- Net Asset Value per share was $4.85 at June 30,
2019.
- Continued progress toward completion of $25 million
investment in Rand by East Asset Management. Transaction expected
to close in second half of 2019, subject to remaining regulatory
approval.
- Invested $250,000 in a follow-on transaction during the
second quarter.
Rand Capital Corporation (Nasdaq:RAND) (“Rand”), a business
development company, announced its results for the quarter and six
months ended June 30, 2019.
Allen F. (“Pete”) Grum, President and Chief Executive Officer of
Rand Capital, commented, “We are proceeding with the steps
necessary to complete the $25 million investment in Rand by East
Asset Management (“East”) following approval of the transactions by
our shareholders on May 16. Rand Capital Management has finished
its process to become a Registered Investment Adviser and the
Securities and Exchange Commission has deemed its registration as
effective. The final regulatory consent that is needed as a
condition to closing on the East transaction is approval from the
U.S. Small Business Administration. We continue to expect to close
in the second half of 2019.”
Second Quarter 2019 Financial Highlights
- Reported $4.85 net asset value (NAV) per share at June 30,
2019, compared with $5.06 at March 31, 2019. The sequential
decrease was primarily due to net depreciation in certain portfolio
investments in accordance with the Company’s valuation policy and
higher expenses related to the East transaction.
- Supported a current portfolio company, Genicon, Inc., with a
$250,000 follow-on investment in the form of a promissory
note.
- Investment income increased 41% and 68% over the prior-year
second quarter and first six months, respectively, driven by a
nonrecurring dividend and higher interest income in the second
quarter as well as nonrecurring loan repayment fee income in the
six-month period.
- At June 30, 2019, portfolio fair value was $31.2 million and
consolidated cash was $8.6 million, of which $1.4 million is
available for corporate purposes and $7.2 million is restricted to
the SBIC.
Total investment income in the second quarter of 2019 increased
41% to $583,000 from $413,000 in the same period last year. The
increase was driven by a $194,000 nonrecurring dividend and higher
interest income. Total expenses in the 2019 and 2018 second
quarters were $824,000 and $474,000, respectively. Higher expenses
reflected a $329,000 increase in professional fees and shareholder
expenses related primarily to the East transaction process.
The Company recorded a $433,000 realized pre-tax loss during the
2019 second quarter primarily resulting from its investment in a
company that ceased doing business, reflecting the reclassification
of an unrealized loss previously recorded. Rand also recorded
pre-tax net unrealized depreciation of $1.1 million and $756,000 in
the second quarters of 2019 and 2018, respectively.
Total investment income increased 68% to $1.3 million for the
six months ended June 30, 2019, compared with $776,000 in the same
2018 period. The growth resulted from the Company’s investment
focus on income-generating instruments as well as a $194,000
nonrecurring dividend and $225,000 of nonrecurring loan repayment
fee income realized in the 2019 period. Total expenses for the
first six months of 2019 and 2018 were $1.5 million and $1.1
million, respectively, with the increase primarily related to the
East transaction process.
Pre-tax realized losses were $392,000 in the first six months of
2019, driven by the second quarter loss noted above. Pre-tax net
unrealized depreciation on investments was $600,000 and $1.2
million in the first six months of 2019 and 2018, respectively.
Selected Portfolio Highlights
- Tilson Technology Management, Inc. is on a mission to
build America’s information infrastructure. The company recently
reported that its CEO, Joshua Broder, testified before the U.S.
House of Representatives Workforce Subcommittee on the importance
of training and apprenticeship programs to meet current and future
hiring needs as the industry moves toward 5G and next-generation
technologies. The hearing, entitled, “Mind the Skills Gap:
Apprenticeships and Training Programs,” focuses on new ways private
industry and the government can partner together to meet
ever-growing workforce demands as businesses grow and compete.
Tilson is currently hiring an average of 35 new team members per
month across 23 offices nationwide to support its continued growth
of nationwide network infrastructure design-build services. As one
of the first companies in the U.S. to participate in the
Telecommunications Industry Registered Apprenticeship Program
(TIRAP), a program supporting career development of the
telecommunications workforce, Tilson currently has almost 80 Tower
Climbing Technicians I/II, Antenna and Line Lead and Foremen
registered in the program. At June 30, 2019, Tilson was Rand’s
highest valued investment, at approximately $5.0 million.
