Semi Annual Report
July 19, 2000
Dear Shareholders:
We ended the quarter with our net asset value unchanged from the previous
quarter at $1.51.
During the quarter, we completed new investments in BanKor.com and
TSS-Transnet and increased our investments in two portfolio companies, UStec and
Ultra-Scan.
We purchased $200,000 of preferred stock in BanKor.com as part of a
syndicate that provided $3.75 million of financing to BanKor.com. BanKor.com
provides an affordable, cost-efficient online banking solution to community
banks and other financial institutions. BanKor.com is dedicated to removing the
barriers to online banking and is especially interested in helping to level the
playing field between community banks and their much larger competitors. Our
investment represents approximately 3% of BanKor.com. We also provided $250,000
of capital to a management team, which allowed them to purchase all of the
assets of TSS-Transnet. TSS-Transnet is a trucking and logistics management
company offering a single source logistics solution that encompasses road, rail,
air, ocean, and a variety of distribution services tailored to the customers'
individual business needs. We purchased preferred stock and a warrant for 25% of
the common stock. Management intends to use TSS-Transnet as a platform to
consolidate other trucking companies.
We increased our investment in UStec by exercising options for 50,000
shares. Also, we provided $25,000 in a bridge loan for Ultra-Scan. Both of these
companies are actively pursuing fundraising.
As our portfolio ages, many of our companies are displaying the promise
that we anticipated when we made our original investment. We look forward to
sharing these results with you in the coming quarters. Rand's website has been
launched (www.randcapital.com). The site includes information and links to our
portfolio companies as well as other related sites. We feel our website will
provide a more efficient manner in which to communicate with our shareholders
and provide portfolio company updates. We encourage you to visit our website.
Allen F. Grum
<PAGE>
Portfolio Valuation / June 30, 2000
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
June 30, 2000 March 31, 2000
Company and Business Type of Investment Date Acquired Cost Value Per Share Value Per Share
of Rand of Rand
-------------------------- --------------------- -------------- ------------ ---------- ----------- ----------- ----------
-------------------------- --------------------- -------------- ------------ ---------- ----------- ----------- ----------
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 0.06 349,840 0.06
Inc. (OTC:AWSI)* 488,000 shares
Buffalo, NY. Markets $105,840 Demand
wireless radio Notes at 15%
transmission
communication equipment.
www.aria-glb.com
BanKor.com Bloomfield, Series A 5/30/00 200,000 200,000 0.03
MN. Provides turn-key Convertible
solutions for on-line Preferred Stock -
community banking. 200,000 shares
Cumulative Dividend
$0.08 per share per
annum
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.
marketgauge.
com
Fertility Acoustics, Common Stock - 10/1/97 87,440 1,167,012 0.20 1,167,012 0.20
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
Sears licensed installer Senior Subordinated
of kitchens and baths. Note 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
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
MINRAD, Inc. Buffalo, 595,506 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 2,012,922 0.35
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
Charlottes-ville, VA. additional units
Provides sales support
and management for
unique medical
businesses.
TSS-TransnetMilton, Series A Preference 6/1/00 250,000 250,000 0.04
Ontario. Canadian and Stock - 250 shares
U.S. trucking and 12% Quarterly
logistics company. Dividend250
warrants for common
stock
UStec, Inc. Victor, NY. Promissory Note at 12/17/98 100,500 150,000 0.03 100,000 0.02
Manufacturers and 12% due December
markets digital wiring 2003 50,000 common
systems for residential shares
new home construction. 2,500 warrants for
www.ustecnet.com common shares
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 1,047,888 951,460 0.17 925,838 0.16
Portfolio* ^ Merrill 12,000 shares;
Lynch (MER-F), Motorola Motorola - 10,000
(MOT-A), Citicorp shares; Citicorp -
(CIH-A), Texaco (TXC-A) 10,000 shares;
Texaco - 12,000
shares
896,397 25,163 0.01 164
------- ------ ---- ---
