• Fourth quarter investment income grew 7% to $1.1 million and net investment income grew measurably to $0.7 million compared with the fourth quarter of 2019
  • Investment income for the year grew 14% to $3.1 million compared with 2019; net investment income was measurably higher at $1.8 million
  • Net asset value was $17.86 per share at year end
  • Made largest initial funding of $3.8 million in new portfolio company in the fourth quarter
  • Declared $1.33 per share for 2020 dividend; consisted of $0.39 per share from net investment income and $0.94 per share from capital gains
  • 3,234 shares repurchased in the fourth quarter; 6,631 total shares purchased in 2020
  • Announced first regular dividend of $0.10 per share for first quarter 2021

Rand Capital Corporation (Nasdaq: RAND) (“Rand” or the “Company”), a business development company (“BDC”), announced its results for the quarter and year ended December 31, 2020.

Allen F. (“Pete”) Grum, President and Chief Executive Officer of Rand, commented, “We made measurable progress in 2020 with the transformation of Rand Capital. We declared a special dividend of $23.7 million, or $1.62 per share in March; executed a 1:9 reverse stock split in May; declared the 2020 dividend of $1.33 per share in December and continued to evolve our portfolio. Importantly, we have now structured a path for regularly quarterly dividend payments.”

He added, “The evolution of our portfolio to align with our strategy to be a dividend paying BDC is apparent in the 14% growth in investment income for the year. We focused on more interest-yielding debt securities to increase our investment income in support of our planned regular quarterly cash dividends. We also purchased the securities of several other publicly traded BDCs. This put capital to work earning dividends while providing for ready liquidity as our lending pipeline builds. Through liquidations or exits, we also reduced equity investments by seven portfolio companies. Our equity holdings at the end of 2020 comprised 50% of our portfolio, down from 59% when we entered the year, excluding the investments made in other BDCs. Importantly, we believe most of the remaining portfolio equity investments have strong capital return potential.”

Fourth Quarter Highlights

  • Investment income in the quarter grew 7% as a result of the shift in portfolio mix.
  • Total expenses in the quarter were down 28%, or $200,000, mostly due to the externalization of management and reduced stockholders’ expenses.
  • Net investment income grew to $738,000 compared with $100,000 in the prior-year period.

2020 Highlights

  • Expenses in 2020 were $2.0 million, down from $2.8 million in the prior year for similar reasons as in the fourth quarter.
  • Net investment income per share was $0.77 for the year and reflected the successful shift in strategy to become an income producing, dividend paying BDC. Net investment income also benefited from a $628,000 tax benefit related to the intent to elect status as a regulated investment company for U.S. federal income tax purposes.
  • Net asset value (“NAV”) at December 31, 2020 was $46.1 million compared with $53.6 million at the end of 2019 and compared with $50.0 million at September 30, 2020. The change in net asset value was primarily the result of $8.2 million in dividends.
  • At December 31, 2020, portfolio fair value decreased $1.6 million to $40.0 million compared with September 30, 2020, primarily due to valuation adjustments.

Portfolio and Investment Activity

As of December 31, 2020, Rand’s portfolio consisted of 36 companies. At that date, the portfolio was comprised of approximately 50% in equity investments, 41% in fixed-rate debt investments and 8% in dividend paying, publicly traded BDCs. The annualized weighted average yield of debt investments was 12.7%.

Rand made $4.3 million in new and follow-on investment in the quarter. These included:

  • The Company made its largest initial investment in a new portfolio company, Caitec Inc. Rand invested $3.8 million in total, which was comprised of a $3.5 million, 14% subordinated secured note and $300,000 in Class A Preferred stock.
  • Rand participated in the $34 million Series B funding for portfolio company, Centivo Corporation, by purchasing $500,000 in preferred stock bringing Rand’s total investment in Centivo to approximately $800,000. Centivo’s fair value was $1.4 million at December 31, 2020.

