- eHealth Global Technologies, Inc.
repaid $3.5 million loan
- Invested $650,012 in two follow-on
transactions during the first quarter
- Net Asset Value per share grew to
$5.06 at March 31, 2019, up $0.07 in the first quarter driven by
net investment appreciation
- Shareholder meeting scheduled for
proposed transformational investment of $25 million by East Asset
Management; Rand Board of Directors unanimously recommends
shareholders vote for proposed transactions
Rand Capital Corporation (Nasdaq:RAND) (“Rand”), a business
development company, announced its results for the quarter ended
March 31, 2019.
Allen F. (“Pete”) Grum, President and Chief Executive Officer of
Rand Capital, commented, “We filed the definitive proxy statement
and associated materials with the Securities and Exchange
Commission that provides significant detail regarding the planned
transformation of Rand Capital made possible by the proposed $25
million investment by East Asset Management. The proxy statement
details the thorough process followed by our Board of Directors to
advance this opportunity to drive future value for our
shareholders.”
First Quarter 2019 Financial Highlights
- Reported $5.06 net asset value (NAV)
per share at March 31, 2019, compared with $4.99 at December 31,
2018. The increase was primarily due to net appreciation in
portfolio investments, mostly related to Rand’s investment in
Tilson Technology Management, Inc.
- Received the repayment of a $3.5
million loan by eHealth Global Technologies, Inc.
- Supported two current portfolio
companies with $650,012 of follow-on equity investments:
- Tilson Technology Management, Inc.
$500,012
- KnowledgeVision Systems, Inc.
$150,000
- Investment income nearly doubled over
the prior-year first quarter driven by both higher interest and
nonrecurring loan repayment fee income
- Drew down $2.25 million of new SBA
leverage commitment to fund investment activity and operations; new
debt carries 3.2% annual fixed rate interest through its maturity
in 2029
- At March 31, 2019, portfolio fair value
was $32.5 million and consolidated cash was $8.7 million, of which
$1.9 million was available for corporate purposes and $6.8 million
is restricted to the SBIC.
During the quarter, Rand’s portfolio company, eHealth Global
Technologies, Inc., repaid its $3.5 million loan from Rand with
proceeds from its $41 million recapitalization.
Daniel P. Penberthy, Rand’s Executive Vice President, stated,
“In 2016, we were introduced to eHealth by a co-investor with whom
we had partnered on previous transactions. We made an initial
investment of $1.5 million in eHealth to support the company’s
strategic growth, including expansion of its electronic medical
record retrieval business into additional health network systems.
We invested an additional $2 million during this short investment
period as the company continued its growth trajectory. eHealth grew
its employee count by over 30% during Rand’s investment tenure,
while Rand benefited from a strong yield on its investment.”
Total investment income in the first quarter of 2019 nearly
doubled to $719,000 from $363,000 in the same period last year. The
increase included higher interest as well as approximately $225,000
of nonrecurring fee income associated with the loan repayment by
eHealth. Total expenses in the 2019 and 2018 first quarters were
$690,000 and $589,000, respectively. Higher expenses reflected a
$125,000 increase in professional fees related mostly to the
proposed strategic investment by East.
The net change in unrealized appreciation/depreciation on
investments was approximately $402,000 of net appreciation in the
first quarter of 2019 compared with $347,000 of net depreciation in
the 2018 first quarter. The net appreciation in the 2019 quarter
was driven by an increase in the valuation of the Company’s
investment in Tilson, partially offset by decreases in valuations
of other portfolio companies.
Selected Portfolio Highlights
- Tilson Technology Management,
Inc., which has been recognized for eight consecutive years on
the Inc. 5000 list of fastest growing companies, provides network
deployment and information system professional services to telecom,
construction, utility and government clients. Tilson recently
announced that it raised up to $100 million in funding commitment
to support the expansion of its nationwide network of
infrastructure design-build services and to enable the spin-out and
capitalization of its asset ownership affiliate, SQF, LLC. SQF
maintains authority to own and develop telecommunications assets in
public rights-of-way throughout the United States and is a leading
pole owner and solutions provider for 5G. Supported by Tilson’s
real-estate entitlement, engineering, construction and operational
capabilities, SQF provides customers with a range of infrastructure
options, from single site design-build services to fully outsourced
deployment and management nationwide. Including its additional
investment and market value appreciation recorded in the first
quarter, Rand’s total investment in Tilson was valued at
approximately $5.0 million at March 31, 2019.
