March 31,1997 / First Quarter
April 18, 1997
To Our Shareholders:
During the first quarter we reached an agreement to provide
equity and convertible subordinated debt to BioVector, which is a
medical product design and distribution company. Located in
Western New York, the company provides a national and
international sales organization for medical companies. This
allows medical companies to concentrate their resources on
product development and provides a cost efficient mechanism for
them to market products. The management team for BioVector is
headed by Bill Burns, founder and former CEO of Matrx Medical,
and is one of the strongest we have encountered. This is the
first result of our efforts to target the Health and Medical
field.
During the quarter we continued to work with Aria Wireless
Systems, Inc. and Compass Partners to enable Aria to emerge from
Chapter 11 as an operating company. The hearing date to confirm
the Reorganization Plan is scheduled for May 2. The Plan calls
for the court approved Debtor in Possession loan in the amount of
$3,000,000 to be converted into equity equal to 80% of
Reorganized Aria, with the remaining 20% distributed to certain
creditors.
The plan also allows for Rand to convert its existing DIP loan to
equity in the Reorganized Aria as well as participate in the DIP
loan described above. It is anticipated that the Reorganized Aria
will be a publicly traded company when it emerges from Chapter
11. (The Plan also extinguishes the equity interests of old Aria
of which Rand was an owner. Rand wrote this investment off in the
first quarter of 1996)
Aria is also undertaking a series of depositions with various
members of senior management of Comptek Research, Inc. Aria has
asserted that Comptek may not have fulfilled its financial
obligations under the merger agreements and that Comptek may be
liable for damages. We are closely monitoring this situation with
counsel to determine Rand's legal rights as a shareholder of both
Aria and Comptek.
During the first quarter, we also initiated an action against
Rand Pharmaceutical and Larry Artz, a former officer of that
company. We are pursuing damages against him for his failure to
account for the disposition of Rand Pharmaceutical's assets.
Over the past six months, we have been working with ARS, Inc. to
raise approximately $10 million of new subordinated debt. This
money will be used to retire their current debentures, repurchase
equity and provide expansion capital. Consistent with that
capital plan and our valuation policy, we have increased our
valuation in ARS to $1,257,820. During the first quarter, we
continued to liquidate our publicly traded equity positions. Our
debenture in Mobile Data Solutions, Inc. was converted into
common stock and these shares were sold for a gain of $500,000.
We also liquidated our holdings in Transworld Telecommunications,
Inc. and sold 2,880 shares of Heartland Wireless Communications.
Additionally, we wrote off our investment in Mobile Media
Corporation to reflect their Chapter 11 filing. The net result of
these activities was a $.02 decline in our Net Asset Value from
$1.53 at December 31, 1996 to $1.51 at March 31, 1997.
For the first time in 30 years Don Ross's name is not listed as a
Director of Rand Capital. His contributions as a founder, Chief
Executive Officer and Director were a valuable asset to Rand. We
thank him for his service.
Our liquidity position is at a recent all-time high with over $4
million in available funds. We are working hard to invest these
funds into profitable investments. We look forward to sharing the
results of these efforts in the coming year.
s/Allen F. Grum
___________________
Allen F. Grum
President
s/Nora B. Sullivan
___________________
Nora B. Sullivan
Executive Vice President
<PAGE>
<TABLE>
<CAPTION>
Portfolio Valuation / March 31, 1997
March 31, 1997 December 31, 1997
Per Per
share share
Date Company and Type of of of
Acquired Business Investment Cost Value Rand Value Rand
-------- ----------- --------------- ---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
6/23/95 American Tactile Convertible 150,000 150,000 0.03 150,000 0.04
Corporation debentures at 8%
Medina, N.Y. due June 2000
Develops and April 2001
equipment and with detachable
systems to warrants
produce ADA signs
for the visually
impaired
8/29/91 ARS, Inc. Common stock - 125,000 314,455 0.09 250,000 0.06
Cheektowaga, NY 25 shares 375,000 943,365 0.13 750,000 0.18
Assembles and Convertible
distributes debentures at 14
replacement 2/3% due August
automotive 2000
products
11/6/95 BioWorks, 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
2/23/96 Clearview Cable Common stock - 55,541 55,541 0.01 55,541 0.01
TV, Inc. 400 shares
New Providence,
NJ Wireless
cable television
system operator
10/16/95 Commercial Common stock - 100,000 100,000 0.02 85,000 0.01
Maintenance 163,526 shares
Organization,
Inc.