Liquidity and Capital Resources

During the quarter, the Company repurchased 3,234 shares of outstanding common stock for $39,000 under a $1.5 million share repurchase authorization. The average purchase price was $11.98 per share. For the year, Rand has repurchased 6,631 shares of outstanding common stock for $77,000 at an average purchase price of $11.57 per share. Total shares outstanding at year-end were 2,582,169.

Cash and cash equivalents at the end of the quarter was $20.4 million and represented 44% of net assets. Outstanding SBA leverage was $11 million at the end of the quarter and there was $3 million remaining available to draw on the SBA loan program. The earliest debenture maturity is in 2022 when $3 million in borrowings are due.

Webcast and Conference Call

Rand will host a conference call and live webcast today, March 8, 2021, at 1:30 p.m. Eastern Time to review its financial condition and results 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 “Investor Relations”.

A telephonic replay will be available from 4:30 p.m. ET on the day of the call through Monday, March 15, 2021. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 13715235. 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 an externally managed 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). The Company’s investment objective is to maximize total return to its shareholders with current income and capital appreciation by focusing its debt and related equity investments in privately-held, lower middle market companies with committed and experienced managements in a broad variety of industries. Rand invests in early to later stage businesses that have sustainable, differentiated and market-proven products, revenue of more than $2 million and a path to free cash flow or up to $5 million in EBITDA. The Company’s investment activities are managed by its external investment adviser, Rand Capital Management, LLC. Additional information can be found at the Company’s website where it regularly posts information: https://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 effectiveness of Rand’s new investment strategy, the success of increasing interest income with new investments, the capital return potential of Rand’s equity investments, the competitive ability and position of Rand; 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) the risk that Rand and/or Rand SBIC may be unable to fulfill the conditions required in order to elect to be treated as a RIC for U.S. tax purposes; (2) evolving legal, regulatory and tax regimes; (3) changes in general economic and/or industry specific conditions; and (4) other risk factors as detailed from time to time in Rand’s reports filed with the Securities and Exchange Commission (“SEC”), including Rand’s annual report on Form 10-K for the year ended December 31, 2020, quarterly reports on Form 10-Q, the definitive proxy statement and other documents filed with the SEC. Consequently, such forward-looking statements should be regarded as Rand’s current plans, estimates and beliefs. Except as required by applicable law, Rand 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

(Audited)

 

 

December 31,

 

 

2020

 

 

 

2019

 

ASSETS

 

 

Investments at fair value:

 

 

Affiliate investments (cost of $14,835,885 and $19,035,446, respectively)

$

13,891,199

 

$

12,151,435

 

Non- Control/Non-Affiliate investments (cost of $25,884,428 and $25,584,017, respectively)

 

26,157,302

 

 

24,869,357

 

Total investments, at fair value (cost of $40,720,313 and $44,619,463, respectively)

 

40,048,501

 

 

37,020,792

 

Cash and cash equivalents

 

20,365,415

 

 

25,815,720

 

Interest receivable (net of allowance of $15,000 and $166,413, respectively)

 

258,186

 

 

142,265

 

Deferred tax asset

 

-

 

 

1,204,198

 

Prepaid income taxes

 

220,740

 

 

343,096

 

Other assets

 

74,100

 

 

265,378

 

Total assets

$

60,966,942

 

$

64,791,449

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS)

 

Liabilities:

 

 

Debentures guaranteed by the SBA (net of debt issuance costs)

$

10,824,587

 

$

10,786,913

 

Dividend payable

 

3,434,117

 

 

-

 

Accounts payable and accrued expenses

 

171,373

 

 

207,873

 

Due to investment adviser

 

156,999

 

 

50,564

 

Deferred revenue

 

153,895

 

 

37,583

 

Deferred tax payable

 

121,141

 

 

-

 

Bonus payable

 

-

 

 

80,000

 

Total liabilities

 

14,862,112

 

 

11,162,933

 

 

 

 

Stockholders’ equity (net assets):

 

 

Common stock, $0.10 par; shares authorized 100,000,000; shares issued: 2,648,916 at 12/31/20 and 1,688,485 at 12/31/19; shares outstanding: 2,582,169 at 12/31/20 and 1,628,369 at 12/31/19

