securities represented 90% 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.

(c)

(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, 2022, ASC 820 designates 90% 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 in good faith by our external investment advisor RCM and approved by the Board of Directors. 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)

(f)

As of December 31, 2022, the total cost of investment securities was approximately $55.7 million. Net unrealized appreciation was approximately $5.8 million, which was comprised of $13.5 million of unrealized appreciation of investment securities and ($7.7) million of unrealized depreciation of investment securities. At December 31, 2022, the aggregate gross unrealized gain for federal income tax purposes was $13.2 million and the aggregate gross unrealized loss for federal income tax purposes was ($6.7) million. The net unrealized gain for federal income tax purposes was $6.5 million based on a tax cost of $55.0 million.

(g)

(h)

Reduction in cost and fair 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. None at December 31, 2022.

(j)

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

(k)

Affiliate Investments are defined by the 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)

(m)

(n)

Publicly traded company.

(o)

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2022 (Continued)

Investments in and Advances to Affiliates


Company	Type of Investment	January 1, 2022, Fair Value		Net Change in Unrealized Appreciation (Depreciation)			Gross Additions (1)		Gross Reductions (2)			December 31, 2022, Fair Value		Net Realized Gains (Losses)			Amount of Interest/ Dividend/ Fee Income (3)
Control Investments:
ITA Acquisition, LLC	$1,900,000 Term Note at 12% (+2% PIK) due June 21, 2026.	$	—	$	—		$	1,976,116	$	—		$	1,976,116	$	—		$	159,738
	$1,500,000 Term Note at 12% (+2% PIK) due June 21, 2026.		—		—			1,560,091		—			1,560,091		—			127,117
	1,124 Class A Preferred Units and 1,924 Class B Common Units.		—		(748,810	)		748,810		—			—		—			—
	Total ITA		—		(748,810	)		4,285,017		—			3,536,207		—			286,855
	Total Control Investments	$	—	$	(748,810	)	$	4,285,017	$	—		$	3,536,207	$	—		$	286,855
Affiliate Investments:
Applied Image, Inc.	$1,750,000 Term Note at 10% due February 1, 2029.	$	1,750,000	$	—		$	—	$	—		$	1,750,000	$	—		$	184,022
	Warrant for 1,167 shares.		—		—			—		—			—		—			—
	Total Applied Image		1,750,000		—			—		—			1,750,000		—			184,022
BMP Food Service Supply Holdco, LLC	$2,500,000 Term Note at 12% due November 22, 2027.		—		—			2,500,000		—			2,500,000		—			33,533
	24.83% Preferred Interest		—		—			600,000		—			600,000		—			—
	Total FSS		—		—			3,100,000		—			3,100,000		—			33,533
BMP Swanson Holdco, LLC	$1,600,000 Term Note at 12% due September 4, 2026.		1,600,000		—			—		—			1,600,000		—			201,334
	Preferred Membership Interest for 9.29%.		233,333		—			—		—			233,333		—			—
	Total BMP Swanson		1,833,333		—			—		—			1,833,333		—			201,334
Carolina Skiff LLC	6.0825% Class A Common Membership Interest.		1,300,000		657,000			—		—			1,957,000		—			653,437
DSD Operating, LLC	$3,063,276 Term Note at 12% (+2% PIK) due September 30, 2026.		2,759,183		—			380,599		—			3,139,782		—			720,247
	1,067 Class A Preferred shares.		1,067,500		886,698			—		—			1,954,198		—			—
	1,067 Class B Common shares.		—		—			—		—			—		—			—
	Total DSD		3,826,683		886,698			380,599		—			5,093,980		—			720,247
Filterworks Acquisition USA, LLC	$2,283,702 Term Note at 12% (+2% PIK) modified to 8% PIK and 6% payable in A-0 shares for the period May 1, through December 31, 2022, due December 4, 2023.		2,446,617		—			186,488		—			2,633,105		—			358,545
	626.2 shares Class A-1 Units.		256,994		—			—		—			256,994		—			—
	417.7 shares Class A-0 Units.		—		—			139,232		—			139,232		—			—
	Total Filterworks		2,703,611		—			325,720		—			3,029,331		—			358,545
ITA Acquisition, LLC	$1,900,000 Term Note at 12% (+2% PIK) due June 21, 2026.		1,920,459		—			29,324		(1,949,783	)		—		—			139,547
	$1,500,000 Term Note at 12% (+2% PIK) due June 21, 2026.		1,516,152		—			23,151		(1,539,303	)		—		—			110,373
	1,124 Class A Preferred Units and 1,924 Class B Common Units.		125,000		—			623,810		(748,810	)		—		—			—
	Total ITA		3,561,611		—			676,285		(4,237,896	)		—		—			249,920
Knoa Software, Inc.	973,533 Series A-1 Convertible Preferred.		—		—			—		—			—		—			—
	1,876,922 Series B Preferred.		479,155		(379,155	)		—		—			100,000		—			—
	Total Knoa		479,155		(379,155	)		—		—			100,000		—			—
Mezmeriz, Inc.	1,554,565 Series Seed Preferred.		—		—			—		—			—		—			—
Microcision	Membership Interest Purchase Warrant for 5%.		85,000		—			—		(85,000	)		—		190,000			—
New Monarch Machine Tool, Inc.	22.84 Common.		—		—			—		—			—		(22,841	)		—