- OutMatch Holdings, LLC empowers companies to make the
best decisions about their people, from hiring and development to
leadership and culture. OutMatch recently announced that they
joined forces with The Devine Group to become one company under the
name OutMatch. The deal brought together two exceptional companies,
client bases, and product offerings to further strengthen OutMatch
as the clear leader in predictive talent analytics. The combination
drives innovation for OutMatch and The Devine Group clients alike,
offering the scalable, integrated OutMatch platform including
pre-hire assessments and employee development, as well as culture
analytics and video interviewing from OutMatch’s recent
acquisitions of Pomello and Wepow. The addition of the video
interviewing technology provided by Wepow further intensified
OutMatch’s platform of predictive talent solutions. At June 30,
2019, Rand’s investment in OutMatch was valued at approximately
$2.1 million.
- SciAps, Inc. is an instrumentation company specializing
in portable analytical instruments. The company’s mission is to
provide durable, field-tested, portable instruments to identify any
compound, any mineral, any element – anyplace on the planet.
Founded in 2013 by industry experts, the company’s revenue
continues to double every year and the company also continues to
innovate core handheld technologies for in-field measurements of
elements, chemicals and minerals. For example, the company makes a
highly disruptive handheld LIBS analyzer (laser induced breakdown
spectroscopy). It is the world’s only handheld analyzer capable of
measuring carbon content in stainless steel, and carbon content in
carbon equivalents. It has replaced a much larger, heavier
technology in the energy industry (pipelines and refining), as well
as the steel manufacturing and fabrication industries across
multiple sectors. The flagship LIBS analyzer also analyzes carbon
and other elements in geochemical and agricultural samples and is
the only handheld capable of in-field lithium measurements for
mineral exploration serving the world’s increasing demand for
lithium batteries. SciAps’s latest offering, a handheld RAMAN
technology, is complementary to LIBS, providing chemical and
mineral identification capability and allowing the company to enter
the billion dollar global safety and security market segments. At
June 30, 2019, Rand’s investment in SciAps was valued at
approximately $1.6 million.
As of June 30, 2019, Rand’s portfolio consisted of 28 active
companies. At that date, the portfolio was comprised of
approximately 65% in equity investments and 35% in debt
investments, compared with 58% in equity investments and 42% in
debt investments at June 30, 2018. The change was attributable to
the repayment of a large loan by a portfolio company in 2019.
Webcast and Conference Call Rand will host a conference
call and live webcast today, August 6, 2019, at 1:30 p.m. Eastern
Time to review its financial condition and results for the 2019
second 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 4:30 p.m. ET on the
day of the call through Tuesday, August 13, 2019. To listen to the
archived call, dial (412) 317-6671 and enter replay pin number
13692268. 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 currently 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
approval from the U.S. Small Business Administration (“SBA”); the
intention of Rand Capital 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; (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.
FINANCIAL TABLES FOLLOW.
Rand Capital Corporation and
Subsidiary
Consolidated Statements of
Financial Position
June 30,
2019
December 31,
(Unaudited)
2018
ASSETS
Investments at fair value:
Control investments (cost of $0
and $99,500, respectively)
$
-
$
99,500
Affiliate investments (cost of
$21,313,526 and $20,708,659, respectively)
18,302,106
17,026,091
Non-Control/Non-Affiliate
investments (cost of $14,154,010 and $17,483,984, respectively)
12,939,939
17,541,213
Total investments, at fair value
(cost of $35,467,536 and $38,292,143, respectively)
31,242,045
34,666,804
Cash and cash equivalents
8,646,007
4,033,792
Interest receivable (net of
allowance of $166,413 and $161,000, respectively)
119,717
145,532
Deferred tax asset
842,218
525,198
Prepaid income taxes
503,067
1,138,708
Other assets
346,010
11,690
Total assets
$