 

2,384,547

 

 

1,519,637

 

Capital in excess of par value

 

49,883,890

 

 

34,142,455

 

Treasury stock, at cost: 66,747 shares at 12/31/20 and 60,116 shares at 12/31/19

 

(1,545,834

)

 

(1,469,105

)

Total distributable earnings

 

(4,617,773

)

 

19,435,529

 

Total stockholders’ equity (net assets) (per share - 2020: $17.86, 2019: $32.93)

 

46,104,830

 

 

53,628,516

 

Total liabilities and stockholders’ equity (net assets)

$

60,966,942

 

$

64,791,449

 

 

 

 

Rand Capital Corporation and Subsidiaries

Consolidated Statements of Operations

        (Unaudited)   (Audited)  

For the Quarter Ended December 31,

 

For the Year Ended December 31,

 

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Investment income:         Interest from portfolio companies:         Affiliate investments  

$

179,147

 

 

$

190,861

 

 

$

666,969

 

 

$

823,565

 

Non-Control/Non-Affiliate investments  

$

541,535

 

 

 

280,122

 

 

 

1,794,974

 

 

 

696,975

 

Total interest from portfolio companies  

 

720,682

 

 

 

470,983

 

 

 

2,461,943

 

 

 

1,520,540

 

          Interest from other investments:         Non-Control/Non-Affiliate investments  

 

623

 

 

 

58,410

 

 

 

87,784

 

 

 

166,556

 

Total interest from other investments  

 

623

 

 

 

58,410

 

 

 

87,784

 

 

 

166,556

 

          Dividend and other investment income:         Affiliate investments  

 

79,355

 

 

 

13,125

 

 

 

118,730

 

 

 

320,806

 

Non-Control/Non-Affiliate investments  

 

147,826

 

 

 

259,042

 

 

 

309,351

 

 

 

259,042

 

Total dividend and other investment income  

 

227,181

 

 

 

272,167

 

 

 

428,081

 

 

 

579,848

 

          Fee income:         Affiliate investments  

 

5,000

 

 

 

16,179

 

 

 

15,417

 

 

 

27,639

 

Non-Control/Non-Affiliate investments  

 

102,194

 

 

 

167,186

 

 

 

109,694

 

 

 

430,113

 

Total fee income  

 

107,194

 

 

 

183,365

 

 

 

125,111

 

 

 

457,752

 

Total investment income  

 

1,055,680

 

 

 

984,925

 

 

 

3,102,919

 

 

 

2,724,696

 

          Expenses:         Base management fee  

 

155,318

 

 

 

85,483

 

 

 

589,519

 

 

 

85,483

 

Interest on SBA obligations  

 

104,190

 

 

 

104,190

 

 

 

416,760

 

 

 

408,039

 

Professional fees  

 

185,062

 

 

 

141,182

 

 

 

568,857

 

 

 

548,041

 

Shareholders and office operating  

 

40,400

 

 

 

91,003

 

 

 

258,266

 

 

 

557,546

 

Directors' fees  

 

31,375

 

 

 

30,128

 

 

 

116,500

 

 

 

117,500

 

Insurance  

 

7,767

 

 

 

7,232

 

 

 

33,868

 

 

 

38,302

 

Corporate development  

 

2,066

 

 

 

15,814

 

 

 

14,546

 

 

 

67,441

 

Other operating  

 

90

 

 

 

14,091

 

 

 

662

 

 

 

17,504

 

Salaries  

 

-

 

 

 

76,790

 

 

 

-

 

 

 

621,290

 

Bonuses  

 

-

 

 

 

115,000

 

 

 

-

 

 

 

115,000

 

Employee benefits  

 

-

 

 

 

45,452

 

 

 

-

 

 

 

189,157

 

Bad debt (recovery) expense  

 

-

 

 

 

-

 

 

 

(24,000

)

 

 

5,413

 

Total expenses  

 

526,268

 

 

 

