October 8, 1998
TO OUR SHAREHOLDERS:
For the quarter ended September 30, 1998, we decreased our net assets by
$277,000, or $.05 per share, resulting in total net asset valuation of
$8,152,410.
On a positive note, we increased our valuation in MINRAD, Inc. from $623,000
to $949,512. During the quarter they entered into a strategic alliance with
Wilson Greatbatch. In this transaction, MINRAD, Inc. received $1.2 million cash,
personnel and inventory for a line of products in the magnetic resonating
industry that will be sold through BioVector, Inc. In exchange, Wilson
Greatbatch received stock and options for approximately 9% of MINRAD, Inc.
Separately, BioVector, Inc. reached an exclusive sales agreement with
Electro-Catheter Corp. (OTCBB:ECTH) and Cardiac Control Systems, Inc.
(OTCBB:CDCS) in North America. We expect to generate revenues in October.
Offsetting these positive results and leading to the net decline of
$277,000, was a decline in the stock price of two of our publicly traded
companies. We revalued our investment in ARIA Wireless Systems, Inc. from
$610,000 to $122,000 and in Lightbridge, Inc. from $126,495 to $57,012.
Management and the Board of Directors remain committed to increasing the
value of Rand Capital and our stock.
I thank you for your support.
Allen F. Grum
President
<PAGE>
PORTFOLIO VALUATION / SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
September 30, 1998 June 30, 1998
Date Per Share Per Share
Company and Business Type of Investment Acquired Cost Value Rand Value Rand
<S> <C> <C> <C> <C> <C> <C> <C>
ARIA Wireless Systems, Inc. (OTC:AWSI)* Common stock - 488,000 shares 5/23/97 438,000 122,000 0.02 610,000 0.11
Buffalo, NY. Markets radio
transmission communication equipment
www.ariawireless.com
ARS, Inc. Participation in subordinated 7/1/97 1,000,000 1,087,000 0.19 1,067,000 0.19
Buffalo, NY. Assembles and distributes debenture at 12% due July,
replacement automotive products 2002 through April 2005
www.arsradiators.com 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 165,000 common shares
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 Option to purchase 15,000
proprietary shares methods to diagnose onset
methods to diagnose onset of ovulation. of ovulation.
J. Giardino First Mortgage at 12% 2/26/88 172,034 172,034 0.03 172,034 0.03
Buffalo, NY. Owns and leases
commercial property
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
www.healthway.com
Lightbridge, Inc. (NASDAQ: LTBG)* Common stock - 14,253 shares 3/31/94 218,271 57,012 0.01 126,495 0.02
Burlington, MA. Provides software based
services for wireless telecommunications
industry.
www.lightbridge.com
MINRAD, Inc. Common stock - 118,689 shares 8/4/97 429,000 949,512 0.17 623,000 0.11
Orchard Park, NY. Developer of laser Option to purchase 5,000 shares
guided surgical devices.
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 Preferred stock - 100,000 shares
Serial Storage Architecture for computer with 6% cumulative dividend
industry.
www.pathlight.com
Reflection 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
www.reflectiontech.com
UStec Common stock - 47,583 shares 6/26/98 100,000 100,000 0.02 100,000 0.02
Victor, NY. Manufactures residential Term loan at 6%, repaid
digital wiring systems January 1998
www.ustecnet.com
Other investments (a) Other 992,964 294,298 0.05 329,060 0.05
-----------
Total portfolio investments 4,510,269 3,741,856 0.66 3,987,589 0.70
=========
Cash and cash equivalents 3,369,044 0.59 3,354,765 0.59
Net receivables(payables) 13,110 .-- 58,883 0.01
----------- -----------
Net assets before taxes 7,124,010 1.25 7,401,237 1.30
Tax provision(benefit) (1,028,400) (0.18) (1,028,400) (0.18)
----------- -----------
Net assets $8,152,410 $8,429,637
========== ==========
Net asset value per share $1.43 $1.48
(5,708,034 shares at September
30, 1998 and June 30, 1998)
</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.
Rand Capital Corporation
Board of Directors (Elected by Shareholders April 14, 1998)
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 Title Email
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
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 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