- KnowledgeVision Systems, Inc. is
a leader in smart media creation, hosting and tracking technology.
Its Knovio® video platform is used by more than 300,000 people
worldwide in more than 2,000 companies and campuses to create,
host, share, organize, collaborate around, and measure online media
and presentation content. The company recently announced the launch
of Knovio AutoNarrate, a feature for online presentations that
virtually eliminates searching for voice-over talent and
time-consuming scheduling to help content creators deliver narrated
presentations in multiple languages in seconds. The company
believes that this feature represents an evolution in how training,
human resources and corporate communications professionals deliver
audio presentations. It gives companies an effective and flexible
option to reach global audiences with translated content. Including
its first quarter investment, at March 31, 2019, Rand’s investment
in KnowledgeVision was valued at approximately $1.2 million.
As of March 31, 2019, Rand’s portfolio consisted of 29 active
companies. At that date, the portfolio was comprised of
approximately 66% in equity investments and 34% in debt
investments, compared with 60% in equity investments and 40% in
debt investments at March 31, 2018.
Webcast and Conference Call
Rand will host a conference call and live webcast today, May 2,
2019, at 3:30 p.m. Eastern Time to review its financial condition
and results for the 2019 first quarter, 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 6:30 p.m. ET on the
day of the call through Thursday, May 9, 2019. To listen to the
archived call, dial (412) 317-6671 and enter replay pin number
13689533. 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) 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. 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 U.S. Small Business Administration (“SBA”);
the intention of Rand Capital Corporation (“Rand Capital”, “Rand”
or the “Company”) and Rand Capital SBIC, Inc. (“Rand SBIC”) to
elect to be taxed as a regulated investment companies for U.S.
federal tax purposes; the intention to declare and pay a special
cash and stock dividend after 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 stock purchase 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 and/or Rand SBIC may be unable
to fulfill the conditions required in order to elect to be treated
as a regulated investment company for U.S. 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 the board of directors
of Rand Capital is unable or unwilling to declare and pay the
special cash and stock dividend or pay quarterly 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, later filed quarterly
reports on Form 10-Q, the definitive proxy statement for
the proposed transactions 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.
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in
respect of solicitation of proxies from shareholders of Rand
Capital in respect of the proposed transactions. Rand Capital has
filed the definitive proxy statement in respect of the proposed
transactions, which was first sent or made available to
shareholders on or about April 18, 2019. INVESTORS OF RAND CAPITAL
ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER RELEVANT
DOCUMENTS CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTIONS AND RELATED
MATTERS. Investors may obtain the definitive proxy statement and
other documents filed by Rand Capital with the SEC from the SEC’s
website at www.sec.gov or from Rand Capital’s website at
www.randcapital.com. Investors and security holders may also obtain
free copies of the definitive proxy statement and other documents
filed with the SEC from Rand Capital by calling Investor Relations
at 716-843-3908.
Participants in the Solicitation
Rand Capital and its directors, executive officers, employees
and other persons may be deemed to be participants in the
solicitation of proxies from the shareholders of Rand Capital in
respect of the proposed transactions. Information regarding the
persons who may, under the rules of the SEC, be considered
participants in the solicitation of Rand Capital shareholders in
connection with the proposed transactions is set forth in the
definitive proxy statement filed with the SEC, which can be
obtained free of charge from the sources indicated above.
FINANCIAL TABLES FOLLOW.