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2022 (Continued)


Company	Type of Investment	January 1, 2022, Fair Value		Net Change in Unrealized Appreciation (Depreciation)		Gross Additions (1)		Gross Reductions (2)		December 31, 2022, Fair Value		Net Realized Gains (Losses)		Amount of Interest/ Dividend/ Fee Income (3)
SciAps, Inc.	187,500 Series A Preferred.		210,000		1,290,000		—		—		1,500,000		—		—
	274,299 Series A1 Convertible Preferred.		96,000		408,710		—		—		504,710		—		—
	117,371 Series B Convertible Preferred.		124,000		126,000		—		—		250,000		—		—
	113,636 Series C Convertible Preferred.		84,000		91,000		—		—		175,000		—		—
	369,698 Series C1 Convertible Preferred.		207,000		192,274		—		—		399,274		—		—
	147,059 Series D Convertible Preferred.		250,000		—		—		—		250,000		—		—
	Warrant to purchase Series D-1 Preferred.		—		45,000		—		—		45,000		—		—
	$2,090,000 Second Amended and Restated Secured Subordinated Promissory Note at 12% due August 20, 2024.		1,480,000		—		605,000		—		2,085,000		—		231,520
	Total SciAps		2,451,000		2,152,984		605,000		—		5,208,984		—		231,520
Seybert’s Billiards Corporation	$4,139,444 Term Note at 12% (+2% PIK) due January 19, 2026.		1,907,775		—		2,276,331		—		4,184,106		—		532,377
	Warrant for 4% Membership Interest.		25,000		—		—		—		25,000		—		—
	$1,435,435 Term Note at 12% (+2% PIK) due January 19, 2026.		1,406,690		—		34,165		—		1,440,855		—		216,720
	Warrant for 4% Membership Interest.		25,000		—		—		—		25,000		—		—
	5.82 Common shares		—		—		194,000		—		194,000		—		—
	Total Seybert’s		3,364,465		—		2,504,496		—		5,868,961		—		749,097
Tilson Technology	120,000 Series B Preferred.		3,900,000		659,500		—		—		4,559,500		—		52,500
Management, Inc.	21,391 Series C Preferred.		695,000		117,800		—		—		812,800		—		—
	70,176 Series D Preferred.		2,280,000		386,400		—		—		2,666,400		—		—
	15,385 Series E Preferred.		500,012		84,488		—		—		584,500		—		—
	211,567 Class A-1 Units of SQF Holdco LLC.		800,000		—		—		—		800,000		—		—
	23,077 Series F Preferred.		750,003		126,797		—		—		876,800		—		—
	Total Tilson		8,925,015		1,374,985		—

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