June 30, 1999
Semi-Annual Report
July 13, 1999
Dear Shareholders:
During the second quarter of 1999, we increased our investment in Pathlight
Technology, Inc. by purchasing $225,000 preferred stock, and converting our Note
to preferred stock. Pathlight is a leading developer of storage area network
technology specifically designed for the sharing of critical data storage
resources. The company recently entered a multi-year agreement with the IBM
Storage System Division.
During the quarter, we also increased our investment in Hammertime Kitchen
& Bath Works, Inc. with a $100,000 short-term Note. Hammertime is one of eight
kitchen and bath installers nationally licensed by Sears Roebuck & Company.
Also during the quarter, we entered into one new investment, Ellicottville
Energy, Inc., with a $145,000 short-term Note. Ellicottville Energy is a
cogeneration facility selling electricity to a regional utility. They also
operate a hardwood lumber drying facility.
We ended the quarter with a net asset value of $1.42 per share and a cash
position of $3.1 million. Our pipeline of potential investments is very active
and we hope to report on these transactions in the coming quarters.
Thank you for your support.
Allen F. Grum
President
<PAGE>
<TABLE>
<CAPTION>
Portfolio Valuation / June 30, 1999
June 30, 1999 March 31, 1999
------------- --------------
Per Per
share share
Company and Business Type of Investment Date Acquired Cost Value of Rand Value of Rand
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
American Tactile Corporation Convertible 6/23/95 150,000 50,000 0.01 50,000 0.01
Medina, NY. Develops equipment Debentures at 8%
and systems to produce signage. due June 2000
www.americantactile.com and April 2001 with
detachable warrants
ARIA Wireless Systems, Inc. Common Stock - 5/23/97 438,000 122,000 0.02 122,000 0.02
(OTC:AWSI)* 488,000 shares
Buffalo, NY. Markets wireless
radio transmission
communication equipment.
www.ariawireless.com
BioVector, Inc. Common Stock - 4/17/97 445,030 520,030 0.09 485,000 0.08
Buffalo, NY. 125,000 shares
Medical technological sales Preferred Stock -
force company. 260,000 shares
Option to purchase
10,000 Common Shares
BioWorks, Inc. Series A 11/6/95 56,000 56,000 0.01 56,000 0.01
Geneva, NY. Develops and Convertible
manufactures Preferred Stock -
biological alternative to 32,000 shares
chemical pesticides.
www.bioworksbiocontrol.com
Clearview Cable TV, Inc. Common Stock - 400 2/23/96 55,541 55,541 0.01 55,541 0.01
New Providence, NJ. Cable shares
television operator.
DataView, LLC Convertible 10/1/98 200,000 200,000 0.04 200,000 0.04
Mt. Kisco, NY. Designs, Subordinated Note -
develops and markets $200,000
browser based software for 8% Due October 15,
investment professionals. 1999
www.marketgauge.com
Ellicottville Energy, Inc. Note at 9.3%, due 6/29/99 145,000 145,000 0.03 - -
Ellicottville, NY. June 29, 2000
Cogeneration facility selling
electricity to a regional
utility.
Fertility Acoustics, Inc. Common Stock 10/1/97 50,000 125,000 0.02 125,000 0.02
Buffalo, NY. Developer of -600,000 shares
proprietary methods Option to purchase
to diagnose onset of 180,000 shares
ovulation.
J. Giardino First mortgage @ 2/26/88 -0- -0- 0.00 121,112 0.02
Buffalo, NY. Commercial real 13%, paid in full
estate. June 1999
Hammertime, Inc. Convertible 10/1/98 300,000 300,000 0.05 100,000 0.04
Clarence, NY. Exclusive Sears Preferred Stock - 100,000
licensed installer 1,000 Shares
of kitchens and baths. Senior Subordinated
Note at 12% due
October 2000
Promissory Note at
15%, due August 1999
HealthWay Products Company, Common Stock-1,000 3/18/96 100,100 100,100 0.02 100,100 0.02
Inc. Syracuse, NY. shares
Manufactures air Promissory Note at
filters and climate 24%, due June 1996
control devices. 4,667 warrants for
www.healthway.com Series A Preferred
Stock
InfoMiners, Inc. Bridge loan at 10% 12/21/98 420,000 420,000 0.07 420,000 0.07
Amherst, NY. Data warehousing due June 1999
and decision 147,000 warrants
support software for for shares of stock
healthcare industries.
www.infominers.com
Lightbridge, Inc. Common Stock - 3/31/94 109,439 72,307 0.01 66,648 0.01
(NASDAQ:LTBG)* 5,843 shares
Burlington, MA. Provides
software based services
for wireless
telecommunications industry.
www.lightbridge.com
MINRAD, Inc. Common Stock - 8/4/97 429,000 949,512 0.17 949,512 0.17
Buffalo, NY. Developer of 118,689 shares
laser guided surgical devices.
Pathlight Technology, Inc. Class A Series 10/7/97 425,000 425,000 0.07 200,000 0.04
Ithaca, NY. Develops high Convertible
technology Serial Preferred
Storage Architecture for Stock - 200,000
computer industry. shares with 6%
www.pathlight.com cumulative
dividend.
Preferred Class B -
117,187 shares
67,578 warrants for
shares of stock
Platform Technology Holdings, Two units with 9/24/97 8,045 60,000 0.01 60,000 0.01
LLC option for two
Charlottesville, VA. Provides additional units
sales support and
management for unique medical
businesses.
