1996
SEPTEMBER 30
THIRD QUARTER
[LOGO]
RAND CAPITAL
CORPORATION
<PAGE>
October 25, 1996
To Our Shareholders:
Please notice that our address, look and the content of this
report all have changed. We have moved upstairs in the Rand
Building to a smaller office suite to reduce our expense base.
The new "look" and report content are the beginnings of an
ongoing program to improve shareholder communication. We will
expand the discussions of our individual portfolio companies to
provide more information about their results. Look for more
changes in the future. We welcome you to share your thoughts with
us.
In July we signed a letter of intent to provide expansion capital
to Strategic Staffing Affiliates (SSA), a company formed by the
owners/management of an existing temporary staffing agency in
Williamsville, New York. The company's business plan is to
acquire small to mid-sized temporary staffing agencies in the
United States and then to provide capital, cash flow and certain
back office operations while allowing each agencies to maintain
its independence in the daily operations. The first acquisition
was Key Resource Group, where management has 55 years of combined
experience. The funds from our investment, in the form of a
debenture and warrants, will be used for their next acquisition.
Rand's investment reflects our new investment approach, as we
outlined in our June 1996 Shareholder Report: later stage
development financing with a current pay feature, solid
management and geographic proximity.
In the second quarter of 1996, Aria Wireless Systems, Inc. filed
for bankruptcy protection under Chapter 11. Since then, Rand has
provided debtor in possession financing of $100,000. We have
also worked closely with Compass Partners to develop financial
and operating plans that will allow Aria to emerge from
bankruptcy as an operating company. Compass Partners intends to
provide one million dollars in DIP financing and ultimately
acquire control of the company. These plans should be finalized
in early 1997. We expect all Aria shareholders interests to be
eliminated under any plan. We hope to have the option of either
converting our secured loan into equity or receiving all of our
principal and interest. The results of these proceedings will
occur during the next few quarters.
During the third quarter, we made an additional investment in
Ultra-Scan Corporation in the form of a $50,000 note and we
purchased 23,986 common shares of Coral Systems, Inc. We
received a partial distribution from Clearview Cable and
liquidated 7,000 shares of Heartland Wireless Communications,
Inc. in accordance with our public stock management policy.
Our net asset value as of September 30,1996 was $7,034,639 or
$1.66 per share, as compared to $7,425,198 or $1.76 per share as
of June 30, 1996. The decline was primarily due a decline in the
prices of our publicly held stocks.
We encourage your participation in the re-vitalization of Rand
Capital and thank you for investing in our future.
Allen F. Grum Nora B. Sullivan
President Executive Vice President
<PAGE>
Rand Capital Corporation
Portfolio Valuation
September 30, 1996
<TABLE>
<CAPTION>
September 30, 1996 June 30, 1996
------------------ ------------------
Per Per
Date Company and Share share
Acquired Business Type of Investment Cost Value of Rand Value of Rand
________ _______________ ------------------ -------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6/23/95 AMERICAN TACTILE Convertible 150,000 150,000 0.04 150,000 0.04
CORP. Medina, NY. debentures at 8%
Develops equipment due June 2000 and
and systems to April 2001 with
produce ADA signs detachable
for the visually warrants
impaired
8/29/91 AUTO RADIATOR Common stock - 25 125,000
SALES, INC. shares
Cheektowaga, NY Subordinated 375,000 1,000,000 0.24 1,000,000 0.24
Manufactures and convertible
distributes debentures at 14
replacement 2/3%
automotive products
02/23/96 CLEARVIEW CABLE TV, Common stock - 400 56,000 56,000 0.01 124,000 0.03
INC. shares
New Providence, NJ.
Wireless cable
television operator
10/16/95 COMMERCIAL Common stock - 170 85,000 85,000 0.02 85,000 0.02
MAINTENANCE shares
ORGANIZATION, INC.
Coral Springs, FL.
