January 22, 1998
To Our Shareholders:
During the past quarter we were pleased that seven of our investments were
re-valued at higher levels. They were:
1. ARIA Wireless Systems, Inc. was increased by $50,000 to $488,000 to reflect
an option we received to purchase 100,000 shares at $.50 per share. We received
this option as compensation for various investment banking activities that we
performed on the company's behalf.
2. Comptek Research, Inc. was increased by $50,000 to reflect a put option that
we received to settle various disputes arising over the bankruptcy of ARIA. This
option allows us to sell our 49,221 shares at $9.50.
3. MINRAD, Inc. was increased by $31,000 to $40,000. This was primarily caused
by our receipt of 2,500 shares that were issued to Rand in conjunction with a
working capital loan to MINRAD, Inc. We also received a cash fee of $21,500 for
the loan.
4. Fertility Acoustics, Inc. and BioVector each increased by $75,000 to reflect
their successful efforts in raising new capital at higher prices than our
purchase. Each of these companies raised equity at $2.50 per share, up from our
investment at $1.00 per share.
5. Platform Technology Holdings, LLC was valued at $25,000. We received these
shares as compensation for our contributions to Platform Technology.
6. ARS, Inc. was increased by $18,000 to reflect the increase in the value of
the warrants that were issued in conjunction with the debenture that we own.
This increased value of $232,500 was augmented by a gain of $75,000 received in
a settlement of a claim against an insurance carrier. The claim was for defense
fees paid by Rand in the StopFire Litigation, which was dismissed earlier this
year.
These gains were offset by our decision to write off our investment in
Ultra-Scan Corporation. In September they failed to repay a term loan that came
due. We received a judgment against the company and are moving to collect on the
judgment. In light of this action, we felt that it is prudent to write off
our stock investment will continue to monitor the situation to insure that
our interests are protected.
With over $3,000,000 in liquid assets (53 cents per share), we are actively
looking for new investments. Our ability to wisely invest this cash is the key
to the success of Rand. We look forward to sharing these successes with you.
Regards,
s/Allen F. Grum s/ Nora B. Sullivan
Allen F. Grum Nora B.Sullivan
President Executive Vice President
<PAGE>
Portfolio Valuation / December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
12/31/97 9/30/97
Date Per Per
Aquired Company & Business Type of Investment Cost Value Share Value Share
Of Rand of Rand
- ------- ----------------------- ------------------- -------- ------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
5/23/97 ARIA Wireless Common stock - 438,000 488,000 0.09 438,000 0.08
Systems, Inc.* 488,000 shares
Buffalo, NY. Markets
radio transmission
communication
equipment
7/1/97 ARS, Inc. Participation in 1,000,000 1,029,000 0.18 1,011,233 0.18
Cheektowaga, NY. subordinated
Assembles and debenture at 12%
distributes due July, 2002
replacement through April 2005
automotive products with detachable
warrants
4/1/97 BioVector, Inc. Common stock - 50,000 125,000 0.02 50,000 0.01
Orchard Park, NY. 50,000 shares 360,000 360,000 0.06 360,000 0.06
Medical technological Convertible
sales promissory note at
8%, due April
2002. Option to
purchase 140,000
common shares
6/29/95 Comptek Research, Common stock - 693,998 464,023 0.08 418,379 0.07
9/13/94 Inc.* 49,221 shares^ 61,607 61,607 0.01 71,875 0.01
Buffalo, NY. Term loan at prime
Develops electronic less 1%, due June
systems for military 1999
and non-military
applications
3/31/94 Lightbridge, Inc.* Common Stock - 218,271 218,271 0.04 218,271 0.04
Burlington, MA. 14,253 shares
Provides software
based services for
wireless
telecommunications
industry. Acquired
former coral Systems,
Inc. investment,
November '97.
10/1/97 Fertility Acoustics, Common stock - 50,000 125,000 0.02 0 0.00
Inc. 50,000 shares
Orchard Park, NY. Option to purchase
Developer of 15,000 shares
proprietary methods
to diagnose onset of
ovulation.
3/18/96 HealthWay Products Promissory note at 100,000 100,000 0.02 100,000 0.02
Company, Inc. 24%, due June
Syracuse, NY. 1996. 4,667
Manufactures air warrants for
filters and climate Series A preferred
control devices stock
2/26/88 J. Giardino First mortgage at 194,921 194,921 0.03 197,797 0.03
Buffalo, NY. Owns 11%
and leases
commercial property
8/4/97 MINRAD Common stock - 9,000 40,000 0.01 9,000 0.00
10/3/97 Orchard Park, NY. 4,000 shares Term 420,000 420,000 0.08 0
Developer of laser loan at 12%, due
guided surgical March 1998
devices.
10/7/97 Pathlight Technology, Class A Series 100,000 100,000 0.02 0 0.00
Inc. 1(a) Convertible
Ithaca, NY. Develops Preferred stock -
high technology 100,000 shares
Serial Storage with 6% cumulative
Architecture for dividend
computer industry.
10/4/95 Reflection Series J 500,000 150,000 0.03 150,000 0.03
Technology, Inc. convertible
Waltham, MA. preferred stock -
Develops and licenses 243,903 shares
proprietary virtual
display technology
12/11/92 Ultra-Scan Common stock - 276,986 0 0.00 276,986 0.05
Corporation 47,583 shares Term 50,000 50,000 0.01 50,000 0.01
Buffalo, NY. loan at 6%, due
Ultrasonic September 1997
fingerprint scanning
technology
Other investments Other 627,423 217,719 0.04 206,690 0.04
-------- ------- ---- -------- ----
Total portfolio 5,150,206 4,143,541 0.73 3,558,231 0.62
investments Cash 3,031,391 0.53 3,693,596 0.65
and cash 138,188 0.02 57,399 0.01
equivalents Net -------- ---------
receivables
(payables)
Net assets before 7,313,120 1.28 7,309,226 1.28
taxes (1,028,100) (0.18) (806,786) (0.14)
Tax
provision(benefit)
Net assets $8,341,220 $8,116,012
Net asset value $1.46 $1.42
per share
(5,708,034 shares
at December 31,
1997 and September
30, 1997)
</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
a, c, g Jayne K. Rand
<PAGE>
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 NASDAQ SmallCap Market - 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]
[email protected]