Other investments Other
Total 6,925,534 8,002,795 1.40 7,452,174 1.30
Portfolio investments
Cash and Cash 51,154 0.01 646,881 0.11
equivalents ------ ---- ------- ----
Net receivables 114,871 0.02 97,663 0.02
(payables)
Net Assets before 8,168,820 1.43 8,196,718 1.43
Taxes --------- ---- --------- ----
Tax provision (471,880) (0.08) (471,880) (0.08)
(benefit)
--------- ---------
Net Assets 8,640,700 8,668,598
Net Asset Value per Share 1.51 1.51
(5,708,034 shares outstanding
at March 31, 2000 and 5,723,034
shares outstanding at June 30, 2000)
</TABLE>
* Publicly owned company ^ Unrestricted securities 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
Results from Annual Shareholders Meeting held April 13, 2000
(1) Board of Directors Election
Votes For Votes Withheld Against
--------- -------------- -------
Reginald B. Newman II 4,955,438 8,940 -
Allen F. Grum 4,955,438 8,940 -
Luiz F. Kahl 4,955,438 8,940 -
Erland E. Kailbourne 4,954,238 10,140 -
Ross B. Kenzie 4,943,823 20,555 -
Willis S. McLeese 4,954,438 9,920 -
Jayne K. Rand 4,955,438 8,940 -
(2) Appointment of Deloitte & Touche as Auditors
Votes For Votes Withheld Against
--------- -------------- -------
4,932,215 16,078 16,085
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
www.continentalstock.com
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 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, 2000 and December 31, 1999
Assets Unaudited June 30, 2000 December 31, 1999
Investments at Directors' $ 8,002,795 $ 5,319,399
valuation (cost: at 6/30/00 -
$6,925,534;
at 12/31/99 - $6,182,596
Cash and cash equivalents 51,154 1,139,708
Interest receivable (net of
allowance of $13,167 98,576 83,524
at 6/30/00 and at 12/31/99)
Deferred tax asset 471,880 1,071,880
Other assets 55,396 34,436
------ ------
Total Assets $ 8,679,801 $ 7,648,947
================== ==================
Liabilities and Stockholders'
Equity (Net Assets)
Liabilities:
Accounts payable and accrued
expenses $ 39,070 $ 44,174
Income taxes payable 30 30
-- --
Total Liabilities 39,100 44,204
------ ------
Stockholders' Equity (Net
Assets):
Common stock, $.10 par - shares 572,804 570,804
authorized 10,000,000 issued
and outstanding 5,723,034 at
June 30, 2000 and 5,708,034
at December 31, 1999.
Capital in excess of par value 6,907,329 6,889,379
Undistributed net investment (2,180,259) (1,955,808)
(loss)
Undistributed realized gain on
investments 2,596,531 2,696,531
Net unrealized (depreciation) (744,296) (596,163)
of investments --------- ---------
Net Assets (per share 6/30/00 -
$1.51; 12/31/99 - $1.33) 8,640,701 7,604,743
--------- ---------
Total Liabilities and $ 8,679,801 $ 7,648,947
Stockholder's Equity =========== ===========
<PAGE>
RAND CAPITAL CORPORATION
Statements of Operations
Six Months ended June 30, 2000 and December 31, 1999
Unaudited June 30, 2000 December 31, 1999
Investment income:
Interest from portfolio $ 44,063 $ 78,926
companies
Interest from other 79,707 77,264
investments
Other income - 45,878
------- -------
123,770 202,068
------- -------
Expenses:
Salaries 149,804 155,500
Employee benefits 44,825 38,443
Directors' fees 18,000 13,500
Legal fees 14,380 9,928
Professional fees 15,628 12,342
Stockholder and office 36,206 28,184
Insurance 14,510 16,936
Corporate development 8,851 13,318
Other operating 40,019 57,701
------ ------
342,223 345,58
------- ------
Investment (loss) before (218,453) (143,786)
income taxes
Income taxes provision 5,998 5,488
Deferred income tax provision (benefit) - -
-------- -------
Investment (loss) - net (224,451) 149,274
-------- -------
Realized and unrealized gain
(loss) on investments:
Net gain (loss) on sales (100,000) (14,300)
and dispositions -------- -------
Net realized gain (loss) on (100,000) (14,300)
investments
Deferred income tax - -
provision -------- --------
Net realized gain (loss) (100,000) (14,300)
-------- --------
Unrealized appreciation
(depreciation) on investments:
Beginning of period (863,197) (551,889)
End of period (1,077,262) (863,197)
---------- ---------
Increase (decrease) in 1,940,459 (311,308)
unrealized appreciation
Deferred income tax 600,000 -
provision (benefit) ------- -------
Net increase (decrease) in 1,340,459 (311,308)
unrealized appreciation --------- --------
Net realized and unrealized 1,240,459 (325,608)
gain (loss) on investments --------- --------
Net increase (decrease) in net $ 1,016,008 $ 474,882)
assets from operations =========== =========