Coral Springs, FL
Maintenance
service network
for retailers,
restaurants,
vendors
9/13/94 Comptek Research, Common stock - 693,998 283,021 0.05 246,105 0.06
Inc.* 49,221 shares^ 92,410 92,410 0.02 102,678 0.02
Buffalo, NY Term loan at
Develops prime less 1%,
electronic due June 1998
systems for
military and non-
miliary
applications
3/31/94 Coral Systems, Series A 200,000 422,222 0.07 422,222 0.10
Inc. convertible 18,271 18,271 0.00 18,271 0.00
Longmont, CO preferred stock
Develops fraud 99,999 shares
prevention Common stock -
software for the 11,938 shares
wireless industry
3/18/96 HealthWay Promissory note 100,000 100,000 0.02 100,000 0.02
Products Company, at 12%, 4,667
Inc. warrants for
syracuse, NY Series A
Manufactures air preferred stock
filters and
climate control
devices
2/23/96 Heartland Common Stock - 65,174 6,552 0.00 38,045 0.01
Wireless 2,880 shares^ 180,203 18,116 0.00 118,180 0.03
Communications, Common Stock -
Inc.* 7,963 shares
Richardson, TX
Wireless cable
television system
operator
2/26/88 J. Giardino First mortgage 214,553 214,553 0.04 218,448 0.05
Buffalo, NY Owns at 10%
and leases
commercial
property
5/19/94 Mobile Data Common stock - 0 0 0 0.00 465,851 0.11
solutions, Inc.* shares^
Vancouver, BC
Develops mobile
data software
12/31/90 MobileMedia Common stock - 67,322 0 0.00 25,461 0.01
Corporation* 50,923 shares^ 26,028 0 0.00 9,268 0.00
New York, NY Common stock -
Provider of 20,369 shares
paging and other
wireless data
services
10/4/95 Reflection Series J 500,000 500,000 0.09 500,000 0.12
Technology, Inc. convertible
Waltham, MA preferred stock
Develops and 443,784 shares
licenses
proprietary
virtual display
technology
1/6/95 Transworld Common stock - 0 0 0 0.00 37,058 0.01
Telecommunication shares^
s, Inc.*
Salt Lake City,
UT Wireless cable
television
systems operator
12/11/92 Ultra-Scan Common stock - 276,986 276,986 0.05 276,986 0.07
Corporation 47,583 shares 50,000 50,000 0.01 50,000 0.01
Buffalo, NY Note at 6%, due
Ultrasonic September 1997
fingerprint
scanning
technology
Other investments Other 200,060 200,060 0.04 100,060 0.02
________ _______ ____ _______ _____
Total portfolio $3,801,552 0.67 $4,075,174 0.96
investments
Cash and money 4,110,391 0.72 1,605,501 0.38
market
investments
Net receivables 159,309 0.02 24,174 0.01
(payables) _________ _________
Net assets $8,071,252 1.41 $5,704,849 1.35
before taxes
Tax provision (559,071) (0.10) (753,687) (0.18)
(benefit)
Net Assets $8,630,323 $6,458,536
========= =========
Net asset value $1.51 $1.53
per share
5,708,034 shares
at March 31,
1997 and
4,225,477 shares
at December 31,
1996
</TABLE>
* Publicly owned company ^ Unrestricted securities
Rand Capital Corporation
Board of Directors
Reginald B. Newman II Chairman of the Board
g Thomas R. Beecher, Jr.
Allen F. Grum
a, c Luiz F. Kahl
c, g Ross B. Kenzie
a Willis S. McLeese
c, g Jayne K. Rand
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 Chief Financial Officer
Corporate Data
Stock Listing - Over the Counter - NASDAQ symbol RAND
Transfer Agent and Registrar - Continental Stock Transfer &
Trust Company
General Counsel - Hodgson, Russ, Andrews, Woods &
Goodyear, LLP
Independent Accountants - Deloitte & Touche LLP
We appreciate the support of our current shareholders and welcome
your comments.
Tel: 716-853-0802
Fax: 716-854-8480
Email: [email protected]
[email protected]