726,365

 

 

 

1,974,978

 

 

 

2,770,716

 

Net investment income (loss) before income taxes  

 

529,412

 

 

 

258,560

 

 

 

1,127,941

 

 

 

(46,020

)

Income tax (benefit) expense  

 

(209,086

)

 

 

158,175

 

 

 

(628,187

)

 

 

39,677

 

Net investment income (loss)  

 

738,498

 

 

 

100,385

 

 

 

1,756,128

 

 

 

(85,697

)

          Net realized (loss) gain on sales and dispositions of investments:         Control investments  

 

-

 

 

 

-

 

 

 

-

 

 

 

80,393

 

Affiliate investments  

 

(7,984,468

)

 

 

-

 

 

 

(7,927,552

)

 

 

(472,632

)

Non-Control/Non-Affiliate investments  

 

(410,857

)

 

 

1,510,000

 

 

 

1,944,273

 

 

 

1,510,000

 

Net realized (loss) gain on sales and dispositions, before income taxes  

 

(8,395,325

)

 

 

1,510,000

 

 

 

(5,983,279

)

 

 

1,117,761

 

Income tax expense  

 

-

 

 

 

346,784

 

 

 

-

 

 

 

255,923

 

Net realized (loss) gain on sales and dispositions of investments  

 

(8,395,325

)

 

 

1,163,216

 

 

 

(5,983,279

)

 

 

861,838

 

          Net change in unrealized depreciation on investments:         Affiliate investments  

 

6,455,129

 

 

 

(2,793,687

)

 

 

5,939,325

 

 

 

(3,970,007

)

Non-Control/Non-Affiliate investments  

 

1,011,763

 

 

 

3,017,636

 

 

 

987,534

 

 

 

(3,325

)

Change in unrealized depreciation before income taxes  

 

7,466,892

 

 

 

223,949

 

 

 

6,926,859

 

 

 

(3,973,332

)

Deferred income tax expense (benefit)  

 

182,530

 

 

 

6,198

 

 

 

1,955,942

 

 

 

(907,521

)

Net change in unrealized depreciation on investments  

 

7,284,362

 

 

 

217,751

 

 

 

4,970,917

 

 

 

(3,065,811

)

          Net realized and unrealized (loss) gain on investments  

 

(1,110,963

)

 

 

1,380,967

 

 

 

(1,012,362

)

 

 

(2,203,973

)

Net increase (decrease) in net assets from operations  

$

(372,465

)

 

$

1,481,352

 

 

$

743,766

 

 

$

(2,289,670

)

Weighted average shares outstanding  

 

2,583,622

 

 

 

1,241,719

 

 

 

2,268,356

 

 

 

836,893

 

Basic and diluted net increase (decrease) in net assets from operations per share  

$

(0.14

)

 

$

1.19

 

 

$

0.33

 

 

$

(2.74

)

         

Rand Capital Corporation and Subsidiaries

Consolidated Statements of Changes in Net Assets

 

 

 

 

2020

 

 

2019

 

Net assets at beginning of year

$

53,628,516

 

$

31,524,187

 

 

 

 

Net investment income (loss)

 

1,756,128

 

 

(85,697

)

Net realized (loss) gain on sales and dispositions of investments

 

(5,983,279

)

 

861,838

 

Net change in unrealized depreciation on investments

 

4,970,917

 

 

(3,065,811

)

Net increase (decrease) in net assets from operations

 

743,766

 

 

(2,289,670

)

 

 

 

Declaration of dividends

 

(8,190,723

)

 

-

 

Issuance of capital stock, net

 

-

 

 

24,393,999

 

Purchase of treasury shares

 

(76,729

)

 

-

 

Net assets at end of year

$

46,104,830

 

$

53,628,516

 

 

Company: Allen F. ("Pete") Grum President and CEO Phone: 716.853.0802 Email: pgrum@randcapital.com

Investors: Deborah K. Pawlowski Kei Advisors LLC Phone: 716.843.3908 Email: dpawlowski@keiadvisors.com

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