January 21, 1999
To Our Shareholders:
For the quarter ended December 31, 1998, we increased our assets by $84,622
and ended the year with a Net Asset Value of $1.44.
In December, Auto Radiator Sales was sold to Visteon Automotive Systems (a
unit of Ford Motor) and we received $1.2 million as proceeds from the sale. This
ends a seven year association with ARS and we are proud to have helped the
company grow from a startup to $75 million in annual sales. We wish we had more
investments with management like Auto Radiator Sales.
We entered into two new and one follow on investments during the
Quarter.
We participated by providing $420,000 in a convertible bridge loan for
InfoMiners, Inc. InfoMiners, Inc. serves the healthcare market and provides data
mining tools that assist decision support solutions through database systems.
They are currently raising $4 million and we will have the option to convert our
loan at the same terms as the new financing. In addition to the loan, we
received a warrant to purchase 147,000 shares. We also participated in a
financing for Dataview, LLC. Information about this company can be found at
www.marketgauge.com. Dataview designs, develops and markets browser-based
software products which are geared toward the financial market, enabling
capitalization on the growth of Internet technology. Under the terms of our
investment, our loan will convert to 2.70% of Dataview, LLC. Finally, we
participated in a follow on investment with Pathlight Technology, Inc. and
invested $100,000 in a Convertible Note.
We end 1998 with $3.75 million in cash or $.66 per share of our Net Asset
Value in cash. Our goal in 1999 is to prudently invest these funds and increase
our shareholder value.
I thank you for your support.
Allen F. Grum
President
<PAGE>
PORTFOLIO VALUATION / DECEMBER 31, 1998
<TABLE>
<CAPTION>
December 31, 1998 September 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>
American Tactile Corporation Convertible Debentures 6/23/95 150,000 50,000 0.01 50,000 0.01
Medina, NY. Develops at 8% due June 2000
equipment and systems to and April 2001 with
produce signage. detachable warrants
ARIA Wireless Systems, Inc. Common Stock - 488,000 shares 5/23/97 438,000 122,000 0.02 122,000 0.02
(OTC:AWSI)* Buffalo, NY.
Markets wireless radio
transmission communication
equipment.
www.ariawireless.com
ARS, Inc. Debenture at 18.74% (repaid 12/98) - - - - 1,087,000 0.19
Buffalo, NY. Distributes
replacement auto products.
BioVector, Inc. Common Stock - 50,000 shares 4/17/97 50,000 125,000 0.08 125,000 0.08
Orchard Park, NY. Convertible Promissory Note at 8%, 360,000 360,000 360,000
Medical technological due April 2002 Option to purchase
sales force company. 165,000 Common Shares
BioWorks, Inc. Series A Convertible Preferred 11/6/95 56,000 56,000 0.01 56,000 0.01
Geneva, NY. Develops Stock - 32,000 shares
and manufactures biological
alternative to chemical
pesticides.
Clearview Cable TV, Inc. Common Stock - 400 shares 2/23/96 55,541 55,541 0.01 55,541 0.01
New Providence, NJ.
Cable television operator.
DataView, LLC Convertible Subordinated Note- 10/1/98 100,000 100,000 0.02 - -
Mt. Kisco, N.Y. Designs, $100,000
develops and markets browser 8% Due October 15, 1999
based software for investment
professionals.
www.marketgauge.com
Fertility Acoustics, Inc. Common Stock -150,000 shares 10/1/97 50,000 125,000 0.02 125,000 0.02
Orchard Park, NY. Option to purchase 15,000 shares
Developer of proprietary
methods to diagnose onset
of ovulation.
J. Giardino First mortgage @ 12% 2/26/88 121,112 121,112 0.02 172,034 0.03
Buffalo, NY.
Commercial real estate.
Hammertime, Inc. Convertible Preferred Stock - 10/1/98 100,000 100,000 0.04 - 0.01
Clarence, NY. 100,000 Shares 100,000 100,000 50,000
Exclusive Sears licensed Senior Subordinated Note at
installer of kitchens 12% due October 6, 2000
and baths.
HealthWay Products Promissory Note at 24%, 3/18/96 100,000 100,000 0.02 100,000 0.02
Company, Inc. due June 1996
Syracuse, NY. Manufactures 4,667 warrants for Series
air filters and climate A Preferred Stock
control devices.
www.healthway.com
InfoMiners, Inc. Bridge loan at 10% due 12/21/98 420,000 420,000 0.07 - -
Amherst, NY. Data June, 1999
warehousing & decision 147,000 warrants for shares
support software for of stock
healthcare industries.
www.infominers.com
Lightbridge, Inc. Common Stock - 13,165 shares 3/31/94 218,271 72,408 0.01 57,012 0.01
(NASDAQ:LTBG)*
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 0.17 949,512 0.17
Orchard Park, NY.
Developer of laser guided
surgical devices.
Pathlight Technology, Inc. Class A Series 1(a) 10/7/97 100,000 100,000 0.04 100,000 0.02
Ithaca, NY. Convertible Preferred Stock - 100,000 100,000
Develops high technology 100,000 shares with 6% cumulative
Serial Storage Architecture dividend. Subordinated Note at
for computer industry. 7.5% due December 2000
www.pathlight.com
Platform Technology Two units with option for 9/24/97 8,045 60,000 0.01 50,000 0.01
Holdings, LLC two additional units
Orchard Park, NY.
Provides sales support and
management for unique
medical businesses.
Reflection Technology, Inc. Series J Convertible Preferred 10/4/95 500,000 150,000 0.03 150,000 0.03
Waltham, MA. Develops Stock - 243,903 shares
and licenses proprietary
virtual display technology.
www.reflectiontech.com
UStec, Inc. Promissory Note at 12% 12/17/98 100,000 100,000 0.02 100,000 0.02
Victor, NY. due December 2003
Manufacturers & markets
digital wiring systems
for residential new home
construction.
www.ustecnet.com
Other investments
Other - 491,832 20,597 0.00 52,757 0.01
_______ ______ ____ ______ ____
Total portfolio investments 4,047,801 3,387,170 0.59 3,741,856 0.66
=========
Cash and Cash equivalents 3,757,399 0.66 3,369,044 0.59
Net receivables(payables) 20,583 0.00 13,110 -
______ ______
7,165,152 1.25 7,124,010 1.25
Net Assets before Taxes (1,071,880) (0.19) (1,028,400) (0.18)
___________ __________
Tax provision (benefit)
Net Assets 8,237,032 8,152,410
========= =========
Net Asset Value per Share (5,708,034 1.44 1.43
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.
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
