<PAGE> 1
March 31, 2000
First Quarter Report
April 13, 2000
Dear Shareholders:
I am pleased to report that we grew our Net Asset Value by 14% to $1.51.
This represents a continuation of the strong performance of our portfolio
companies. In particular we are pleased with the performance of Pathlight
Technology, Inc., Fertility Acoustics, Inc. and ARIA Wireless Systems Inc.
Rand increased its investment in Pathlight Technology, Inc. with a $750,000
participation in the corporation's recent $5 million issuance of Series C
Preferred Stock. The investment represents the fourth round of financing that
Rand has participated in since 1997. Rand now owns approximately 5.2% of
Pathlight.
Pathlight competes in the Storage Area Network Infrastructure Market for
Gateways and Routers. During the quarter, they announced OEM agreements with
Aviv Corporation, ECCS, Inc., Glyph Technologies, Overland Data, Unisys
Corporation and Computer Network Technology. Additionally, IBM strengthened its
relationship with Pathlight by announcing that the Pathlight Virtual Private SAN
technology would be included in each SAN Gateway.
Pathlight also engaged the Investment Banking firm of Chase H&Q to assist
the Board of Directors in evaluating strategic alternatives.
As a result of the financing, in conjunction with Pathlight's execution on
its business plan, and the establishment of several key OEM relationships, Rand
has increased its valuation of Pathlight from $610,000 to $2,012,922.
Rand has exercised its options with Fertility Acoustics, Inc. and has
acquired an additional 180,000 shares at $0.21 per share. Rand also received an
additional 68,736 shares as part of the BioVector, Inc. closeout. This brings
its total shares to 848,736 of common stock. During the quarter Kimberly-Clark
Corporation made an investment in Fertility Acoustics at $2.75 per share. Due to
the strategic relationship and consistent with our valuation policy, we are
discounting the value by 50% and valuing our shares of Fertility Acoustics, at
$1.38. This increases our value of Fertility Acoustics from $125,000 to
$1,167,012.
We also increased our valuation of ARIA Wireless Systems, Inc. and our
preferred stock portfolio to reflect an increase in their market price. We were
also repaid on our term loan with InfoMiners.com.
It was a great quarter for us, and I look forward to our continuing
success. I want to thank our shareholders and Directors for helping us achieve
these results.
Allen F. Grum
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PORTFOLIO VALUATION / MARCH 31, 2000
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
Per Per
Share Share
Company and Business Type of Investment Date Acquired Costs Value of Rand Value of Rand
- -------------------------- --------------------- -------------- ------------ --------------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
American Tactile Convertible 6/23/95 150,000 50,000 0.01 50,000 0.01
Corporation Medina, NY. Debentures at 8%
Develops equipment and due June 2000 and
systems to produce April 2001 with
signage. detachable warrants
www.americantactile.com
ARIA Wireless Systems, Common Stock - 5/23/97 543,840 349,840 0.06 288,840 0.05
Inc. (OTC:AWSI)* 488,000 shares
Buffalo, NY. Markets $105,840 Demand
wireless radio Notes at 15%
transmission
communication equipment.
www.aria-gib.com.com
BioWorks, Inc. Geneva, Series A 11/6/95 56,000 56,000 0.01 56,000 0.01
NY. Develops and Convertible
manufactures biological Preferred Stock -
alternative to chemical 32,000 shares
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. shares
Cable television
operator.
Contract Staffing Series A 8% 11/8/99 100,000 100,000 0.02 100,000 0.02
Buffalo, NY. PEO Cumulative
providing human resource Preferred
administration for small Stock-10,000 shares
businesses.
www.contract-staffing.com
DataView, LLC Mt. Kisco, 5.5% Membership 10/1/98 310,357 343,357 0.06 343,357 0.06
NY. Designs, develops Interest
and markets browser
based software for
investment
professionals.
www.dataviewllc.com/
marketgauge/
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
Per Per
Share Share
Company and Business Type of Investment Date Acquired Costs Value of Rand Value of Rand
- -------------------------- --------------------- -------------- ------------ --------------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Fertility Acoustics, Common Stock - 10/1/97 87,440 1,167,012 0.20 125,000 0.02
Inc. Buffalo, NY. 848,736 Shares
Developer of proprietary
methods to diagnose
onset of ovulation.
G-TEC Natural Gas 41.67% Class A 8/31/99 300,000 300,000 0.05 300,000 0.05
Systems Buffalo, NY. Membership Interest
Manufactures and 8% Cumulative
distributes systems that Dividend
allow natural gas to be
used as an alternative
fuel to gases.
www.gas-tec.com.
