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Rand Capital Announces Second Quarter 2018 Results

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  • Invested $775,000 during the second quarter
  • Net Asset Value per share was $4.87 at June 30
  • Progressing with Small Business Administration (SBA) new
    financing process

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 six
months ended June 30, 2018.

Allen F. ("Pete") Grum, President and Chief Executive Officer of Rand
Capital, commented, "During the quarter we invested $775,000 in debt
instruments supporting KnowledgeVision's progression of its smart media
technology. Since we first began investing in them in 2013, the company
has increased its registered user base tenfold."

Mr. Grum added, "We continue to work with the SBA to secure an
additional $6 million of debentures. With a full pipeline of investment
opportunities, we look forward to completing this transaction and
putting the funds to work in support of exciting growth businesses."

Second Quarter 2018 Financial Highlights

  • Reported $4.87 net asset value (NAV) per share at June 30, 2018,
    compared with $4.97 at March 31, 2018. The decrease was primarily due
    to write-downs of investments in certain portfolio companies based on
    their recent operating performance.
  • Supported an existing portfolio company, KnowledgeVision®
    Systems, Inc., with $775,000 of investments during the quarter.
  • Investment income increased 18% and 15% over the prior-year second
    quarter and first six months, respectively.
  • At June 30, 2018, portfolio fair value was $32.3 million and
    consolidated cash was $4.7 million.

Total investment income in the second quarter of 2018 grew to $413,000,
up from $349,000 in the second quarter of 2017. The $64,000 increase was
driven by the Company's success with focusing on investments in income
producing instruments. Total expenses in the 2018 and 2017 second
quarters were $474,000 and $607,000, respectively, reflecting a
reduction of 22%. The decrease is primarily due to lower professional
fees, partially offset by higher bad debt expense.

Total investment income was $776,000 and $678,000 for the first six
months ended June 30, 2018 and 2017, respectively. Similar to the second
quarter, the growth was driven by the Company's investment focus on
income-generating instruments. Total expenses for the first six months
of 2018 and 2017 were $1.1 million in each period.

Selected Portfolio Highlights

  • KnowledgeVision
    Systems, Inc.
    is a leader in smart media creation and hosting
    technology. Its Knovio® video platform is used by more than
    300,000 people worldwide in more than 2,000 companies and campuses to
    create, host, share, organize, collaborate around, and measure online
    media content. The company recently further strengthened its
    leadership position by winning its second U.S. patent for its video
    presentation technology, launching a groundbreaking live multimedia
    webcasting product, Knovio Live. Including its second quarter
    investments, at June 30, 2018, Rand's investment in KnowledgeVision
    was valued at approximately $1.3 million.
  • Centivo
    Corporation
    is a new high-value healthcare solution built
    specifically for employers and their employees and families. CentivoSM
    targets lowering healthcare costs and improved healthcare outcomes by
    rewarding members and providers for smart choices and actions while
    delivering an exceptional member experience. Centivo recently raised
    $34 million in Series A funding, in which Rand invested $200,000 and
    converted a $100,000 convertible note during the first quarter of
    2018. The capital will be deployed to build the company's technology
    and infrastructure, develop local partnerships, and support market
    launch. At June 30, 2018, Rand's investment in Centivo was valued at
    approximately $301,000.
  • Rheonix,
    Inc.
    is a developer of fully automated, sample-to-answer
    molecular testing solutions for use in multiple applications. Rheonix
    recently announced two new innovative products for use on the
    Encompass Optimum™ workstation. First, they expanded their Beer
    SpoilerAlert™ assay to detect more organisms that may cause spoilage
    in beer, resulting in the simplest and most comprehensive beer
    spoilage test in the market. Second, Rheonix launched the Listeria
    PatternAlert™ assay, a breakthrough method for rapidly identifying
    molecular patterns from Listeria strains. Its quick results
    enable food producers to take rapid action to reduce the risk of
    contamination and recall. In addition, the company has initiated
    clinical studies to gain FDA clearance for its Encompass MDx™
    Workstation and the Rheonix STI Tri-Plex assay for the simultaneous
    detection of three sexually transmitted infections. At June 30, 2018,
    Rand's investment in Rheonix was valued at approximately $2.9 million.

As of June 30, 2018, 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 59% in equity
investments and 41% in debt investments at June 30, 2017.

Webcast and Conference Call

Rand will host a conference call and live webcast today, August 7, 2018,
at 1:30 p.m. Eastern Time to review its financial condition and results
for the 2018 second 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 "Investor Relations" heading. 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 "Investor Relations" heading.