Rand Capital Corporation and
Subsidiary Consolidated Statements of Financial Position
March 31, 2019
December 31, (Unaudited) 2018
ASSETS
Investments at fair value: Control investments (cost of $0 and
$99,500)
$ - $ 99,500 Affiliate investments (cost of
$21,442,998 and $20,708,659, respectively)
18,804,026
17,026,091 Non-Control/Non-Affiliate investments (cost of
$14,151,246 and $17,483,984, respectively)
13,687,175 17,541,213 Total
investments, at fair value (cost of $35,594,244 and $38,292,143,
respectively)
32,491,201 34,666,804 Cash and cash
equivalents
8,694,705 4,033,792 Interest receivable (net of
allowance: $161,000)
137,214 145,532 Deferred tax asset
425,461 525,198 Prepaid income taxes
846,120
1,138,708 Other assets
338,507
11,690 Total assets $
42,933,208 $
40,521,724
LIABILITIES AND
STOCKHOLDERS’ EQUITY (NET ASSETS)
Liabilities: Debentures guaranteed by the SBA (net of debt
issuance costs)
$ 10,758,657 $ 8,554,443 Profit
sharing and bonus payable
- 125,000 Accounts payable and
accrued expenses
154,082 245,758 Deferred revenue
40,867 72,336 Total
liabilities
10,953,606 8,997,537
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 3/31/19 and 12/31/18
686,304 686,304 Capital in
excess of par value
10,581,789 10,581,789 Accumulated net
investment loss
(1,642,785) (1,665,552) Undistributed net
realized gain on investments
26,252,574 26,221,443 Net
unrealized depreciation on investments
(2,429,175)
(2,830,692) Treasury stock, at cost: 541,046 shares
(1,469,105) (1,469,105)
Total stockholders’ equity (net assets) (per share - 3/31/19:
$5.06; 12/31/18: $4.99)
31,979,602
31,524,187 Total liabilities and
stockholders’ equity (net assets) $
42,933,208 $
40,521,724
Rand Capital Corporation and
Subsidiaries
Consolidated Statements of
Operations
(Unaudited)
For the Quarter Ended March 31, 2019
2018 Investment income:
Interest from portfolio companies: Affiliate investments
$
208,715 $ 147,036 Non-Control/Non-Affiliate investments
197,250 150,312
Total interest from portfolio
companies
405,965 297,348 Interest
from other investments: Non-Control/Non-Affiliate investments
17,811 5,110
Total interest from other investments
17,811 5,110 Dividend and
other investment income: Affiliate investments
34,625 50,783
Non-Control/Non-Affiliate investments
-
3,382
Total dividend and other investment
income
34,625 54,165 Fee income:
Affiliate investments
4,247 3,167 Non-Control/Non-Affiliate
investments
256,722 3,019
Total fee income
260,969 6,186
Total
investment income 719,370
362,809
Expenses: Salaries
181,500 169,874
Employee benefits
62,932 63,745 Directors' fees
28,624 34,875 Professional fees
226,655 101,687
Stockholders and office operating
61,255 64,439 Insurance
9,601 11,988 Corporate development
18,460 15,796
Other operating
1,584 2,691
590,611 465,095 Interest on SBA obligations
99,124
77,569 Bad debt expense
- 45,900
Total expenses
689,735 588,564
Net investment gain (loss) before income taxes 29,635
(225,755) Income tax expense (benefit)
6,868
(52,426)
Net investment gain (loss)
22,767 (173,329)
Net realized
gain on sales and dispositions of investments: Control
investments
40,500 - Income tax expense
9,369
- Net realized gain on sales and dispositions
of investments
31,131 -
Net change in unrealized
depreciation or appreciation on investments: Affiliate
investments
1,043,595 (250,000) Non-Control/Non-Affiliate
investments
(521,300) (201,489)
Change in unrealized depreciation or appreciation before income tax
expense (benefit)
522,296 (451,489) Deferred income tax
expense (benefit)
120,779
(104,405) Net change in unrealized depreciation or appreciation on
investments
401,517 (347,084)
Net realized and unrealized gain (loss) on
investments 432,648
(347,084)
Net increase (decrease) in net assets from
operations $ 455,415 $ (520,413)
Weighted average shares outstanding 6,321,988
6,321,988
Basic and diluted net increase (decrease) in net
assets from operations per share $ 0.07
$ (0.08)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190502005258/en/
Company:Allen F. ("Pete") GrumPresident and CEOPhone:
716.853.0802Email: pgrum@randcapital.com
Investors:Deborah K. Pawlowski / Karen L. HowardKei
Advisors LLCPhone: 716.843.3908 / 716.843.3942Email:
dpawlowski@keiadvisors.com /
khoward@keiadvisors.com
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