RAND CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
and any dividends in arrears are recognized into income and added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such
time as the preferred equity is redeemed.
Revenue Recognition - Fee Income
Primarily consists of the revenue
associated with the amortization of financing fees charged to the portfolio companies upon successful closing of SBIC financings and income associated with portfolio company board attendance fees. The income associated with the amortization of
financing fees was $41,872, $24,091 and $22,634 for the years ended December 31, 2018, 2017 and 2016, respectively and is estimated to be approximately $46,000 in 2019, $21,000 in 2020 and $6,000 in 2021. The board fees were $2,000, $1,000 and
$4,000 for the years ended December 31, 2018, 2017 and 2016, respectively. In addition, we recorded a fee of approximately $142,000 for modifying a debt instrument during the year ended December 31, 2018.
Realized Gain or Loss and Unrealized Appreciation or Depreciation of Investments -
Amounts reported as realized gains and losses
are measured by the difference between the proceeds from the sale or exchange and the cost basis of the investment without regard to unrealized gains or losses recorded in prior periods. Proceeds held in escrow are reported in other assets. The cost
of securities that have, in managements judgment, become worthless are written off and reported as realized losses when appropriate. Unrealized appreciation or depreciation reflects the difference between the valuation of the investments and
the cost basis of the investments.
Original Issue Discount
Investments may include original issue
discount, or OID, income. This occurs, for example, when the Corporation purchases a warrant and a note from a portfolio company simultaneously, which requires an allocation of a portion of the purchase price to the warrant and reduces the
purchase price allocated to the note by an equal amount in the form of a note discount or OID. The note is reported net of the OID and the OID is accreted into interest income over the life of the loan. The Corporation recognized $39,653, $32,129
and $9,996 in OID income for the years ended December 31, 2018, 2017 and 2016, respectively. OID income is estimated to be approximately $41,000 for 2019.
Deferred Debenture Costs
- SBA debenture origination and commitment costs, which are netted against the debenture obligation
(See Note 5 SBA Debenture Obligations), will be amortized ratably over the terms of the SBA debentures. Amortization expense was $27,400 for each of the years ended December 31, 2018, 2017 and 2016, respectively. Amortization
expense on currently outstanding debentures for the next five years is estimated to average $29,000 per year.
Net Assets Per
Share
-
Net assets per share are based on the number of shares of common stock outstanding. There are no common stock equivalents outstanding.
Supplemental Cash Flow Information
- Income taxes refunded (paid) during the years ended December 31, 2018, 2017 and 2016
amounted to $26,448, ($486,769) and ($2,560,614), respectively. Interest paid during the years ended December 31, 2018, 2017 and 2016 was $282,875, $282,875 and $283,650, respectively. During 2018, 2017 and 2016, the Corporation converted
$609,817, $269,445 and $19,252, respectively, of interest receivable and
payment-in-kind
(PIK) interest into debt investments. During the year ended December 31,
2016, the Corporation recorded one escrow receivable for $1,100,000 from the sale of Gemcor II LLC, which was collected during 2017. During the year ended December 31, 2016, the Corporation collected $1,510,248 in escrow receivable from
BinOptics Corporation.
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