Maintenance service
network for
retailers,
restaurants,
vendors
9/13/94 COMPTEK RESEARCH, Common stock -
INC. Buffalo, NY. 49,221 shares
Develops electronic Term loan at prime 806,944 385,630 0.09 391,891 0.09
systems for less 1%, due June
military and non- 1998
military
applications
3/31/94 CORAL SYSTEMS, INC. Convertible
Longmont, CO. preferred stock
Develops fraud 200,000 shares
prevention software Common stock -
for the wireless 23,986 shares 218,271 440,493 0.10 422,222 0.10
industry
3/18/96 HEALTHWAY PRODUCTS Promissory Note, 100,000 100,000 0.02 100,000 0.02
COMPANY, INC. 15% interest, due
Syracuse, NY. June 18, 1996
Manufactures air
filters and climate
control devices
2/23/96 HEARTLAND WIRELESS Common stock - 218,247 232,575 0.06 384,134 0.09
COMMUNICATIONS, 9,880 shares
INC. Richardson,
TX. Wireless cable
television system
operator
2/26/88 J. GIARDINO First mortgage at 220,347 220,347 0.05 223,139 0.05
Buffalo, NY. Owns 10% interest
and leases
commercial property
11/9/95 JAMESTOWN SAVINGS Common stock - 500,000 500,000 0.12 500,000 0.12
BANK 50,000 shares
Jamestown, NY
Community savings
bank
5/19/94 MOBILE DATA Convertible 100,000 315,560 0.07 299,738 0.07
SOLUTIONS, INC. debenture at 7.5%,
Vancouver, BC. due December 1996
Develops mobile
data software
12/31/90 MOBILE MEDIA CORP. Common stock - 94,250 325,575 0.08 747,567 0.18
New York, NY. 71,292 shares
Provider of paging
and other wireless
data services
10/4/95 REFLECTION Series J 500,000 500,000 0.12 500,000 0.12
TECHNOLOGY, INC. Convertible
Waltham, MA. Preferred Stock -
Develops and 243,902 shares
licenses
proprietary virtual
display technology
11/6/95 TGT, INC. Series A - 56,000 56,000 0.01 56,000 0.01
Geneva, NY. Convertible
Develops and Preferred Stock -
manufactures 32,000 shares
biological
alternative to
chemical pesticides
1/6/95 TRANSWORLD Common stock - 131,498 139,866 0.03 112,072 0.03
TELECOMMUNICATIONS, 132,826 shares
INC.
Salt Lake City, UT.
Wireless cable
television systems
operator
12/11/92 ULTRA-SCAN Common stock - 326,986 326,986 0.08 276,986 0.07
CORPORATION 47,583 shares Note
Buffalo, NY at 6%, due June
Ultrasonic 1997
fingerprint
scanning technology
OTHER INVESTMENTS Other 100,060 100,060 0.02 25,060 0.00
-------- -------- ---- ------ ----
Total portfolio $4,934,092 1.17 $5,397,809 1.28
investments
Cash and money 1,105,807 0.26 1,119,448 0.26
market investments
Net receivables 199,389 0.05 231,473 0.06
(payables) _______ -------
Net assets before $6,239,288 1.48 $6,748,730 1.60
taxes
Tax provision (795,351) (0.19) (676,468) (0.16)
(benefit) --------- ---------
Net assets $7,034,639 $7,425,198
--------- ---------
Net asset value $1.66 $1.76
per share
(4,225,477)
</TABLE>
<PAGE>
RAND CAPITAL CORPORATION
BOARD OF DIRECTORS
---------------------------------------------------------------
Reginald B. Newman II Chairman of the Board
g Thomas R. Beecher, Jr
Allen F. Grum
c,g Ross B. Kenzie
a,c Willis S. McLeese
c,g Jayne K. Rand
a Donald A. Ross
a Frederick W. Winter
a - MEMBER OF AUDIT COMMITTEE
c - MEMBER OF COMPENSATION COMMITTEE
g - MEMBER OF GOVERNANCE COMMITTEE
OFFICERS
---------------------------------------------------------------
Allen F. Grum........President, Chief Executive Officer
Nora B. Sullivan.....Executive Vice President
Robin K. Penberthy...Secretary and Treasurer
CORPORATE DATA
---------------------------------------------------------------
General Counsel..................Hodgson, Russ, Andrews,Woods &
Goodyear, LLP
Independent Accountants..........Deloitte & Touche, LLP
Transfer Agent and Registrar.....Continental Stock Transfer &
Trust Company
Stock Listing....................Over the Counter-NASDAQ symbol
RAND
