- Received $6 million SBIC funding
commitment
- Invested $2.5 million in eight
companies during the year; included one addition to the Rand
portfolio
- Net Asset Value per share grew to
$4.99 at December 31, up $0.15 in fourth quarter driven by
investment appreciation
- Announced proposed investment of $25
million by East Asset Management
Rand Capital Corporation (Nasdaq: RAND) (“Rand”), a venture
capital company which invests in growth businesses with unique
product, service or technology concepts, announced its results for
the quarter and year ended December 31, 2018.
Allen F. (“Pete”) Grum, President and Chief Executive Officer of
Rand Capital, commented, “We are diligently working with East Asset
Management on the proposed $25 million investment in Rand,
announced in late January. This will be an exciting and
transformational event for Rand and our shareholders.”
He added, “As previously announced, we were pleased to receive a
$6 million funding commitment from the U.S. Small Business
Administration in December. Our investing activity increased to a
more normal level in the fourth quarter, as we provided capital to
five companies in support of their growth plans.”
Fourth Quarter and Full Year 2018 Financial
Highlights
- Reported $4.99 net asset value (NAV)
per share at December 31, 2018, compared with $4.84 at September
30, 2018 and $5.05 at December 31, 2017
- Sequential improvement was primarily
driven by net appreciation in certain portfolio investments, in
accordance with the Company’s valuation policy.
- Decline compared with the year-ago
value was primarily due to net realized losses on dispositions of
certain portfolio investments.
- For the full year, invested in eight
companies totaling $2.5 million
- During the fourth quarter, invested
$1.1 million
- Included $600,000 in a new portfolio
company, Tech 2000, Inc.
- Supported four existing portfolio
companies with follow-on investments:
- Genicon Inc., $250,000
- BeetNPath, LLC, $122,628
- Tilson Technology Management, Inc.,
$100,000
- Empire Genomics, LLC, $50,000
- Investment income increased 76% and 45%
over the prior-year fourth quarter and full year, respectively,
driven by higher interest and dividends as well as nonrecurring
distribution income and nonrecurring loan restructuring income
- At December 31, 2018, portfolio fair
value was $34.7 million and consolidated cash was$4.0 million
- During the fourth quarter, received a
$6 million SBIC funding commitment, and drew down $750,000 to fund
investment activity and operations
Total investment income in the fourth quarter of 2018 grew 76%
to $668,000, up from $380,000 in the fourth quarter of 2017. The
$288,000 increase included approximately $114,000 of incremental
interest and $156,000 of incremental dividends and other
distributions, as well as increases in other income. Total expenses
in the 2018 and 2017 fourth quarters were $684,000 and $448,000,
respectively. Excluding bonuses, 2018 fourth quarter expenses were
$559,000, compared with $436,000 last year. The increase was driven
by higher professional fees primarily due to the pending strategic
investment that was announced on January 25, 2019.
Total investment income was $2.1 million and $1.5 million for
the years ended December 31, 2018 and 2017, respectively. The
growth was driven by higher interest and dividend income as well as
loan restructuring income in the third quarter. Total expenses for
the year were approximately
$2.2 million in 2018, up from $2.0 million in 2017.
Selected Portfolio Highlights
- Tech 2000, Inc. is a
Cisco Training Partner offering a variety of training courses and
certifications. For more than 25 years, the company has worked with
Fortune 500 companies to develop and deliver solutions to support
their IT training needs. From traditional classroom and
computer-based training, to virtual delivery and today’s enhanced
eLearning, Tech 2000 is a leader in the delivery of knowledge and
skills. They are on the forefront of providing next generation
learning and training solutions to meet the individual needs of
their clients. Their recent financing provides the company with
capital to continue to expand and leverage ongoing industry
advancements to better serve its customers. Tech 2000 is the newest
addition to the Rand portfolio, with a debt investment valued at
approximately $611,000 at December 31, 2018.
