1998
March 31
First Quarter
[LOGO]
RAND CAPITAL
CORPORATION
<PAGE>
April 14, 1998
During the first quarter, the Net Asset Value for Rand Capital Corporation
(Rand) has increased from $1.46 to $1.47. This represents the second consecutive
quarter, and three out of the previous four quarters, Rand has shown an increase
in its Net Assets. This growth, and consistency in growth, can be attributed to
the successful execution of our business plan.
During the quarter, ARIA Wireless Systems, Inc. (ARIA) began to trade under
the symbol of AWSI on the OTC Bulletin Board System. This strategic initiative
has increased the liquidity of our stock and has been well received by the
investment community. Based on the recent appreciation of the stock, we
increased our valuation in ARIA, from $488,000 to $610,000, or 25%.
Rand has also reached an agreement with Hammertime Kitchen and BathWorks,
Inc. (Hammertime) to provide $200,000 of expansion capital. Hammertime is a
licensee of Sears Home Central and will provide kitchen and bath remodeling
services in Western New York and Northwestern Pennsylvania. The capital and
business plan contemplate expansion throughout the Eastern United States.
During the quarter we purchased $420,000 of common stock in MINRAD, Inc.
The company has developed a patented laser guided surgical device which is sold
throughout the world. MINRAD has received over $2 million in orders and recently
entered into a European distribution agreement with MediCert, which provides for
$82 million in sales over 10 years. The company received the Health Care
Industries Association Best New Technology award in 1997.
We continued to restructure our portfolio by selling our stock in Comptek
Research, Inc. Our valuation of ARS, Inc. was increased to reflect the value of
our warrants and we received full payment on our loan to UltraScan, Corp.
Over the last twelve months we increased our shareholder base by 18%. I
welcome the new shareholders and look forward to sharing positive results in the
future.
Regards,
Allen F. Grum
President
<PAGE>
Portfolio Valuation / March 31, 1998
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
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Per Per
Date share share
Company and Business Type of Investment Acquired Cost Value of Rand Value of Rand
<S> <C> <C> <C> <C> <C> <C> <C>
ARIA Wireless Systems, Inc. (OTC:AWSI)* Common stock - 488,000 shares 5/23/97 438,000 610,000 0.11 488,000 0.09
Buffalo, NY. Markets radio
transmission communication equipment
ARS, Inc. Participation in subordinated 7/1/97 1,000,000 1,047,000 0.18 1,029,000 0.18
Buffalo, NY. Assembles and distributes debenture at 12% due July,
replacement automotive products 2002 through April 2005
with detachable warrants
BioVector, Inc. Common stock - 50,000 shares 4/17/97 50,000 125,000 0.02 125,000 0.02
Orchard Park, NY. Convertible promissory note at 360,000 360,000 0.06 360,000 0.06
Medical technological 8%, due April 2002. Option to
sales force company purchase 140,000 common shares
Comptek Research, Inc. (AMEX: CTK)* Common stock - 49,221 shares^ 9/13/94 - - - 464,023 0.08
Buffalo, NY. Develops electronic systems sold March 1998. Term loan at 51,339 51,339 0.01 61,607 0.01
for military and non-military applications prime less 1%, due June 1999
Fertility Acoustics, Inc. Common stock - 50,000 shares 10/1/97 50,000 125,000 0.02 125,000 0.02
Orchard Park, NY. Developer of proprietary Option to purchase 15,000 shares
methods to diagnose onset of ovulation.
HealthWay Products Company, Inc. Promissory note at 24%, due 3/18/97 100,000 100,000 0.02 100,000 0.02
Syracuse, NY. Manufactures air filters June 1996. 4,667 warrants for
and climate control devices Series A preferred stock
J. Giardino First mortgage at 12% 2/26/88 174,866 174,866 0.03 194,921 0.03
Buffalo, NY. Owns and leases
commercial property
Lightbridge, Inc. (NASDAQ: LTBG)* Common stock - 14,253 shares 3/31/94 218,271 218,271 0.04 218,271 0.04
Burlington, MA. Provides software based
services for wireless telecommunications
industry.
MINRAD, Inc. Common stock - 39,563 shares 8/4/97 429,000 460,000 0.08 40,000 0.01
Orchard Park, NY. Developer of laser Term loan at 12%, matured 10/3/97 - - - 420,000 0.08
guided surgical devices. March 1998
Pathlight Technology, Inc. Class A Series 1(a)Convertible 10/7/97 100,000 100,000 0.02 100,000 0.02
Ithaca, NY. Develops high technology Serial Preferred stock - 100,000 shares
Storage Architecture for computer industry. with 6% cumulative dividend
vReflection Technology, Inc. Series J convertible preferred 10/4/97 500,000 150,000 0.03 150,000 0.03
Waltham, MA. Develops and licenses stock - 243,903 shares
proprietary virtual display technology
Ultra-Scan Corporation Common stock - 47,583 shares 12/11/92 276,986 0 0 0 0
Amherst, NY. Ultrasonic fingerprint Term loan at 6%, repaid - - - 50,000 0.01
scanning technology January 1998
Other Investment(a) Other
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Total portfolio investments 4,425,885 3,784,464 0.66 4,143,541 0.73
=========
Cash and cash equivalents 3,531,551 0.62 3,031,391 0.53
Net receivables(payables) 54,100 0.01 138,188 0.02
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Net assets before taxes 7,370,115 1.29 7,313,120 1.28
Tax provision(benefit) (1,028,400) (0.18) (1,028,100) (0.18)
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Net assets $8,398,515 $8,341,220
========== ==========
Net asset value per share $1.47 $1.46
(5,708,034 shares at March 31, 1998
and December 31, 1997)
</TABLE>
* Publicly owned company ^ Unrestricted securities
(a) Includes Investments with valuation less than $100,000 during both periods
Note: Restricted securities, including securities of publicly-owned companies
which are subject to restrictions on resale, are valued at fair value
as determined by the Board of Directors. Fair value is considered to be
the amount which the Corporation may reasonably expect to receive for
portfolio securities if such securities were sold on the valuation
date. Valuations as of any particular date, however, are not
necessarily indicative of amounts which may ultimately be realized as a
result of future sales or other dispositions of securities.
<PAGE>
RAND CAPITAL CORPORATION
BOARD OF DIRECTORS (Elected by Shareholders April 14, 1998)
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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
Allen F. Grum President, Chief Executive Officer [email protected]
Nora B. Sullivan Executive Vice President [email protected]
Daniel P. Penberthy Chief Financial Officer [email protected]
CORPORATE DATA
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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
Number of Shareholders 1,087 (as of March 10, 1998)
Rand is actively seeking good business opportunities for investment
consideration. If you are aware of such businesses which may need Rand's support
and assistance, please feel free to contact us.
Rand Capital Corporation
2200 Rand Building
Buffalo, NY 14203
Tel: 716-853-0802
Fax: 716-854-8480