Hammertime Kitchen & Convertible 10/1/98 300,000 300,000 0.05 300,000 0.05
Bath Works, Inc. Preferred Stock -
Clarence, NY. Exclusive 1,000 Shares Senior
Sears licensed installer Subordinated Note
of kitchens and baths. at 12% due October
2000 Promissory
Note at 15%, due
August 1999
HCI Systems Kennebunk, Series B Preferred 12/15/99 100,500 100,500 0.02 100,500 0.02
ME. Facilities Stock - 67,000
management software Shares 5%
solution. Cumulative Dividend
www.hcisystems.com
InfoMiners.com Amherst, Bridge loan repaid 12/21/98 0 0.0 420,000 0.07
NY. Data warehousing March 31, 2000
and decision support
software for healthcare
industries.
www.infominers.com
MemberWare Technologies, Promissory Note at 9/16/99 100,000 150,000 0.03 150,000 0.03
Inc. Pittsford, NY. Prime Rate + 4.5%
Internet company engaged due September 2004.
in web related Common Stock -
consulting services. 40,000 Shares
www.memberware.com 34,000 warrants for
shares of stock
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
Per Per
Share Share
Company and Business Type of Investment Date Acquired Costs Value of Rand Value of Rand
- -------------------------- --------------------- -------------- ------------ --------------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
MINRAD, Inc. Buffalo, 546,621 Common 8/4/97 874,030 1,111,000 0.19 1,111,000 0.19
NY. Developer of laser Shares. 53,628
guided surgical devices. Preferred Shares
Merged with BioVector,
Inc. December
1999.
Pathlight Technology, Class A Series 10/7/97 1,174,996 2,012,922 0.35 610,000 0.11
Inc. Ithaca, NY. Convertible
Develops SAN technology Preferred Stock -
for computer industry. 200,000 shares with
www.pathlight.com 6% cumulative
dividend.
Preferred Class B -
117,187 shares
Class C Preferred
Stock - 214,285
Shares
67,578 warrants for
shares of stock
Platform Technology Two units with 9/24/97 8,045 60,000 0.01 60,000 0.01
Holdings, LLC option for two
Charlottesville, VA. additional units
Provides sales support
and management for
unique medical
businesses.
UStec, Inc. Victor, NY. Promissory Note at 12/17/98 100,000 100,000 0.02 100,000 0.02
Manufacturers and 12% due December
markets digital wiring 2003
systems for residential 50,000 warrants for
new home construction. common shares
www.ustecnet.com
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
Per Per
Share Share
Company and Business Type of Investment Date Acquired Costs Value of Rand Value of Rand
- ------------------------- -------------------- --------------- --------- --------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Vanguard Modular Preferred Units - 12/16/99 270,000 270,000 0.05 270,000 0.05
Building Systems 2,673 Units with
Philadelphia, PA. Leases Warrants
and sells high-end
modular space solutions.
www.vanguardmodular.com
Preferred Stock Merrill Lynch - 7/15/99 1,047,888 925,838 0.16 879,000 0.15
Portfolio* Merrill Lynch 12,000 shares;
(MER-F), Motorola Motorola - 10,000
(MOT-A) Citicorp shares; Citicorp -
(CIH-A), Texaco (TXC-A) 10,000 shares;
Texaco - 12,000
shares
Other investments Other 971,398 164 160
----------- ------------- ----------- ----------------- ---------
Total portfolio
investments 6,550,035 7,452,174 1.30 5,319,398 0.93
-----------
Cash and Cash 646,881 0.11 1,137,233 0.20
equivalents
Net 97,663 0.02 74,561 0.01
receivables(payables)
------------- ----------- ----------------- ---------
Net Assets before 8,196,718 1.43 6,531,192 1.14
Taxes
Tax provision (471,880) (0.08) (1,071,880) (0.19)
(benefit)
------------- ----------- ----------------- ---------
Net Assets 8,668,598 7,603,072
------------- -----------------
1.51 1.33
</TABLE>
Net Asset Value per Share (5,708,034 shares outstanding at December 31, 1999 and
5,723,034 shares outstanding at March 31, 2000)
* 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
<PAGE> 6
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 13, 2000)
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/CEO [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 823 (as of March 6, 2000)
Rand is actively seeking business opportunities for investment consideration. If
you are aware of those businesses that may need Rand's support and sassistance,
please feel free to contact us.
Rand Capital Corporation
2200 Rand Building
Buffalo, NY 14203
Tel: 716-853-0802 Fax: 716-854-8480