- Knoa Software, Inc. is a
leading provider of user experience management software. They
deliver solutions that generate unique insights for the
optimization of the end-user experience and improved efficiencies
for enterprise applications from vendors including SAP, Oracle and
others. Knoa's patented software provides CIOs and business
executives the actionable metrics needed to ensure that
organizations and end-users realize the full value of their
software investment. SAP resells Knoa’s solution under the name SAP
User Experience Management by Knoa. As evidence of their market
penetration, in 2018, Knoa’s cloud revenue accelerated by more than
250% and its total number of cloud customers doubled. Additionally,
they closed on their largest cloud deal in their history in 2018.
At December 31, 2018 Rand’s investment in Knoa Software was valued
at approximately $1.2 million.
- Microcision, LLC is a leading
manufacturer of medical device implants and instrumentation. From
product development through production, Microcision capabilities
include complex turning, drilling, cross-drilling, threading and
milling of small parts made from all medical grade metals and
plastics. The company has invested millions of dollars in
state-of-the-art CNC technology, training, information and tracking
systems, allowing Microcision to produce the most complex
configurations in the most cost-effective manner. The company’s
financial results led to Rand increasing the fair value of its
investment in the fourth quarter. At December 31, 2018 Rand’s
investment in Microcision was valued at approximately $2.5
million.
As of December 31, 2018, Rand’s portfolio consisted of 30 active
companies. At that date, the portfolio was comprised of
approximately 59% in equity investments and 41% in debt
investments, compared with 57% in equity investments and 43% in
debt investments at December 31, 2017.
Webcast and Conference Call
Rand will host a conference call and live webcast today, March
7, 2019, at 4:30 p.m. Eastern Time to review its financial
condition and results for the 2018 fourth quarter and full year, as
well as its strategy and outlook. The review will be accompanied by
a slide presentation, which will be available on Rand’s website at
www.randcapital.com under the “Investor Relations” heading. A
question-and-answer session will follow the formal
presentation.
Rand’s conference call can be accessed by calling (201)
689-8263. Alternatively, the webcast can be monitored on Rand’s
website at www.randcapital.com under the “Investor Relations”
heading.
A telephonic replay will be available from 7:30 p.m. ET on the
day of the call through Thursday, March 14, 2019. To listen to the
archived call, dial (412) 317-6671 and enter replay pin number
13687508. The webcast replay will be available in the Investors
section at www.randcapital.com, where a transcript will also be
posted once available.
ABOUT RAND CAPITAL
Rand Capital (Nasdaq: RAND) provides investors the ability to
participate in venture capital opportunities through an investment
in the Company’s stock. Rand is a Business Development Company
(BDC) with a wholly-owned subsidiary licensed by the U.S. Small
Business Administration (SBA) as a Small Business Investment
Company (SBIC). Rand focuses its equity investments in early
or expansion stage companies and generally lends to more mature
companies. The Company seeks investment opportunities in businesses
with strong leaders who are bringing to market new or unique
products, technologies or services that have a high potential for
growth. Additional information can be found at the Company’s
website where it regularly posts information:
http://www.randcapital.com/.
Safe Harbor Statement
This press release contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than historical facts, including but
not limited to statements regarding the expected timing of the
closing of the proposed transactions; the ability of the parties to
complete the proposed transactions considering the various closing
conditions, including receipt of necessary shareholder approvals
and approval from the Small Business Administration; the intention
of Rand Capital to elect to be become a regulated investment
company for U.S. federal tax purposes; the intention to declare and
pay a special cash and stock dividend upon the closing of the
proposed transactions; the intention to pay a regular cash dividend
after the completion of the proposed transactions; the expected
benefits of the proposed transactions such as a lower
expense-to-asset ratio for Rand Capital, increased net investment
income, availability of additional resources, expanded access to
and sourcing platform for new investments and streamlining of
operations under the external management structure; the business
strategy of originating additional income producing investments;
the competitive ability and position of Rand Capital following
completion of the proposed transactions; and any assumptions
underlying any of the foregoing, are forward-looking statements.