Reflection Technology, Inc. Series J 10/4/95 500,000 150,000 0.03 150,000 0.02
Waltham, MA. Develops and Convertible
licenses proprietary Preferred Stock -
virtual display technology. 243,903 shares
www.reflectiontech.com
UStec, Inc. Promissory Note at 12/17/98 100,000 100,000 0.02 100,000 0.02
Victor, NY. Manufacturers and 12% due December
markets digital wiring 2003
systems for residential new 50,000 warrants for
home construction. common shares
www.ustecnet.com
Other investments Other 471,296 62 0.00 10,330 0.00
Total portfolio 4,402,451 3,850,552 0.68 3,471,243 0.61
investments =========
Cash and Cash 3,076,444 0.54 3,505,402 0.61
equivalents
Net receivables(payables) 79,078 0.01 98,868 0.02
------ ------
Net Assets before 7,000,074 1.23 7,075,513 1.24
Taxes
Tax provision (benefit) (1,071,880) (0.19) (1,071,880) (0.19)
----------- -----------
Net Assets 8,077,954 8,147,393
========= =========
Net Asset Value per 1.42 1.43
Share (5,708,034
shares outstanding
during both periods)
</TABLE>
* Publicly owned company ^ Unrestricted securities as defined in Note (a)
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. Among the factors considered by the Board of Directors in
determining the fair value of restricted securities are the financial condition
and operating results, projected operations, and other analytical data relating
to the investment. Also considered are the market prices for unrestricted
securities of the same class (if applicable) and other matters which may have an
impact on the value of the portfolio company.
<PAGE>
Rand Capital Corporation
Board of Directors (Elected by Shareholders April 27, 1999)
Reginald B. Newman II Chairman of the Board
Allen F. Grum
a, c Luiz F. Kahl
g Erland E. Kailbourne
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 786 (as of March 15, 1999)
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
<PAGE>
Rand Capital Corporation
Statements of Financial Position
June 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
Assets Unaudited June 30, 1999 December 31, 1998
- ------ ----------------------- -----------------
<S> <C> <C>
Investments at Directors' valuation(cost: at $ 3,852,213 $ 3,387,170
6/30/99 - $4,402,451;
at 12/31/98 - $4,047,800
Cash and cash equivalents 3,076,444 3,757,399
Interest receivable (net of allowance of $13,167 60,164 65,616
at 6/30/99 and $13,167 at 12/31/98)
Deferred tax asset 1,071,880 1,071,880
Other assets 70,782 23,973
------ ------
Total Assets $ 8,131,482 $ 8,306,038
=========== =========
Liabilities and Stockholders' Equity (Net
Assets)
Liabilities:
Accounts payable and accrued expenses $ 50,168 $ 67,306
Income taxes payable 1,701 1,700
----- -----
Total Liabilities 51,869 69,006
------ ------
Stockholders' Equity (Net Assets):
Common stock, $.10 par - shares authorized 570,804 570,804
10,000,000 issued and outstanding 5,708,034 at
June 30, 1999 and December 31, 1998.
Capital in excess of par value 6,889,379 6,889,379
Undistributed net investment (loss) (1,806,535) (1,568,711)
Undistributed realized gain on investments 2,710,831 2,739,156
Net unrealized (depreciation) of investments (284,865) (393,596)
--------- ---------
Net Assets (per share 6/30/99 $1.42; 12/31/98 - $1.44) 8,079,614 8,237,032
--------- ---------
Total Liabilities and Stockholder's Equity $ 8,131,482 $ 8,306,038
========= =========
</TABLE>
<PAGE>
Rand Capital Corporation
Statements of Operations
Six Months ended June 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
Unaudited June 30, 1999 December 31, 1998
----------------------- -----------------
<S> <C> <C>
Investment income:
Interest from portfolio companies $ 73,622 $ 211,795
Interest from other investments 76,724 76,217
Other income 10,680 57,198
------ ------
161,026 345,210
------- -------
Expenses:
Salaries 156,034 179,964
Employee benefits 44,674 9,828
Directors' fees 20,000 13,500
Legal fees 18,957 23,816
Professional fees 15,398 9,043
Stockholder and office 33,487 69,238
Insurance 20,400 22,500
Corporate development 10,617 43,391
Other operating 73,382 (16,781)
------ --------
392,949 354,499
------- -------
Investment (loss) before income taxes (231,923) (9,289)
Income taxes provision 5,900 5,600
Deferred income tax provision (benefit) - (120,805)
--------- ---------
Investment (loss) - net (237,823) 105,916
--------- -------
Realized and unrealized gain (loss) on
investments:
Net gain (loss) on sales and dispositions (28,325) (91,013)
-------- --------
Net realized gain (loss) on investments (28,325) (91,013)
Deferred income tax provision 0 -
-------- --------
Net realized gain (loss) (28,325) (91,013)
-------- --------
Unrealized appreciation (depreciation) on
investments:
Beginning of period (660,630) (532,947)
End of period (551,889) (660,630)
--------- ---------
Increase (decrease) in unrealized 108,731 (127,683)
appreciation
Deferred income tax provision (benefit) 79,826
-------- -------
Net increase (decrease) in unrealized 108,731 207,509
appreciation ------- -------
Net realized and unrealized gain (loss) on 80,406 298,522
investments ------ -------
Net increase (decrease) in net assets from $157,417 $192,606
operations ======== ========
</TABLE>
