October 16, 1997
To Our Shareholders:
Our third quarter can be characterized by positive events that
could have happened. Unfortunately they did not materialize
during this quarter and I am disappointed to report that the net
result was a decrease in our Net Asset Value of nine cents per
share.
An inability to execute on their Business Plans and disappointing
financial results have led us to reduce our valuations in
Reflection Technology, Inc., American Tactile Corp. and
Commercial Maintenance Organization, Inc. This was offset in part
by small increases in our valuations of Comptek Research, Inc.
and the warrants that we received with our investment in ARS,
Inc.
We anticipated that ARIA Wireless Systems, Inc. would have begun
trading in the public market during the third quarter. Various
factors prevented this from happening. ARIA has recently
completed the necessary NASDAQ filings and we hope that their
stock will begin to trade in the fourth quarter. On a positive
note, we received a put option for our shares of Comptek stock to
settle various disputes associated with the bankruptcy of ARIA.
During the quarter, we agreed to provide $430,000 in a working
capital loan for MINRAD and exercised an option to purchase
$50,000 of shares in Fertility Acoustics, Inc. Both of these
medical device companies use BioVector to distribute its
products. The funds for these transactions will be disbursed in
the fourth quarter. We were successful in our litigation against
Rand Pharmaceutical and the CEO, Larry Artz. We obtained a
judgment against the company and him for violating various terms
of our investment agreement.
I am pleased to report that the Rand Annual Report was recognized
by the American Business Communicators by awarding Rand the First
Place Award for Financial Content and two Second Place Awards for
Cover Design and Letter to Shareholders.
We continue to execute the business strategy that we outlined in
our previous communications to you and believe that this will
result in maximizing shareholder value. We appreciate your
continued support.
Regards,
Allen F. Grum Nora B. Sullivan
President Executive Vice President
<PAGE>
PORTFOLIO VALUATION / SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
September June 30,
30, 1997 1997
Date Type of Per share Per share
Acquired Company and Business Investment Cost Value of Rand Value of Rand
-------- -------------------- ---------- ---- ----- --------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
6/23/95 American Tactile Convertible 150,000 50,000 0.01 150,000 0.03
Corporation debentures at
Medina, NY. Develops 8%, due June
equipment and 2000 and
systems to produce April 2001
ADA signs for the with
visually impaired detachable
warrants
5/23/97 ARIA Wireless Common stock 438,000 438,000 0.08 438,000 0.08
Systems, Inc.* - 438,000
Orchard Park, NY. shares
Markets radio
transmission
communication
equipment
8/29/91 ARS, Inc. Common stock 125,000 0 0.00 507,820 0.09
Cheektowaga, NY. - 25 shares
Assembles and Subordinated 375,000 0 0.00 750,000 0.13
distributes convertible
replacement debentures at
automotive products 14-2/3%, due
August 2000.
Investment
redeemed
July, 1997
7/1/97 ARS, Inc. Participation 1,000,000 1,011,233 0.18 0 0.00
Cheektowaga, NY. in
Assembles and subordinated
distributes debentures at
replacement 12% due July,
automotive products 2002 through
April 2005
with
detachable
warrants
4/17/97 BioVector, Inc. Common stock 50,000 50,000 0.01 50,000 0.00
Orchard Park, NY. - 50,000
Medical shares 360,000 360,000 0.06 360,000 0.06
technological sales Convertible
promissory
note at 8%,
due April
2002. Option
to purchase
100,000
common shares
10/16/95 Commercial Common stock 100,000 20,000 0.00 100,000 0.02
Maintenance - 163,256
Organization, Inc. shares
Coral Springs, FL.
Maintenance service
network for
retailers,
restaurants, vendors
6/29/95 Comptek Research, Common stock 693,998 418,379 0.07 375,556 0.06
Inc.* - 49,221
Buffalo, NY. shares^
9/13/94 Develops electronic Term loan at 71,875 71,875 0.01 82,143 0.01
systems for military prime less
and non-military 1%, due June
applications 1999
3/31/94 Coral Systems, Inc. Series A 200,000 200,000 0.04 422,222 0.07
Longmont, CO. convertible
Develops fraud preferred
prevention software stock
for the wireless 200,000 18,271 18,271 0.00 18,271 0.00
industry shares
Common stock
- 11,938
3/18/96 HealthWay Products Promissory 100,000 100,000 0.02 100,000 0.02
Company, Inc. note at 15%,
Syracuse, NY. 4,667
Manufactures air warrants for
filters and climate Series A
control devices preferred
stock
2/26/88 J. Giardino First 197,797 197,797 0.03 211,545 0.04
Buffalo, NY. Owns mortgage at
and leases 11%
commercial property
10/4/95 Reflection Series J 500,000 150,000 0.03 500,000 0.09
Technology, Inc. convertible
Waltham, MA. preferred
Develops and stock -
licenses propriety 243,903
virtual display shares
technology
12/11/92 Ultra-Scan Common stock 276,986 276,986 0.05 276,986 0.05
Corporation - 47,583
Buffalo, NY. shares
Ultrasonic Term loan at 50,000 50,000 0.01 50,000 0.01
fingerprint scanning 6%, due
technology September
1997
Other investments Other 400,340 145,690 0.02 283,335 0.05
-----------------------------------------------
Total $3,558,231 0.62 $4,675,878 0.81
portfolio
investment
Cash and cash 3,693,596 0.65 3,293,126 0.58
equivalents
Net 57,399 0.01 118,786 0.02
receivables ------ -------
(payables)
Net assets 7,309,226 1.28 8,087,790 1.41
before taxes
Tax provision (806,786) (0.14) (542,942) (0.10)
(benefit)
Net Assets $8,116,012 $8,630,732
========== ==========
Net asset $1.42 $1.51
value per ===== =====
share
(5,708,034
shares at
September 30,
1997 and June
30, 1997)
* Publicly owned company ^ Unrestricted securities
</TABLE>
<PAGE>
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
a, c, g Jayne K. Rand
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
Daniel P. 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 Deloitte & Touche LLP
Accountants
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]