Forward-looking statements concern future circumstances and results
and other statements that are not historical facts and are
sometimes identified by the words “may,” “will,” “should,”
“potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,”
“estimate,” “overestimate,” “underestimate,” “believe,” “could,”
“project,” “predict,” “continue,” “target” or other similar words
or expressions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove to be
incorrect, actual results may vary materially from those indicated
or anticipated by such forward-looking statements. The inclusion of
such statements should not be regarded as a representation that
such plans, estimates or expectations will be achieved. Important
factors that could cause actual results to differ materially from
such plans, estimates or expectations include, among others,
(1) that one or more closing conditions to the transactions
may not be satisfied or waived, on a timely basis or otherwise,
including that the SBA may not approve the proposed transactions or
that the required approvals by the shareholders of Rand Capital may
not be obtained; (2) the risk that the proposed transactions
may not be completed in the time frame expected by parties, or at
all; (3) the risk that Rand Capital may be unable to fulfill
the conditions required in order to elect to be treated as a
regulated investment company for U.S. federal tax purposes;
(4) uncertainty of the expected financial performance of Rand
Capital following completion of the proposed transactions;
(5) failure to realize the anticipated benefits of the
proposed transactions, including as a result of delay in completing
the proposed transactions; (6) the risk that Rand Capital is unable
to declare the special cash and stock dividend or pay regular
dividends on a going forward basis; (7) the occurrence of any
event that could give rise to termination of the stock purchase
agreement; (8) the risk that shareholder litigation in
connection with the proposed transactions may affect the timing or
occurrence of the contemplated transactions or result in
significant costs of defense, indemnification and liability;
(9) evolving legal, regulatory and tax regimes;
(10) changes in general economic and/or industry specific
conditions; and (11) other risk factors as detailed from time
to time in Rand Capital’s reports filed with the Securities and
Exchange Commission (“SEC”), including Rand Capital’s annual report
on Form 10-K for the year ended December 31, 2018,
quarterly reports on Form 10-Q, current reports on
Form 8-K and other documents filed with the SEC.
Consequently, such forward-looking statements should be regarded as
Rand Capital’s current plans, estimates and beliefs. Except as
required by applicable law, Rand Capital assumes no obligation to
update the forward-looking information contained in this
release.
FINANCIAL TABLES FOLLOW.
Rand Capital Corporation and
Subsidiaries
Consolidated Statements of Financial
Position
December 31,
2018 2017
ASSETS
Investments at fair value: Control investments (cost of $99,500)
$ 99,500 $ 99,500 Affiliate investments (cost of
$20,708,659 and $20,871,129, respectively)
17,026,091
17,016,795 Non-Control/Non-Affiliate investments (cost of
$17,483,984 and $15,718,690, respectively)
17,541,213
15,167,767 Total investments, at fair value
(cost of $38,292,143 and $36,689,319, respectively)
34,666,804 32,284,062 Cash and cash equivalents
4,033,792 6,262,039 Interest receivable (net of allowance:
$161,000)
145,532 231,048 Deferred tax asset
525,198
551,863 Prepaid income taxes
1,138,708 762,047 Other assets
11,690 42,854
Total assets $
40,521,724 $
40,133,913
LIABILITIES AND
STOCKHOLDERS’ EQUITY (NET ASSETS)
Liabilities: Debentures guaranteed by the SBA (net of debt
issuance costs)
$ 8,554,443 $ 7,855,173 Profit
sharing and bonus payable
125,000 144,000 Accounts payable
and accrued expenses
245,758 178,348 Deferred revenue
72,336 37,707
Total liabilities
8,997,537 8,215,228
Stockholders’ equity (net assets): Common stock, $0.10 par;
shares authorized 10,000,000; shares issued 6,863,034; shares
outstanding of 6,321,988 at 12/31/18 and 12/31/17