A telephonic replay will be available from approximately 4:30 p.m.
Eastern Time today through Tuesday, August 14, 2018. To listen to the
archived call, dial (412) 317-6671, and enter conference ID number
13681337. 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) with a
wholly owned subsidiary 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. The Company seeks investment
opportunities in businesses with strong leaders who are 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
 
June 30,
2018 December 31,
(Unaudited)   2017  

ASSETS

Investments at fair value:
Control investments (cost of $99,500) $ 99,500 $ 99,500
Affiliate investments (cost of $21,937,593 and $20,871,129,
respectively)
17,526,818 17,016,795
Non-Control/Non-Affiliate investments (cost of $15,903,520 and
$15,718,690, respectively)
  14,701,108     15,167,767  
Total investments, at fair value (cost of $37,940,613 and
$36,689,319, respectively)
32,327,426 32,284,062
Cash 4,720,381 6,262,039
Interest receivable (net of allowance: $237,641 at 6/30/18; $161,000
at 12/31/17)
127,897 231,048
Deferred tax asset 898,903 551,863
Prepaid income taxes 740,086 762,047
Other assets   55,956     42,854  
Total assets $ 38,870,649   $ 40,133,913  
 

LIABILITIES AND STOCKHOLDERS' EQUITY (NET
ASSETS)

Liabilities:
Debentures guaranteed by the SBA (net of debt issuance costs) $ 7,868,873 $ 7,855,173
Profit sharing and bonus payable - 144,000
Accounts payable and accrued expenses 168,918 178,348
Deferred revenue   65,880     37,707  
Total liabilities 8,103,671 8,215,228
 
Stockholders' equity (net assets):
Common stock, $.10 par; shares authorized 10,000,000; shares issued
6,863,034;
shares outstanding of 6,321,988 686,304 686,304
Capital in excess of par value 10,581,789 10,581,789
Accumulated net investment loss (1,808,243 ) (1,597,146 )
Undistributed net realized gain on investments 27,215,738 27,215,738
Net unrealized depreciation on investments (4,439,505 ) (3,498,895 )
Treasury stock, at cost; 541,046 shares   (1,469,105 )   (1,469,105 )
Total stockholders' equity (net assets) (per share $4.87 at 6/30/18;
$5.05 at 12/31/17)
  30,766,978     31,918,685  
Total liabilities and stockholders' equity (net assets) $ 38,870,649   $ 40,133,913  
 
 
Rand Capital Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
   
For the Quarter Ended For the Six Months Ended
June 30, June 30,
  2018       2017     2018       2017  
Investment income:    
Interest from portfolio companies:
Affiliate investments $ 175,990 $ 137,243 $ 323,026 $ 274,000
Non-Control/Non-Affiliate investments   139,710       140,397     290,022       249,731  
Total interest from portfolio companies   315,700       277,640     613,048       523,731  
 
Interest from other investments:
Non-Control/Non-Affiliate investments   7,735       6,859     12,845       17,834  
Total interest from other investments   7,735       6,859     12,845       17,834  
 
Dividend and other investment income:
Affiliate investments 76,266 53,024 127,049 115,397
Non-Control/Non-Affiliate investments   2,676       2,681     6,058       5,193  
Total dividend and other investment income   78,942       55,705     133,107       120,590  
 
Fee income:
Affiliate investments 4,416 3,167 7,583 4,084
Non-Control/Non-Affiliate investments   6,725       5,768     9,744       11,537  
Total fee income   11,141       8,935     17,327       15,621  
Total investment income   413,518       349,139     776,327       677,776  
 
Expenses:
Salaries 169,875 165,413 339,749 330,826
Employee benefits 45,251 47,699 108,996 100,069
Directors' fees 28,624 36,374 63,499 71,249
Professional fees 37,341 178,193 139,028 262,195
Stockholders and office operating 64,599 80,725 129,038 147,935
Insurance 6,900 6,258 18,888 17,560
Corporate development 10,646 11,609 26,442 33,317
Other operating   2,424       3,323     5,115       5,283  
365,660 529,594 830,755 968,434
Interest on SBA obligations 77,269 77,569 154,838 155,138
Bad debt expense   30,741     -     76,641       -  
Total expenses   473,670     607,163     1,062,234       1,123,572  
Net investment loss before income taxes (60,152 ) (258,024 ) (285,907 ) (445,796 )
Income tax benefit   (22,384 )   (99,403 )   (74,810 )     (171,911 )
Net investment loss   (37,768 )   (158,621 )   (211,097 )     (273,885 )
 
Net increase in unrealized depreciation on investments:
Affiliate investments (306,441 ) (665,675 ) (556,441 ) (665,675 )
Non-Control/Non-Affiliate investments   (450,000 )     (52,664 )   (651,489 )     (433,308 )
Increase in unrealized depreciation before income tax benefit (756,441 ) (718,339 ) (1,207,930 ) (1,098,983 )
Deferred income tax benefit   (162,915 )     (241,623 )   (267,320 )     (378,050 )
Net increase in unrealized depreciation on investments   (593,526 )     (476,716 )   (940,610 )     (720,933 )
Net unrealized loss on investments   (593,526 )     (476,716 )   (940,610 )     (720,933 )
Net decrease in net assets from operations $ (631,294 )   $ (635,337 ) $ (1,151,707 )   $ (994,818 )
Weighted average shares outstanding 6,321,988 6,321,988 6,321,988 6,321,988
Basic and diluted net decrease in net assets from operations per
share
$ (0.10 )   $ (0.10 ) $ (0.18 )   $ (0.16 )
 

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