41,699,064
$
40,521,724
LIABILITIES AND STOCKHOLDERS’ EQUITY (NET
ASSETS)
Liabilities:
Debentures guaranteed by the SBA
(net of debt issuance costs)
$
10,768,075
$
8,554,443
Profit sharing and bonus
payable
-
125,000
Accounts payable and accrued
expenses
264,529
245,758
Deferred revenue
34,407
72,336
Total liabilities
11,067,011
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 6/30/19 and 12/31/18
686,304
686,304
Capital in excess of par
value
10,581,789
10,581,789
Accumulated net investment
loss
(1,786,085
)
(1,665,552
)
Undistributed net realized gain
on investments
25,920,065
26,221,443
Net unrealized depreciation on
investments
(3,300,915
)
(2,830,692
)
Treasury stock, at cost: 541,046
shares
(1,469,105
)
(1,469,105
)
Total stockholders’ equity (net
assets) (per share - 6/30/19: $4.85; 12/31/18: $4.99)
30,632,053
31,524,187
Total liabilities and
stockholders’ equity (net assets)
$
41,699,064
$
40,521,724
Rand Capital Corporation and
Subsidiaries
Consolidated Statements of
Operations
(Unaudited)
For the Quarter Ended June
30,
For the Six Months Ended June
30,
2019
2018
2019
2018
Investment income:
Interest from portfolio
companies:
Affiliate investments
$
206,036
$
175,990
$
414,751
$
323,026
Non-Control/Non-Affiliate
investments
109,453
139,710
306,703
290,022
Total interest from portfolio
companies
315,489
315,700
721,454
613,048
Interest from other
investments:
Non-Control/Non-Affiliate
investments
53,538
7,735
71,349
12,845
Total interest from other
investments
53,538
7,735
71,349
12,845
Dividend and other investment
income:
Affiliate investments
207,060
76,266
241,685
127,049
Non-Control/Non-Affiliate
investments
-
2,676
-
6,058
Total dividend and other
investment income
207,060
78,942
241,685
133,107
Fee income:
Affiliate investments
3,606
4,416
7,853
7,583
Non-Control/Non-Affiliate
investments
3,353
6,725
260,075
9,744
Total fee income
6,959
11,141
267,928
17,327
Total investment
income
583,046
413,518
1,302,416
776,327
Expenses:
Salaries
181,500
169,875
363,000
339,749
Employee benefits
40,167
45,251
103,099
108,996
Directors' fees
28,624
28,624
57,248
63,499
Professional fees
111,273
37,341
337,928
139,028
Stockholders and office
operating
319,506
64,599
380,761
129,038
Insurance
10,969
6,900
20,570
18,888
Corporate development
14,866
10,646
33,326
26,442
Other operating
1,225
2,424
2,809
5,115
708,130
365,660
1,298,741
830,755
Interest on SBA obligations
110,534
77,269
209,658
154,838
Bad debt expense
5,413
30,741
5,413
76,641
Total expenses
824,077
473,670
1,513,812
1,062,234
Net investment loss before
income taxes
(241,031
)
(60,152
)
(211,396
)
(285,907
)
Income tax benefit
(97,731
)
(22,384
)
(90,863
)
(74,810
)
Net investment loss
(143,300
)
(37,768
)
(120,533
)
(211,097
)
Net realized gain (loss) on
sales and dispositions of investments:
Control investments
39,893
-
80,393
-
Affiliate investments
(472,632
)
-
(472,632
)
-
Net realized loss on sales and
dispositions before income taxes
(432,739
)
-
(392,239
)
-
Income tax benefit
(100,230
)
-
(90,861
)
-
Net realized loss on sales and
dispositions of investments
(332,509
)
-
(301,378
)
-
Net change in unrealized
depreciation or appreciation on investments:
Affiliate investments
(372,448
)
(306,441
)
671,148
(556,441
)
Non-Control/Non-Affiliate
investments
(750,000
)
(450,000
)
(1,271,300
)
(651,489
)
Change in unrealized depreciation
or appreciation before income taxes
(1,122,448
)
(756,441
)
(600,152
)
(1,207,930
)
Deferred income tax benefit
(250,708
)
(162,915
)
(129,929
)
(267,320
)
Net change in unrealized
depreciation or appreciation on investments
(871,740
)
(593,526
)
(470,223
)
(940,610
)
Net realized and unrealized
loss on investments
(1,204,249
)
(593,526
)
(771,601
)
(940,610
)
Net decrease in net assets
from operations
$
(1,347,549
)
$
(631,294
)
$
(892,134
)
$
(1,151,707
)
Weighted average shares
outstanding
6,321,988
6,321,988
6,321,988
6,321,988
Basic and diluted net decrease
in net assets from operations per share
$
(0.21
)
$
(0.10
)
$
(0.14
)
$
(0.18
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190806005122/en/
Company: Allen F. ("Pete") Grum President and CEO Phone:
716.853.0802 Email: pgrum@randcapital.com
Investors: Deborah K. Pawlowski / Karen L. Howard Kei
Advisors LLC Phone: 716.843.3908 / 716.843.3942 Email:
dpawlowski@keiadvisors.com / khoward@keiadvisors.com
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