686,304
686,304 Capital in excess of par value
10,581,789 10,581,789
Accumulated net investment loss
(1,665,552 )
(1,597,146 ) Undistributed net realized gain on investments
26,221,443 27,215,738 Net unrealized depreciation on
investments
(2,830,692 ) (3,498,895 ) Treasury stock,
at cost: 541,046 shares
(1,469,105
) (1,469,105 )
Total stockholders’ equity (net assets) (per share 2018: $4.99;
2017: $5.05)
31,524,187
31,918,685 Total liabilities and
stockholders’ equity (net assets) $
40,521,724 $
40,133,913
Rand Capital Corporation and
Subsidiaries
Consolidated Statements of
Operations
For the Quarter EndedDecember
31,
For the Year EndedDecember
31,
2018 2017
2018 2017
Investment income: Interest from
portfolio companies: Affiliate investments
$ 225,648
$ 147,461
$ 741,432 $ 563,708
Non-Control/Non-Affiliate investments
209,755
174,202
757,308
591,608 Total interest from portfolio
companies
435,403 321,663
1,498,740
1,155,316 Interest from other investments:
Non-Control/Non-Affiliate investments
16,897
6,579
37,614
30,761 Total interest from other
investments
16,897 6,579
37,614 30,761
Dividend and other investment income: Control
investments
60,000 -
60,000 - Affiliate investments
142,419 43,739
318,324 233,544
Non-Control/Non-Affiliate investments
-
2,472
6,058
10,070 Total dividend and other investment income
202,419 46,211
384,382 243,614
Fee income: Affiliate investments
4,042 2,166
15,667 8,416 Non-Control/Non-Affiliate investments
9,564 3,368
170,551 16,675 Total fee
income
13,606 5,534
186,218 25,091
Total investment income 668,325
379,987
2,106,954
1,454,782
Expenses:
Salaries
169,875 165,411
679,499 661,650 Bonus and
profit sharing
125,000 12,000
125,000 12,000 Employee
benefits
45,977 22,256
194,818 160,779 Directors'
fees
36,627 34,876
128,750 142,499 Professional fees
186,386 46,308
407,159 356,936 Stockholders and
office operating
53,173 55,795
230,050 249,085
Insurance
6,599 6,258
34,187 31,876 Corporate
development
20,647 15,264
62,117 65,202 Other
operating
11,102 12,620
21,092 20,675
655,386 370,788
1,882,672 1,700,702 Interest
on SBA obligations
78,594 77,569
311,000 310,275 Bad
debt recovery
(50,342 ) -
- - Total
expenses
683,638 448,357
2,193,672
2,010,977
Net investment loss before income taxes
(15,313 ) (68,370 )
(86,718 ) (556,195
) Income tax expense (benefit)
6,495
(347,936 )
(18,312 )
(536,897 )
Net investment (loss) gain
(21,808 ) 279,566
(68,406 ) (19,298 )
Net realized (loss) gain on sales and dispositions of
investments: Affiliate investments
(338,469 ) -
(1,464,142 ) - Non-Control/Non-Affiliate investments
- 138,240
- 138,240 Net realized
(loss) gain on sales and dispositions before income tax (benefit)
expense
(338,469 ) 138,240
(1,464,142 )
138,240 Income tax (benefit) expense
(63,108 )
49,556
(469,847 )
49,556 Net realized (loss) gain on
sales and dispositions of investments
(275,361 )
88,684
(994,295 ) 88,684
Net change in
unrealized depreciation or appreciation on investments:
Affiliate investments
438,975 794,990
608,207 129,315
Non-Control/Non-Affiliate investments
1,073,071
(81,715 )
171,711
(404,023 ) Change in unrealized depreciation
or appreciation before income tax expense (benefit)
1,512,046 713,275
779,918 (274,708 ) Deferred income
tax expense
278,366
855,316
111,715
505,356 Net change in unrealized depreciation or
appreciation on investments
1,233,680
(142,041 )
668,203
(780,064 )
Net realized and unrealized gain (loss)
on investments 958,319
(53,357 )
(326,092 )
(691,380 )
Net increase (decrease) in net assets from
operations $ 936,511 $
226,209
$ (394,498 ) $
(710,678 )
Weighted average shares outstanding
6,321,988 6,321,988
6,321,988 6,321,988
Basic and
diluted net increase (decrease) in net assets from operations per
share $ 0.15 $ 0.04
$ (0.06 ) $ (0.11 )
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190307005108/en/
Company:Allen F. ("Pete") GrumPresident and CEOPhone:
716.853.0802Email: pgrum@randcapital.comInvestors:Deborah K.
Pawlowski / Karen L. HowardKei Advisors LLCPhone: 716.843.3908 /
716.843.3942Email: dpawlowski@keiadvisors.com /
khoward@keiadvisors.com
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